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Operator: Ladies and gentlemen, good day, and welcome to Yeahka Limited 2025 Interim Results Announcement Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'll now pass the call to Mr. Vincent Chan, Head of Corporate Development and Capital Markets of Yeahka. Please go ahead, sir.
Vincent Chan: Thank you, and hello, everyone. Welcome to Yeahka's 2025 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 comes from a variety of sources outside of Yeahka's control. Please refer to our disclosure documents on our website's IR section for a detailed discussion of risk factors. Now let me introduce the management team on today's call. Luke Liu, our Founder, Chairman and CEO, will kick off with a short overview. I will then provide a business review. John Yao, our CFO, will conclude with a financial review translated by Derek Lai, our Director of Finance, before we open up the floor for questions. Without further ado, I will now turn the call over to Luke.
Yingqi Liu: Thank you, Vincent. Hello, everyone. Our results in the first half of 2025 clearly demonstrate our technological advancement and product capabilities, strengthened commercialization of our business model, and scalability of our global business. Our international operations continued to deliver stellar growth and served more global branded clients with diversified payment and value-added services. Our AI efforts drove further measurable results in client production, adoption and innovation. Our in-store e-commerce business achieved profitability and is well positioned to deliver more returns to our group. Compared to the first half last year, we delivered a stronger top line, higher efficiencies, lower operating costs and of course, much higher bottom-line growth rate for our shareholders. This solidifies our market-leading position to leverage our core product expertise, global footprint and borderless applications for merchants and consumers and better capture opportunities under the rapid digital currency evolution around the world. Our international business set yet another milestone with CNY 1.5 billion transaction value in the first half of this year, already exceeding the full year in 2024 and is poised to deliver multiples of growth as we finish this year. Our higher growth builds on our multifold internationalization strategy. First, we expanded into other global major economies such as the U.S. with penetration into the state level, as well as with Japan with license applied across the nation. Second, we deepened support to other global financial payment players like HSBC to bring synergies on an international basis. Third, we leveraged best practice based on our decades of industry experience and selectively applied to each overseas market to bring additional value. In fact, our core overseas advantages lies in our capabilities to serve not only Chinese or cross-border clients, but also domestic merchants and consumers based on local preference. All these factors will triangulate and continue translating into more global clients, benefiting more merchants and consumers in each overseas market locally and cross-border. Our product innovation provides another solid growth leg. In 2025, our AI-generated digital human videos revolutionized the marketing industry. First, with optimized LLM integration, we used shorter time, lower cost to generate higher volume of good quality marketing videos and images. Second, we co-created use cases, spearheading knowledge sharing sessions with platform counterparts like ByteDance. In fact, we were ByteDance's first partner in their usage of human -- digital humans in their public domain. Thirdly, we expanded vertical's adoption and won new clients like JD and Kuaishou in e-commerce, all this from virtuous cycle of intelligent commercial ecosystem and would drive our growth in AI-related transaction volume, which is growing at 40% month-on-month at the moment. So did our one-stop payment services grow healthily. It delivered more robust revenue, profit and cash flow in the first half of this year. We concentrated on operational excellence and achieved higher fee rates and margin in Mainland China through widening distribution network, more dynamic pricing and increased focus on customers with higher profitability. And the fee rates, margins and average transaction volume per merchant overseas are multiple times higher than those in Mainland China. With our overseas business still at an early stage, contributing to just 4% of the payment gross profit, I'm confident it will continue to grow attractively. Beyond payments, our merchant solutions business, in particular, our precision marketing transaction volume will -- reached a record high in the first half of this year. We expanded its coverage to leading enterprises in more industry verticals and maintained higher market share serving the key customers. Our products, including growth driven by AI continue to drive customer stickiness and growth. After our strategic upgrade implemented last year, our in-store e-commerce solutions also started to deliver profits month-over-month in the second quarter of this year, setting a foundation for higher quality growth in the future. Our focus on large-scale, higher-margin customers, expansion in key cities and increased connection with platforms to boost customers' network expansion, all contribute to quality client acquisition and retention. This provides support to better consumption experiences, both locally and abroad, where we've already been replicating our business model overseas. So across all our business segments, our results in the first half of 2025 exemplify early progress of our core strategy in product investments, increased commercialization amongst payment and other value-added technology services and replication of growth to many more merchants in the rest of the world. This long-term vision will continue to drive myself and everyone at Yeahka. With dedicated execution and restless approach to excellence, we are very well positioned to lead the industry and deliver more to our shareholders. Along this vein, may I pass to Vincent to give a detailed business review.
Vincent Chan: Thank you, Luke. Indeed, profitability across all our business segments enhanced in the first half of this year, thanks to our product advancement, business models upgrade and scale-up of our global businesses. Our overseas business achieved robust and rapid growth in the first half of this year. Overseas GPV exceeded CNY 1.5 billion, surpassing the total transaction volume of full year in 2024 already, which highlights our differentiated international strategy, serving payment acceptance for local merchants and customers overseas in addition to cross-border transactions. Across our overseas market, payment rate was 67 bps and gross margin exceeded 50%. Together with average transaction value per merchant, all these three unit economics metrics are multiple times higher overseas compared to those in Mainland China. If you multiply these three metrics together, you get to the long-term profit potential of this strategy we are adopting. And of course, there is a fourth driver, new market. And we target global major economies. This year, after federal MSB license, we further obtained state MTL license in the U.S. We've also obtained Japan's nationwide payment license. These open up more huge markets for us to expand our services to. And yet the other growth driver is more strategic alignments with other major global payment companies as well. This year, we added Alipay, AlipayHK and WeChat Pay to widen our partner HSBC's payment channels, and we will continue to explore further cooperation in digital currencies and overseas markets. 2025 is also a year of product innovation for us. We greatly expanded merchants' adoption of digital humans in their marketing efforts. They simply input keywords, and our tools automatically generate lively videos with digital influencers speaking to the hearts of audience. This significantly reduced labor cost in human actors and traditional production processes by more than 80%, and it allows instant production of large volume of high-quality advertising materials. Our application of technology won industry's accolades, such as with ByteDance, putting us as their inaugural partner for digital humans, where their customers on all their platforms can use our products as well. As such, AI transaction volume grew by 40% month-on-month and AI-generated content only accounted for 20% of the total production volume. So there's a long way for growth, both locally and overseas. For merchants, we also use AI to generate business analysis and decision-making recommendations for clients. For consumers, we created personalized shopping experiences through chat boxes. Fushi Technology, our investee company, created AI shop where these chats in an app generates product categories based on users' indication of preferences and behavioral data. So more precise product recommendations and sales conversion could be made. And for our operations, we have also further applied AI to KYC, risk control, customer service and product programming. For example, adoption rates of AI-assisted programming reached nearly 40% and our overall operating expenses were reduced by almost 20%. In our China payment business, we also upped our performances at all fronts. Our revenue, fee rate and margins all increased to demonstrate our market leadership and operational excellence against local competitors. We did this with three approaches: First, dynamic pricing. We have tiered up clientele by value propositions and optimized rates accordingly. Second, diversified channels to penetrate more regions. We collaborated with over 7,000 partners and deepened cooperation with major agents to synergize and expand into more local markets and prefecture-level cities. Thirdly, more focus on higher potential clients. We tapped into clients with larger transaction flow and more sophisticated demands in industries such as gas stations and property management, who have stronger willingness to pay for more stable and higher-quality servicing. As fundamentals for local payment business enhanced, so will the benefit to our value-added services. Let's start with merchant solutions. Our precision marketing business achieved a record high transaction volume of over RMB 1.7 billion in the first half this year. That's a 23% increase year-on-year. We expanded servicing of major fintech enterprises to well-known consumer and Internet brands such as Haier, HelloBike and Ele.me. Clients like these enjoyed increased adoption of AI, where our core competencies played in. They only needed to input texts. Our system would evaluate clients' industry attributes and their target consumer groups, create or select suitable influencers, design their facial expressions and movement details and generate videos with content as smooth as, if not smoother, than real life. This eliminated the cumbersome processes of traditional live-action shooting and editing. In fast-paced consumer and Internet sectors, timely production of personalized marketing content means more effective, more targeted sales otherwise lost to competitive categories. This business continues to command a high gross margin of over 90% in the first half this year. Deepening AI applications and expanding cooperation with domestic and international partners will amplify revenue and profitability for Yeahka. Similarly, our third business segment, in-store e-commerce solutions also delivered profitability in consecutive months in the second quarter after our strategic upgrade implemented since last year. We focused on high-quality and higher-margin customers, significantly reduced our investment in direct sales team and instead developed distribution networks. We concentrated on providing services to large-scale customers like China Telecom, Midea, Haidilao and Yili, promoted services upsell and enhanced customers' repurchase rates. Their fees paid upfront contributed over 60% of revenue, further ensuring profitability and cash flow ahead of selecting each project to take on. Our win for in-store e-commerce is truly platform agnostic, having integrated into mainstream platforms like Douyin, Xiaohongshu, Dianping, and Gaode AMAP, further boosting marketing sales conversion, delivering continuous year-on-year growth in the number of serviced stores with new brands, including China Telecom and Midea. This business has also been more integrated with our payment services, enabling for us more resource sharing and for clients, more seamless e-commerce and payment acceptance experiences all in one. We've also successfully replicated our business model overseas, such as in Japan, Singapore, Hong Kong and Macau, assisting more foreign F&B and hospitality merchants in bettering consumption experiences for Chinese consumers abroad. To conclude, in the first half of this year, with better profitability across all our business segments, we have laid out a very strong foundation for Yeahka to deliver higher quality sustainable growth for years to come. This will continue to set us apart in the industry with our uniquely unified product offerings that are based on payments but go way beyond payments for locals across China, Asia and beyond. With that, I will now turn the floor over to John, our CFO, to present a review of our financial results with translation provided by Derek, our Director of Finance. Thank you, both.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] Thanks, Vincent. Hello, everyone. Let me introduce the financial performance of Yeahka in the first half of 2025.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] Our revenue increased by 4% from RMB 1.57 billion in the first half of 2024 to RMB 1.64 billion in the same period of 2025, mainly due to the growth of our one-stop payment services revenue.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] Our revenue structure is further internationalized. The overseas GPV in the first half of 2025 was RMB 1.5 billion, which has exceeded the full year GPV of about RMB 1.1 billion in 2024.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] In the first half of this year, our gross profit increased to RMB 360 million (sic) [ RMB 383 million ], increased 27.6% year-on-year. The overall gross profit margin increased from 19% in the first half of 2024 to 23.3% in the same period of this year.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] The gross margin of one-stop payment service increased from 6.9% to 13.7%, mainly because our payment business gradually reduced the commission level to agents by taking advantage of the leading position in the industry.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] The unique advantage of Yeahka is that it provides merchants with a full range of services from basic payment facilities to digital solutions, which gives us great flexibility and scalability.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] The gross margin of merchant solutions increased from 90.9% in the first half of 2024 to 91.3% in the same period of this year, which is mainly due to our increased application of AI technology, continued improvement of product profitability and strict cost control while focusing on high-margin customer groups.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] In terms of profit, our net profit in the first half of 2025 was RMB 41.3 million, an increase of 27% compared to RMB 32 million in the same period of 2024. Adjusted EBITDA increased by 6.2% from RMB 163 million in the first half of 2024 to RMB 173 million in the same period of 2025.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] This improvement is due to enhanced cost optimization across our operation.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] Firstly, the deep integration of AI has significantly reduced labor expenses with selling, administrative and research and development expenses in the first half of this year decreased by 19.3% compared to the same period of last year.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] Secondly, through optimized capital structure and cost reduction measures, our financing cost decreased by 52% year-on-year during the first half. Meanwhile, our debt ratio dropped from 35.9% at the end of last year to 33.4% in the mid of 2025.
Zhijian Yao: [Foreign Language]
Derek Lai: [Interpreted] This arrangement provide solid foundation for the company's continued high-quality profit growth and help the company develop healthily in the global digital process.
Vincent Chan: [Foreign Language] John. With that, may we open up the call to any questions from the line. Operator, kindly go ahead.
Operator: [Operator Instructions] First question comes from the line of Johnny Xie from Deutsche Bank.
Johnny Xie: This is Johnny from Deutsche Bank. I have two questions. First question is about our GPV in the first half. Management mentioned there's is a rebound in the second quarter, so I would like to know how is the rebound moving on since the third quarter? And what's the driver for the GPV growth? Is it come from the traditional payments? Or is it come from the app-based payments, or is it because the overseas payment? My second question is about payment fee rate. We noticed that our fee rate has picked up about 1%. So I would like to know what's the driver for the pickup of take rates and if management expect this take rate to be sustainable for the second half and beyond?
Vincent Chan: Thanks for your question, Johnny. Let me address the first one about GPV growth over the first half of this year. This year, we are seeing sequential growth in our GPV in both traditional payments as well as app-based payments in the second quarter over the first quarter against the backdrop of some challenges in the industry GPV or even drops in some of our competitors, which is largely driven by consumption downgrade and lowering of ticket size per transaction. But our fees rate, as you rightly mentioned, have increased by 1 bp to 12.5 compared to last year. And to your question, we achieved this by threefold. First of all, we leverage our wider partner networks to penetrate further into more regions and get into higher-quality clients. And secondly, we also have a more targeted approach towards larger-sized customers who naturally demand more sophisticated servicing and hence, have higher willingness to pay and more attractive fee rates. And last but not least, we also have a more refined approach towards our customer pricing based on segmentations and relationships in order to achieve the results. So at this point in time, we are still seeing these strategies at work. So we are confident about our growth in both the GPV as well as rate for the rest of the year and that's for our local business. You also touched upon our overseas business. In the first half of this year, our overseas gross profit from payments contributed about 4% to our total payments gross profit. And the overseas GPV contribution comparatively is only slightly above 0.1%. And you can see that there is a huge differential between gross profit and GPV contribution percentage from overseas versus the total. So that's a structural multiplier effect in our opinion, across fee rates, across margins as well as across average transaction per customer in more developed overseas markets compared to Mainland China market. So each of these three metrics are about 3 to 5x higher overseas versus the domestic Mainland market. And that speaks to the bigger profitability potential of the overseas payment acceptance business development. So we are confident that these structural differences across overseas and domestic markets will broadly remain. So it naturally follows that we would keep working on expanding our overseas businesses.
Operator: Next, we have Vicky Wei from Citi.
Yi Jing Wei: So would management provide some color about your thoughts on shareholder return program and potential investment for the year for new opportunities such as overseas payment and stablecoins? And then my second question is about the domestic payments. So what is the latest competition landscape of domestic payments that you would like to share?
Vincent Chan: Thanks, Vicky. First question about our investments for new opportunities. Especially in overseas, we indeed have a very differentiated proposition away from other Chinese companies in that we serve local merchants and customers overseas as opposed to just Chinese going overseas. So that opens up a much larger and a very attractive market in the rest of the world. If you look at the GDP, the economies and the markets in the rest of the world, they are huge to begin with, and they also tend to have higher average transaction value per merchant, higher fees, higher take rate and higher margins. And we also have an edge versus the foreign competitors in that we offer a wider range of payment channels, much more cost efficiently there. And on top of payments, we also offer other value-added services. So there's a genuine proposition for us to invest and help these merchants and consumers overseas. Now the investment would come in a few aspects. First, licenses. The ones in the U.S., Japan, Singapore, Hong Kong, et cetera, they are only a start. We'll continue to pursue major economies globally and invest. And secondly, investment would go into products. The product suite that set us apart from our competitors need to be continually innovated to maintain the edge. Our processing system and our setup already in place overseas do give us operating leverage to expand in a more agile manner. And thirdly, we need to continue investing into people, local sales who can develop local clients and stay closest to their truest needs. And fourth, local partners and channels where we can replicate our market-leading business model in China overseas. So we will continue to invest for our international growth based on payments and beyond payments into a one-stop digital solution. That's our vision. Our success in China and in the rest of world encourage us to be a global player. Our Chairman, our employee friends have been purchasing Yeahka's shares in the market. We are invested in this mission, and we will continue doing that to provide more return to our stakeholders. And you asked about our domestic payment businesses as well as landscape as well. Based on the industry data we have been seeing lately, large major players in the industry, including ourselves, are gaining market share. I think this is because of, one, larger players tend to have better services, especially for larger-sized customers. They have more sophisticated demands, so they focus more on serviceability and breadth of services provision. So they tend to select more established service providers. These customers also tend to have more needs on value-added services beyond payment, which also tend to be more offered by larger service providers. Second reason is larger players also have the means to invest more into their systems, particularly risk management. For example, their larger data sets tend to provide more information points to incorporate AI into forecasting or modeling computation. This probably will play an increasingly larger role as AI applications will be more embedded into the payment risk detections. And last but not least, a third reason is the consumption patterns are very dynamic. And hence, the wider geographical footprint of larger players allow them to penetrate into regions and adjust faster to these dynamics and capture market share more efficiently. So then as a market leader in China, we are also playing our strengths against this backdrop. We serve more larger-sized customers to capture these stickier transaction flow, such as those in property management and those in energy industries. We also continue to apply technology, including AI to raise our fraud detection and increase quality and stability of our transaction flow. And we also work very hard to step up our network of agents, our network of partners, our network of banks so as to optimize our outreach in attracting and retaining end clients. I hope that address your questions.
Operator: [Operator Instructions] Next, we have Manyi Lu from DBS.
Manyi Lu: I have a question regarding to -- can you hear me?
Vincent Chan: Yes, perfectly well.
Manyi Lu: Yes, yes, yes. Good. Yes, so my question is whether management can share more color on the latest development of the overseas expansion?
Vincent Chan: Sure, Manyi. As you have probably realized from the news, Japan is our latest payment expansion. And our payment license over there play to our existing Japanese product and sales setup in Tokyo, our team as well as adding payments as a step-up to our other value-added services that are already being served in the country. Now Japanese merchants are broadly keen on attracting foreign consumers to spend in the country. Our Tokyo teams have been helping F&B clients, hospitality clients, hotels and retail clients there to market to Chinese consumers already. And we look to expand that servicing to these Japanese merchants on payment acceptance as well, so then it becomes a more unified solution from customers acquisition and then to payment acceptance and then the ongoing recommendations and repeat purchases that come afterwards. As a country, we are very optimistic about the future growth in cashless payment. For example, QR code payment penetration in the country is still very low at around 5%, but it's growing very fast at about 30% CAGR in Japan. And so there are increasing demand from Japanese clients to address wider sources of customers, add QR code wallets and leverage merchants and in-store e-commerce solutions. We already served all these one-stop in China, so we believe we can add values with our best practices in Japan as well. And there are also more local products that we are looking to introduce anew in Japan. It's a very large, good potential market with a lot of gaps we are looking to fill.
Operator: [Operator Instructions] Next question comes from the line of [ Han Chun ] from BOCOM International.
Unknown Analyst: I would like to ask one more question about the international business. As more payment companies go overseas, whether there is any changes in the competitive landscape?
Vincent Chan: Thanks a lot, [ Hanna ], for the question. First of all, we look at it from a licensing perspective because, obviously, compliance is the most important aspect of expansion and doing any payment businesses and we stay the most stringent and most compliant in all these matters when we are expanding overseas as well. So we are seeing tightened approval processes as well from an overall regulatory perspective overseas for licenses. These regulators tend to check things very thoroughly from risk management systems, compliance track records, overseas expansion plans, local commitments, et cetera, et cetera, before granting further licenses. So that will take more time and create a natural barrier for entry going forward. As a market, overseas markets, by and large, are more mature given their economy's development stage compared to Mainland China. We are confident that the multiple times higher fee rates there versus Mainland China and multiple times higher average transaction value are there to stay. And hence, they present very structural opportunities for us to address. And then our edge versus the local competitors lies in our ecosystem and our technological capabilities as in our system of partners and channels that provide services and customer stickiness. And then our product suite that can also provide additional value these partners and peers may not be able to provide. So we are not worried about competitive economics in these overseas markets. We focus on servicing quality, stability and innovation. And then economics would easily follow naturally. So we are confident that our profit contribution from overseas would continue to increase.
Operator: Next, we have Ronghao from Citic.
Ronghao Yang: I'm Ronghao Yang from Citic Securities. My question is, could you share your latest thoughts and plans on cross-border payments? [Foreign Language]
Vincent Chan: [Foreign Language] Ronghao, thank you. Cross-border payments. From a macro perspective, traders and export companies are indeed reconstructing their supply chains globally. We have been observing a lot of this in our clients as well. There are more segmentations along that chain across more participating countries and going through more value-adding steps along the way, so to speak. So under the current climate, we believe these clients will have increasing demands for more efficient payment channels and methods that could streamline their processes amongst these reconstructed value chains, the new world, so to speak, and then reduce friction to facilitate better trades. And I believe we have also been observing more countries are facilitating similar protocols and channels. We think this would benefit more enterprises, including private payment service providers to participate in that change. And then aside from the cross-border business growth, our overseas business also comprised of a sizable local payment acceptance that would also add value to merchants and customers locally overseas. So then this business model not only cover clients across geographies and make the connections, but it also provides more diverse exposure to economies and local consumption trends globally.
Operator: [Operator Instructions] I see no further questions on my side. I will now pass it back to Vincent.
Vincent Chan: Thank you very much. We are now ending the call. If you have any further questions, please feel free to contact us directly. Our contacts together with other information in relation to our results can be found on our website at www.yeahka.com. I appreciate everyone for joining our results today and see you again soon.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]