Yeahka Ltd

Ladies and gentlemen, good day and welcome to Yee Can Limited's 2024 Interim Results Announcement Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I'll now pass the call to Mr. Vincent Chan, General Manager of Capital Markets for the company. Please go ahead, sir.

Thank you and hello, everyone. Welcome to ECAS 2024 Insurance Results Conference call. Before we start, we would like to remind you that this presentation includes forward-looking statements that involve a number of risks and uncertainties. Information on general market conditions come from a variety of sources outside of ECAS control. Please refer to our disclosure documents on our website's IR section for a detailed discussion of risk factors. Now, let me introduce the management team on today's call. Luke Liu, our founder, chairman, and CEO, will kick off with a short overview. I will then provide a business review. John Yao, our CFO, will conclude with a financial review translated by Derek Lai, our Director of Finance, before we open the floor for questions. Without further ado, I will now turn the call over to Luke.

Thank you, Vincent. Hello, everyone. Amid the microeconomic volatility in the first half of 2024, we remain steadfast to our long-term vision being an all-rounded commerce enablement services provider to merchants. We made more progress, increasing salaries beyond payments into other business lines, more international expansion, and wider application of AI. We believe this provides a higher quality of basis to seize more opportunities in the longer game and to deliver sustainable profits and value to our stakeholders. First, we advanced our one-stop payment services business model with wider regions covered in underserved markets. Further, diversified and resilient set of vertical penetrating more profitable customer segments served. and broader customer acquisition channels through deeper collaboration with strategic partners. We served more large and mid-sized merchants, leveraging the network and partnerships with over 100 banks as we scaled our product and region coverage. Our one-stop offering of payments, plus other commerce enablement services also give us a unique edge in digitizing for and certifying the various demand of large and mid-sized merchants. We therefore maintain our market leadership with a strength of foundation. Second, we up both our long payment services commercialization. and a share of revenue and profit contribution. This makes our service offering even more comprehensive and resilient than before and underscores our commitment to be the one-stop commerce enablement services provider for merchants. This long payment business also enhanced their profit margins year over year. We also significantly increase sales efficiency in our in-store e-commerce services with agile approaches feeding the micro trends in the industry. This is a visible pathway to run with the profitability in the second half and a sustainable growth in the year to come for this business. Third, we make Great Stripes oversees winning over 200 global brands, covering more than 20,000 stores. Our investment company, Fushi, offers proprietary and localized merchant solutions that satisfy demand from world-renowned customers. It is wiping out the latest products and vertical coverage. As many of you know, overseas markets have many pockets with attractive economics, and this paved the way for the very wide channels of profit to come. Fourth, we further integrated large-language models for both revenue-generating and cost-optimizing purposes. Our new products helped merchants ultimate price seeding to optimize monetization. We empowered them with precise marketing and automatic content generation tools to raise sales conversion. We also applied to our own customer servicing system. Therefore, our selling and Administrative expenses continue to decrease year over year by more than 10%. And last but not least, our ESG efforts were recognized internationally. For instance, in S&P Global's 2024 Sustainability Yearbook and ranked first in our industry in China. Our business uplifts underserved merchants and consumers in communities locally and abroad. In the first half of 2024, we increased the energy usage utilization rate by 7% through constructing green data centers and traded 12 million risky transactions with wider adoption of AI. we remain committed to based on payments beyond payments. Our proposition has always been to leverage our extensive payments platform to fully digitize merchants all around their commerce. Such full suite technology remains our age over others. In feeling more agile scaling up and now is increasingly about going global, as we play a more important role in global journey of digitization. On this note, may I pass to Vincent to give a detailed business review?

Thank you, Luke. We sustained market leadership in one-stop payment services business with foundation reinforced for all-rounded high-quality growth. Whilst industry-wide down-trading consumption drove down average transaction amount per customer, enhanced GPV, our peak daily counts of app-based payment transactions maintained nearly 60 million, and our fee rate remained stable at 12.3 bps in the first half of 2024. This demonstrates our pricing power as China's leading payment brand and merchants' preference for our services. Interchange fee adjustment also impacted our payment revenue in the first half, but such impacts will cease in the second half. We therefore focused on intrinsic resilience of this business. First, we deepened into lower tier cities, especially in north and southwest China, to assess many underserved merchants. Second, we diversified our verticals into those with stronger economic resilience. For example, sports and fitness, healthcare, energy and services. Third, we selected collaboration with more profitable customers, including serving large and medium-sized merchants. Fourth, we adopted broader customer acquisition channels, such as with SaaS providers and over 100 banks. Such network and partnerships helped us win more large and medium-sized merchants. Our services that go beyond payments into many other commerce-enabling technology also satisfy high demands from larger-sized clients. Our proactive overseas expansion also grew rapidly. For instance, our GPV in Singapore grew over 50% year-on-year. New global brands won over include Bvlgari, Child Type Folk Jewelry, Rolex, Mikimoto, TWGT, Fred Perry, and Beach & Hound. For products in overseas regions, We also expanded services such as local wallets, overseas wallets, credit cards, foreign exchange, and cross-border remittances to satisfy customers' demands in various regions. We collaborated with chain stores, large shopping malls, and food courts to improve efficiency of acquiring payment transaction volume. Our store competitive advantage overseas is our payment plus commerce enablement technology. This helps us present one-stop services to merchants overseas and offer convenient solutions to the demand in changing circumstances. That allows us to capture more opportunities globally where customers' willingness to pay is generally more attractive. Turning to merchant solutions business, we maintained our strong capabilities in providing tailor-made offerings to merchants specific to their different verticals. We provided a wider variety of value-added services to address our merchants' entire lifecycle demands. We also increased monetization. Therefore, revenue from our merchant solutions grew 21.2% year on year in the first half of 2024. Our AI and data-driven tools are backed by our proprietary technology stacks, as well as our computing algorithm. and our big data models are continually trained by the sheer amount of transactional and behavioral data through our services. So we are well positioned to devise further application scenarios in various settings, geographies, and markets. As much of the R&D investments were made in the past, gross profit margin for our merchant solutions further increased to 90.9%. In terms of in-store e-commerce services, we strategically focus on higher quality and more profitable customers based on continual review of market dynamics in each locality, whilst phasing out those who are not generating as much. For example, we increase servicing key accounts and chain stores, such as NYSRA and Yuanji Yunjiao, from over 13,000 branded stores at year end of 2023 to over 18,000 at the end of current first half, or an increase of 35%. There are more demands for customized services in creative marketing through various forms of content channels. And these are met by our diverse range of services, including short videos, live streaming, and online store upgrades that boosted their store-level productivity. thereby increasing their stickiness to us and also willingness to pay for our services. As a result, sales efficiency grew. Both revenue per merchants and revenue per our employee increased during the first half of 2024. Furthermore, we increased adopting upfront fees in addition to commission fees based on merchants' GMV. These fees, in advance, of our launch of services helps protect profitability of each project we select. As a result, our gross margin further increased to 81.5% in the first half of 2024. Both gross profit per merchants and gross profit per our employee increased during the period. Net loss in the first half of 2024 also continued to decrease by 39.6% year over year to RMB 15.6 million. when rates profitability has become more visible by this second half. Such strategic upgrade also lays a more solid foundation for sustainable, high-quality profit growth in the long term. Our long-term international development strategies also made remarkable progress across business lines. We entered into economically attractive markets with customers' high willingness to pay, and that increases our profit quality. On the back of the 50% year-over-year GPV growth overseas, we believe the global customers in payments give us good opportunities to expand our broader commerce enablement offerings to merchants. All our proprietary technology stacks, established payment routes, and big data algorithm as a result of experiences working with tens of millions of merchants for over a decade are all ready for deployment further overseas. In fact, our Fuxi business, a commerce enablement platform in APAC, is already serving our merchant solutions overseas for over 200 global and regional brands such as Starbucks, Wuji, Pizza Hut, Sunway, New Balance, and Levi's, covering over 20,000 stores in Southeast Asia, including Indonesia, Vietnam, Malaysia, and Singapore. As these brands expand footprints in the region, Fushi is also naturally positioned to provide various self-developed products to these brands in the new geographies. For example, more customized applications are served for these same customers to improve their service efficiency, thereby increasing their effectiveness to us. We have our own local team overseas that understands a very particular customer's preference by various verticals within these overseas markets. We are also expanding into more verticals such as energy, real estate, and business services as we scale. And last but not least, as a company funded with TechDNA, we remain relentless using large language models for both revenue generating and cost-optimizing purposes. We have our own AI laboratory and development and science center to coordinate such efforts across departments so that AI usage in various commerce scenarios are optimized for merchants, both domestically and internationally. For example, we launched new products to help merchants automate price setting, perform precise marketing with tools otherwise more available to larger corporates, and generate automatic content with style consistent to their unique branding. All these increased our merchants' sales conversion and productivity and lowered their cost per head. We also furthered applied AI usage to our sales tool. We raised AI code adoption rates to enhance programming efficiencies. We integrated large models into our product upgrade to streamline workflows. We also stepped up language conversion tools for consumers servicing checkbox in multi-language environments as we scale overseas. Our automated customer service efficacy rate increased to over 80%, and our selling and administrative expenses continue to decrease year over year by more than 10%, which is yet another driver for our sustainable delivery of profitable return to our stakeholders as we scale along the global journey of digitization. On this note, I'll pass to John, our CFO, to reveal our financial results and be translated by our Director of Finance, Derek. Thank you.

Thank you, Vincent. Hello, everyone. Now I would like to introduce EECA's financial performance in the first half of 2024.

Thanks, Vincent. Hello, everyone. Let me introduce the financial performance of EECA in the first half of 2024.

Our income was $24.62 billion in the first half of 2023.

A revenue decreased by 23.5% from RMB 2.1 billion in the first half of 2023 to RMB 1.6 billion in the same period of 2024. This is due to macroeconomic volatility, which leads to a temporary decline in the payment GPV. 另一方面是由于我们主动淘汰盈利能力较低的客户及项目。 In addition, we proactively eliminate customers and projects with lower profitability.

虽然收入总额下降,但是我们的收入结构进一步得到优化。

Although the total revenue decreased, our revenue structure was further optimized.

具体表现为,不仅非支付业务收入绝对值同比增长, 而且非支付业务收入对公司整体收入的贡献比例也显著提升。 该比例从23年上半年的11%提高至今年同期的44.6%。

Besides the revenue of non-payment business increased year on year, the contribution ratio of non-payment business revenue to the company's overall revenue has also increased from 11% in the first half of 2023 to 14.6% in the same period this year.

理卡的獨特優勢是能為商戶提供從基礎設施到

e-card's unique advantage is that it can provide merchants with a full range of services from basic payment facilities to digital solutions, which makes our business highly flexible and scalable.

In the first half of 2024, our gross profit decreased to 300 million RMB, mainly due to the decline in revenue.

However, the overall gross profit margin increased from 17.7% in the first half of 2023 to 19% in the same period this year.

This is mainly due to the increase in the proportion of non-payment revenue mentioned above.

This gross profit margin is not only higher than that of payment business, but also has been rising in the past three years.

The gross profit margin of merchant solution increased from

87.6% in the first half of 2023 to 90.9% in the same period this year. And the gross profit margin of in-store e-commerce services increased from 76.9% in the first half of 2023 to 81.5% in the same period this year.

這些成果都得益於我們三大業務持續的交叉銷售, 使得協同效益提升。

All these results benefit from the continued cross-selling and synergies of our three business lines.

Non-payment business has always been an important part of our long-term strategy.

the benefits of our early R&D investment have gradually begun to show.

This has helped diversify the company's profit structure, increasing the gross profit margin of non-payment business from

52.6% in the first half of 2023 to 69.1% in the same period this year. Our net profit in the first half of 2024 of RMB 32.6 million has exceeded three times of the annual net profit of Renminbi, 10.1 million in 2023. 这是由于我们的成本和费用端进行了进一步的优化。 This is because our costs and expenses have been further improved and optimized.

首先AI的深度使用为我们节约了人力成本,今年上半年, First, the in-depth use of AI has saved our labor costs.

Therefore, the sales and administrative expenses in the first half of this year decreased by 11.2% compared with the same period last year.

其次,我們降低了融資成本並優化資本結構。

Second, we reduced financing costs and optimized capital structure, resulting in a 6.2% decrease in financing costs.

预计24年下半年会进一步下降。

and a decrease in gearing ratio from 45% at the end of last year to 41% in the middle of this year, and it is expected to decline further in the second half of 2024.

The three steps provide solid foundations for the company's continued growth in high-quality profits, and can help the company to develop healthily in the global digitalization process.

The above mentioned layout provides a solid foundation for the company's continued high-quality profit growth and can help the company develop healthily in the global digitalization process.

Thank you, John. Thank you. With that, may we open up the call to any questions from the nine? Operator, can you go ahead?

Thank you. As a reminder to ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 and 1 again. We will take our first question and your first question comes from the line of Thomas Chong from Jefferies. Please go ahead your line is open.

Let me translate myself. I've got three questions here. The first one is the impact of the microenvironment on payment business. And the second, what's the future strategy on our local services? And the last one is, What's the latest updates on overseas business? Thank you.

Thank you, Carol. It's good to hear from you.

Regarding your first question about macro impact, the first half of 2023, or 23 as a whole year, is indeed a high base given the consumption recovery in China post-COVID. The problem in first half this year is macroeconomics in China and its impact on consumption pattern towards non-trading. That means decrease in average transaction value, which is consistent to many industry reports and narratives on results from other public companies and other reports that you might have seen. If that did not change, our GBV and revenue will be better because we kept up the number of transactions served day in and day out, as well as the fee rate. Our peak daily counts of transactions, as I mentioned earlier, remains at about 60 million per day. and our fee rate remains 12.3 bps, which speaks about one, the frequency of transaction activities in China is still vibrant bright and large, and number two, our continued ability to garner this market share given our brand and our product services capabilities. And generally, we also think that regulations are good for the industry long term. It provides a healthier environment for capable service providers to demonstrate their real edge. Merchants appreciate one-stop services addressing their genuine commercial needs. That sets us apart from the crowds because there are many service providers out there, but not full suite payment and commerce enablement technology solution end-to-end and across China and overseas. And with regard to your second question about install e-commerce strategies. We upgraded our model to focus on higher quality and more profitable customers. We continually revealed the market dynamics in each locality. We also phased out some of the customers that may not be generating as much. And that's why some of the names that I mentioned earlier came into place. They're all chain stores like and the number of stores served for them also increased by 35%. These type of customers, like Tastian Burgers and all the big name chains, they have more demands for customized services through short videos, live streaming, text, graphics, online store upgrades, and we provide all this end-to-end, and we help them do their business better. And that's how we grow our sales efficiency, how we grow our revenue per head, revenue per merchant as well as gross profit from each of these merchants. And another important upgrade is the way we receive revenue from them by increasing the upfront fees portion. And that's very important because it's loosening up the connection with the GMV with these merchants as well as helping us to make sure that the profitability of each project we take on is good enough to fit into our long-term plan. And as a result, our gross margin increased, and the net loss for this business also increased by quite a large amount this year. And therefore, as we project further out, we are quite confident about runway profitability by the second half of this year. And that's very important because it lays a stronger foundation for us to deliver sustainable growth in many years to come. And your last question about overseas progress, there's a lot of remarkable progress to share. The GPV in Singapore grew over 50% year on year, for example. We won a lot of new global brands by serving these customers locally in these overseas regions. We also expanded our product offerings to make it as comprehensive as possible ranging from local, international, foreign exchange, all kinds of payment methods by collaborating also with more merchants, more chain stores, larger shopping malls, food courts that help us acquire larger transaction volume. And we believe that our core proposition being payment plus commerce enablement technology also applies over there. because we present our one-stop services solutions to these merchants overseas, and they have these demands, and they appreciate that, and therefore use our services also overseas. From our point of view, we are very excited about this. Overseas market, we see that customers offer higher attractive economics, and their willingness to pay is also higher. That's on the payment side. On the commerce enablement side, our Fushi business is also serving many customers overseas. Names like Starbucks, over 200 of these overseas, they are using our services already. And we are very excited about it because as these brands expand footprints in the region, we are also naturally positioned to provide various self-developed products to these brands in the new geographies. For example, more customized applications are served for these SAM customers to improve their service efficiency and to increase their stickiness to us. And we believe that our local team overseas that understands local demands will also help us expand into further verticals going forward. And so we believe all these global customers in both payment and non-payment sides give us good opportunities to expand along with them. And our tech stacks, our payment rails, our big data algorithm, all these would be very helpful for us to keep serving them overseas.

Thank you. We will take our next question. Your next question comes from the line of Vicky Wei from Citi. Please go ahead. Your line is open.

Thanks, management, for taking my question. Will management share some color about the free rate trend and the competition landscape for the payment business in the second half? Thank you.

Thanks, Vicky.

Thanks for dialing in. On fees rate, First of all, as I mentioned before, 2023 is quite a high base. But if you put into perspective, the feed rate in 2021 was 10, 11 bps. 22 was 12, 15 bps. 23 was 13, 14 bps. It would be unrealistic to forecast feed rates to keep growing in the macro environment facing us in China today. If you look at our 12.3 bps feed rate in the first half this year, remaining similar to our previous costs. Even though the external environment was better last year, we think that it does speak about our market share and leadership by leveraging our full switch payment and digital tax services. And we enforce our ecosystem, leaving our partners with reasonable margins as well. So we are quite confident about our fee rate being maintained at low teams, even if we are to be conservative about the macro environments going forward. In terms of competitive landscape, the market continues to prefer service providers with full service, full value chain, you know, one stop. That's our unique proposition. Those who are constrained by product range, regions coverage, or technological abilities, or ability to adapt in an ever-changing environment would generally lose their places along the value chain, I believe. And that leaves the relatively fragmented market today. to be more consolidated going forward towards the top ones. That's the case in many other parts of the world, we see. And therefore, in our overseas expansion, we adopt a similar approach, leveraging the tech stacks and service offerings we already have. As we believe, high-quality services and channels are appreciated by merchants, and that's how we won our global names, like Chow Tai Fook and Mikimoto. And we do see a lot of room to grow in these overseas markets which offer attractive economics with high willingness to pay. And I also think AI will be another key differentiating factor on both revenue generation and cost reduction. We started to monetize through helping merchants automate price setting, launch precise marketing, generate content automatically, et cetera. It's not just about the tech, but the main knowledge about the verticals. about lowering your clients in each specific industry. And those who have this combination, we believe, will have a unique edge in the non-DM. Hopefully that gives you more perspectives about how we look at the industry going forward.

Thank you. We will take our next question. And your next question comes from the line of Hang Su from CICC. Please go ahead. Your line is open.

Good evening, management. Thank you for accepting my question. I am Su Hang, the interpreter of the central company. There are two questions I would like to ask the management. One is to ask how you see the monitoring trend of the domestic payment industry and the development progress of the domestic cash collection. Another is a mid-term plan for overseas payment business, including target market and business center. So this is Han Su from CCC. I have two questions for the management. The first is how you think of the trend of regulation and the impacts on offline post-payment business. And the second is what's your mid-term strategy of overseas payment business, including the target markets and focuses of business? Thank you.

Thanks, Suhan. Good to hear from you. I'll answer the first question, and Luke will take the second one. First one about regulations, I think it is generally good for the industry on a long-term basis. Merchants do appreciate one-stop services addressing their genuine commercial needs, and regulation provides a healthier environment for those who are capable to demonstrate their edge. And I think that sets us apart from the crowds because there are many service providers out there, but not all of them can provide the unique proposition that we offer day in and day out. I'm not too worried about regulations nor impact from the bigger picture as we have demonstrated about our market share through the number of transactions as well as our pricing power through the fees way that we see. And internationalizing has been also our core strategies because our global customers give us good opportunities to expand along with them with attractive economics and also good margins overseas. We think that paves the wrong way for a very wide channel of profits to come as we serve overseas like a local service provider. And again, AI is truly exciting. We started to monetize through it already, and we believe this is an early start in making tools more widely available to merchants, leveraging all these merchants' insights we have across different verticals that even pure tech technology companies without the merchant's edge don't have. I'll hand over to Luke for the second question about our plan overseas and our focus.

So for the overseas business strategy, if I can summarize, we try to leverage existing products and experience in China to other regions. We are focused on the local customer and try to provide the products to the local consumers and merchants, not only targeting the Chinese tourists. I think this is a big difference between us and the competitors. And secondly, we want to provide a one-stop service for the merchant sites. Not only the payment business, but also the digital solutions, marketing solutions, and the fintech services. So, you know, it's a blue ocean for the a lot of regions. It's hard for a merchant to find a first-reach service package that can get all the solutions done. A lot of them can use the payment infrastructure can use mobile payment or they can collect money, but they cannot to, I mean, to automate their inner process of their stores or their shops. We can give them, I mean, high quality but lower cost solutions for them. I think it's also a unique advantage of us. We are still setting up the infrastructure so far, but we are confident that one day we can provide the whole services, which we are also providing in China. Thank you.

Thank you. Once again, if you wish to ask a question, please press star 1 and 1 on your telephone.

We will take our next question.

And your next question comes from the line of Johnny Tsai from Deutsche Bank. Please go ahead. Your line is open.

Hi, this is Johnny from Deutsche Bank. My question is about overseas expansion. So could you share more how much revenue and GMV as well as the profit contributed from overseas and what's your expect the optimal percentage contribution in the future? Second question is about the, I noticed that the company employees number continue to reduce. So could you share which kind of job function has been reduced and how much more operating costs can we reduce in the second half? Thank you.

Thanks a lot, Johnny.

Thanks for initiating coverage on us as well. First of all, in terms of overseas business contribution, we are currently deriving revenue from a variety of countries, from Singapore, Indonesia, Malaysia, as well as other in the region. We will continue to expand the contribution from a wider variety of sources. We do think that is a very important long game. This is a relatively early start of us, but at the same time, there's a lot of growth opportunities in the overseas market, especially in the developed ones. We see that the economics are very attractive. the margins is also more so over there. And we therefore, we're very focused on the type of segments and markets that we are entering into to ensure that as we grow further, there will be a meaningful contribution to our business model as well as helping us to deliver sustainable growth delivery. Secondly, in terms of the lower number of employees, a lot of that are indeed replaced by our AI expertise. I'll give you examples. In the automatic content generation space, as well as the servicing space with customers, a lot of it replaced by chatbots doing so, based on our large language models. And therefore, we don't need as many manual labor as before. And we find that customer experience that we heard is also very satisfactory and therefore help us to deploy more AI technology going forward in this regard. We think that there's a trend. We think that there's more to be done. And there's more to be harnessed. For example, if I take customer servicing rate right now, we have increased it to about 80%. But there's also more things to be done in this regard and in many other regards as well. So many more exciting things to come.

Thank you.

This concludes today's question and answer session. I'll now hand the call back to management for closing remarks.

Thank you very much. I would like to thank you everyone again for joining our results today. We are now ending the call. If you have any further questions, please feel free to contact us directly. Our contacts together with other information in relation to our results can be found on our website at www.e-car.com. Thank you and see you again soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.