Hello, ladies and gentlemen. Thank you for standing by for iClick Interactive Asia Group Limited's Second Quarter 2021 Financial Results Conference Call. At this time all participants are in listen-only mode. After management prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Lisa Li, Investor Relations Director. Lisa, please go ahead.

Hello, everyone, and welcome to iClick's second quarter 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 Madrid 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, T.J., Chairman of the Board, Chief Executive Officer and Co-Founder of iClick, will first provide a high level review of the second quarter 2021 results and share his thoughts on our execution strategy ahead. Chief Financial Officer, Terence Li, will follow and give us additional insights on the financial results for the second quarter and provide guidance for third quarter and full year of 2021. He will then turn the call back over to T.J. 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 Legislation 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 includes discussions of unaudited 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. T.J., please go ahead.

Thank you, Lisa, and welcome to the call everyone. We are excited to share with you yet another quarter of robust growth in both our Marketing and Enterprise Solutions and strong financial and operating performance. In fact, the second quarter saw a record performance on numerous metrics including Enterprise Solutions revenues, gross profit, adjusted EBITDA and adjusted net income, further demonstrating that we have the right data driven solutions for our clients, and that we are enjoying strong demand from our products and services. With our solid execution and a clear strategy to further penetrate the enormous private domain traffic market, we remain confident in our strong outlook for the future. Total revenue in the second quarter grew 34% to $78 million. Looking at our two business segments, Enterprise Solutions achieved record results for the seventh consecutive quarter with revenue reaching $13.4 million, up 160% year-over-year. Our Marketing Solutions segment also continued to deliver a healthy growth as revenue grew 22% year-over-year to $64.6 million. Gross profit increased by 46% year-over-year, outpacing revenue growth as we further expand sales growth in Marketing Solutions and drive increased contributions from our higher margin Enterprise Solutions business. While we keep investing actively in Enterprise Solutions, we have still managed to achieve historical highs in adjusted EBITDA and adjusted net income, demonstrating the strong economics of scale we have achieved in Marketing Solutions. iClick is a market leader in assisting clients realize digital transformation through embracing offline to online integration opportunities and private domain traffic market in China. Encouragingly, according to PwC, online and offline retail sales in China are estimated to reach $2 trillion and $6 trillion, respectively. And we believe the total $8 trillion can give us a rough estimate of the enormous market potential we are facing. While our key account…

Thank you, TJ. Hello, everyone. I'm pleased to share with you our strong financial performance in the second quarter of 2021. Our second quarter financials represent numerous records, including record results for Enterprise Solutions for the seventh consecutive quarter and record gross profit, adjusted EBITDA and adjusted net income. In addition, revenue and gross billing also hit second quarter highs. Revenue for the second quarter of 2021 grew to $78 million, up 34% from $58.1 million for the same period of the prior year, attributable to the increase in contributions from Marketing Solutions and Enterprise Solutions. Revenue from Marketing Solutions grew to $64.6 million for the second quarter of 2021, up 22% from $53 million for the second quarter of 2020, primarily as a result of growing market demand from specified action marketing campaigns. Revenue from Enterprise Solutions was $13.4 million for the second quarter of 2021, up approximately 160% from $5.1 million for the second quarter of 2020, primarily due to the increasing need for online and offline consumer behavior data integration and digital transformation. Gross profit for the second quarter of 2021 was $24.3 million, representing a 46% increase compared with $16.6 million for the second quarter of 2020, mainly due to the continued expansion of the company's Marketing Solutions and contribution from higher-margin Enterprise Solutions. Cash and cash equivalent, time deposit and restricted cash as of June 30, 2021, was $103.7 million compared with $94.5 million as of December 31, 2020. Our balance sheet remains strong to accommodate both our organic growth and M&A opportunities. We have in place a $50 million ADS repurchase program through December 31, 2021. And as of June 30, 2021, the aggregate value of purchased shares was approximately $7.4 million. In addition, our Board of Directors today authorized the company to upsize…

Thank you, Terence. Our data-driven solutions are clearly driving scalability and sustainable growth and the cross-selling opportunities we are seeing from our existing Marketing Solutions clients and through partnership with Baozun, are feeling strong growth opportunities ahead. We have achieved strong performance through the first half of 2021 and believe we have established the core fundamentals for driving further growth. We are more committed that -- we are more committed than ever to growing our higher-margin Enterprise Solutions segment along with our Marketing Solutions segment to improve the overall profitability of the company. The market opportunity for private domain traffic is massive with applications in virtually every segment of the consumer and the B2B market. We also recognize that a pure SaaS model in China is not ideal and therefore, for the key account clients, we expect to benefit from the collaboration with Baozun to provide operations, services and outstanding warehousing and logistics systems. Meanwhile, we also see huge market potential ahead with mid-tier clients that we are not only servicing with our SaaS tools but also providing with valuable industry methodology. We see this dynamic as driving stronger scalability that will yield growth in Enterprise Solutions. I wish to thank all our key stakeholders, partner clients and shareholders who see what we see in iClick, that is the promise for a very bright future, the promise of delivering true innovation against the backdrop of the digital transformation overtaking China. To all our devoted iClickers who help us to deliver excellence every day, I say thank you to all of you for it is with you that our success truly rests. To our shareholders, I know that while we are experiencing the impact of shifting regulatory sentiment due to our geography, we will not be swayed by interim shifts in sentiment that do not impact our fundamentals. Instead, we remain keenly focused on the long-term drivers that have led us here, the history of our successes and the prospects of our ongoing success, which we believe are bright. While we feel current valuations do not represent the fair value of the future of iClick, we will remain focused on creating lasting shareholder value. Our management team is dedicated as always to driving growth, profitability and excellence. Thank you 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.

Yes. Thank you. At this time, we’ll begin the question-and-answer session. And the first question comes from Nelson Cheung with Citi.

So let me translate the questions in English. So thanks, management for taking my questions. Congratulations on a solid quarter and TJ, for your new role. And I have two questions. My first question is on the Marketing Solutions. Just wanted to check if management have any updated advertising outlook in the second half this year or next year despite the impact of education overhang and the soft consumer sentiment as well as the resurgence of COVID cases. And my second question is related to the Enterprise Solutions. Just want to check if management can share the number of new KA clients added this quarter as well as the mid-tier clients this quarter. And do you see whether your plan will be disrupted given the soft consumer sentiment, which may lead to softer business growth of mid-tier client right now? Thank you.

Thank you for your questions. This is TJ. Your questions cover two parts, Marketing Solutions and Enterprise Solutions. And I will take the first question about Marketing Solutions. Overall speaking, in the first half, our advertising business delivered a good performance with revenue growing by 20% year-on-year. If you look at the Chinese market, indeed, there were some industries that were tightly regulated such as the K-12 online education and gaming, and the pandemic has brought more uncertainties to the economic outlook. Therefore, the advertising business was affected. And in the second quarter, you’ll see that the impact was limited. But in the third quarter, the impact is likely to grow bigger. So there are indeed uncertainties in the market. But our advertising business cover a lot of industries, and in addition to those tightly regulated ones, we also have traditional industries such as consumables, FMCG, household chemicals, luxury, which enjoy healthy growth. So – and in addition, our advertising business has achieved economies of scale. And with the steady growth in its revenues, we have seen adjusted EBITDA and adjusted net income increasing steadily. Therefore, for the second half, our management will focus more on the potential implications of the uncertainties in the market. And we will be more cautious in developing our advertising business and with more focus on risk management, cash flow management so as to ensure steady profitability. And in spite of all the negative impact, as our CFO, Terence has mentioned, we maintain our guidance on operating revenue. Thank you. Okay. As to your second question about Enterprise Solutions, it also involved two parts. First is the key account clients. The second is mid-tier clients. And we maintained our early year guidance on the growth of key account clients. And this year – that is,…

Thank you. And the next question comes from Thomas Chong with Jefferies.

I have two questions. The first question is about iSmartGo. So do we have any update on iSmartGo, like any quantitative numbers or just number of clients? And my second question is about the overseas strategy.

Thank you for your question. This is TJ. As to our overseas strategy, well, currently, we are using iSmartGo to target mid-tier clients, and our strategy is to help foreign friends to enter the Chinese market. Because, in the past, Chinese consumers, they can go abroad for shopping, but thanks to the pandemic, they can't do it anymore, so through iSmartGo, we can provide opportunity to foreign brands who can then use the WeChat ecosystem to sell their products to the Chinese consumers and also maintain their relationship with the members in China. And after launching this product, we've seen very good progress. And currently, we are working with brands in Korea, Japan and Southeast Asian countries, and we've already shared two of these in the script. So overall speaking, our overseas strategy is to leverage our products and operating methodology to help foreign brands. And our advantages in overseas market is that our Marketing Solutions business already have a big customer base in the overseas market. So we actually can take the opportunities presented by the pandemic to upsell our SaaS product, including iSmartGo to this client base.

Thank you.

Thank you. And the next question comes from Colin Liu with China Renaissance.

So I'll just translate for myself. We saw very good progress in terms of the standardized products across many markets. I just wanted to ask if we – if the company has any kind of target regarding the number retail outlets or the number of merchants they want to sign up by the end of this year. And regarding the GMV take rate revenue model, are we going to see any sort of meaningful contribution in this year? Or is this something which should be more forward-looking to forecast on that?

Thank you for your question. This is TJ. As aforementioned, by the end of second quarter, we have already signed nearly 3,000 outlets. And for the full year, I expect to acquire or sign up more of this than we predicted earlier this year. Because earlier this year, we expected to sign up 4,000 to 5,000 outlets, but I think that for the full year, we will be very likely to have 8,000 to 9,000 outlets signing with us. And that means that the standard products are very attractive to these mid-tier clients. And because these clients, they are chain stores, so they need our iSCRM product to help them connect with consumers and operate their private domain traffic. As to the contribution, we are still signing up the outlets, and also the contribution needs to be allocated along 12 months. So the current contribution will not be big for the full year, maybe like single digit or high single digit. As to the GMV profit-sharing model, we are very optimistic about this model. And currently, we are trying it with some mid-tier clients, and they all welcome it and – because they can use the iSCRM to operate their private domain traffic and also operate their communities, therefore bringing extra sales revenue to these merchants. Therefore, they are more than willing to share the profit with us. And I think this model will be better for the Chinese market because if we're simply selling SaaS tools to them, these clients will not be very sticky because, after all, it will incur cost for them. And long term, they are not willing to pay. As to the GMV model, since we can bring extra revenue to them, it will greatly ensure the stickiness of clients. And therefore, our clients were not willing to actually jump the ship and find other partners.

Thank you. And the next question comes from Brian Kinstlinger with Alliance Global Partners.

Great. Thanks for taking my questions and nice results. First, can you quantify the revenue from education in the first half of the year as a percentage of Marketing Solutions? And then based on your guidance, what are the assumptions in the second half of the year? And then similarly, there's been discussion around new regulations in the China gaming sector. Can you tell us if there's been any impact on your Marketing Solutions business from gaming customers? And any expectations in the near term of changes of advertising budgets specifically within that customer set? Thank you.

Hello, Brian, this is Terence. I think, I could first answer some – about the numbers first. And then I think I will pass the questions to TJ to comment more about the industry and how the gaming sector may impact our second half results. First of all, online education was being regulated since actually last quarter, from the first quarter. And so it has been adjusting the numbers quite substantially. So in the second quarter, it only takes around 2% to 3% of our total gross billings, so it's really small numbers. And we're actually believing – or budgeting minimal numbers in the second half or even zero numbers at the moment. And for the gaming, actually, it's a relatively bigger sector for us. It takes around 15% to 20% of our total numbers in terms of the gross billing and some of the revenues numbers as well. So I guess I would then pass the questions to TJ to answer on the second part about the industry kind of outlook on the gaming and education sector.

Thank you for your question. This is TJ as to the outlook of Marketing Solutions in the second half. Well, due to the latest regulatory policy changes, some industries were adversely affected, in particular online education. We've actually seen the impact on the advertising budget of online education in Q2 and although the tightening of the regulations happened in Q3 and in fact, in the second quarter, many of our online education clients didn't place any advertisements anymore. But we were not affected in the second quarter because the revenues from other industries actually made up the gap. And in the near future, other industries such as gaming and tourism will also be affected by the regulatory policy changes. So looking ahead at the second half, we've seen a lot of uncertainties in the Marketing Solutions business. Although our Marketing Solutions business have a lot of industries, we will be more cautious and prudent in developing it in the second half and we’ll focus more on industry leaders, as well as industries with more certainty. And we also will focus more on risk management and cash flow management, so as to maintain the healthy growth in our Marketing Solutions business. Thank you.

Thank you. And this concludes the question-and-answer session, so I would like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact iClick’s Investor Relations department through the contact information provided on our website. See you next time. Thank you.

Thank you. This concludes the conference call. You may now disconnect your line. Thank you.