Quhuo Limited (QH) Earnings Call Transcript & Summary

Hello, and welcome to the Deutsche Bank Depository Receipt Virtual Investor Conference. I'm pleased to announce that our next presentation will be from Quhuo Limited from China. [Operator Instructions] On a final note, all of today's presentations will be recorded and can be accessed via the Deutsche Bank website, adr.db.com. At this point, I'm very pleased to welcome Leslie Yu, Chief Executive Officer of Quhuo Limited which trades on the NASDAQ under the symbol QH. Welcome, Leslie.

Thank you. Hello, everyone. Thanks for attending the conference. I'm Leslie Yu, CEO and founder of Quhuo. This conference will be done by me; Barry, Cofounder of the company; and Sandra, the company's CFO. Barry will spend about 20 minutes to go through the PPT and leave the time for Q&A. Thanks for attending. Please go on, Barry.

Hello, everyone. This is Barry. It's my pleasure to have you all here joining us in the conference. I'll go through the slides quickly. Quhuo, we are a leading gig economy platform in China. Currently, we have a leadership position in China's multiple high-growth markets. And we tech-enabled system and standardized service, aiming to empower the workforce to grow their business and provide service products to meet the needs of local communities. Currently, our service has covered 139 cities across 30 provinces. And on our platform, the daily average active workers is over 68,000 every single day. And we have served over 45 million orders every single month, which means about 1.5 million orders every single day. Currently, our business has covered several areas and the major business area is on-demand food delivery, covering food and grocery deliveries. And the second part of business is housekeeping. And third part is mobility service coverage, online ride-hailing and shared-bike maintenance business. Next slide. This is how we run and the logic of how we run our business because as you know -- all you know, currently in China, the on-demand local delivery service is very strong, and there are several major service platforms currently in China such as Meituan and Ele.me. And we have created a lot of demand in the market, and we provide a lot of jobs and workforces to them. And also, by recruiting those workforce, we provide training and also standard service to the end users. And also by offering consistent and high-quality standard service, those platforms will give us more job opportunities. And by those job opportunities, we will recruit more and more workforce and supply more and more to the local communities. And this circle of business grows very quickly. Next slide, please. Our mission is that we're aiming at optimizing the workforce efficiency and provide more career solutions on our platform, and we will become the largest gig economy workforce platform dedicated to serving the local communities. And our goal is to improve service standards with optimized our cost structures to meet growing needs of the local community and empower the workforce to grow their own business on our platform and to establish an ecosystem to improve the workforce life and work status. And the next slide is our development in the past few years. Our company was founded in 2012. In 2013, we started our business relations with Ele.me. In 2014, we started business with Meituan. And in 2017, we started our business with Pizza Hut, which is part of the Yum! Group. And in 2018, we started business with KFC and also entered the second business area industry to -- in the mobility to start partnership with DiDi and also Mobike in the shared-bike and maintenance. In 2019, we entered our third industry, which is industrial cleaning business with Anxin Group, Carlyle Apartment. In 2020, we started our grocery delivery with [indiscernible] and our cleaning service with Hilton and also with Shangri-La with GoFun with [indiscernible]. In 2021, we started our business with NIO and LF Logistics. And I have to mention that from 2017 to 2020, as you can see, our business -- our delivery orders has grown by 66.6%. And our workers -- number of workers growth is 52.4%, which means our efficiency has been greatly increased during the past 3 years. And in this slide is some details of the division of our other details. As you know, we started our business with on-demand food deliveries. From 2018, we started to enter different business scenarios in the industries. So as you can see on the right-hand side, currently, the food delivery only accounts for about 80.9% of our business. And the nonfood delivery orders account for about 19.1%. In those nonfood delivery, the grocery deliveries is 80,000 orders every single day. And still, we have used Intelligent Food Box service order is nearly 80,000 orders every single day. And in our mobility service, the shared-bike maintenance is 76,000 orders every day and the rider-hailing about 32 (sic) [ 32,000 ] orders every day. And our New Retail Service about 3,500 orders every single day. And for the housekeeping, it's about 21,000 orders every single day. And for the housekeeping, currently, we're serving about 1,300 hotels and over 7,000 B&Bs And this is our current data of -- some data currently. And currently, our registered workers is over 24 -- sorry, it's over 240,000 workers on our platform. And this number is very important, about 17,300 (sic) [ 17,700 ] staffs has been -- were engaged in 2 and more types of work, which, for example, there may be someone working on on-demand food delivery in the noon time, in the lunch time and dinner time. But in the morning, in the afternoon or maybe in the midnight, he is working on the shared-bike maintenance to change the batteries and regrouping those spikes. So this means he has been involved and engaged in 2 different types of works. And then another one is that the percentage of the registered female workers has increased from 5% of last year to 10% of this year by Q1. In 2020, we have acquired Lailai, which is a leading workforce platform specialized in housekeeping solutions And by this acquisition, we entered the hotel cleaning service area and started up our partnership with JW Marriott, Hilton and Quanji. And also by this acquisition, this has directly added over 30,000 workforce on our platform. And by this acquisition, we not only set up our business in the hotel cleaning business and also built up our foundation to the community-based family service in the cleaning and maintenance area. And in 2021, we had invested in oTMS, which is a leading smart logistic solution platforms, specialized in FMCG fashion and new retail service. OTMS is one-stop transportation service provider which provides service, including TMS system and also the door-to-door [ long-haul ] services. And by this acquisition, we have access to many big brands in FMCG, retail and fashion such as Bestseller, Li-Ning and Anta. And this investment helped us to expand our business to the Retail Service market and added new job opportunities to our current workers. And this is the market currently we are in. Currently, we define our market as a market for Workforce Operation Solutions. This is a very big and quick increasing market. As you can see from 2019 to 2024, according to the forecast of Frost & Sullivan, the CAGR is 23.1%, which means in the future, the next few years, the increase is very steady and very high. And this is figure I have to mention that from the CAGR of 2017 to 2019, the market CAGR is 22.7%, while Quhuo's CAGR is 77.2%. We beat to the market growth rate by over 3x. Currently, this is our market position. Currently, Quhuo is the largest platform specialized in housekeeping and on-demand food deliveries. And also, we are the early mover, and we are the first one to build up our own internally developed Quhuo+ system, which is the management system. And also currently in the geography part, we have covered over 139 cities across 30 provinces, and we covered both Tier 1, Tier 2, down to Tier 3 and Tier 4 cities. And also, as you can see from the right-hand side, companies from the perspective of revenue and orders. We account about 4% of total market. But you can see from the #2 and #5, added together is not -- just is not as much as what we have right now, which means we only have 4% of the market, but we are definitely absolute market leader in the market, which means the market is still very big and very diversified which also means that in the near future there is still a lot of room for merger and acquisition. The market will further consolidate which give us more and more opportunity to quicker growth. And this slide shows our geographic coverage currently in China. You can see we cover the most [ prosperous ] area currently in China and also we cover most provincials and capitals and the major cities in China. And from the lower corner on the left-hand side, you can see from 2017 to 2021 in the 4 years' time, our delivery areas has been almost tripled in the 4 years' time, which also shows our -- the very high speed of our growth in China. In this slide is a brief introduction of our system. Our system named Quhuo+ system is entirely our internal developed based on our past experience of 8 years operation. And the big feature of this system is that it is a combined connected to our HR management system, operation management system and financial management system. This is -- it can show the live data on the platform. As local manager, we -- I can see all the details, operational figures and even financial figures by T plus 2 times. So I don't need to bother in the data analysis. The system -- the AI system will help me to do all the analysis and give me an output of business optimization suggests. My job is to follow on the suggestion in the implementation. So this has basically lowered the burden of the local management team in the data analysis. They just need to focus on recruitment and the daily day-to-day operation and implementation. And also on the lower corner of the right-hand side, you can see we not only build up system for the management, and we also build up a community for the workers. All our workers of Quhuo have this mobile portal of Quhuo+. On this platform, we can apply for different job scenarios. They can introduce reference -- their relatives and friends to join the team to -- for a different job, and then they can apply for buy and lease all the materials and working equipment and they can apply for blue color apartments for accommodation and then they can -- there is also various financial tools to ease their lives to help them to [indiscernible] in their life. So our job is to create multiple job opportunities on our platform. So the blue collars have different choice on our platform, and then they can stay longer with us. So they can directly lower our recruitment costs and then increase our efficiency. And the next 2 slides is our financial figures. I'll hand it over to Sandra.

I'll quickly go through the next -- the last 2 pages, which is our main financial highlights. Let's look at our revenue growth for the last 4 years. You can see from the picture, our total revenues achieved CAGR of 58% from CNY 655 million for 2017 to nearly CNY 2.6 billion for 2020. And in 2020, even under the adverse impact of COVID-19 pandemic, our revenue still achieved a year-over-year growth rate of over 25% compared to the year 2019. And as for the structure of our revenues, which is shown on the right side of this page, you can see that as a result of our multi-scenario strategy, the percentage that our on-demand delivery business accounted of the total revenue keeps going down quarter-by-quarter. Currently, the percentage is around 95%. And we expect our new business scenario like mobility solutions, including shared bike and maintenance and ride-hailing solutions and housekeeping accommodation solutions, which is our 2 major new business lines will contribute to more and more portions of our revenues going forward. The last page is about our profitability. You can see from this page, along with our robust revenue growth, we also achieved a CAGR of 88% for gross profit growth for the last 4 years. Meanwhile, our adjusted net income was keeping growing significantly year-over-year. In 2020, the adjusted net income reached CNY 77 million, which representing 50% of the year-over-year increase compared to 2019. And I think that's a brief introduce our business model and our main financial highlights. This concludes our presentation. Now we are happy to take your questions.

Thanks, everyone, and now I will answer some questions have been put on the board. And the first question -- Okay. I got, the first question is about can we discuss how we recruited the gig workers. And the answer to the question is that currently we're basically using our internal referring system because since 9 years we have accumulated more than 200,000 workforce on our platform. So every workforce on our platform has been installed Quhuo+ app, application, which will help this -- which will enable the workforce on our platform to refer their relatives or friends to find the job in our platform. So that's the most effective way for our current recruiting system. Also, we provide a settle-down service by cooperating with house rental company and the loan financial company who enable the workforce to -- fast way to get into the working status and without concerning too much about how they can settle down in new cities. So that's the answer for the first question. Second question is about, can we provide a breakdown of what percentage of our workforce is delivery and the housekeeping and taxi rider sharing services? And which segment is growing fast? Currently that we have about 84 percentage of our workforce is mainly focusing on delivery. And about 4 percentage is mainly focusing on taxi rider sharing services and about 13 percentage of workforce is mainly focusing on housekeeping. And the fastest growing is the segment of the housekeeping. currently that we -- housekeeping, we're serving for the hotels, and we're also serving for the communities. And the third question is about to discuss our 2022 expansion plans for new retail service markets. As introduced by my cofounder, Barry, and we already invested in the oTMS that's we call it logistics SaaS companies which mainly is servicing for the new retail big service group -- new retail service group in China, like KK Group. And currently that we consider the new retail service market is kind of we call -- to increase the income for our workforce, especially in the delivery -- in on-demand delivery segment and also for the mobility segment. And we expect it will contribute to our revenue and in 2022 it will be more than CNY 30 million, but it's more like add-on service so instead of our major strategy. The fourth question is what's our business model and the revenue stream and how we differentiate our platform for gig workers that uses these competitors. We define our gig economy platform, which includes 2 parts. First part is it will provide standard service products for our business clients and for community family. So we provide a standard service product instead of we just recruiting while we're doing staffing so which is a major difference us from other competitors, which is mainly doing for like information exchange between companies and the employees. And the second part, we call as this -- mainly our user as a workforce -- So we needed to provide the service for the workforce, including recruiting, including training and including data management also including the settle-down programs, which we provided. So we're mainly focusing to solve the conflicts -- contradictionary -- conflicts between the employer as a flexible employer and the successful employees because for the flexible employer, they want sustainable and standard service. But for the flexible employees, they want the flexible work model and sometimes they want to work and sometimes they may not. So in order to provide standard service product to the business accounts and also can make good use of workforce on our platform, which is mainly 2 goals of our platform, which is different from other just recruiting or staffing companies. So about our business model and the revenue stream and we usually to -- for example, like on-demand food delivery, our major 2 customers are like Meituan and Ele.me. And we charge them is based on the quantity and the quality of the orders. So the deal is based on the quantity and the quality of the orders instead of how many people we use to fulfill the service request. And for our workforce on the platform, for our gig workers and based on their contributions in different business scenarios, we have the comprehensive and we call this a bonus system and the salary package to enable them to have sufficient and stable income for every month, so as to make them have a good living in the cities. The fifth question is about what do you see as your growth drivers for 2022. We consider the main -- the growth drivers can divided in 3 parts. For the on-demand food delivery, we expect constant and steady growth because you still expand gradually. And for the housekeeping, we are learning the strategy to family. So we're not just servicing for the business kind, we will provide service for the community families. And we expect for the -- fast growth is on the mobility and house-treating sectors, and we expect a very steady growth for the on-demand food delivery. And besides of that, we will add a new segment, which we call is training. We are cooperating with the training schools in China and help our gig workers on platform to acquire middle and higher-level skills and help them to raise their income. So the training session will also become the growth driver for our 2022. Yes. Thanks for all the questions. and if any new questions, please kindly raise. Thanks. That's it.