Weimob Inc. (2013) Earnings Call Transcript

Good evening, ladies and gentlemen. Welcome to Weimob Inc.'s 2025 Interim Results Conference Call. A copy of the interim results announcement can be found and downloaded from the company's Investor Relations website. [Operator Instructions] This call will be conducted in Mandarin and English simultaneous interpretation will be provided. Please note that this conference may cover non-IFRS metrics and refer to the company's results announcement. Joining us today on the call are Mr. Sun Taoyong, Chairman of the Board and Chief Executive Officer; Mr. You Fengchun, Executive Director and President of Weimob Group; and Mr. Cao Yi, Chief Financial Officer. I will now turn the call over to Mr. Sun.

Investors, analysts, good evening. Now let me do a review of our company's 2025 first half results and the second half outlook. I believe you have already read our half yearly report. So I would like to go through the salient points with you. In the past 3 years, all along, we have been striving to lower cost and improve efficiency and high-quality development. AI technology is the core drive, and we are enhancing our marketing as well as operational efficiency, and we have achieved some results. Now let me present our financial results. First, revenue. So looking back in 2024, perhaps you are aware from our financial statements, our revenue declined quite a lot and loss expanded. And there are 2 major reasons. The first is advertising media platforms change of rebate policy. Now actually, our policy adjustment lagged behind until the second half of last year. So actually, in the first half, if you talk about advertising merchants revenue, it has to be adjusted. Second reason, last year, we did cost control and efficiency improvement, and we exited from a lot of low-margin businesses and lost businesses. So as a result, revenue also came down for the whole year. If we exclude the impact about media policies, then overall revenue was up 7.8% year-on-year. So revenue had achieved a turnaround. If we exclude impact from small- to medium-sized businesses, our revenue should reach double digits growth. And if we look at second half of last year on a half-on-half basis, our revenue growth was 29%. So that's about our first half revenue. And then about gross profit. This year, actually, we achieved a very good number for gross profit. Last year, it's RMB 6.64 billion, and we're up 75 -- we are up 8.7 percentage points to RMB 7.5 billion. Adjusted gross profit, that is after excluding last year's rebate impact, we're up 36% year-on-year. And this is mainly because in the past few years, we achieved high-quality development, and we have also phased out some low-margin businesses. Then about profit, I think you are most concerned about this. So we are happy to say that in the first half this year, we achieved the first turnaround since 2021, adjusted EBITDA at RMB 72 million, adjusted net profit, RMB 17 million. And operating cash flow also improved a lot from the end of last year. So there is only small outflow. In the past 3 years, we cut cost and improved efficiency. We achieved high-quality development. AI is our new growth direction. And so far, we have seen achievements and effectiveness. And then concerning subscription revenue, for subscription revenue on a year-on-year basis, there is a 10% decline. Major reason is that last year, we phased out many small- to medium-sized revenue. And for subscription revenue, there is, as a result, some impact -- some deferred impact. At the end -- at the second half of 2023, there is some base impact in relation to revenue deferment. And so there is further impact on subscription revenue, leading to a small decline. However, on a half-on-half basis, in fact, subscription revenue has stabilized and achieved growth. Two main reasons. For our key accounts, Smart Retail revenue is very stable. This year, for Smart Retail, there is more decline in the revenue. Overall speaking, it is because of the overall macro economy and some enterprises have cut their budget and then demand is also deferred. As a result, there is a slight decline. But then for Smart Retail, overall speaking, revenue is stable, RMB 286 million. So the overall retention rate is very high. Merchants operation is very good. Merchants mind share is very good. Now some merchants have reduced store count. So overall speaking, revenue is stable for key accounts. At the same time, for the first time, we disclosed this number, and that is AI-related revenue. In the first half this year, it reached RMB 34 million. So as a result, our SaaS business had stabilized and achieved growth. So as a result, this is a new growth driver for our SaaS business. And then in relation to Merchant Solution revenue in the first half this year, gross billing was RMB 8.8 billion, up 3 percentage points. Now this year, we still insist on high-quality development. So for low gross margin and long credit cycle businesses and customers, we have phased them out. So our gross billing comparing with the same period last year was quite good. And last year, because platforms adjusted their rebate policy, we have adjusted the policy correspondingly. And then for customer rebates, they have decreased. This year, the rebate gap has gone back to positive. So RMB 338 million is the Merchant Solution revenue comparing with second half of last year, there is more than a onetime growth. Last year, in the first half, we had to adjust the media revenue rebates. Well, if we exclude this adjustment, then Merchant Solutions revenue growth was 45.3%. Merchant Solutions gross profit is high, 91%. So for TSO and financial businesses, we have actually decreased these businesses. Overall speaking, if you look at revenue, gross profit and profit, overall speaking, I think that in the past 3 years, by lowering cost and improving efficiency and by insisting on high-quality development, we have achieved quite good results. Now let's take a look at our business specifically. First of all, moving upmarket, that is Smart Retail. Right now, it is very stable and sound. For some large industries like property, commercial property, retail, fashion retail and so on, their shares are very high. Overall revenue is stable, accounting for 65.2% of total subscription revenue. For merchants, GMV growth, it is also very good. On a year-on-year basis, it's up 13.4%. And then GMV results and also number of GMV merchants grew a lot. And then when we face key customers and also integrated solutions, our solutions are well received by many merchants. The year-on-year growth is very satisfactory. In the first half of the year, we worked on multi-platform operation. So you have read our media information. Together with some mini shop, we are doing a lot of integration. So for example, inventory, merchandise, members' benefits and so on, these are all integrated and synergized. And then on WeChat e-commerce, we have achieved in-depth integration for Weimob mini program on Douyin and Meituan, we have achieved connection. So TikTok and Meituan, the voucher issue systems have been connected already. And we are also integrated with RedNote and also Alipay. Recently, we have connected to these platforms. And for business scenarios and vertical industries, this year, for pet industry, we have offered a solution for the pet industry, now this industry is in a leading position. And also for other, for example, shopping department store, shopping guidance and so on, we are doing a good job. And also, we are doing a good job with the property sector. So here, you can see our business solution matrix. In the past, for example, wholesale business, membership services, sales guidance services, enterprise WeChat business, our revenue with big customers showed stable growth. Next, let's talk about the focus of this year, and that is AI. I'm sure everyone is paying attention to it. Starting 2023, we began to prepare for our AI product WAI. So here, we have 3 product matrices, WAI SaaS, WAI Pro, and WIME. So for WAI SaaS, it is based on the existing SaaS customers. So we offer the WAI product. And basically, there are store, construction store decoration and also image generation. Altogether, there are 15 agents that can help merchants to build their stores very quickly and achieve online operation. Now in the past, we sold software to merchants, but now we offer to merchants and we deliver to merchants. An operation team with digital employees, so 15 agents are -- like 15 digital agents. In the past, we meet a designer and shopping guide and customer service person and also digital data analysts and so on. Now they have been turned into a digital employee being delivered to merchants. So merchants only need very small manpower. Even one person may be enough. So with the integration between AI and the digital employee, merchants can very quickly operate their stores. So we can see that store building is a lot faster. So merchants stores building agent, utilization rate was up by 5x and active level of merchants is also a lot higher. So that's about our WAI SaaS product. And then for WAI Pro, we offer a customized AI service to merchants. Some merchants may have very special scenarios. For example, in terms of health service and also digital person. So there are some specific agents based on our own experience, we can do customization and AI service for them. So this is one breakthrough that we have achieved. Finally, for [2C] segment, consumers or professional type consumers, they can be individuals or they can be sole proprietors and we offer WIME product. For WIME, it is not only based on WeChat's mini program. E-commerce customers can use our WIME. Besides, for example, product image generation, product posters and also one-click change for everything, all these can be generated with WIME. In the past, merchants incurred a lot of costs in the generation of their product images. They may have to hire models for photography. So this entails a lot of cost. But with WIME, we can quickly generate the necessary images. And then we have already 116,000 registered WIME users and revenue growth month-on-month was 172%. So that's our progress in WIME. Now let me talk about our marketing segment. So for Weimob marketing, overall, gross revenue was up 3.4% year-on-year. Merchant Solution revenue was up 45%. One important growth point is our video account advertising. So consumption is up 46% year-on-year. If you take a look at gross billing of video accounts every year, it achieved rapid growth for Weimob. In terms of video account advertising market share, it is very high. Besides, we have multiple channels, we have RedNote advertising. Consumption is up 67%. And internally, through AI, we can lower cost and improve efficiency. Internally, we have 4 different systems. So [indiscernible] and so on, so they can help our overall advertising efficiency and lower cost for us. At the same time, we have integrated a lot of media offering total solutions for our customers. So that is an important breakthrough for our merchant solutions. And finally, let me talk about outlook. First of all, the most important point is that we embrace AI. I personally think that Weimob upon our establishment was a company with 10-year mobile Internet cycle. In the coming 10 years, it is going to be a big AI cycle and Weimob fully embraces AI. And we will also promote the utilization and implementation of AI agent applications. Now we already have 15 agents. In the future, we will continue to work more on new scenarios, and we will offer more agent utilization for customers. No matter whether we're talking about WAI SaaS, WAI Pro and WIME, we are continuously iterating. So they will be incorporated into merchants, e-commerce and operations. Besides, we dig deep into WeChat e-commerce ecosystem. Last year -- at the end of last year, for WeChat gift-giving function after it was launched, WeChat e-commerce achieved a very good effect. So this year, when we look at WeChat e-commerce, it is continuing to strengthen, for example, recommendation -- purchase recommendation and so on. And then we are preparing a lot of other related businesses. In the future, in the whole WeChat e-commerce ecosystem, its robust development will help our SaaS business overall speaking. Third, we expand multichannel business possibilities. We can see that overall speaking, in the past, regarding SaaS, we already expanded on RedNote, Meituan and also TikTok. And in the future, we will focus more to enhance each ecosystem. When it comes to precise marketing, in the past, on RedNote and Kuaishou, we already achieved rapid growth. And this year, in Q4, we may start our TikTok business. In 2021, regarding TikTok business, we achieved RMB 3 billion GMV scale. And in the future, we will restart the TikTok business. And we believe that in Q4 or next year, for our overall merchant solution revenue, it will give a big drive. And number four, we will strive to expand local life services market. Right now, online e-commerce retail business many customers have gradually reached saturation. But for off-line, no matter whether you talk about F&B or beauty services and also on-demand home services, there are a lot. So now we are working, focusing on on-demand home services scenarios and also for retail, leisure, health care, clinic, pet services and also home repair, maintenance, we are offering corresponding solutions. So in terms of local life services market, it will become a main growth engine for our overall SaaS business in the future. Finally, internationalization. For our international business, in the past all along, we have been planning and making deployments for our overseas business. We are an important service provider for Shopify. We offered a lot of applications to overseas customers. At the same time, in the future, we will set up a Weimob global business department to help Chinese brands to go global. And then for Weimob going global, we will incorporate overseas marketing. And then there are a lot of advanced overseas tools, including our integrated operation service. In the future, in September, roughly, we will announce to the public our business progress in terms of Weimob going global. And then for heading, in Southeast Asia, Middle East, Europe and Africa and North America, we have achieved quite good progress. So for example, Pop Mart and also MINISO and so on, we focus on these businesses going global. So the above are some highlights of financial performance and also business outlook. Next, our CFO, Mr. Cao, will go through in detail our financial results. Thank you.

Analysts, investors, good evening. Now I'm going to present to you our first half overall financial performance. In 2025, we faced very complicated volatile external environment, and there is the AI technology revolution. We focused on cost control and improvement of efficiency. We wanted to achieve turnaround. At the same time, in relation to e-commerce AI technology application, we wanted to use technology to drive growth and transformation. In the first half, total revenue was RMB 780 million. Looking at the financial statements, it's down 10.6%. As Mr. Sun just said, in 2024, on advertising platform, there was the decrease in rebate and the timing was quite late. So there is a big difference between the ratio in the first half and second half. So looking at the full year rebate percentage and after making adjustments between first half and second half, in first half, comparing with first half 2024, we are up 7.8% in revenue. For subscription revenue, RMB 440 million, down 10.1%. But on a half-on-half basis, subscription revenue had stabilized. There is slight growth. For Merchant Solution revenue, RMB 340 million, down 11.3% year-on-year. However, as I said earlier, if we try to readjust the rebate impact, then the adjusted revenue achieved 45.3% growth, which is quite a big growth. In first half 2025, revenue share was stable. Revenue breakdown was stable. But then for subscription revenue, apart from retail revenue, which is stable at 60-plus percent, our company actively explored AI technology used around e-commerce, and we achieved commercial monetization. AI-related revenue in first half '25, RMB 34 million, accounting for 7.9% of subscription revenue. Besides, in terms of costs and expenses, we insisted on per capita efficiency coming first. So results have been very clear. As of 30th June 2025, we had 3,400 employees. Total salary expenses was RMB 617 million in first half '24, and it declined to RMB 466 million, down 24.5%. So we are able to further lower operating expenses. S&D expenses, RMB 190 million -- RMB 390 million was the selling expenses and then general and administrative expenses, RMB 220 million, down 24.5%. As of mid-2025, our total assets was RMB 6.67 billion, cash and equivalent, RMB 1.57 billion receivables, RMB 1.81 billion. As of middle of the year, our short-term debt, including short-term bank borrowings, RMB 1.95 billion, including 50 million of collateral loan and RMB 370 million syndicated loans and RMB 1.54 billion of other loans. So these are based on healthy growth of our advertising business. And as a result, there is a funding need. For advertising business operating capital, there was healthy growth and credibility of customers is healthy. And this year, we did a good job about cash flow management in first half of the year, advertising net cash inflow, RMB 220 million. So basically, cash outflow was a small amount, more or less the same as last year. Now let's take a look at some important indicators. In 2025 for our 2 revenues, as Mr. Sun just said earlier, let me supplement. First of all, in first half '25, our subscription revenue, RMB 440 million, looking at the financial statements, is down 10.1%. This is mainly because in early 2024, we took the initiative to adjust our business structure. We phased out low gross margin, low-quality subscription businesses. However, historical orders for the whole 2024 also led to some revenue, RMB 30 million and RMB 20 million for the first and second half. But for these orders, they did not cause any sharing impact for 2025. So as a result, there is a gap of RMB 30 million. But if we exclude such gap, then in the first half this year, on a year-on-year basis, the gap is not that big for this revenue. And comparing with the second half last year, there is growth. Besides, we actively explored new businesses, new technologies. In the first half, through AI application revenue was RMB 34 million. So on a half-on-half basis, we have stabilized this part. Merchant Solution revenue, RMB 338 million in the first half, and we talked about the rebate ratio difference between first half, second half after reinstating it, then on an adjusted basis, it's up 45.3%. This is a big growth, mainly because of 2 reasons. In first half 2025, gross billing was RMB 8.6 billion, up RMB 280 million. And a big growth is from our early 2025 work for the downstream, so there is a rebate gap. Last year, it is 2.1%, and it rose significantly to 3.85% this year. And there is 1.7% rebate gap or an increase in net rebate. So RMB 8.6 billion gross billing caused a very important impact on our sales profit. In first half last year, there was RMB 66 million TSO and financial revenue. But this year, there is no longer such revenue. So our growth is very big. And then about gross profit. In the first half of the year, gross margin achieved overall rise. So subscription gross margin 66%, 67% in 2023. And in 2024, it came down to 68% to -- and 51% in first half, second half. In first half this year, it was reversed. Subscription gross margin went back to 63%. One driving factor is the historical capitalized R&D expenses. So in 2024, for intangible assets, they had been provisioned already. And R&D expenses in 2025 went into general and administrative expenses. So the impact on cost was greatly reduced. For subscription revenue, as explained earlier, there's a RMB 30 million gap, but then it is because of historical orders and legacy reasons. On a half-on-half basis, we have stabilized. So subscription gross margin rose back. Merchant Solutions gross margin change is for high-margin advertising rebates and TSO financial business split. In the first half this year, Merchant Solutions was almost all high-margin businesses. There is no low-margin business. So it's at 91% gross margin for this segment. In first half this year, our result is that revenue stabilized, gross profit went back and costs and expenses have been optimized. So in the first half this year, adjusted net profit achieved a turnaround. If we do a split by business segments, then there is continuous improvement. For SaaS in the past 2.5 years by continuous cost control, we reduced the loss. In the first half this year, loss was RMB 130 million, down RMB 26 million. And then in terms of costs and expenses, we no longer have the sharing of R&D expenses and there is optimization of staff costs. As a result, it drove the reduction in loss. For advertising, in the first half, it lost RMB 30 million. Now there is a profit of RMB 180 million. Now our net rebate was up 1.7% as a result. It drove big profit growth. So this shows that at the beginning of the year for advertising platforms, we have adjusted our operating strategies, and we have adjusted the discount policy as well. So the effects are very significant. Adjusted net profit achieved a turnaround. Our free cash flow is balanced. In the first half for SaaS cash outflow, RMB 220 million comparing with the past half year period, it is narrowing continuously. For advertising, there is cash inflow of RMB 220 million. So in the first half free cash flow, there was only a small outflow of RMB 30 million. Basically, it achieved a breakeven. And then in 2024, we actually saw that in March this year, when we communicated with you, our 2024 advertising platform, lowered rebates and then there is structure optimization for SaaS. So adjusted loss was RMB 533 million. It was quite big. During March results announcement, we said -- we presented our road map to achieve turnaround in 2025. After half a year's effort, I think I can give you a preliminary report. If you refer to these 2 slides on the right, well, this is the turnaround forecast given at that time. And on the left-hand side, after the first half, this is the revised picture. So if you look at the actual completion results, what we did well in the first half is, first, in relation to reduction in rebate for the advertising platform, it can improve profit margin. Gross billing is stable. As a result, profit grew RMB 170 million for the whole year. On this basis, profit will continue to grow by RMB 190 million. Secondly, cost control and improvement of efficiency. We optimized staff costs and related expenses at the end of last year, during results announcement and during March results announcement, we said that the impact would be RMB 1.18 billion. Now for the whole year, impact will be RMB 138 million. And then the third point is R&D expenses. And also in 2024, that was the provisioning. And then there is a reduction of loss of RMB 100 million that was achieved in the first half. For the whole year, we can narrow loss by RMB 187 million. In 2024, for the whole year, we made a one-off bad debt provision and there are other one-off impairments. This year, these will not happen. So with all these items together, for the whole year, we have confidence that we can achieve a turnaround. And after what we have done in the first half, our confidence is even stronger than that in March. And then in the second half of the year, for SaaS organic growth, we have to work harder. We face macroeconomic challenge and contraction of consumption. So for medium- to large-sized customers, we may see some headwinds. So in terms of sales strategy and product innovation, we will do more in the market. For innovative AI businesses and commercialization opportunities, we'll continue to explore the development of AI agents. After half a years of effort, our turnaround plan has been quite smooth. So we believe that in the future, we will see better prospects. So that's my presentation about our financial performance. Now we are happy to take questions from investors and analysts.

[Operator Instructions] The first question is from [indiscernible] from Citic Securities.

Congratulations to your company for achieving breakeven and excellent results in this first half year. I have 2 questions to ask. First, looking at your first half subscription solutions have stabilized. What are some new highlights for the subscription revenue? In the financial statements, you talked a lot about AI products. So in which scenarios will you see new changes about AI products in the second half of the year? How should we look forward to the growth and profitability of these products? Second question, now for Tencent ecosystem, they have launched WeChat Mini Store. It has been 1 year or so. So in relation to these mini stores, what have you done? What about the activity level of merchants? And how are they utilizing such mechanism? What will be the drive to your business? And in the second half of the year for WeChat e-commerce ecosystem development, what will be the impact on your company?

Thank you for the questions. Let me take the first question. The second question will be taken by Mr. You. Okay. First question is about our overall revenue in the first half. First of all, Smart Retail revenue from key customers, it is very stable at the same time. Our overall AI revenue achieved good progress. So on a half-on-half basis, we have stabilized and achieved growth. In the second half, our subscription revenue year-on-year would also grow because in the first half, there was a year-on-year decline. About RMB 30 million was because of deferred revenue. So at the second half of last year, there was still deferred revenue, but the base is very small already. So with this base effect, in the second half of the year, for subscription, I think the impact of deferment will be very small besides for large customers, we will gradually increase investment into retail business and local service market. Subscription revenue will enhance the share of smart retail. So on product end, sales end, we're increasing revenue share of Smart Retail in the past. In the sales end, we have small to medium-sized team and channel team and key customers team. For these 3 teams, now they focus on Smart Retail and also key customer business or upmarket business. So upmarket revenue will increase in share. So for this revenue, I think retention will be more stable. We'll continue to increase revenue share of Smart Retail. This can also raise our revenue -- our subscription revenue. We will develop a lot of local live service fields, for example, pet industry, service at home or on-demand home service and so on. In relation to pets or shop guidance, there will be more industry solutions to be launched and that can enhance our Smart Retail revenue. One important revenue is AI. In the past, after our deployment in the past 2 years, in terms of AI commercialization, we have seen preliminary results. This year is the beginning year of AI commercialization for us. So for AI commercialization, we have enjoyed some revenue. As I mentioned earlier, WAI SaaS, WAI Pro and WIME, these are the 3 major products. They cover many scenarios, and they mainly focus on e-commerce scenarios. For e-commerce, I can see a lot of product services, product posters, product pages, AI creative posters, smart profile writing, smart copywriting and so on. So there are many scenarios in which our AI products will be used. Besides, we use a lot of AI capabilities to develop many agents. As I mentioned earlier, so with our designer agents, well, the merchants by means of some prompts can already ask the agent to generate product images. And then there can be automatic response in customer service area. These capabilities can help merchants lower their cost and improve their efficiency. Besides, the overall activity level can also increase. For our AI revenue, now the base is not high. So in the second half, I believe there will still be half-on-half growth. In the second half of the year for subscription revenue, we are still optimistic on a year-on-year basis, I think there will be positive growth. And then for the mini stores, perhaps I'll ask Mr. You to take the questions.