Quhuo Limited (QH) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Quhuo First Half Year of 2023 Earnings Conference Call. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. [Operator Instructions] I would now like to turn the call over to Ms. Qishu Wang Please go ahead, Qishu.

Thank you, operator. Hello, everyone. Welcome to Quhuo's First Half Year of 2023's Earnings Call Conference Call. The company's results were released earlier today and are available on our IR website. On the call today are Leslie Yu, Chairman and CEO; CFO, Barry Ba. Leslie will review business operations and the company highlights followed by Barry, who will discuss financials and the guidance. They be a available for answering your questions in the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and the current market and operating conditions and relate to the events that involve known or unknown risks, uncertainties and other factors. All of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under the law. With that, I will now turn the call over to our Chairman and CEO, Mr. Leslie Yu. Please go ahead.

Thank you, Qishu. Thank you all for joining our first half of 2023 earnings conference call. Following the increasing revenue first and the improving profitability later early in 2022, Quhuo continued to enhance profitability and optimize costs in the first half year of 2023. Meanwhile, based on our mobility service solutions, we have embarked [indiscernible] growth trajectory for our business, which has yielded a significant achievement. Albeit current domestic economic condition, Quhuo achieved [ the most ] improvements in its financial results during the first half of 2023. Generally speaking, in the first half of 2023, Quhuo achieved 78.6% year-on-year decrease in net losses and an 87-point decrease in adjusted net losses. Adjusted EBITDA also increased by 2.8%, reaching RMB 11.1 million. First, mobility service solutions and housekeeping services have delivered satisfactory results. First of all, we made a progress in cost and expense control through technology optimization in the first half of 2023. Overall operating costs decreased by RMB 5.7 million year-on-year. General and administrative expenses decreased by 18% to RMB 80.1 (sic) [ 81.6 ] million. And research and development expenses decreased by 7.2% to RMB 6.6 million. Considering the current economic condition in the domestic market, we also managed asset liability allocation, resulting in an increase in interest income from RMB 191,000 in the first half of 2022 to RMB 742,000. Interest expenses also decreased by 38.6% from RMB 3.8 million in the first half of 2022 to RMB 2.3 million in the first half of 2023. As you may know, our on-demand delivery solutions and mobility service solutions are mainly well-known consumer service platforms, such as Meituan, B&B and the major chain restaurants like KFC, McDonald's and the Luckin coffee. Through platform fulfillment services, Quhuo offers streamlined management operations and standardized service products, while charging service fees for order fulfillment. In the first half of 2023, the sales revenue from on-demand delivery and mobility solutions, excluding vehicle export solutions, amounted to RMB 1.7 billion. Our housekeeping and accommodation services are provided on the SaaS plus service model. The SaaS plus service model primarily offer a comprehensive solution for housekeeping and accommodation and other community service providers, encompassing services such as online traffic, orders, payments and customer support. Additionally, we provide value-added services like human resource management, financial management and data analysis. Helping service providers enhance management efficiency and decision-making capabilities thereby improving service quality and user satisfaction leading to increased revenue. Meanwhile, the primary source of revenue for SaaS plus service product is the commission collected from partners based on the GMV charges through our platform. In the first half of 2023, the revenue from housekeeping and accommodation solutions and other services amounted to RMB 28.2 million. In the first half of 2023, we actively expanded the second growth curve. In February, Quhuo officially launched an international business on Quhuo International. After preparation in March and April, we officially launched the vehicle export solutions in May. As of now, the results have been significant. With cooperation [indiscernible] reached for over 3,000 units, the contracts of 1,720 units had been signed and more than 200 units delivered. In May alone, the service generated revenue of RMB 11.98 million and achieved profitability. The remaining service contracts that have been signed but not yet fulfilled are expected to continue bringing financial returns to the company in the second half of the year. Quhuo International will continue to increase investment in this business gradually building a network of our commodity dealership in 58 countries and regions around the world, including China and [indiscernible] According to the media reports, the total volume of China's used car exports in 2021 was approximately 15,000 vehicles within just one month of Quhuo's vehicle export solutions going live. The volume of signed contracts already accounted for 20% of the total export for the entire year of 2021. The report indicates that China's used car exports are expected to exceed 100,000 vehicles in 2023 with a predominant focus on electronic vehicle export. This is set to provide Quhuo internationalization efforts with an even greater room for expansive development. We believe that the achievement Quhuo has made in the vehicle export solutions are partly attributed to China's domestic vehicle scrappage policies and the rapid growth of the electronic -- electric industry. However, even more crucial is Quhuo's extensive data and operational experience is the ride-hailing services. The business team of Quhuo's mobility service solutions has been deeply rooted in the ride-hailing service for over 5 years and has more than 2 decades of experience and resources in automotive export field. Currently, Quhuo has become one of the key partners of China's largest ride-hailing platform, Didi. All the above allowed our business team of Quhuo's mobility solutions to connect with various large- and medium-sized automotive manufacturers, dealerships and in the secondhand car market, allowing us to swiftly access information, our vehicles for sale and establish close relationship with relevant entities. Our close collaboration with overseas dealers has led to robust communication and cooperation type. This formidable network of partnerships have laid a strong foundation for Quhuo's international expansion, enabling us to see an early presence in overseas market. Leveraging our mature ride-hailing business line, operational experience, [ accumulated asset ] data and diversified vehicle resources, we achieved profitability within just one month of launching this service. In future, Quhuo will leverage its secondhand car repair capabilities for streamlined operations. Currently, the overseas expansion of used cars is our action of development. Electric vehicles are the main source driving China's used car export accounting for about 70%. In addition to serving ride-hailing drivers and providing these our used car sales, Quhuo possess robust car repair capabilities. While offering ride-hailing solutions, the company has accumulated significant resources for vehicle maintenance and repair, creating a unique network of vehicle repair resources. Relying on Quhuo International's long-standing network of overseas dealership and the increasing volume of used car domestically, Quhuo will continue to build its core advantage in optimizing used car repair by establishing and collaborating all repair centers nationwide. Quhuo aims to enhance efficiency through standardized process, create international used car certification standard and optimize the environment for international used car transactions. For instance, setting up a refurbishment center at vehicle export locations, completing used car repairs and condition grading and ensure vehicles are shipped on same day when they reach the port to reduce logistics costs. Through innovative transaction models of domestic operations [ through ] international export, Quhuo International will become the company's second growth wave and explore entirely new realms of development, which will boost the company's revenue and profitability, providing a broader scope for growth. Moreover, it will offer various industry stakeholders more business opportunities and avenues in collaboration. It will not only faster the development of international automotive trade and bring forth opportunities arising from the booming electric vehicle industries to overseas countries and regions, but also actively assume a positive corporate social responsibility in global energy conservation and emissions reduction. We are confident that Quhuo International is offering a more diversified range of products and services to our clients, catering to the varied needs of different regions and markets. This will create additional revenue streams for us, propel overall company growth and unlock substantial business opportunities and growth potential. This concludes my statement. I will now turn the call over to our CFO, who will discuss our financial results for the first half of [ 2023]

Thanks, Leslie. Hello, everyone. Welcome to Quhuo's First Half Year of 2023 Conference Call. Please be reminded all the amounts of the year will be RMB unless stated otherwise. The first year of 2023, total revenue recorded RMB 1,736.3 million compared with total revenue of RMB 1,863.8 million in the first year of 2022, as [ COVID ] break out. Revenue from on-demand delivery solutions were RMB 1,649.6 million, representing a decrease of 6.5% from RMB 1,763.3 (sic) [ 1,763.8 ] million in the first half year of 2022, primarily because we enjoyed more preparation policy during the first year of 2022 amid the COVID-19 damage, which was significantly reduced in the 6 months ended June 30, 2022, following the relief of the pandemic. Revenue from mobility service solutions consisting of shared-bike maintenance, ride-hailing, freight service solutions and newly launched vehicle export solutions were RMB 58.5 million, representing an increase of 3.6% from RMB 56.5 million in the 6 months ended June 30, 2022, primarily due to 2 major points: one is the commencement of vehicle export solutions, which generated revenue of RMB 12 million; and second, our enlarged customer base and the service scope for ride-hailing solutions service. Revenue from housekeeping and accommodation solutions and other services are RMB 28.2 million, representing a decrease of 35.2% of RMB 43.5 million in the first 6 months ended June 30, 2022, primarily due to the transition of the business model in hotel and accommodation service. Overall, Quhuo realized a number of financial data improvement amid the current economic conditions in domestic market. Cost of revenue was RMB 1,669.5 million, representing a decrease of 5.7% year-over-year, primarily attributable to the decrease of our labor cost -- decreasing our labor cost and hiring expenses. Our G&A expenses were RMB 81.6 million, representing a decrease of 18% from RMB 99.5 million in the 6 months ended June 30 of 2022, primarily due to the decrease in 3 major points: one, the share-based compensation expense has decreased from RMB 12.5 million in the first year of 2022, down to RMB 3.9 million in the first year of 2023. And the second is the welfare and business development expenses and office expenses from -- has decreased from RMB 29.5 million in the first year of 2022 down to RMB 17.3 million in the first year of 2023. Our R&D expenses were RMB 6.6 million, representing a decrease of 7.2% from RMB 7.2 million in the 6 months ended June 30, 2022, primarily due to the decrease in the average compensation level for our R&D personnel as a restructured result of our R&D team. Other income was RMB 6 million compared to other losses of RMB 8.3 million in the first half of 2022, primarily due to the increase in our fair value change of the investment in the mutual fund. The income tax benefit was RMB 2.4 million as compared to income tax expense of RMB 6.7 million in the first year of 2022, primarily due to the increase in our deferred tax asset benefit. And net loss attributed to Quhuo Limited was RMB 9.6 million as compared to RMB 25 million in the first year of 2022. Adjusted net loss was RMB 1.8 million as compared to adjusted net loss of RMB 14.1 million in the first year of 2022. And our adjusted EBITDA was -- earnings of RMB 11.1 million as compared to adjusted EBITDA of RMB -- earnings RMB 10.8 million in the first year of 2022. In terms of the balance sheet at June 30, 2023, the company has cash, short-term investment and restricted cash of RMB 178.2 million and short-term debt of RMB 95.7 million. This concludes my prepared remarks. Thank you for your attention. We are now pleased to answer your questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from [indiscernible] of Tiger.

I have a question, Quhuo always wanted localized community like services. Is there some relation between the newly launched vehicle export solutions and the companies of [ ride-hailing ] business? And can it establish a complementary relationship with the existing business?