JS Global Lifestyle Company Limited (1691) Earnings Call Transcript & Summary

Investors and analysts, good morning. I'm Mars Chen from Investor Relationship and Corporate Communications Department. Welcome to JS Global Interim Results Presentation. Before we officially begin, please allow me to introduce the management team who are present today. They are Madam Han Run, CFO and Executive Director; Senior Vice President of Finance and Chief Officer APAC Operations, Leon Liu; Chief Financial Officer, Financial Director, Kan Jiangang; Secretary of the Board of Directors of Joyoung, [indiscernible]. Before it's too late, let's invite, Madam Han, to make an opening speech.

Good morning, everybody. Thank you for attending the JS Global 2024 interim results presentation on your busy schedule. On behalf of JS Global Lifestyle, I would like to express my heartfelt gratitude to all of you for your long-term support and interest. Over the past 6 months, JS Global has entered a new phase of development and a new beginning. We have optimized the allocation of resources, attracted global talent and increased our investment in R&D, user research, marketing and other areas. We have made a lot of progress, but we also have identified some areas where we still need to improve. Today, my team and I would like to share with you some of our operating results for the past 6 months. The Joyoung segment remains the group's largest revenue-generating business. Despite the increasingly competitive market and challenging customer environment in this operating region, we stayed true to Joyoung's core value of health innovation. During the first half of 2024, advanced the research and development of the new products to tackle the small but significant issues in daily lives. Joyoung has introduced the third generation of 0 coating nonstick rice cookers designed to help consumers prepare healthier, personalized taste of rice. Additionally, we also have launched instant water purifier that can operate for up to 6 years without needing to the filter replacement. And the new line of technological products featuring unique automatic soymilk maker for SN Asia Pacific restructuring. In the second half of 2023, we have directly operated by JS Global. During the first half of this year, we've focused on the optimizing of IT, tax, internal control, legal and HR functions across SN Asia Pacific to ensure that the business units could fully optimize on the potential of Asia Pacific markets. In terms of organic growth, we continue to see steady increase in market share and sales revenue, particularly by reinforcing our leading position in cordless vacuum cleaner in Japan to -- the markets in Australia, New Zealand and South Korea have also performed exceptionally with strong growth across most categories, providing valuable experiences for the future market expansion. Additionally, we also have expanded our regional presence by formally entering the Indonesian and Philippines market through the exclusive distribution model in participating with the prominent local distributors partnership as SN Pacific will continue to advance its infrastructure improvements. We are confident that this segment will maintain the steady growth in the future, contributing positively to the group's overall performance. Now let's invite Leon and Mars to introduce 2024 interim results and the upgrade of the 2 different segments. Now that's the first thing invite Leon.

Thank you, Madam Han. Thank you so much for your continuous attention to JS Global. Now let me introduce to you the key financial metrics in H1. For revenue, we have been very resilient, reaching 29.5% of the growth. Gross margin and gross profit have all maintained their growth, except for the earnings from the transaction related. We still have about 13.1% of the growth. So for gross profit and gross margin because of our significant investment in Joyoung, it has got a significant decline of the EBITDA after adjustment. We also have already got a very good result of the positive revenue growth. So the adjusted EBITDA, you can also see from the announcement, the main influences are still about our partial investment valuation adjustment and then for the sourcing and supply chain investment during the transitional period. These are the major assessments. Now let's talk about the breakout of the revenue for H1 for the third party -- from the third-party revenue. According to the constant exchange rate, we have about 17.7% growth. What is impressive is about the SharkNinja APAC growth and the proportion of the transaction related has from 9% to be doubled to more than 20% of H1 this year. In the next page, we could also see, according to the region and area. So for the revenue, you can see compared with last year, the Y-o-Y except for Japan for the rest of the markets have all got a significant growth. And for Japan with a constant exchange rate, we also have seen over 30% of the growth. For the third-party sales of the gross margin, we can also see the gross margin level. We also can see compared with last year -- we have over 2% of the growth compared to last year. The major contribution is also from the overall product portfolio especially for APAC including for the new products of [ NPD ], they have a very high gross margin. Now let's see the overall cycle of the operation. We have maintained a very healthy cash flow. You can see with almost 30% of the revenue growth, our inventory turnover and receivable turnover compared with the end of 2023, it has all been improved. For the payable turnover has also been improved until this half of 2024 compared with last year. So it's also because of our restructuring and our stable supply chain and stable cash flow. We have reached this healthy operational cycle. Now let's, lastly, introduce our overall balanced capital structure. We also can see at the end of July last year, we have already returned all the loans with interest bearings. And now we have like 0 interest-bearing loans for all the operations all based on our own cash generation. So for the debt, for ROIC, you can see they are all very healthy. We are very confident we could still support our APAC growth and these are all about the 2024 H1 overall financial report. Now I would like to invite Mars to introduce the updates of the 2 different business units.

Thank you, Leon, good morning. And [ JY ] has just finished its performance release. Now I'm going to update you. For H1, we have already got the 30th anniversary and our new scientific technological product new launch. Over the past 30 years, Joyoung has always adhered to the health innovation by paying attention to and solving the small problems in everyone's life. Joyoung has continued to participate in the core technology, building the quality small household appliances, constantly promoting the innovation of healthy life style to help Chinese people to live better. To be more specific, Joyoung has launched 3 core new products. The first one is our third generation, 0 coating rice cooker. Compared with the previous generation, this generation where the inner container has further adopted the technology of rice grain activation suspension [ theme ] which makes the nonstick effect meet the National Class II Nonstick Standard through the heating module on the base and the top. And the air cooling technology with precise temperature control to adjust the softness and hardness of the taste, you could also make it possible to realize the human computer interaction through IOT. The second one is the all-round wall-breaking nutrition master, Y8, which uses the brushless variable frequency motor to reduce the noise from the source to make the cooking process more quiet and comfortable. And we also have loaded with the automatic 1 button processing, cleaning, sterilization and drying [ lazy ] possible function. And in grinding and pulping, BlenderX crushing system and intelligent remote sensing technology can help the consumers to obtain the better delicate taste and more nutrients. The third one is [indiscernible] R5P. This product adopts this 3-in-1 full-linked antibacterial system of the future elements. So pipeline and pasteurization to prevent the inside of the water filter from becoming the hot bed of bacteria. So the biggest selling point is as it has the long-lasting future cycle that it could be used for 6 years, much longer than the most products available in line to lower the cost of replacement for the future. So we also have stick to the idea of solving the problem of combining health and innovation to solve the small but important problems. So the next is about the business update of SN Pacific. After the strategic reorganization, Joyoung has vigorously developed the SharkNinja APAC this year helping it to establish a more perfect system and function as the Madam Han said. A more complete team and system accelerating the launch of the new products and new categories and gaining more market share through expanding the market -- promotion and marketing activities. This slide is what we always speak to, this IR deck because this page will guide our team to constantly keep going forward. SN APAC is committed to actively influencing the quality of life of every family every day, focusing on consumers, gaining more deeper insight into the consumers' ideas, providing the localized products with the best cost performance. At the same time, on the marketing side, providing quality marketing activity to improve the brand image, to improve the brand awareness of the consumers and the new product utility rates could also be improved. So the growth strategy of SN Pacific has been based on the development strategy of constantly exploring new markets, new opportunities and constantly consolidating the new advantages into the core existing categories, introducing new categories as well. In the first half of this year, the company maintained good growth in Japan, showing strong performance in new markets like Australia, New Zealand and South Korea. We also have entered new markets. Other products have also launched in the market and with very good popularity among the consumers. So now let's talk about the first pillar of the growth is in our core products we have been very successful. So the cordless vacuum cleaner in Japan, as we all know. Now let's take the cordless vacuum cleaner as an example. Last year, we have launched the CleanSense iQ and [ EvoPower System ] NEO series. So in this half of the year, it has been very well welcomed. It has also been very well received by the local retailers. In the past 6 months, our in-store display has been constantly expanded. According to GfK POS statistics, our market share of the cordless vacuum cleaner in Japan compared with last year's 17% to being improved to 19% this year. Compared with 2021, within more than 2 years, our market share has been doubled or even more. This is still like in H1 of this year with our sales competitor carried out the price for quality measure and then discounting strategy for H1 this year. This has shown our Japanese consumers and retailers constantly having their trust in the brand and products of SharkNinja. But now I would like to share with you how could we achieve the second growth of the category -- of the new category. So for example, the Ninja Blast, the portable blender, after entering Australia in H2 last year, it has received a very good response. We have also introduced into Japan and South Korea. And this is the first time that we have launched the new products of Ninja in Japan market. And after 2 months of the launch, we realized that the Ninja Blast had already topped the market share list in Japan. We had become the #1 in Japan. And in Japan and South Korea, we also had invested in the Ninja branding and [indiscernible] product marketing. And on the TVs, magazines and bus stops as well as the screens of the malls as well as the shopping -- shops construction, we have a great development. And all these events are able to deliver our better brand image and the content of the products to the consumers. And last but not least, the third pillar is the expansion of the new market and it helps us to further expand the market share. And last year, we have accessed the New Zealand, Australia and South Korea market. And last year in April, we had acquired the distributors to access the Australian market. And as for the South Korea, we collaborated with the new distributors closely and reentered the market. So for these 2, we entered in new markets. We have a great advancement. So as you can see here, we are gaining the market share in Australian market and all of the core categories are gaining our shares. And what's worth mentioning is that since the beginning of the 2023 to the end of June this year, the cordless category has been gaining traction and have increased from 1% to 16% this year. So this had demonstrated that the share of the cordless in the past 6 months has become a great and strong brand in Australia. And likewise, in South Korea, our marketing is very eye-tracking to the consumers, and we won a lot of good feedbacks from the consumers. And over the past 6 months, we had continuously launched the core product in the South Korea, and this momentum will continue. And hopefully next year this time, we are able to share with you more details about the change of the market share in South Korea like today's share -- win of the market share in Australian market. And the final part, as I should very quickly walk you through our effort in ESG. And I believe that our performance in this front is also very great. And in the first half of 2024, we have been successfully listed among the Hang Seng ESG 50 Index and has become the only home durable company in China, incorporated in the Standard and Poor 2024 Sustainable Development Yearbook. And all those recognitions had identified our efforts in ESG and sustainable development and laid a solid foundation for our future sustainable development. And the Joyoung Foundation also celebrated our 30-year anniversary and the 1,500 Charity Kitchens had been established in the first half of the year, and we will continue to contribute to improving the health and nutrition of students living in the rural areas and guarantee their healthy lives. And this presentation deck will be uploaded to the website. And that is the end for the prepared remarks. And if you are on Zoom, you can type in the words to ask the questions. And while we are waiting for you to type in your questions on the web, let's check out the Secretary and operator about the telephone questions, and she will introduce you how to raise the questions.

[Operator Instructions] Next, let's welcome [indiscernible] to ask the question.

[indiscernible]. Dear managers, I have a small question. So first is still about our Japan market. And can you share with us the proportion of the revenue from Shark and Ninja. And as for Shark in the Japanese market, we have been gaining our market shares for the vacuum cleaners, and we can see this trend over the past few years. So how do you deploy your categories and distributor channels. And Dyson and Hoover some of the other competitors are also developing very quickly. So what is the differentiation of our positioning? So what are our benefits and advantages to differentiate ourselves and what are our highlights? This is my first question.

All right. Thank you very much for your question. I'd like to invite Leon to answer the question about the revenue share between Shark and Ninja and the rest of us will add our comments. All right. Thank you for your question.

Thank you. And this is a great question. In Japan, we have seen that over the years -- well, actually, in the past 4 and 5 years, we mainly focused on the vacuum cleaners, the wet and dry market share as you can see from the slide, this year it almost has reached 20%. And, however, for Ninja, we had launched the first Ninja product, Ninja Blast, in February. But before that, we didn't have any new product. And yesterday, we also started the sales of the second new product of Ninja in Japan. And this is a very compact, small sized tabletop blender. So in terms of the unit price, currently Ninja only contributed very little to the total revenue in Japan. But because we believe that the total scale -- addressable scale of the blender market is not very large, but as we had shared with you in a short time of 2 months, we had become #1 in terms of the market share in Japan. So I did not have more detailed data, but you can take a look at our data as well as the time we have launched. So right now, it's still a very small proportion from Ninja, but we expect that in the future we will further expand it to other categories and Shark and Ninja may reach a 50-50 share to the contribution of the revenues. And the second question you asked is about the channel and the category deployment in Japan. All right. And right now, in Japan, we have both online and off-line channels. And all of the offline home appliance franchise stores like BicCamera, Yodobashi, [indiscernible] Denki, all of these are the top chain stores of home appliances, and we have 2,400 [indiscernible] counters, stores, et cetera. And online, we have Rakuten, Amazon and our own website to sell to the consumers. So we have been following the path of SharkNinja, that is the omnichannel. So this -- what we have been doing in the Japanese market, both online and offline. And so the last part of your question is about our differentiation compared with the other competitors and what are our biggest advantages and features? So as you can see from our slides, among our competitors, at least one of them that is Tyson to be more specific. Well, in SharkNinja APAC or Japan, each year, we will launch the new products and our competitors is slower in new product launch compared with us. So our benefit is that we're constantly adapted to the needs of the consumers. And according to their needs, we launched new products to gain more market share. And for our competitors, they are not as quick as launching new product as us. And some of the competitors even reduced their clients to gain more sales volumes, but this is definitely unsustainable. And we also have made some counter measures. And if you have the chance to go to Japan, you can visit those tools of Shark. And you can compare our price with the products of our competitors. There are some differences, definitely. So innovation is still the key for us.

I have something to add here. We can see that recently, we have more and more competitors decided to develop overseas. And in our development in APAC region, we can see that compared with the traditional brands, definitely, there are some impact from the emerging markets, and we do need to bridge the new life into our portfolios with innovation and launch of new products and SN APAC is an early adopter and an early player access in those market. And we also enjoy the benefits as a global market with the global footprint.

I have a follow-up question. And just now you talked about the new product launch. And indeed, this is a great feature of us. So in terms of the planning of the new product, can you give us a more detailed introduction? What will be the direction for the new product launch in the second half of the year?

Are you asking about Japanese market or the whole APAC region?

Well, maybe both.