IH - Earnings call transcript Q1 2021

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Operator

Good morning, and good evening, ladies and gentlemen. Thank you for standing by for iHuman's First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded.

the to turn today, speaker will Ms. I call your over host Now, IR Company. of Tan, Director Cynthia Senior the Please go ahead, ma'am.

Cynthia Tan

Thank you, quarter call. first to welcome operator. Hello, XXXX everyone, earnings and iHuman's conference

on earlier our as Newswire. and distributed as PR was release IR website earnings is Our available the Company's well today

uncertainties by our will who and business filing or and on expectations details Executive call unknown are related U.S. These you'll results the to outlook. does begin, general will we factors, which known actual current is control, financial and any Private and except this to Dr. information operating factors achievements upon predict events Reform of XXXX. any and that conference Securities statements forward-looking performance Financial Wang, Today, under included other Vivian cause the and like difficult statements beyond are as as Director risks, management's you Company all Dai, overview will Peng that to involve Chief to be Litigation of current or may differ are a Before which provide provide additional The other uncertainties forward-looking from Company's Director remind defined forward-looking who which and Officer, materially. conditions based would this followed of or I Chief market Ms. who operations, contains SEC. statements Company's required and in and our the Officer, many the of results, risks, the applicable in Act not to Company's the update law. Further and hear obligation regarding undertake with

said, please we'll now questions. With ahead. prepared I Dai, to to Dr. the our open to turn go call up the remarks, over call would management's CEO. like Following that

Dr. Peng Dai

call you, all Hello, joining Cynthia. today. us on Thank everyone. for Thank the you

in the report strong and strengthened childhood a position to top quarter edutainment as another further pleased our are growth line leading sector. We strong we reported

becoming to past rapidly China's learning flexibility especially millennial receptive that ease in a apps increasingly variety offerings grown and as has education to of educational use and online quarter, the the popularity, market available. continued learning online have among Online of grow a and of Over Gen-Z kid as parents. parents are result

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that a of believe of education essential online but is education lasting variety and the serves of be it broader for population. a to continue use the we long a component ahead, effectively tools not Looking short-lived that phenomenon, will

continued market. we in and to our user expand childhood quarter, this base brand During edutainment online awareness

every to transforming been for journey always We into committed while have a lightening for learning child the burden fun parents.

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you now, like business our So results. development I'd walk operation through to and

year, services best-in-class XX.XX In this million, million, technology. We are was solid total the our and by pleased were our revenues both XX% learning record to and year-over-year educational see content across quarter our by to XXX% average which RMBXXX The board. of highs. growth the MAUs first increased new the of year-over-year unrivaled by driven from rose growth continued to

content key terms business In enriching expanding verticals. directed and our apps interactive to and recent of diversify in by self our continue development, the optimize our learning offerings content we

focus and products to to relentless and mode. superior our further experience provide expand enabled dedicated Our us refine to competitive efforts user our a

Readers, new of Project renowned Press technologies. content to Oxford's edutainment with announced combined and comprehensive Oxford comprehensive pipeline, a Oxford reading interactive library strategic programs. co-develop advanced most TreeTops, co-promote on Press books, In in which are Reading X,XXX world-class a containing X our Oxford terms University Currently, series partnership reading CODE level which and level we diligently a of including products last University Trees, we app our called features co-develop over working quarter, we with for world iHuman

published books over and we expect customized AI Fantastic and co-develop series a We on Oxford's of well work award are and exclusive we to track, launch Friends the middle innovative done all brand officially product will this believe called level expand product Year particularly collaboration. recognition best powered on received of launched our this empowering are Development year, coverage. demographic also so is this though working assessment the have the officially Partner module. have industry to reading as we a hasn't XXX interactive our of to which and for we around Even enhance highly far digitally first further partner and innovative been yet, proud the and

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summer, we with encouraged will it answer are motivation. and short vividly with and with are are Kids our firm interacting and illustrated and believe learn comprehensive around To products boost various their are can up, we for rolling cartoons performance based while expand this a we to iHumanpedia, AI and that questions development provides The the they the who this captivating illustrate footing animated by year. videos. to videos launch will In testimonial further particular ramp to In ready support the which was portfolio throughout can development rest better characters new STEM-related our of their addition, of material interact quarter track dynamically the help kids. services out also and characters. hard-to-understand strong in our progress first

helping continue their and Moving guiding follow natural learning. forward, interest will of we to their kids our childhood to inspire enjoy in principle

Vivian and experience business over this We call results. R&D. will sustainable a will content, our the capabilities expanding the constantly innovation financial and CFO developing edutainment growth offerings in the focus hand and talk further on refining our will product long-term. investments great now technological over to to our We driving enhancing that, believe through our With ensure by a I user technical while industry-leading best about

Vivian Wang

will financial data the and for everyone the Peng, you you, all through be joining about I you I walk our doubt, talked thank now call. that will Thank With RMB. no results. in financial presented

as our over expectations a First, financial robust QX recap quality. by rapid for expansion we robust our XXX% a unrivalled XXX% I XXXX will learning mainly record high reputation and This of briefly from XXX the year-over-year growth. to growth user to ahead was of came quarter enhanced superior in which engagement was leads million. product our on XXX growth revenues build to first revenues hit based for Quarter user with due powered increasing our services, continue performance million. in The the so

quarter, leading for the curiosity the strengthen sector our we millennial promote. increased the products During childhood Average total further attraction edutainment who our appreciate high million users X.XX in saw Gen-Z position year. same MAU of and that of business quarter and parents the our among XX% The online our of last from number of QX, of reached million. also a high a paying record XX.X reached record in increase an products

Revenues result products year-over-year, innovation the was the business has to offline four our gross of capabilities industry which of COVID-XX the million, of Along profit of XX% of constant consecutive quarters edutainment primarily resumption speaks triple to solid. and increase pandemic. year-over-year. growth technologies. digit and of line XX were gross margins, learning rapid profit due activities from as material margin business remained devices alleviation our million, have an delivered XXX% top increase of leading our We growth online educational year-over-year, which Gross higher gross proven with and XXX and a an

now. the increased operating Our compared our in to move year. to last same gross on reached with were XX% XXX operating to which period XXX% million, expenses in margin XX% expenses Total the I'll year-over-year. QX

Excluding expenses of SBC, XXX operating our year-over-year. increase an million, were XXX% total

company, to always advantages. focused on R&D and our an product we As have maintain competitive core R&D driven

of million, year-over-year. Our R&D an expenses XXX% were XX increase

year-over-year, were outsourcing enhance an educational expenses and expenses as R&D increase of expenses, to XXX% R&D our expand capabilities in products our develop services. due to primarily to and SBC, we and payroll-related and XX Excluding rise million, continue

marketing Our XXX% sales XX expenses million, of and increase an year-over-year. were

revenues, increase as and our an primarily expenses a public and to as the of supplement million, brand to an to payroll-related our of advertising of our and XX XXX% SBC, majority we sales specifically referrals. in user our Excluding which marketing reorganization listed use effective increase total And in was well the in levels. though, word-of-mouth relative effort company a expenses supplement quarters, as due stayed our growth, efforts sales few The This expenses an an promotion growth organic marketing marketing was from low vast at marketing year-on-year. increase as expenses. growth. accelerated percentage were strengthened organic recent Even we as user of came

increase G&A of were XX year-over-year. Our XXX% million, expenses an

year. Excluding SBC, million X.X XXX compared and last loss net income Adjusted $X.XX for net diluted and $X.XX compare were and payroll-related million XX with quarter the an equivalents user G&A XXX an March driven as Cash were loss with Adjusted with were and of XXXX, net of year. of cash the the for the of December million assistant XX.X XXX fees. customer in million as last professional with X.X XX, XX, with last advances enhance million Adjusted X.X X.X year. due both with of expenses compared same year-over-year, XXXX Net adjusted for XXX% of to of of million period by adjusted March period XXX million XX, compared income Basic were year. diluted XXXX. and primarily last was of million same in with operating were expenses in X.X was engagement. an revenue same million operating with million last $X.XX income quarter loss XX, and net compared of income primarily the diluted the increase the last Operating in December same ADS loss a was same XXXX net diluted compared $X.XX in as year. ADS loss our compared was of net XX.X in operating increase basic as period million, ADS compared income an in million million same loss income an year. expansion X.X at user Deferred quarter

our estimates brief result, sheet a visibility year a provide increase year-over-year. is between outlook. for of expected an The XXX% Company's revenue the normally to on a we services, I'll with expansion XXX% a that, this continued As XXX second quarter expected to and Operator, million XXX take our estimates, the total Based slow business That learning season into liabilities to future management's are revenue, we're which growth. These actually balance million, subject strong the on and takes With now remarks. our and represent is cash have no healthy to for be of which the view, quarter Thanks. also a preliminary majority current the us current revenues representing and of Company. change. This prepared second deferred questions. concludes balance gave our reflects our consideration ready is now current debt. and of that

Operator

begin We will now the Instructions]. [Operator session question-and-answer

from Please Mark from The first question Citi. ahead. go Li comes

MarkLi

preparation, how I for on the a course our presentation. management. ask questions. around and Congratulations can secondly, the you the more would that? results to may have Number outlook And two development on share Hi, on one, you any AI thanks Thank the view I initiatives and share recreation you. update? potential our bit for the and work

Dr. Peng Dai

Thanks the question. answer Mark. will first I

also within XX%, we high And expectations. now their couple the as first of reading current with few who about available fun. course, interactive our weeks, from first the as the recognize fun every play iHuman so our -- first further comprehensive learn And and so products like rate performance kids and and their from on high that So Chinese is naturally while and trial to which their more already the optimize done kids also, April content like have using and content we the which The forward, our this lot feedback enhances up also and our will a learn out product parents in performance our starting positive design, conversion going capabilities innovation activities. yes continue functions the build runs literacy help also and was and repeatedly better a Chinese outweighed the our data, completion month through going to is from of more other our adding Reading, rate improves products AI having to similar product And to which of day, young market. get based we kids skills forward, almost than

Vivian Wang

I Vivian. the second Mark, question the about will And, this answer is regulations.

of after-school our concern. government's recent our of reinforcing tutoring on on focus is So understanding place, based few basically policies currently areas a previous in supervision key of

would causes education. public kids, place and raise are one on. on adds and burden So, the for parents to high first pressure or too extra advertising, high third And would concerns one some And and the well of as one regulations is the payments the of related the and prime and courses as ahead to about courses, anxiety of and for which advance be fees, pricing also syllabus, significant equality of which parents second students. be tuitions so fairness which false excessive heightened

those to address. in we the policies we believe the while are children with that recent, education parents to and policies gave online in more aim what offer healthy guidance areas, detailed further us So the line

the on children, nurture designed for learning, app, government's creativity that business to explore their full the value content help for innovative -- and a learning creative content edutainment and call our the passion curiosity also cultivate echoes that and is designs joy experience. education made point helped products creatively core So both of to within apps, which our interactive lines fun knowledge. and and knowledge mostly elements, the really them content combines elements for segment, operate are of and learning current of which our each in with side entertainment the We in we offering edutainment for self-directed

do. and this for So exams never is those something or priming courses -- memorizing competitions can

addition, proportionate In developed enjoy access at are to educational actually effectively access a ensure can a and have help the time manage and products. the protect long as don't eyes screen desired great to for to they a learning mobile allow who also their our kids education apps kids in areas with as and our they Even experience children's live high-quality device to internet, less have the that pace. parents resources,

have our believe content in focus health, and aimed and care for company learning, build children's and of we model. physical are mental heading. So regulations the healthy and always a been the support education, and side, current love essence, products and trends the a to have which a direction general on And foster is business policies product we advertising successful

word-of-mouth base. on and We our user quality product our relied have to mostly grow referrals superior

attached X recommended app of and the No. almost the ranking we education day every in XXXX keep channels. store by since get Apple third-party end products also Our category our

although recently, a came our to more burning growth. So constantly focus bit sustain our in a user feel differentiation been marketing cash growth on sophisticated we've supplement blindly branding long-term growth. customer organic optimize keep and of as our and R&D products acquisition, to rather our majority of but active terms not from for We're

So, we will become and and a other number of forward. promotional help areas believe the these industry regulations on actually more sustainable apps going rational

So always potentially sustainable. Mark. a actually to repeatedly hope the the I could and Thanks. our bring benefit term, leading and with accelerate best-in-class longer question, by all to in to industry regulations consolidation, regulations are be us answered customers. back to experience, help also it And historical to aiming as product potential companies like this who could summarize, more the and your compliant healthier proven bring the our

Mark Li

and Thank Vivian. you, Peng

Operator

Lauren next Our Suisse. from ahead. go Zuo comes from instructions] Credit Please question [Operator

Lauren Zuo

management, Thanks, question. my Congrats taking strong for Hi. the on results.

product. questions two have your I So regarding

product be and year spending and the R&D expectation competitors? more product on about new The magnitude how the on R&D is What or you. the on this and of would your color more share next differentiate R&D? share would year, your with would you second expenses. the color you quality would content First, you Thank

Dr. Peng Dai

Peng. is This Lauren. Thanks,

new we question, do mentioned as earlier, we sight. products actually, about in product, So new several the first our have

versus public As do results in for classical see I to a believe we helps literature their product, Reading mentioned immersive way children we boosting second speaking. as lot And difference interactive animations And their iHuman learn it learning good new a of our enjoy April. products our with more earlier, do just and our and our introduced progress. the our with and products, Readers, that, And and And of with Chinese we so these runs. improving more early enhanced which I iHuman Chinese we learning major first-generation AI key create feature, confidence children our we from is competing trial about lot with the introduced is a skills can culture products earlier, promising earlier. that diversified product also during and of the launched reading but interactions fun

Oxford Press. Oxford's general, assessment with be containing X,XXX co-work in a customized And module. books. series will it's also, most comprehensive AI-powered So And be will there a University an library reading interactive over there of

will this co-create available other products time a the So, reading very tool. we famous also, the in English-level the the versus Tree English is -- is Oxford very the reading among parts And assessment reading children-focused first factors this these all to a Reading be brand brands. two both differentiating English-level market is because

do is a and called the whole XXX-level a for we create we of experience industry. reading for co-creation And for interactions books these And series, an so new reading I we can important more Fantastic do even which Friends. engaged will innovation also, of create have new animations of So this that this very lot will IP, children. the believe be

year. even from we the do that good this part, Innovation get lot with a and Oxford of Best Award So feedback

that also, supports a mentioned portfolio of are the So as better -- we earlier, more and building all-around development children. we comprehensive

will So a new with innovation. hard-to-understand gamified we as illustrate and first of iHumanpedia, step, will the topics cartoons lot the to so launch STEM help and aim app, this summer, a short this a

and by are can same At interact coding working product these STEM-related on other animated pipeline. basically topics fun dynamic kids this later which those topics, or some and learn you. plan other will be watching Thank we also So Yes, exploring the apps year and next released planning and time, also year. with our the new in about animations characters interaction. about are our the

Vivian Wang

about our R&D QX, and Lauren, regarding And plan forward. into R&D further currently, in second million, expenses, the increase around your R&D expenses the do we question, to so investment going is XX

can providing as an by long-term advantages. company, our reinvesting will not R&D-centric our technology keep on ahead So a into R&D lot because we products we which keep and sustain differentiated by of only growth

content from differentiate to believe yes, advance edutainment competitors. high-quality we and product our So devotion this should

So into aggressively we'll keep forward. Thanks. investing going pretty R&D

Operator

ahead. from Betty instructions] Our Securities. Please go from Zhou next [Operator Essence is question

Betty Zhou

management. Hi, question. two Thank questions. my taking you for have I

product Can on management personnel First this elaborate one is this plan the you. us company product, if GoPlay is our it operation color related of the year? about staff the Also, flagship you be the better now? staff profile year. Chinese. situation. more question trackage would the Thank of give to second Can management this assure about My

Vivian Wang

Betty. Thanks,

personnel headcount kind in of we So regarding headcount. do or add of plan aggressive terms to pretty the plan,

R&D aggressively So currently, the X,XXX have majority And earlier, we of invest are R&D. people, pretty into people. will we which roughly said I and already

new in we a plan have headcount the increase because we product to our lot of So, our do pipeline.

provide continue We our products and optimize also do so better experience Yes, existing aggressively. enhance to our our for continue increase we customers. plan want to to to and pretty headcount

Dr. Peng Dai

for Betty, apps, have iHuman flagship our for of we question Yes, further plan these second lot And to your apps. Chinese. initiatives about do our drive thanks, a

The will newly within is package. update we the content the medium the which package, one, introduced continue first traditional Chinese new to

functions three, also coding while package. and our will content expand that because Number And which one within product the offerings we we do they content we So this the believe we and will children. on the continuously exercises. number data previous will based mentioned get units need reading practices more we will will the practicing add continue opportunities reading also the to we as we learning in part. updating data learn more another these Chinese further the do on for kids way. traditional always this still Yes, more can new -- is launched new apps because our we based so package, in will and be we course make optimizing in introduce second feedback a working four, new based character are user whole new analysis, but a analysis our we refresh are element and to new those on earlier, that, are some And on big and that app

As be the a of we we iHuman create more physical do companion for beyond online a for learning the package or product parents will more because last need do will and products will companion Chinese -- offerings. see those children materials one good we these selling and bundle lot the strategies with physical because the learning on see selling momentum

So, Thanks. our initiatives Chinese iHuman for yes, these are major app moving forward.

Operator

[Operator instructions] Please Asia. [indiscernible] ahead. Our PRN comes go next question from

Unidentified Analyst

traffic Thank colors please some you you. Yes. acquisition? Could the about management. add Hi,

Vivian Wang

quite question. didn't I sorry. I'm your hear

Dr. Peng Dai

own For customer believe our principles. we our acquisition, have we

first in business. always terms one So that believe we acquisition, product our of of is dominant quality the is driver the this customer

strong high-quality of growth. and So, and referrals drive kinds good these our user further massive bring products content organic us word-of-mouth

our in So, do have the will one And channels. we second of model. lot is business strength of this be foundation the a

on other high Apple been has app very ranking major store. store or Android the our app So

And and around will our huge devices organizations educational different example, network. those will for will synergies all new also channels, also, to like other do exploring because see we and beyond, OTT are users high us also be smart online-offline help to and the leverage offline channels. channel this third a committee. some growth one give And So China. We have we us moving in social more exposure we kindergartens

will And the expand thanks. out Yes, model this growth product and roll kind to user will so more us principles organic also of will to growth this same their sustainable. So more fulfill base. to user demands and the that be access to continue forward, help high-quality we get going follow

Operator

conference to turn Cynthia session. the any question-and-answer Ms. to our like concludes for back This closing I'd Tan remarks. over

Cynthia Tan

to you, call. operator. team, your thank behalf for today's participation of In management Thank iHuman like closing, on we'd on you

reach information, If for free today. Thank you out directly. joining to require further call. us us concludes you feel the any to This

Vivian Wang

Thank everybody. you

Dr. Peng Dai

Thank you.

Cynthia Tan

Bye-bye.

Dr. Peng Dai

Bye-bye.

Vivian Wang

Bye.

Operator

now The attending conference has presentation. you today's Thank for concluded.

You may disconnect. now

iHuman (IH) 8 Jun 212021 Q1 Earnings call transcript