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00:35 Hello, everyone. Welcome to Yeahka’s twenty twenty one Interim Results conference Call.

Before we start, we would like to remind you that this presentation includes forward looking statements that involve a number of risks and uncertainties. Information on general market conditions come from a variety of sources outside of Yeahka.

00:55 Now, let me introduce the management on today's call. First, Luke Liu, our founder, Chairman and Chief Executive Officer will kick-off with an overview of our business.

I will then go through our business review. John Yao, Chief Financial Officer will conclude with a financial review before we open up the floor for questions.

And Derek Lai, our Director of Finance will translate for John. 01:19 I will now turn the call over to Luke.

01:22 Thank you, Ben. Good evening and good morning, everyone.

For those of you who are new to our story, I'd like to give a quick overview. Our company is a leading payment based technology platform.

[Indiscernible] our listing, we will adhere to our Start From Payment, Go Beyond Payment philosophy. And we are gradually expanding our payments services to a commercial digital Ecosystem.

01:51 We hope to create more value beyond payments for our merchants and consumers and this has been an exciting place. Myself and our team will share more with you about growth progress and achievements we made in the first half of twenty twenty one on this call.

02:12 Twenty twenty one so far has been a special year as we emerged from the outbreak of COVID-19, which brought unprecedented challenge to all of us in twenty twenty. In the first half of this year, we have seen gradual recovery of China's economy, and it's a great business opportunity to facilitate the multi-payment and the digital transformation needs of our user users through our innovative endeavors.

02:48 Now, I would like to share our major achievements for the first half twenty twenty one. First, regarding our development of payment services, either foundation of growing merchants and consumer’s user base in our ecosystem.

We continued our effort to diversify distribution channels, forge industry alliances and execute marketing initiatives. On the merchant front, the number of actual payment service merchants continued to grow reaching six point one million at the end of first half of twenty twenty one, up thirty one percent year on year.

03:36 On the consumer front, the number of consumers served by the company's payments service increased by sixty seven percent year on year to approximately eight twenty million. Targeting the small tech size, high frequency, daily consumption, our peak day average [indiscernible] QR Payment transactions reached to nearly forty two million.

Secondly, on the development of commercial utilization on one hand, we focus on improving the operating efficiency of our merchants. 04:20 In order to achieve with this, we continue to optimize a self-developed SaaS digital solutions improve and upgrade operating model of merchants to series of modules such as orders, management, inventory control, CI and other digital solution for their daily operations.

On the other hand, not only do we want to help improve the brand awareness with our marketing services. But it’s even important to grow their business directly.

05:02 To achieve this goal, we upgraded our services and established the in-store e-commerce service. Merchants now can easily create awareness from promotions via their mobile device and connect to millions of consumers through our online and off-line sales network.

We’re excited about the opportunity for [indiscernible] existing relationship with merchants and enabling our platform directly interaction with consumers at the same time. 05:44 Looking ahead, consumer and Industrial Internet development will continue to facilitate the digital transformation of Chinese commerce.

We hope by leveraging our technological capabilities and the customer insights, we can create ecosystem can generate powerful network effect. Brand owners, merchants, consumers, channel promoters, advertisers, and other participants are able to cross sell each other in our entire ecosystem.

06:23 Maximize the economic and the social value of each participant, and help the growth and the success of the digital economy. With that infrastructure that is capable of processing over one hundred million transaction daily with the best assistance capability.

We'll capture emerging opportunities [indiscernible] from technological advancements by combining the underlying function of private cloud computing, blockchain and AI technology. 07:01 It will help us continue to extend the business boundary and the full sales are committed to building a commercial digitalized ecosystem.

We are hopeful to become an integrated internet provider and create a sustainable long-term value for our shareholders, employees, and society. 07:25 And with that, I will turn over to Ben to give a detailed business review.

07:31 Thank you, Luke. Good evening and good morning to everyone.

Now, let me provide some more color on the development of the two key business segments, payment services and technology enabled services. Our solid business performance in the first half of twenty twenty one was a testament to our resilient business model and unparalleled execution capabilities.

07:54 First, let me walk you through our payment services. Payment services remain our core business and our traffic gateway.

In the first half of twenty twenty one with the resumption and recovery of China's real economy, our payment service have grown strongly as we continue to diversify our channel network and expand our merchant base. 08:16 Meanwhile, we optimized our technology platforms integrated internal resources, increased R and D investments and then refined the management of our operations.

In the first half of twenty twenty one, the total count of ad based transactions increased by seventy three percent and GPV increased by fifty six percent year on year. 08:39 In particular, for our core focus QR code payments; the peak daily average count of transactions was almost forty two million.

In addition to the boom in the [indiscernible] transactions, we also increased the reach of our payment service to merchants and consumers. As Luke mentioned, in the first half, the number of active payment service customers increased by thirty one percent year on year to six point one million and the number of consumers served via the payment services increased by sixty seven percent year on year to eight twenty million, both record high in company's history.

09:18 The rapid growth in our payment services was attributable to efforts to accelerate the diversification of our distribution channels and our effective marketing policies. First, we collaborated with leading distribution and sales agents in the industry and developed a well structured network in three hundred and twenty four cities, across thirty provinces in China.

09:43 Second we cooperated with more than one thousand three hundred offline SaaS service providers and [tapped into] (ph) a diverse set of used cases banning, food and beverage retail, parking, reviewing by sharing, charger sharing, internet cafes, etcetera, And third, we have been working with commercial banks to support their merchant services, such as settlement card acquisitions as we require new merchants. And in turn we can offer technology enabled and payment services to the bank's merchant networks.

10:16 Last, but not least, we offer geographic specific incentives to merchants to help get them up to speed after the pandemic. In terms of emerging payments, the PBOC took the lead to kick-start the world's first digital currency pilot program with announcement of the digital renminbi in twenty twenty.

10:37 We have been jointly promoting the implementation of digital renminbi with commercial banks. Our dedicated project team has accelerated breakthroughs in key technologies related to digital, including mobile payments and terminal security.

We have already jointly conducted several pilot projects with banks in a number of cities. 11:00 Another major part of our business is a technology enabled business services.

This segment consists of precision marketing services, merchant’s SaaS products, Fintech services and our newly launched in-store e-commerce business. Given our access to a huge merchant and consumer base we are being promoting cross selling between our product and service offerings, which helped to drive customer numbers to nearly one point seven million, a year on year increase of one hundred and eighty nine percent.

11:29 First regarding the precision marketing services, we maximize the value for our customers by intelligently matching advertisers and a variety of offline scenarios with our proprietary data management platform and our programmatic and trading platforms. The first offline traffic owners lacked awareness of the potential of monetizing.

While the advertisers seek to more accurately target their customers to boost advertising effectiveness. 11:57 We’ve been expanding our diverse used cases scenarios, which include catering retail parking and vending machine and are connecting these consumption related traffic with advertisers from variety of interests, through and all the portal.

In addition, we further enhance our live streaming operation for advertisers and form the marketing closely loop to meet their promotion needs and maximize the performance. 12:24 During the period, our marketing services recorded a revenue of over RMB 240 million, an increase of sixty nine percent year on year.

The number of advertisers increased twenty six percent year on year to six hundred and the average revenue per advertisers ARPU increased thirty six percent year on year to RMB one hundred and fifty one thousand. The expanded traffic appeal to advertisers and growth in ad budgets are mutually reinforcing.

12:58 We process more than two hundred terabytes of data per day and more than ten billion requests covering twenty six million merchants on behalf of nine hundred million users. We have more than one hundred million parameters in our service models that are related to over three thousand end user characteristics.

13:18 Second, regarding our SaaS digital solutions, we continue to focus on bringing the best tools for our payment merchants to help reduce their cost of operating costs and acquire customers more efficiently. All on the one-stop platform easily accessible with WeChat mini programs and other applications to combine a seamless experience.

As a result, most of our users are self registered to try our SaaS models at an attractive annual fee package. 13:48 During the period, our SaaS Digital Solutions recorded a revenue of RMB million, up one hundred and thirty four percent year on year.

Merchants can flexibly choose from a variety of products that we offer. Many of which has been developed to meet the specific needs of different industries.

For example, Yuehuiquan, a coupon aggregation and distribution platform built upon blockchain’s underlying technology. 14:16 The number of merchants on Yuehuiquan grew one hundred and fifty seven percent over the past six months to one hundred and forty four thousand.

Another example is Juhuisaosao, a smart payment model to significantly reduce a merchant’s order delays and emissions during peak periods. The number of merchants using Juhuisaosao increased by one hundred and forty four percent over the past six months, to one hundred and fifty four thousand.

In addition, modules including QR code ordering, membership management and inventory management were also widely used by our retail and restaurant merchants. 14:55 As Luke mentioned, we officially kick-launched our in-store e-commerce business.

Our SaaS users can now purchase our precision marketing expansion pack and together with the guidance from our local product experts, creates promotion campaigns for discount packages and listed on our platform. Notably with our offline sales networks, merchants can precisely acquire their all offline private traffic and retain these consumers into repeat buyers online.

15:24 Last but not least, I'm highly excited to talk about our newly launched in-store e-commerce platform. A new business that is upgraded from our marketing services to create direct sales growth for our merchants.

It will help them generate diversified marketing campaigns with our mobile app for consumers to enjoy more local lifestyle discount benefits more conveniently. 15:47 Since it trial operation in the second half of twenty twenty has seen great demand.

15:53 According to the iResearch report, the online penetration rate of Community lifestyle services were also increased from twenty four percent in twenty twenty to thirty point eight percent in twenty twenty five. So there is vast growth potential, which will open huge opportunities for us.

16:11 On the supply side, our in-store e-commerce platform allows merchants to analyze behavioral preferences of local consumers through the massive amount of payment data that we process. Different type’s merchants such as hot pot, barbecue and formal dining restaurants can design and launch customized discount packages to better meet consumer demand, all under the guidance of our local product experts.

16:37 We also helped merchants precisely drive offline consumer traffic with our payment and SaaS sales network. The offline plus online outreach ensures the merchants to enjoy a direct positive impact in their sales.

And we're getting good repeat purchases for our consumers too. 16:58 We have also gradually opened up our platform to our payment services.

As of June the thirty twenty twenty one, our in-store e-commerce business has served nearly ten thousand merchants and more than one point four million consumers. GMV platform hit RMB 71 million.

During the period, our in-store e-commerce business recorded almost forty five million in revenue. 17:27 Overall, our in-store e-commerce business further depended the connection between the merchants and consumers in our ecosystem.

This is another important product has been developed with our payment business as an entry point. 17:40 Going forward, our in-store e-commerce business will continue to empower merchants and bring consumers local lifestyle services that are most cost effective, more convenient and higher quality.

17:54 In terms of services, we provide loan facilitation entrusted loans and insurance referral service to merchants. Risk control and a complaint operations are always our top priorities.

We continue to improve our risk identification and management capabilities by further investing in risk control R and D. We also appropriately raised lending standards by leveraging AI and machine learning algorithms to analyze and categorize merchants and consumer databases.

18:23 In the first half of twenty twenty one, the total amount of loans facilitated was approximately RMB five forty million, an increase of one hundred and fifty two percent year on year. Weighted average tenure was ten point two months.

Our delinquency rate for loans over thirty days remains contained at approximately three point eight percent, a relatively low level in the industry. 18:48 In addition, our insurance referral services maintained steady growth.

Given our strong confidence in our growth strategy, this first half we have also announced a share purchase plan of no more than U.S. one hundred million U.S.

dollars under the RSU Scheme. The shares so purchased will be used as a reward for the RSU participants.

This also reflects the continuous intention to retain and motivate key employees, which is core in driving the company's future success. 19:21 With that, I will now pass the call over to John, our CFO, and our Director of Finance, Derek will provide the translation.

19:29 [Foreign Language] 19:57 Thank you, Ben. Following Luke and Ben’s representation, I would like to reemphasize that our current portfolio of payments and technology enabled business services have been the driving force behind our strong financial results, which enable us to continue developing a scalable and sustainable commercial digital ecosystem.

Now, let me briefly go through the highlights of our financial results for the first half of this year. 20:27 [Foreign Language] 21:05 Our overall results improved in comparison was the same period in twenty twenty.

Total revenue reached RMB one four hundred million, representing a year on year increase of thirty percent net profit for the first half of twenty twenty one increased significantly. We record a net profit of RMB million as compared with RMB two hundred and twenty three million for the same period in twenty twenty.

Our earnings share was RMB point six nine dollars as compared with point thirty three dollars for the same period in twenty twenty. 21:47 [Foreign Language] 22:05 The increase in revenue was mainly attributable to our rapid development of the technology-enabled business services.

Revenue contribution from technology-enabled business services rapidly increased to twenty six percent from eighteen percent for the same period in twenty twenty. 22:25 [Foreign Language] 23:03 The revenue breakdown of technology-enabled business services is as follows.

Precise marketing revenue reached RMB two hundred and forty three million representing a year on year increase of sixteen nine percent. SaaS digital solution revenue was twenty seven million representing a year on year increase of one hundred and thirty four percent.

Fintech services revenue was RMB forty three million representing a year on year increase of ninety percent. The newly launched in-store e-commerce services revenue was approximately RMB forty five million.

23:42 [Foreign Language] 23:54 Gross profit was RMB 348 million, representing a year on year increase of five percent. Within this, gross profit from technology-enabled business services was RMB one hundred fifty one million accounting for forty four percent of our gross profit as compared with thirty five percent for the same period in twenty twenty, mainly due to our ability to scale the technology-enabled business services.

It is expected that the revenue and gross profit of our technology-enabled business services will continue to rise in the future. 24:51 [Foreign Language] 25:23 The overall fill rates slightly decreased to ten point five bps from thirteen point nine bps in the same period of twenty twenty.

Within this service fee rate of traditional payment business increased slightly compared the same period of last year, while our payments service fee rate of ad based business decreased compared with the same period of last year, which was in line with our strategy to expand our merchant base so as to offer more attractive fee rate policy. 25:56 [Foreign Language] 26:32 We continue to increase our investment in R and D.

In the first half of this year, R and D expenses were RMB one hundred eight million, representing a year on year increase of ninety four percent, mainly due to an increase in the number of R and D personnel and increased investment in systems, big data, and product developments. We believe that continuous upgrades of our proprietary technology platform will consistently yield the best tech system solution to help merchants with digital operations, while guiding our long term sustainable development.

27:12 Thank you everyone. That's it for our prepared remarks.

We'll now open the call to questions.

28:03 [Foreign Language] 28:38 Hi management. Thanks for taking my questions.

Congratulations on the strong results, and I have two questions here. First, we know that [indiscernible] opening up their ecosystems to each other.

Just how should we think about the impact on e-com, especially our QR code payment business? And my second question is that, we have noted that our major competitor Lakala is also providing technology in the business such as SaaS and marketing services.

So how should we think about the competition with Lakala in QR code payment and technology-enabled business or what are our key strengths? Thank you.

29:17 Sure. Thanks for the question.

I’ll address them one by one. So on the first question on [indiscernible] opening up their ecosystem to each other.

We read the news, so I think the most, what they're talking about is on the online scenarios, such as the e-commerce. In terms of the data, all the data that needs to go through the PBOC and the Central Bank in order to be settled or the pass through to the next layer of the payment value chain.

And for us, the positioning in our integrated QR code has not been changed. 29:48 We're being dedicated to serve all of these small merchants helping them to accept a variety of payment solutions, including the card payments and QR code and we don't think that positioning value proposition is going to change in this environment.

30:03 On the second question on the Lakala, I think we don't really comment on our peers, but what we are priding our ourselves on is really the variety of value-added services, that we offer on top of the payment solutions that we have. So, if you look at the trajectories of our development, so we started of our SaaS operations in twenty fifteen gradually converting these payment customer’s, payment merchants into using our SaaS solutions.

And that the numbers have shown that. 30:37 And then if you look at the precision marketing platform that we have, capturing all of these offline scenarios and offline consumption scenarios, and match those to the demands of the advertisers in which we're seeing strong increase in both the number of advertisers on our platform and also the ARPU per advertisers.

And also if you look at the e-commerce business, this is another way for us to deepen our relationship with our merchants not only helping them to reduce the cost of operations, but also to increase their direct sales number with our connections to the consumers via the online plus offline omnichannel channel reach. 31:17 So, I think from our perspective, we are doing really well in terms of the numbers.

If you just look at the competitions of our gross profit coming from the tax services, we've seen another record high, which has forty three percent this half compared to about thirty five percent in the comparable period last year. So, I think all of these numbers just show that we are diversifying our solutions into the tax services.

31:48 That's very clear. Thank you.

31:53 Thank you.

32:07 Hi. Can hear me?

32:10 Hi, Timothy. Yes, we can hear you.

32:13 Yeah. Thanks very much for taking my question.

I have two questions. So first of all, I would like to know about the trend of a fee rate.

So you are giving discounts to push the merchant numbers and also the [indiscernible] that you will be. So what's the view of the future tech rate going forward?

Are you still giving discounts or are you think [indiscernible] has already stabilized and I'm not sure whether you think there are any chance for all the tech rate to get some refund? And secondly, regarding the business in-store e-commerce surface, I would like to know a little more about the business model, like how we generate like forty five million RMB roughly with around like seventy one billion GMV as disclosed in the announcement.

And I think to develop the business we have incurred quite a bit of the expenses, the SG&A expenses. So, how much of the increase of the actual expenses were related to this new business?

Just would like to know about the – like the profitability of this business? Thank you.

33:33 Sure Thanks for the question, Timothy. So on the first question on the channel fee rate, yes, very accurate observation that our fee rate is slightly down to about ten point five basis points in the first half of this year from about eleven point four basis points.

So I think the key behind it is really where trying to increase that CapEx in a more aggressive manner. 33:56 So what we're are looking for in this industry is we have one hundred million small merchant offline and so far, we've only captured six point one million So, I think the penetration opportunities are still out there, so which is something that's up for grab.

And the way we do it, I think last year, we've been overly too conservative in terms of the theory that we charge. 34:18 I think if you look at some public information as well as some numbers disclosed by our peers.

You'll see last year, I think the industry average fee rate was about ten basis points. While for us, I think for the asset payments last year, we’re charging fourteen basis points.

So much above the market rates. 34:36 So this year, as we are diversifying our service offerings in the tax services, we're being more confident in terms of the monetization capabilities in our value-added services.

So there's no reason for us to charge a much higher fee rate, given there's opportunity for us to convert these payments habits into the higher monetizing technology service business that we have. So, as you can see this first half of the year we're reducing our fee rate in some geographic regions, depending on the competitive landscape in that area.

So that fee rate for payment this year was at about twelve basis points. Still a little bit above the industry average, but I think this is where we're comfortable at in the first half of the year.

35:23 And the results are promising as we are seeing an increasing traffic growth. In both the number of merchants that we serve and also the number of consumers that we get connected to in our payment service, which further help us to grow our tech services in both the SaaS conversions in the precision marketing traffic and also in our newly launched in-store e-commerce business.

35:47 And going forward, I think for the remainder of the year, we are obviously going to observe the market competitiveness very closely. And at this point, I think we think the rates are going to stabilize in the remainder of the year, but that may change given evolving competitive landscape.

But so far I think we think the rates are going to be stabilized for the remainder of the year. And for the second question related to the in-store e-commerce business, which is something we're very excited about, I think Luke can provide more color on that.

36:19 Okay. So basically, in-store e-commerce is a new product that we can help merchants can put their own their product such as a stage of [new] (ph) into our platform and we can utilize our platform to have them to sell them to grow their business directly.

For example, if for [indiscernible], they can put the [indiscernible] into our mini program and our consumers can see the [indiscernible] their coupons, they can come to the store to buy it to enjoy the [meal] (ph) and get the discount. 37:21 So I think it is a little bit light what [indiscernible] does, but we are focused on a larger merchant base and we can reuse our payment network and we can reuse our sales team on the ground and we can use the social networking to sell their products.

I think it's very potential product and they can help their merchants directly than before. 38:10 So, company will put more resources in this product.

And we hope that the product can contribute more value for the whole ecosystem. And bring new clients and the new build deals to our merchants and give more discount to our consumers.

That's introduction. And about the business model, we will charge later, currently I think the most important thing is we hope one more merchants and the consumers can use the platform, the product and we will optimize the user experience and we try to take more merchants into the platform and I think is just the beginning, it's much potential in future.

Thank you.

39:26 Yes. Let me add a couple more points on the market.

So, I think we're looking at huge market out there in terms of the local lifestyle services. In twenty twenty one, I think that number is twenty six trillion and looking to further grow by twelve percent in the next five to six years.

Nevertheless, I think that current online penetration rate for that community lifestyle services was only at twenty four percent, so still very low. I think we're looking at a huge market opportunity where we can leverage a lot of the resources, including our offline sales network to help these more merchants offline, including the restaurants using our sales network to help drive the offline traffic into their stores, within the three kilometers of radius that are extremely precise, even more precise than online traffic.

40:17 So this is one of the core advantage that we have in this business model. And because of that, we're able to get these discounts from the merchants as a way to attract consumers directly into their stores.

And that's why you're seeing from the take rates from seven point one million GPV where we've got forty five million sorry seventy one million GPV we got forty five million in the revenues. 40:43 So, it's pretty high.

And going forward, I think that take rates is going to normalize slightly, but nonetheless, I think the core competency that we have in terms of the consumer traffic online from the payment services, as well as the offline traffic that we are able to obtain on behalf of the merchants with the offline sales networks that we have is going to continue to let us enjoy a higher take rate than a lot of our peers that are operating in the same industry. 41:15 And on the third question on expenses, we spent on the new business, maybe I'll ask our CFO to answer that.

41:34 [Foreign Language] 41:42 The expenses related to the new business is around one hundred million.

41:56 So, Timothy does that help?

41:59 Yeah. That's helpful.

Thanks very much for your explanation. Thank you.

42:04 Thank you.

42:17 Good evening management. Thanks for taking my questions.

I have two questions. Number one is, we see that the active merchant number has surpassed six million in the first half, which is very close to the three year target So, is that payment gross margin to see any improvement in the second half or we have new merchant target for the full-year?

And then my second question is about population. So, we see that regulation for the Internet sector focusing on user data collection usage, and analysis.

So will this impact our marketing services? And how should we think of the impact to this business and the outlook in the second half?

Thank you.

43:05 Sure. Thank you for your questions.

So the first question on the gross margins for the payment business. So very keen operation observation on the gross margin was slightly down to about twenty percent in the first half, because we are obviously trying to incentivize more channel partners to join us, particularly in lower tier cities.

So in the beginning, we’re obviously going to offer a slightly higher revenue sharing to these partners in order to enjoy a much higher growth in our traffic, which the results are great. As you can see we got six point one million dollars in the first half.

43:41 And I think in the second half, that we are going to keep the revenue sharing percentages at probably around the same rate for the remainder of the year, it's going to stabilize. And the main reason is at the current time, the top priority for the company on a traffic side is still to obtain as much traffic as we can get in this huge opportunity we're looking to penetrating to more lower tier cities and more diversified areas, so that all of the other businesses that we have in our ecosystem can convert CapEx from the payments into our tech services.

44:19 So, I think for the full year for the remainder of the year, we're still going to see a pretty healthy growth in our active merchant base because we're going to keep the marketing incentives in some geographic areas that we think are top priorities for us. And on a second question on the regulations, regarding the user data collection and analysis, for the Precision marketing services, it hasn't really impacted us because we are operating on a closed loop ecosystem here.

44:50 So, all of the payment data that we get, we don't have all of this, all of these users, individual information. For example, we don't have a user's name, ID card number, a phone number address, all of that.

We don't have and we don't need it. All we need is that user's consumption habits or the consumption preference labels that we can get from each QR code transaction that we have.

We currently have forty two million daily QR code number of transactions per day. 45:20 So, I think all of these data are strictly used within our closed loop ecosystem that our precision marketing services obviously take a great advantage of that to connect all of these different offline traffic scenarios to a variety of advertisers from different industries using our programmatic ad algorithms and also our DMP, data management platform that we have.

45:52 Thank you.

45:55 Thank you.

46:23 Thank you once again for joining us today. If you have any further questions, please feel free to contact Yeahka’s investor relations department through the contact information provided on our website.

Thank you very much. 46:37 Thank you.

Ladies and gentlemen, this does conclude our conference for today. Thank you for participating.

You may all disconnect.