iClick Interactive Asia Group Limited (NASDAQ:ICLK) Q4 2021 Earnings Conference Call March 24, 2022 8:00 AM ET
Company Participants
Lisa Li – IR
Jian Tang – CEO
David Zhang – CFO
Brian Kinstlinger – Alliance Global Partners
Conference Call Participants
Nelson Cheung – Citi
Colin Lieu – China Renaissance
Thomas Chong – Jefferies
Operator
Hello, ladies and gentlemen. Thank you for standing by for iClick Interactive Asia Group Limited Fourth Quarter and the Full Year 2021 Financial Results Conference Call.
At this time, all participants are in listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. Today’s conference call is being recorded.
I’d now turn the call over to your host, Ms. Lisa Li, Investor Relations Director. Lisa, please go ahead.
Lisa Li
Hello, everyone; and welcome to iClick’s fourth quarter and full year 2021 financial results conference call. The Company’s results were issued earlier today and are posted online. You can download the earnings press release and sign-up for our distribution list by visiting the IR section of our website at ir.i-click.com. In addition, during the call, management will give their prepared remarks in English. During the Q&A session, we will take questions in both English and in Mandarin, and a third-party translator will provide consecutive translation. All translations are for convenience purpose only. In case of any translation discrepancy, management’s statement in the original language shall prevail.
Jian Tang ”TJ ”, Chairman, Chief Executive Officer and Co-Founder of iClick will first provide a high-level review of the fourth quarter and full year 2021 results and share his thoughts on our execution strategy going forward. Chief Financial Officer, David Zhang, will follow and give us additional insight on the financial results for the 2021 fourth quarter and full year and provide guidance for the first quarter and full year of 2022. He will then turn the call back over to TJ for closing remarks before the call is opened for Q&A.
Before we continue, please note that today’s discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Company’s results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the Company’s 20-F as filed with the U.S. Securities and Exchange Commission. The Company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that iClick’s earnings press release and this conference call include discussions of un-audited GAAP financial information, as well as unaudited non-GAAP financial measures. iClick’s press release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures.
I will now turn the call over to our Chairman, Chief Executive Officer and Co-Founder, Jian Tang, TJ, please go ahead.
Jian Tang
Thank you, Lisa and welcome to the call, everyone. 2021 was another year of exceptional growth for iClick, marked by record in growth balance, total revenues in enterprise solutions and marketing solutions respectively and gross profit and currently our enterprise solutions business grew by 125% year over year to $65 million, the second consecutive year of triple digit growth since we launched our digital transformation strategy in 2019, while our marketing solutions business managed to grow by 7% year-over-year to $243 million in 2021, despite multiple headwinds.
Overall, our total revenues increased by 20% year-over-year to $308 million while gross profit grew by 22% to $89 million. Our strong 2021 performance demonstrates the company’s clear vision and the solid execution capability. Shifting regulatory landscape coupled with patent macroeconomic uncertainties and geopolitical tensions translated into a slowdown in China’s economic growth, which started in the second half of 2021. These events have led to our contraction in China’s overall advertising sector and continue to impact our marketing solution segment in the fourth quarter of 2021, and may extend several quarters ahead.
Having said this, we remain confident in the long term growth potential of China’s digital advertising industry and aim to maintain our core advertising client base, which enjoys great synergies with our enterprise solutions business.
We are also excited about the enormous potential brought by the digital transformation mega trend seen in China, which we believe will be a trillion dollar market. As mentioned earlier, our enterprise solutions business has already reached $65 million in 2021 compared with almost zero revenues contribution in 2018, which proves the company is on the right track.
As we have repeatedly mentioned in our vision in our previous conference calls, pure SaaS may not be the most appropriate business model in China. With our fixed collaborations over the past few years, we also learned a great deal that shaped the vision behind our SaaS plus business model. Our robust growth in enterprise solutions reflects the strength of our approach and gives our confidence, we will continue to generate impressive momentum throughout 2022 and beyond.
Currently, we are extremely well positioned with our SaaS plus approach to provide solutions that meet the needs of our clients both today and for the coming years. To frame our solutions approach in defined terms, our philosophy of combining technology with services and the methodology is highly valuable in delivering digitization solutions, which a pure plus model as reflected in our SaaS plus 2022 white paper on digital operation by iClick. iClick not only provides customers with basic online training and the QA services, but also offers more value added services around those scenarios covered by these tools such as project execution and agency operation hosting, effectively solving the shortage of digital operation, manpower and the capacity of some enterprises.
iClick offers diagnosis technology and training for brands and collects abstract and refines the personalized needs of brands based on our standardized digital operation product metrics, then customizes the most suitable system solutions for brands. Within the scope of iClick coordinates internal and external resources for brands, provides execution teams and continuously reviews and optimizes the execution and assists brands at every step of the marketing and operation process and iClick can even provide hosting services, fully covering brand’s digital operations, only when competition and [ph] go hand in hand can refine a path to sustainable development of the business?
The results are clear on extremely compelling, and we are in incredibly proud of what we have accomplished thus far on this journey in furthering our depths and the capabilities in bringing the highest value SaaS Plus offering to cloud. I’m very pleased to share with you that we earlier announced the acquisition of the remaining equity interest in Changyi, a leading independent software vendor in China, which provides intelligence retail and the CRM solutions.
After the completion of the acquisition, Changyi will become a wholly owned subs diary of iClick. This will allow iClick to accelerate the expansion of our enterprise solutions business, spearheaded by our growing SaaS Plus business model. We aim to provide branded clients with a consumer full cycle solution that addresses every aspect of the difficulties in facing the rapidly changing market dynamics in China, including effective key opinion leader recommendations, efficient targeted marketing, and eCommerce partnerships, integrating data assets and solidifying brand profiles. We believe our solution will help brand clients. So for instance, productivity and enhance the private domain to embrace success amidst the digital transformation.
As excited as we are about out our future potential, we are also mindful of the challenges that we and the whole Chinese ADR sector are facing, such as tightened regulatory penny over VIE [ph] structure and the listing potential risks resulting from holding foreign company accountable act. This all have driven negative sentiment for all Chinese ADR companies. iClick included and placed iClick in a challenging position in the capital market. This has likewise diminished our ability to raise capital and cost us to rely solely on cash on hand and access to our credit facility in operating our business.
Given this development, starting in the fourth quarter of 2021, we have strategically reduced the lower margin, higher risk clients and the business of our more capital intensive marketing solutions business in order to devote more investment to the higher margin and higher growth potential of enterprise solutions. That said, we remain convinced that iClick’s business fundamentals remain sound with demand for our SaaS Plus solutions growing and we are capitalizing on our strengths as we weather the impacts of these economic and policies shifts.
As we look to 2022 and beyond, we recognize our needs to remain adaptive to shifting conditions through strategic location of resources. We believe that leveraging cross-selling opportunities across our 3,000 plus clients will leverage synergies between our marketing solutions and enterprise solutions and further drive extensive value for iClick. We have undertaken concerned, adaptive strategic mergers designed to provide sustainable long term growth and ensure stability and sufficient investment for long term growth.
We also look to enhance our key differentiators from our peers when contemplating strategies to buffer iClick from the forces of economic headwinds. Our strong base of key account clients are a significant differentiator for iClick and our integrated partnerships with these clients will provide a relatively solid and stable financial foundation to study iClick against ongoing uncertainty microenvironment and provide opportunities to support our growth this year and beyond.
This concludes my opening remarks and I would now like to turn the call over to our new CFO, David Zhang, to discuss the fourth quarter and 2021 full year financial results. David was appointed CFO and Director in late January this year. He brings over 25 years of experience in financial management, investment and business operations. We are delighted to welcome him to our management team. David, please go ahead.
David Zhang
Thank you, TJ. Hello everyone. I’m pleased to share with you our financial performance for full year of 2021. Despite our challenging macro environment, we still reach record highs in number of key metrics, including revenue and gross profit. I would like to begin my comments with a few key highlights from the full year and fourth culture of 2021 compared to the same period of 2020.
We reported revenues of $307.7 million for 2021 increased by 21% year-over-year, driven by the significant increase of enterprise solutions. Revenue for the fourth quarter of 2021 was $56.3 million increased by 3% year-over-year due to our strategic scale down of marketing solutions.
Looking at each business separately, revenue from marketing solutions grew to $242.6 million for 2021 up 7% year-over-year, primarily as a result of growing market demand from specified action marketing campaigns. For the fourth culture of 2021, revenue from marketing solutions was $56.6 million US dollars increased by 17% year-over-year, primarily as we have started to strategically reduce lower margin and higher risk business within marketing solutions in order to focus on the higher growth potential of the enterprise solutions.
I’m very excited to share the results of the enterprise solutions business, which achieved record level for two consecutive years to US$65.1 million US dollar of 2021 up 125% year-over-year, primarily due to the increasing needs for online and offline consumer behavior data integration and digital transformation.
For the fourth quarter of 2021, revenue from enterprise solutions was $19.7 million US dollar up 87% year-over-year. Gross profit increased by 2022 year-over-year to US$89.2 billion in 2021, mainly as a result of contribution from higher margin in price solutions. Gross profit for fourth quarter of 2021 was US$23.6 million up 1% year-over-year. As of December 31, 2021, the company had cash and cash equivalence, time deposit and restricted cash of US$88.7 million compared with US$94.5 million as of December 31, 2020.
For the rest of my discussion, I will focus on our non-GAAP results. You may find the calculations of this non-GAAP results in the press release we posted early today and which can be assessed at our Investor Relations website. Adjusted EBITDA for 2021 was US$13.4 minute compared with US$17.3 million for 2020. Adjusted EBITDA for the fourth quarter for 2021 was US$65,000 compared with an income of US$5.1 million for the fourth quarter of 2020. The decrease of adjusted EBITDA resulted primarily from additional operating expenses for new business developments and R&D.
Adjusting income for 2021 was US$$1.4 million compared with adjusting income of $7.6 million for 2020. Adjusted net loss for the fourth quarter of 2021 was US$2.7 million compared with adjusted net income of US$2.1 million in the fourth quarter of 2020. Gross billing grew by 18% year-over-year to US$796.9 million in 2021 and reached US$207.3 million for the fourth culture of 2021. For further information, please see the detail recap of other financial metrics in the press release we issued today.
Of December 10, 2020, the company a share repurchase program in which it may purchase its own ADS with aggregate value of up to US$15 million from December 30, 2020 to December 31, 2021. In addition, our board of directors authorize the company to upsize the share program from US$15 minutes to US$25 million on August 25, 2021. As of December 31, 2021, the aggregate value of purchased shares were approximately US$10.9 million. In December 2021, our board of directors had approved a new share repurchase program in which the company made purchases in only cash with aggregate value of up to US$20 million from January 1, 2022 to December 31, 2022.
Now I would like to conclude my remarks with our outlook of enterprise solutions for the first quarter and full year of 2022. Because we are in the process of strategically adjusting our marketing solutions business in the face of current uncertainties of the macro environment, we don’t provide outlook for marketing solutions revenue at this stage. Please know that our outlook is based on current market conditions and reflect our current gauge of the COVID 19 pandemic impact. These assumptions are subject to change. Based on information available as with today of this press release, iClick provides the following outlook.
For the first quarter 2022, we expect revenue from enterprise solutions between US$16 million and US$17 million. For the full year 2022, we expect revenue from Enterprise Solutions between US$90 million and US$106 million. Our SaaS Plus model empower our clients in digital transformation. Looking out to 2022, we are very optimistic about further expansion of our enterprise solution business.
With that, I now turn the call back over to TJ call closing remarks.
Jian Tang
Thank you, David. We are more convinced than ever that the mega trend driving digitalization across China is a long term transformation that iClick is at the forefront of helping clients to involve and capitalize on new capabilities. We envision a trillion dollar opportunity that is deeply entrenched in the involving need to open markets, service customer’s needs better and transform the way companies interact with and retain loyal consumers of the offerings.
That is what iClick is focused on delivering in its services and it is responsibility we, as all iClickers do take extra ordinary seriously. We recognize that our success is contingent on our continued ability to adapt appropriate, to changing market dynamics and economic forces. We meet that challenge through duty to remain vigilant and modify our course as developments dictate. We have succeeded broadly in that capacity as evidenced by our continued strong growth even in the phase of adversity and uncertainty, which are two forces that markets revolve. We foresee continue growth and are optimistic that our evaluation will recover to levels that are more reflective to our true value as we continue to execute on our strategy. We are devoted to innovating and to deliver it on the promise of everything we have built, all with eye toward continuing to improve the overall profitability of the company.
I wish to acknowledge and thank you clients, or thank our clients, partners and key stakeholders for the continued support. We face some material challenges in both the microenvironment and the capital markets where everyone has suffered, including our dedicated iClickers, shareholders and clients, but we have deep belief in our business and the strategies we are implementing now. Beyond the factors outside of our control, we will continue to do our best to deliver on the promise iClick represents in bringing the optimal solutions mix that enables clients to capitalize on the digitalization overtake in China.
Thank you all for participating in today’s conference call and for your continued support. This concludes our prepared remarks. Thank you for joining us on today’s call. We will now open the call to questions. Operator, please go ahead.
Question-and-Answer Session
Operator
[Operator instructions] Our first question comes from the line of Nelson Cheung from Citi. Please ask your question.
Nelson Cheung
My questions for advertising is about management expectation on the sector outlook this year and when would you expect the path for recovery going forward and my next question for Enterprise Solutions would be about your number of new customer additions and retention situation. Thank you
Jian Tang
Thank you for your question. This is TJ. I will take your question about the outlook this year and I will invite David Zhang to answer your second question about the customer addition and existing customer of Enterprise Solutions. First about the business outlook and we think that this year, the ad business in China suffered short term shocks and the reasons are very well known because there are a lot of uncertainties in the macro economy, including the shifting policy environment and the regulatory landscapes, as well as the resurgence of COVID 19 cases, which have constituted severe challenges to the market.
And since the second half of last year, the ad business in China has been experiencing very weak demand and I think that this will continue in the following quarters. And I believe a lot of companies in this industry share similar views as to other company while this year for ad business, we will focus on some core businesses, we will take initiatives to scale back on those lower margin, high risk businesses, where retaining the core businesses that may generate synergies with other businesses. Thank you.
David Zhang
This is David. Let me take your second question. In Q4 2021, there were 500 customers contributing to the revenue of our Enterprise Solution business and as to the customer retention between Q4 for last year and Q1 this year, I don’t have a specific number yet, but I can tell you from past experience that the retention rate will be around 90%.
Operator
Right. Thank you. Next question comes from Colin Lieu from China Renaissance. Please ask your question.
Colin Lieu
Thanks TJ and David for the chance to raise the questions. I have two questions. The first one is about the medium and the long term impacts on advertising industry from the regulatory changes over the last several months. I wonder in two, three year’s time how will this round of regulatory changes will shape the industry? And was the industry landscape going to be like.
And the second question is actually about our SaaS business and our enterprise solutions. We have seen very obvious macro witnesses since second half last year and over last several months or several quarters is our SaaS solution actually helping our customer improve their operating efficiency and generating new revenue opportunities aiming this kind of macro witness. Any colors that can be shared with us and that will be really helpful.
Jian Tang
Well, thank you calling for your question. This is TJ. Let me take your two questions. First question is about the implication of regulatory policies on the advertising industry in the next two to three years. Well, in the previous conference calls, we have mentioned that all these regulations regarding like data security and personal privacy will have an impact in the mid to long term because in the past all the policies about data security or personal privacy require to relax, but it seems that regulators have started to tighten them and shortly speaking, for example, from the second half of last year to the first half of this year, we’ve seen some panic in the industry and the people worried about its active impact on them.
However, we think that in the mid to long term, we will wait for the mid to long term to see any real implications to kick in because we think that the current regulatory policies about the digital security and personal privacy were targeted as those are businesses that operated in a non-compliant manner. As long as you comply with the regulations in data usage, as long as your products and businesses help customers to improve efficiency, I believe that you will enjoy long term benefits, in spite some short term shock.
Second, I think the second source of regulatory measure that may have a long term impact on advertising industry are targeting the industries where brands are located. For example, last year education, insurance and daily industries were subject to a series of range of a regulation and control and show speaking, these measures have produced very profound impact on advertising industry.
We’ve seen this with our eyes, for example, the demand from some industries just disappear all of a sudden, but long term speaking, I don’t think there will be very substantial impact on the advertising industry because those industry verticals that need the advertising business will be reshuffled and after the reshuffling.
The brands from these industries will still need to place advertisement and that the number of advertisements they place actually are populated to economic sentiments instead of the industries where they belong. This is my answer to your first question.
Well as to the second question, I believe it’s about how our sales products and services help customers cope with these macroeconomic hacks. Well, I do think that our products and services are very helpful in particular during the COVID-19 pandemic.
A lot of offline businesses were hard heat and many of our enterprise solutions, product and services can help prices. For example, we provide them with digital outlet solutions, which can include their offline inventories in the online mini programs.
And then we help them to operate the online businesses in the WeChat ecosystem. And in this way, we can help merchant to maintain online operation by absorbing the offline inventories. I think these are very helpful for both brand owners, as well as sales channels.
And also during the weak macroeconomic situation many brands actually have a proactively pursued online pursuit their online businesses. And in addition, China’s the digitalization, as well as the enterprise digitalization and brand digitalization are long-term trend for China and which is part of the 14th five year plan of proposed by the Chinese government.
And I think that our enterprise solutions business actually will respond to this and quite well. And we help our — we help those brands to adapt to increasingly complicated new media ecosystem. For example in the WeChat ecosystem, we help brands to increase interactions with customers.
Therefore enhancing their loyalty and in the, in the KOL ecosystem we help brands to use short video and other new media to interact with the consumers and, and attract consumers to their media campaigns. So marketing campaigns, actually, we have already put in place a complete fleet of product and services to serve brands and all in all. We think that our products and services actually will help customers to cope with these weak macroeconomic situation.
Operator
Right. Thank you. Our next question comes from Thomas Chong from Jefferies. Please go ahead.
Thomas Chong
Thanks. Thanks management for taking my question. So I have two questions. The first question is about M&A. So are we — are there any future M&A plans and what are the M&A considerations? And then my second question is are there any goals for KA clients and the Mid-care clients in 2022? Thank you.
Jian Tang
Okay, thank you for question. I will take two questions from you. First question is about the M&A plan. Not long ago, we were fully acquired a term and you have, if you have been following us for, from time you’ll know about this Company quite well.
And the purpose of this acquisition is to consolidate our enterprise solutions capabilities because we are very integrated part of our enterprise solutions, including its products, teams and service capabilities. And so as to the other and M&A opportunities while we have been looking out for opportunities all along, but since the market condition is not very good right now, so we will be more cautious
Well, your second question is about our customer strategy. Well as to KA clients, our strategy is very clear. That is we will provide size tools and value added services to medium, to larger size to KA clients, to up these clients grow and develop in a complicated media ecosystem in China.
And with that, the strategy has great long term potential in the past, we focused mainly on WeChat ecosystem, but now we’ve been gradually penetrating into the KOL ecosystem. And our aim staff mentioned is to help KA clients to carry out online sales and operation
Well as to mid-tier customers or SMB customers. Well by the way, an, another thing about the key, the KA clients that is we still use the standard sales products to serve our KA clients, of course, for different KA clients. They may have a different customizing customization means and a student then big client base.
Well, since the first half of 2021, we first started to promote standard products to them. And but due to the week economic performance global wise, including China, since the second half of last year to early this here, we haven’t seen very much programs. We can say that programs actually is much slower than we respected, butwe’ve still will keep an eye on the SMB business and we will continue to make some efforts to develop this business.
Operator
All right. Thank you. Our next question comes from Brian Kinstlinger from Alliance Global. Please go ahead.
Brian Kinstlinger
Great. Thanks for taking my questions. With the uncertainty in marketing solutions, coupled with the challenging capital markets for ADRs[ph]. How do you plan on managing the expense side of the business to limit your losses? And can you quantify the bad debt that was recognized during the fourth quarter? And then my second question is how much of your marketing solutions revenue is low margin and not strategic to the enterprise segment? Thanks
David Zhang
Well. This is David Brian, thank you for your question. As to the provisions. Well last year we were provided for the bad debts of two companies, total 5 million years dollars.last here the central government has come up with a lot of a series of regulatory measures, which has hit some industries hard.
So these two companies, one is a eCommerce Company and the other is a gaming Company and to cost control. I think that we have done a pretty good job in cost control, obviously is. And now it’s a difficult time. So actually we will try our best to do better in terms of cost control.
And currently we have a sufficient cash and for you can regard receivables as cash forward to, and currently we have a cash. I also, I also like to clarify that this 5 million use dollars is a special provision for bad jobs. It’s not the overall bad that provisions
Your second question is about those low margin businesses of marketing solutions. Well, currently they account to, for a third of our marketing solution revenues, but, we will take into account the market response in dynamically adjusting the scale down scale,
Operator
Right? You as there are no further questions, I’d like to turn a call back to the Company for closing remarks.
Jian Tang
Thank you once again for joining us today, if you have any further questions, please feel free to contact. I clicks and best your relations department through the contact info provided on our website. Thank you and see you next time. Bye bye.
Operator
Thank you. This concludes the conference call. You may now disconnect your line. Thank you.
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