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spk02: Ladies and gentlemen, thank you for standing by and welcome to Glupin's second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After prepared remarks by the management team, 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 call over to your host today, Yilin Dai, CluPen's investor relations representative. Please go ahead.
spk04: Hello, everyone, and thank you for joining CluPen's second quarter 2021 earnings conference call. The company's financial and operating results were issued in a press release via Newswire Services earlier today and are posted online. You can download the earnings press release and sign up for our distribution list by visiting our IR website. Participants on today's call will be Mr. Chang Xun Sun, our founder and chief executive officer, and Mr. Stephen Lee, chief financial officer. Management will begin with prepared remarks, and the call will conclude with a Q&A session. Before I hand it over to the management, I would like to remind you of Crouppen State's Harvard Statement in relation to today's call. Except for the historical information contained herein, certain matters discussed in this conference call are forward-looking statements. These statements are based on current trends, estimates, and projections, and therefore you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about the potential risks and uncertainties, please refer to the company's file list with the Securities and Exchange Commission. With that, I'm now very pleased to turn the call over to our CEO, Changxun Sun. Please go ahead.
spk08: Hello, everyone. Thank you for your time, investors. Thank you for participating in Rong Nian's second quarter performance announcement conference. We are very happy to see that in the second quarter of 2021, Rong Nian showed a strong potential for business growth. The revenue reached RMB27.4 billion, which is 47.9% of the total growth, which is once again exceeding expectations. Our second quarter's net profit is still at 43%. More importantly, Langev's net loss has been reduced to 2636 million yuan. Langev's net loss has been greatly reduced to 58.4% in the previous quarter. Our second quarter's net profit flow Hello everyone, and thank you for joining Groupon's second quarter earnings call today.
spk04: We're excited to see strong performance in the second quarter, with revenues coming in at RMB 273.9 million, representing a 47.9% year-over-year increase and beating guidance once again. Our second quarter gross margin remained robust at 43.1%. Most importantly, our non-GAAP net loss narrowed to RMB 26.4 million, reflecting a significant 58.4% quarter-over-quarter decrease. Our dollar-based net customer retention rate remained steady at approximately 110% in the three months ended June 30, 2021. In the second quarter of 2021, our high-margin contact center and unified communications businesses contributed more than 50% of total revenue for the first time, with CC revenue more than doubling on a year-over-year basis.
spk08: We also noticed that ZOOM will purchase 5.9, the leading company in the U.S. stock market, with a price of 14.7 billion U.S. dollars. 5.9 provides SaaS services for industry customers in the U.S. In the Chinese market, Ronglian, as a leading company in this field, provides services for banks, insurance, cars, etc. This is a high-speed growth market. It is also because of Q2, we have a series of big customers' CC SaaS business online. Therefore, Ronglian's CC business income has increased by more than 100%. The big customer's CC SaaS business is one of the important growth points of Ronglian's next income continuous growth. Ronglian focuses on product creation. Ronglian's product strategy is to use communication as a starting point to provide new marketing SaaS services for companies with strong B2C characteristics. Ronglian starts from the marketing scene of industry customers, covering the acquisition of clues, the transformation of marketing, the operation of users, the management of sales, the acquisition of chain chains, decision-making, assistance, and other stages of marketing. In this product, Ronglian's core advantage is that it provides the ability to reach users from all channels, including phone, text, video, website, WeChat, and other new media, and through AI plus communication technology, such as AI's AI, AI's powder, AI's community operation, etc. These capabilities make the interaction between enterprises and users more efficient and accurate.
spk04: We noticed a recent announcement made by Zoom to acquire Five9, an industry-leading provider of CC services in the United States, for approximately $14.7 billion U.S. dollars consideration. Like Hupen, a leading industry player in China providing CCAS solutions to large enterprise customers from banking, insurance, automotive, and other industries. Five9 provides CCA solutions to large enterprise customers in the U.S. This transaction is a clear signal that Crouppen's strategic plan, heavily focused on CC business, is on the right track. We are excited to be expanding our footprint in this fast-growing market with huge opportunities, evidenced by the year-over-year doubling of our CC business revenue this quarter. This jump was primarily driven by CCAS solutions provided to a number of large enterprise customers. We believe our CC business will deliver even greater value going forward. Coupang will continue to develop its CCAS business targeting large enterprise customers as key growth drivers for sustainable revenue. We also focused heavily on product development As we empower clients with communication tools, we also add value with the product strategy of providing SaaS solutions to assist companies featured with B2C business model and new marketing. We aim to look at things from our clients' perspective by developing products that can help execute closed-loop marketing scenarios, including customer acquisition, sales conversion, user operations, sales management, efficient marketing, and P purchasing as well as decision aiding.
spk08: The data is stored in the customer side. Rong Lian is a customer with no contact data. Rong Lian will maintain a transparent call record and text record for three to six months, but will not collect and use personal information. In addition, Rong Lian has a clear agreement in the contract. Personal information protection exemptions and to the data encryption and setting of strict access rights. From a long-term perspective, we will continue to strengthen and provide a perfect data security solution to stabilize our leading position in the SaaS business. In terms of strategic cooperation, we will continue to cooperate with the starting point of Tencent, the company WeChat, and Tencent Cloud. Currently, CC's products have been listed as Tencent Cloud's joint development products. The product line of UC is also cooperating with Tencent Cloud in the field of industrial manufacturing, energy, business, and other areas, and is continuously signing orders. The entrance of the customer service of the corporate WeChat is also connecting us with the session of the customer service of the cloud at the end of the year. It is expected that Q3 will release the first edition of the product. My speech ends here. Next, I will give the time to Yipeng.
spk04: Data security has become a hot topic of discussion, and we are aware of the general public's growing concern regarding data security. Coupang prioritizes the security of its clients' data and provides multiple security solutions, including specialized or private cloud and local deployment, to satisfy different data security needs. For large enterprise customers, we mainly provide services through private cloud with data stored at client's end to which Coupang does not have access. For clients served through public cloud, we save desensitized conversation records and text messages for three to six months in strict compliance with network operator's requirements and client's inquiry needs. But we do not collect or use personally identifiable information. In addition, we utilize high-quality data encryption and strictly control data access, and our service contracts contain clear personal data protection disclaimer clauses. In the long run, we will continue to enhance our data security practices, ensuring our ability to provide best-in-class data security solutions and solidifying our leading position in the SaaS sector. While we have achieved solid progress in products and services as well as technology enhancement, our business is also growing steadily through strategic cooperation with leading enterprises such as Tencent, with whom we have partnership on Tencent Cloud, Tencent Xidian, which is Tencent Cloud's SCRM platform, and WeCom. Our CC products are now available on Tencent Cloud's joint development products platform. We have begun receiving orders for UC products through partnership with Tencent Cloud for a wide range of industries, including manufacturing, energy, and social governance. Furthermore, our seven more clouds will connect with WeCom's customer service interface, for which new products are expected to be officially launched in the third quarter. As our cooperation with industry peers broadens, our market position will be further enhanced. That concludes Sun Zong's prepared remarks. Thank you all for joining our call. Now we would like to turn the call over to Stephen for a closer view of our integration with Elite CRM and our second quarter financials.
spk01: Thank you, Changxin and Yili. Hello, everyone, and thank you for joining our call today. We are delighted with our robust results this quarter. Revenues displayed higher quality with our high-margin businesses, including our cloud-based contact center solutions and cloud-based unified communications and collaboration solution business, now contributing about 57.4% of the total revenue. Our dollar-based net customer retention rate remains sound at approximately 110% in the three months ended June 30th, 2021. Our integration with Elite CRM yielded remarkable results, including a stronger product pipeline and more large enterprise customers. As we enrich and refine our products, expand our customer base, and bolster profitability, we are confident in our ability to deliver stable long-term growth and consistently create value for our shareholders. First, I'd like to talk about our integration with Elite CRM. We completed integration with Elite CRM on a product level and more in-depth level in the second quarter The strategic synergies of the Elite CRM acquisition began to materialize as manifested by roughly RMB 13.7 million revenue attributable to the integration during the second quarter. Elite CRM's solid industrial insurance and vast technological capabilities in CRM and strengthen the application layer of our cloud communications infrastructure, complementing our existing business portfolio. Next, let's look at our financial metrics for the second quarter. We recorded impressive results this quarter, beating our projections with revenues totaling RMB 273.9 million, a 47.9% year-over-year increase. The increase was mainly driven by the strong performance of our CC business, which grew significantly at 105.1% year-over-year and contributed around 40% to our revenues. Our CC business has been thriving thanks to our diverse enterprise customers and especially increasing number of large enterprise customers. We have approximately 13,000 active customers as of June 30th, 2021, and most of which are small and medium-sized companies. However, our roster of large enterprise customers is growing steadily, with 205 customers at the end of the second quarter. Our customer concentration rate is very low, enhancing our overall stability. Cost of revenues increased by 36.8% to RMB 155.8 million in the second quarter of 2021 on a year-over-year basis, primarily due to increased telecommunications resource costs, outsourcing costs, and the staff costs as the company continues to scale its business. Growth profit increased by 65.4% year-over-year to RMB 118.1 million and the gross margin remained stable at 43.1% during the quarter. Now moving on to operation expenses. In the second quarter of 2021 operating expenses were RMB 214.5 million representing a 65.6% increase from RMB 129.5 million in the second quarter of 2020. R&D expenses increased by 69.1% to RMB 62 million in the second quarter of 2021, compared with RMB 36.6 million in the second quarter of 2020. Due to an increase in share-based compensation expenses of RMB 3.2 million, an increase in R&D staff expenses for development of core features and functions in cloud-based CC solutions and cloud-based UCMC solutions and an increase in technology service expenses paid to the outsourcing service providers for the development of certain non-core features and functions in cloud-based UC&C solutions. Selling and marketing expenses increased by 56.2% to RMB 72.8 million in the second quarter of 2021 from RMB 46.6 million in the second quarter of 2020 primarily due to an increase in share-based compensation expenses of RMB 6.6 million and the increase in stock expenses as the company continues to scale its business and reach a wider customer base. GMA expenses increased by 72.3% to RMB 79.7 million in the second quarter of 2021 from RMB 46.2 million in the second quarter of 2020 primarily due to an increase in share-based compensation expenses of RMB 28.4 million primarily relating to share options granted to eligible employees and directors and the restricted ordinary shares issued to management employees for business acquisition and the increase in social insurance premiums as the company benefited from social insurance premiums deduction in 2020 according to the government's relief policies during the COVID-19 outbreak. Net loss for the second quarter of 2021 was RMB 105.6 million, compared with RMB 62.2 million in the second quarter of 2020, with the increase primarily driven by increases in non-cash items of RMB 53.8 million. including the increases in share-based compensation of RMB 38.1 million and impairment loss of long-term investments of RMB 15.7 million. For the third quarter of 2021, Klupin currently expects revenues to be between RMB 275 million and RMB 278 million, representing an increase of 43.8% to 45.3% year-over-year. The above outlook is based on the current market conditions and reflects the company's current preliminary estimates of market and operating conditions and customer demand, all of which are subject to substantial uncertainty. With that, I would like to open up the call to questions. Operator, please.
spk02: 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 are 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 your question, please press star then 2. for the benefit of all participants. On today's call, if you ask a question, please first ask in Chinese and then in English. At this time, we will pause momentarily to assemble our roster. The first question comes from Mark Lee with Citi. Please go ahead.
spk00: Hi, Mr. Director. Congratulations on this very good performance. I am Li Ru from Huaqi Bank. I would like to ask, I noticed that the Q2 CC business performed very well. Can you share how the increase of Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q8 and Q7 Q8 Q8 Q9 Q8 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q8 Q9 Q9 Q8 Q9 Q9 Q8 Q9 Q9 Q8 Q9 Q9 Q8 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Q9 Hi, this is Mark Lee from Citi. Congratulations on the strong results. I want to ask, I noticed for the CC business, this quarter the growth has been quite strong. Could you share about the breakdown for RongCC and Chimo? Also, if we exclude the elite CRM contribution, what could be the organic core growth? Also, could you share about the new clients that you'll get in Q2 or their industry? Thank you.
spk01: Okay. This is Steven. For the revenue increase between 7More and RoomCC, like we mentioned before, RoomCC is increasing much faster compared to 7More. I think for this quarter, the RoomCC business is increasing much bigger than 100%. for the second quarter, and as for seven more, I think the increase for seven more is roughly around 40 to 50 percent for this quarter. Just one reminder, and this is actually also for your second question, the revenue for NCC included the about $30 million revenue generated from Elite CRM. So if we take this revenue from Elysium out, then the increase for our sales business for the second quarter is still over 80%. As for the number of, or some example of new customers added for this quarter, I will pass this question to our CEO. This is for some of our new customers. Do you have a list of customers? Wait a minute.
spk07: First of all, let me talk about the power of CC growth.
spk08: First of all, the main source of this QR is our big customers. CC cloud and AI transformation. This is the trend of high-speed growth. The second reason is the increase in the thickness of our products, especially with the increase of CRM and SCM modules. We provide a complete and secure SaaS service for new sales. Q2's new clients Sure. Thank you very much, management, and congrats again. I'll translate it in brief.
spk04: Our growth in CEC mainly relies on two factors. One is our superior sales and marketing team, and another is our continuously enriching products and functional models. Our target is to improve the customer acquisition efficiency and retention rate for its clients. So we currently provide all the services including customer acquisition and sales conversion efficient marketing. The new customers in Q2 is mainly customers from banking, brokers, and other financial situations. The specific name is not very convenient to reveal at this time. We can go on and take the next question.
spk02: Thank you. The next question comes from Mira Lee with CICC. Please go ahead.
spk05: In the second quarter, we see that the company's CC business is growing rapidly. I would like to ask about the new progress of CRM and SCRM business. The second question is about the recent growth in the online education industry. So from the demand for downstream, how much impact does this have on the company's business? The third question is about the number of active users. Because we see that the number of active users in the second quarter has decreased significantly compared to the EQ. I'm going to translate myself quickly. The first one is regarding piece of business. We see a strong growth of piece of business in the second quarter. So could you update more information about the progress of CRM and SCRM business? And my second question is regarding the online education sector, which has experienced some fluctuations recently. So what is the impact of the online education industry on our business? Third question is, we noticed that the number of active customers has decreased slightly compared to the first quarter. So could you share more information about the number of customers by product, such as CPAP, 1CC, and Tmall? And my last question is, could you give us the breakdown of growth margin in terms of the three segments? Thank you.
spk08: Let me answer your first question. In the beginning of the year, we acquired Guo Hebin, which is called Elite CIM. Guo Hebin's integration was very smooth, and the product and customer's strong coverage has begun to show. Guo Hebin's joint income of more than RMB13 million in Q2 In the later stage, we will have further growth in order to create a single order. We are still in the initial stage of SCM. For SCM, the team of Chimo and the team of Industrial Digital Cloud are working on the development. The main focus of Chimo is to set up the industry. The first version of our customer's CIM product has been released in Q2. Now it has formed a certain amount of refunds. This is what we said at the end, the progress of the product in the direction of SCM. The focus of the digital industrial cloud for SCM Thank you. The integration of Elite CRM with industrial digital division is very smooth currently. The strong complementarity between products and customers has begun to emerge.
spk04: And Elite CRM contributed over $30 million revenue in the second quarter. We believe that later on, the synergy in this business will become more apparent. The SDRM business of Krugman is still in its initial phase, and we are both doing SDRM and the new marketing services division, which named before 7More. And in our industrial digital division. For seven more, it's Juke SCIM has already established its first version in the second quarter and began to have some revenue in this quarter. And Rome CC will focus on insurance, automotive, and banks, these three industries. and we target to establish its first demo in the third quarter.
spk02: Was there a follow-up?
spk04: And the second question of CICC analyst is about... Okay, yeah, I will answer the remaining three questions.
spk01: The second question is regarding the recent policies on the education sector, what impact for our business. As of now, the impact is really not there yet. So for our system business, we have been operating as normal. But we expect there will be some changes some minor impact for our business, probably during the second half of the year. As we mentioned during the call, we focus on a lot of different industries. We don't rely on certain industries. The revenues from education sector account for about 8% of our total revenues. So we would expect there will be some minor impact, but since we have been doing very good in other industries, so our target for this year is still the same as the beginning of the year. The third question is regarding the small decrease in terms of our total active customers. Well, actually, the reason for this very small decrease is because we took out some very small customers in terms of ROI who are really not worth for the company investing a lot of resources into those very small customers. But like we mentioned during the call, the number of large enterprise customers you know, who are the major revenue contributor have been increasing for the past several quarters. And we expect this trend will continue into the future. And the very last question is regarding the gross margin for each of our business line. The gross margin for our CPaaS business for Q2 of 2021 is roughly 27%, and the gross margin for The CC business is around 56%, and the gross margin for our UCNC business is actually higher compared to previous quarters, is about 52% for the second quarter of 2021. Okay, thank you.
spk02: Again, if you have a question, please press star then 1. The next question comes from Tina Hu with Goldman Sachs. Please go ahead.
spk03: Okay, thank you very much for your time. I also have four questions. The first question is that I would like to confirm that our CC, because it is a large client, and then it is CC, uh, uh, We expect it to be a break-even between 2023 and 2024. The third question is about the cost of G&A this quarter. In fact, the net income has dropped a lot. uh uh OK.
spk01: I will answer the first three questions, and I think for your last question, we need to take a look. The first question is regarding the CC revenue, especially the room CC revenue. Yes, like I mentioned, the major reason for the increase of our CC business is due to the large enterprise customers, due to the room CC business. And in terms of recurring revenue or the licensing and the program revenue, right now it's about half and half. To be honest, as of now, most of the large enterprise customers are still much more preferred to have a tailor-made private cloud-based solutions compared to public cloud-based solutions, especially considering the recent policies regarding the data security issued by our governments. So I think for us, we'll continue to come up with solutions that most suitable to meet the demands of our large enterprise customers to protect their data security. And at the same time, we will get as much revenue as possible from the public cloud recurring model. The second question is regarding the break-even timetable. As we have been mentioning this since our IPO, I think right now considering the market conditions and the development stage of China's cloud-based communication business, the number one priority for the company is still to get more market share. So in terms of the Brookhaven plant, I think we are most concerned with the improvement of our productivity. I think that's evidenced by our financial results for the second quarter. You can probably see our operating efficiency and productivity have been improving very significantly. So as a result, we expect our breakeven plan will come probably sooner than what you mentioned during the call, but we can't give a very clear timetable in terms of when we can get to the breakeven point on a quarterly basis. The third question is, what's the third question? Oh, the third question is regarding the GLA expenses. Well, I think there are two reasons in terms of why the general expenses as a percentage of total revenue decrease a lot for the second quarter. First of all, as the company gets to a certain level, we will continue to invest in sales and marketing to expand our sales team in order to get more customers, and also we need to continue to invest in the R&D perspective as you know, continue to add more features to our products. But in terms of GMA function, I think it will be very stable in the next, you know, two to three years. And I think another reason is there are some one-time costs either related to, you know, to acquisition of some minority holdings, or in terms of related to IPOs, are not happening for this quarter. So I think those are the two reasons why the GNV, that's a percentage of total revenues decreased for this quarter. And the very last question, Yilin will answer the very last question.
spk04: Yeah, the increase in the numbers of shares outstanding is mainly because two reasons. The first one is because EPS is calculated on a weighted average of outstanding shares based on a time basis. So because we got listed in February, so we issued 46 million new shares in February the 9th. And also on the day we listed our preferred shares are turned into common shares. And the preferred shares are not calculated in EPS before, so it led to a huge increase in number of outstanding shares in second quarter. And our fully diluted number of shares should be around $350 million. It will be just a little higher than $320 million in the second project.
spk03: I understand. Thank you very much.
spk02: Did that conclude the answer to the question? Yes. Thank you.
spk04: We can take that.
spk02: Thank you. Showing no further questions, this will conclude our question and answer session. At this time, I'd like to turn the conference back over to Yi Lin, Investor Relations, for any closing remarks.
spk04: Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon. Good day and good night.
spk02: This concludes the earnings conference call. You may now disconnect your line. Thank you.
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