Good day and welcome Quhuo Limited 2023 H2 and Full Year Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Qishu Wang. Please go ahead..

Thank you, operator. Hello everyone. Welcome to Quhuo's second half and full year of 2023s earnings conference call. The company's results were released earlier today and are available on our AR 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 guidance. They will be available to answer 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 Legislation 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 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 statement 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. And thank you all for joining our second half and full year 2023 earnings conference call. In 2023, we achieved a total revenue of RMB133.7 [ph] million with a gross profit of RMB166.6 million. The adjusted net income reached RMB5.5 million representing a remarkable growth of 64.7% compared to the full year of 2022.

The company achieved positive results in various key financial indicators, such as net income and income per share of ordinary shares marking a historical achievement. Thanks to the strategy of the improved profitability after increase in revenues, implemented by the company starting in 2021.

We have achieved outstanding performance with positive EBITDA in four consecutive financial reporting periods.

Additionally, in 2023, we successfully identified the dual engines driving the second growth curve of our company's business namely the used vehicle export business and SaaS+ services, leading to a significant improvement in the company's profitability.

In terms of vehicle export solution in the full year of 2023, we successfully exported approximately 1,900 used vehicles from China to countries and regions like Jordan, generating a revenue of RMB154 million for the company.

Within a short span of seven months, with an investment of RMB30 million in working capital, we achieved an average monthly revenue of RMB22 million. The high cash turnover rate and the short payment cycle in the international trade arena confirm the sustainability and replicability of this business.

The use of vehicle export business was initiated with the official launch of Quhuo International in February 2023 and it went live in May 2023. Since then, Quhuo has set its insights on the international market, entering a new phase of global development.

Looking back at the achievements of Quhuo International, several factors have contributed to its success. Firstly, the broad overseas market has a strong demand of new energy vehicles, providing favorable conditions for the export of such vehicles.

Secondly, China's dominant position in the global market for new energy vehicles has led to rapid growth in the used vehicle-exporting industry. China's customs data shows that our 69,000 used vehicles vehicle exported from China in 2022 and the total exceeded 160,000 in 2023.

Much of the projection it indicated that the volume of Chinese used vehicle export is expected to reach 400,000 vehicles by 2025. Lastly and most importantly, Quhuo possesses unique advantages that differentiate us from other used vehicle traders.

On the technological and operational front, Quhuo’s mobility solutions management team has deep expertise in the right trading sector for over five years.

They also have more than two decades of experience and resources in the vehicle trading industry, which has provided them with a profound understanding of the used vehicle export market and the ecosystem. Additionally, Quhuo has accumulated over 10 years of professional capabilities in large-scale operations and technology.

In terms of vehicle sourcing, Quhuo has partnered with multiple automobile brands and expanded our reach to medium and large-scale auto manufacturers, dealerships, and the used vehicle market. So, our existing wide selling business since the first half of the 2023 establishing a national wide vehicle sourcing network.

In terms of vehicle refurbishment, Quhuo has accumulated a wealth of vehicle maintenance and repair resources through our previous wide-filling operations. We have also established a unique network of vehicle refurbishment resources through self-construction and partnerships.

Furthermore, at the sales channel level, Quhuo currently has close cooperation with 58 overseas distributors worldwide, providing stable sales channels and new opportunities for market expansion.

All these factors together build Quhuo’s competitive advantage in the global used vehicle trading market, signaling fast business prospects and the trend and it’s development potential. Another important engine for a second growth is the empowerment of SaaS+ service, primarily focused on housekeeping and accommodation solutions nowadays.

Starting from the first half of 2023, the company began piloting the transition to the SaaS+ service empowerment model in the housekeeping services after successfully validating our self-operated model.

After six months of market validation, the company's housekeeping and accommodation solutions began a comprehensive transition towards a SaaS+ empowerment model, starting in the second half of 2023.

This shift allows other small and medium-sized life-service providers to utilize Quhuo’s material operation systems and service products to better meet customer needs.

This transformation of the business model drove rapid growth in the GMV of the housekeeping and accommodation solutions in 2023, reaching RMB514 million, a 53% increase, compared to 2022. Furthermore, thanks to the successful implementation of SaaS+ service empowerment, the profitability of the business segment significantly improved.

The growth profit increased by 48.7% year-on-year, and the growth profit margin rose from 13.4% to 26.4% in housekeeping and accommodation solutions sector. What's even more pleasing is that the empowerment of SaaS+ service has also led to significant cost decrease.

The overall operating cost of housekeeping and accommodation solutions decreased by 35.5%, with a remarkable 53.4% [ph] increase in the operation cost of the hotel services, showcasing significant cost reduction effects.

Throughout the year 2023, through the innovative empowerment of SaaS+ service, we not only significantly enhanced the capabilities of local service provider, but also deeply integrated SaaS+ service into our business operation, achieving significant transformation results.

Since strategy effectively reduced the cost of the entire supply chain, improved operation efficiency, and brought significant economic benefits to the company. Overall, Quhuo's revenue is primarily from three types; Platform fulfilment service, SaaS+ service, and the international trade and the technology service.

Platform fulfilment service is the earliest business segment that Quhuo venture into and serves as the cornerstone of the company. It mainly involves on-demand delivery and mobility service solutions, and it generates revenue through service fee for order fulfillment.

This segment is an important component of the company's revenue as it being steadily developing. In 2023, the revenue from fulfilment service is RMB3.5 billion. SaaS+ service as mentioned earlier, is one of the engines for the second-gross curve, focusing primarily on housekeeping and accommodation services.

It generates revenue through charging for flexible improvement platform services. The great achievement made by SaaS+ service in 2023 has given us the confidence to establish extensive cooperation with more new customers, and expand SaaS+ service into more business areas.

Currently, we are in discussion with leading medical institutions, long-term rental platforms, and senior living apartments in China, intending to enter the medical and health [ph] care industries.

International trade and revenue is another engine for the second growth curve, derived from mobility solutions, especially in the used vehicle export business.

Facing the always-painting in the intangible international trade of used vehicles, such as authentic of transactions, transparency of processes, guarantee of vehicle qualities, and inadequate after-sales services. Quhuo International will launch a unique used vehicle export chain platform called Carnuxt.

This platform aims to create a stable [ph] way marketing environment for car manufacturers, dealers, and consumers while providing win-stop solutions to challenges related to the quality of used vehicle products, sales channels, and after-sales services.

Recently, there has been a push in China for a new round of large-scale equipment review and consumer goods trading programs, which will result in more used vehicle entering the market. This aligns with the growing demand for used vehicles in overseas markets.

Leading the advantages of Carnuxt's trading platform and high-quality services Quhuo aims to see this business opportunity, consolidate our leading position in the international trade of used vehicles and explore greater market potential for used vehicles in China.

SaaS+ Quhuo’s three major service models have jointly constructed and integrated and diversified commercial landscape. With the cornerstone sector being the fulfillment services, which serve as a stabilizing force for the company's revenue and profits.

Meanwhile, the SaaS+ service and international trade serve as vital drives for the company's proactive business expansion, leading to higher opportunities for overall business growth. They also seek to diversify the company's income streams and enhance its profitability, thereby opening up significant growth potential for the company.

In conclusion, whether through the transformation of the SaaS+ business or Quhou International expansion efforts, Quhou has brought about new opportunities in the employment market. In the future, we will also extend our material on-demand delivery service to overseas markets.

Through partnership with local on-demand service platforms, we aim to further develop global delivery services, providing more choices and opportunities for workers both domestically and abroad.

Since the initial team, we have contributed to promoting employment growth, enhancing good labor market flexibility and further driving sustainable social economic development. I concluded my prepared remarks here and now I will hand over the call to our CFO Barry to provide further insights into our financial situation..

Thanks, Leslie. Hello everyone, welcome to Quhuo's second half and full year of 2023 conference call. Please be reminded that all amounts quoted here will be RMB unless stated unwise. Before I go into our full year results, I would like to draw your attention to something notable that occurred during the second half of 2023.

For the six months ended December 31, 2023, revenue was RMB1,966.1 million a slightly increase compared with 2022 same period, which was RMB1,956.6 million. Now let's look at the segment result.

Revenues from on-demand food delivery solutions were RMB1,763.2 million, representing a decrease of 6% from RMB1,874.9 million in the second half of 2022, primarily because we enjoyed more preferential policies and subsidies during the second half of 2022 primarily because we enjoyed subsidy and amid the COVID-19 pandemic, which was significantly reduced in the six months ended December 31, 2023 following the relief of the pandemic.

Revenues from mobility service solutions, consisting of shared-bike maintenance, ride-hailing, vehicle export solutions and freight service solutions, were RMB175.3 million, representing an increase of 239.6% from RMB51 million in the second half year of 2022, primarily due to the success of vehicle export solutions, which generated revenue of RMB142.5 million.

Revenues from housekeeping and accommodation solutions and other services were RMB27.5 million, representing a decrease of about 8.3% from RMB30 million in the second half of 2022, primarily due to the transition of business model in hotel services.

The cost of revenues was RMB1,866.3 million, representing a 3.8% year-over-year increase primarily in line with the increase in our total revenues.

General and administrative expenses were RMB102.7 million, representing a decrease of 9.9% from RMB114.1 million in the second half of 2022, primarily due to the improvement in company management efficiency and the decrease in share-based compensation expenses from RMB7.3 million in the second half of 2022 to a net benefit of RMB4.3 million in the second half of 2023.

R&D expenses were RMB5.7 million, representing an increase of 6.6% from RMB5.4 million in the second half of 2022, primarily due to the increase in investment in SaaS+ technology.

Speaking of income, we recorded other income, net, of RMB10.7 million, compared to other loss, net, of RMB17.8 million in the second half of 2022, primarily due to the fluctuation in the fair value of our investment in a mutual fund.

Income tax expense was RMB1.5 million, as compared to income tax expense of RMB14.3 million in the second half of 2022, primarily due to the lower estimated annual effective tax rate for the second half of 2023.

Net income attributable to Quhuo Limited was RMB13 million, compared with net income attributable to Quhuo Limited of RMB11.8million in the second half of 2022. Adjusted EBITDA was RMB24.1 million, compared with adjusted EBITDA of RMB47.8 million in the second half of 2022.

Adjusted net income was RMB7.4 million, compared to the adjusted net income of RMB17.4 million in the second half of 2022. Now let's move to the full year of 2023. During the fiscal year of 2023, total revenue was RMB3,702.4 million, compared with total revenues of RMB3,820.4 million in 2022.

Revenues from on-demand food delivery solutions were RMB3,412.8 million, representing a decrease of 6.2% from RMB3,638.7 million in 2022, primarily due to we enjoyed more preferential policy and subsidy during 2022 amid the COVID-19 pandemic, which was significantly reduced in 2023 following the relief of the pandemic.

Revenues from mobility service solutions were RMB233.8 million, representing an increase of 116.4% from RMB108.1 million in 2022, primarily due to the success of vehicle export solutions, and we exported around 1,900 units of new energy vehicles and electric mopeds from China and generated revenue of RMB 154.5 million.

Revenues from housekeeping and accommodation solutions and other services were RMB55.7 million, representing a decrease of 24.2% from RMB73.6 million in 2022, primarily due to the transition of business model in hotel service.

Regarding the cost of revenue which was RMB3,535.8 million, which remained relatively stable as compared to the cost of revenues in 2022. Now let’s move to expenses.

G&A expense were RMB184.3 million, representing a decrease of 13.7% from RMB213.6 million, primarily due to the decrease in share-based compensation expense from RMB19.8 million in 2022 to a net benefit of RMB0.5 million in 2023. R&D expense remained relatively stable at RMB12.4 million in 2023 compared with RMB12.5 million in 2022.

Other income, net was RMB16.7 million in 2023, as compared to other loss, net of RMB26.1 million in 2022, primarily due to the fluctuation in the fair value of our investment in a mutual fund.

Income tax benefit was RMB0.9 million in 2023, as compared to income tax expense of RMB21.0 million in 2022, primarily due to the lower estimated annual effective tax rate for the year of 2023, and the increase in deferred tax asset benefit.

Net income attributable to Quhuo Limited was RMB3.3 million in 2023, as compared to net loss attributable to Quhuo Limited of RMB13.1 million in 2022. As our CEO Leslie said before in 2021 we proposed a strategy of improving profitability after increasing revenue. The effectiveness of this strategy was proven in 2022 and 2023.

As we have achieved the positive EBITDA for four consecutive half years which is a remarkable accomplishment. It signified the company's persistent profitability over the past two years demonstrating a stable and sound operational performance.

Other income, net was RMB16.7 million, compared to other loss, net of RMB26.1 million in 2022, primarily due to the fluctuation in the fair value of our investment in the mutual fund.

Income tax benefit was RMB0.9 million compared to income tax expense of RMB21 million in 2022, primarily due to the lower estimated annual effective tax rate for the year of 2023, and the increase in deferred tax asset benefit.

Net income attributable to Quhuo Limited was RMB3.3 million compared with net loss attributable to Quhuo Limited of RMB13.1 million in 2022. Adjusted EBITDA was RMB35.2 million compared with adjusted EBITDA of RMB58.6 million in 2022. Adjusted net income was RMB5.5 million compared with adjusted net income of RMB3.3 million in 2022.

In terms of the balance sheet in 2023 as of December 31, 2023 the company had cash, short-term investments and restricted cash of RMB114.8 million and short-term debt of RMB92.7 million. This concludes my prepared remarks. Thank you for your attention. We are now pleased to take your questions. Operator, please go ahead..

[Operator Instructions] It appears we have no questions at this time. I would like to turn the conference back over to management for closing remarks. I'm sorry if we want to wait for if there is any investor wants to have a question. Maybe give us more five minutes. Okay, so if there is no more questions, we will finish our conference call here.

Thank you everyone for listening. And if you have more questions, you can find us and contact us from our website. Okay, thank you everyone. And goodbye. Pardon me. It looks like we do have some questions who have dialed in. The first one is from Bill Lee with a Tiger [Indiscernible]. Please go ahead..

Thank you. This is Bill from Tiger. Thank you to the management for sharing. My question is what is the Quhuo’s strategic plan for the next steps? Thank you..

Okay, this is Leslie and CEO of Quhuo. Regarding the future plan, firstly, that over the past decade, and we concentrate on building our core competence is a lean operation, through our self-operated model.

But we expected that after the exploration in 2023 from 2024 onwards, we would like to define our strategy to from self-operation to collaborative empowerment which means we will explore more opportunities in collaboration and more focusing empowerment. So we consider three main areas to implement this collaborative empowerment strategy.

And the first phase [ph] is on domestic side, we will focus on providing fast class service empowerment, not just empowering local life service operators in housekeeping and condition. We also we are extending our subclass service to broader business areas.

For example, like elderly [ph] care, because China is now in aging population and medical services and also, we will empower long-term rental apartments. On the international trading side, we were more focused on empowering our trading partners worldwide.

So, we plan to launch a trading platform we call this Carnuxt, which will are working closely with our 58 service dealers worldwide. We plan to transform them into our regional operational collaborative service partners.

So, we will work together with us to further explore opportunities worldwide to address the issues of transparency and securities for used vehicle export trade.

With this initiative, and we hope that we can through issuing Carnuxt certificates provide more quality assurance for our trading partners worldwide, and expand more opportunities in the development of new energy vehicles. And obviously, further increasing Quhuo's market share and revenue in international in the market.

And another part of collaborative empowerment we think about is on the on-demand delivery business. We did some investigation and feasibility studies, and we believe that overseas on-demand delivery market is characterized by significant consumer scale and high growth potential.

As the projection data, as we said, that the market size of overseas market for on-demand delivery is reached about more than $600 billion by 2032. But however, we see the problems and the problems like poor service experience and high delivery cost and also insufficient capacity to handle large volumes of orders in the peak time.

So, we think it's a good opportunity for Quhuo. So, in 2024 we will focus on Southeast Asia and the Middle East as our pioneer stations for overseas expansion. And we will cooperate with the local on-demand platform and some restaurants and also localize like service providers.

And we will mainly to support service experience and high cost in the overseas delivery service market. And we believe that the experience, expertise and also the technology what we accumulated in the past 10 years in China, we will empower our working partners in overseas and we expect to achieve more business growth in overseas market.

And our plan is by 2025, we aim to achieve the business implementation in more than five new countries, and explore other regional markets and furthermore. So about our future plan, in summary, in 2024, we're considering that firstly we are maintaining our domestic cornerstone business, stable growth.

And at the same time, we will actively seek a growth opportunity in the overseas market. So enhance the company's profitability and growth space through the international expansion of used vehicle and also on-demand delivery together with our domestic SaaS+ service. Thank you very much.

I hope that I can clarify that what we are going to do in the future. Yes. Thank you..

Okay, operator please check if there’s more questions..

[Operator Instructions] There are no further questions at this time. I'd like to hand the call back over for closing remarks..

Okay. If there's no more questions, we will finish our conference call here. And thank you everyone for listening tonight. If there's more questions, you can contact us from the IR website. So that's all. Thank you. Goodbye..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..