HONG KONG,Aug. 20,2024 -- Lianlian DigiTech Co.,Ltd. (HKEX: 2598),a leader in China'sdigital payment solution market and global commerce digitalization,today releasedunaudited financial results for 1H2024.
Xin Jie,Executive Director and CEO of Lianlian DigiTech,commented,"We are proud to have driven business growth for our customers,which has resulted in expansion of our customer base. We achieved a year-on-year increase in transaction payment volume (TPV) of 120.1%to RMB1.57trillion,and a year-on-year revenue growth of 40.1% to RMB617.4 million. Our global licenses,stringent compliance,and two decades of experience serving Chinese businesses have earned us the trust of regulators,partners,and customers. This trust,combined with our technology,global network,and value-added services,have given us a lasting competitive advantage."
Xin continued,"In the first half of the year,we launched innovative payment services,such as enterprise wallets,and expanded our presence in Europe. Obtaining an Electronic Money Institution (EMI) License in Luxembourg has allowed us to conduct payment and related services virtually in all EU countries. Looking ahead,we remain focused on internationalization and digitalization. We plan to launch differentiated payment and value-added services to help Chinese businesses expand their product capacities,sell to more customers,and operate more globally."
Wei Ping,CFO of Lianlian DigiTech,added,"Following our successful Hong Kong listing,we are pleased to report strong inaugural interim results marked by notable revenue growth and increasing economies of scale,as shown by a declining expense-to-revenue ratio on non-IFRS basis. While our gross profit margin was lower due to rapid expansion of our lower-margin domestic payments business,we still achieved a healthy 20.3% year-on-year growth in total gross profit. We will continue making prudent investments in technology,innovation,and differentiated services to achieve healthy long-term growth."
Business Highlights for 1H2024
Global Business
Our global digital payment services recorded a TPV of RMB102.3 billion,up by 35.4% year-on-year. This was driven by more companies using global payment services for cross-border transactions.
During the period,we continued to broaden our one-stop service capabilities,upgrade our virtual bank card services,and further improve in acquiring solutions with five major card organizations to meet the varied payment needs of our diverse clientele. In May 2024,we were awarded the EMI license in Luxembourg,marking another substantial breakthrough in penetrating the European market and propelling our internationalization strategy.
Domestic Business and Value-Added Services
Our domestic TPV for digital payment services grew by 130.1% year-on-year to RMB1.47 trillion. This was primarily driven by a major growth in volume from payment products launched in 2023. We also launched our global network and payment capabilities to launch a new enterprise wallet product,empowering enterprise customers to streamline the management of employee business related disbursements on a global scale while optimizing their financial management and internal control procedures. The product is rapidly gaining traction across diverse markets,with promising adoption among state-owned enterprises,listed companies,industry leaders,and SMEs.
Financial Highlights for 1H2024
Total Revenue
Our total revenue for the six months ended June 30,2024 amounted to RMB617.4 million,representing a year-on-year increase of 40.1%. Most of this was driven by RMB158.7 million in revenue growth from digital payment services,as well as an increase of RMB19.5 million in revenue from value-added services. These gains were partially offset by a decrease of RMB1.3 million in other revenues.
The table below sets forth the breakdown of our revenue over the period:
Six months ended June 30
Revenue
2024
2023
Change
Change in %
(RMB in thousands)
Digital Payment Services
541,888
383,231
158,657
41.4%
– Global payment (i)
372,374
305,383
66,991
21.9%
– Domestic payment (ii)
169,514
77,848
91,666
117.8%
Value-added services
66,773
47,303
19,470
41.2%
Others (iii)
8,726
10,055
(1,329)
(13.2)%
Total
617,387
440,589
176,798
40.1%
Notes:
i. Refers to payment transactions for cross-border activities or activities occurring outside of mainland China.
ii. Refers to payment transactions occurring within mainland China.
iii. In addition to providing digital payment solutions,we also operate several other businesses,primarily property leasing.
Digital Payment Services
Most of our revenue in 1H2024 came from both domestic and global digital payments,which brought in RMB541.9 million in total,representing a year-on-year increase of 41.4%,or RMB158.7 million. With respect to the split between global and domestic payments:
Global digital payments: Revenue grew by 21.9% year-on-year,or RMB67.0 million,driven by continued growth in our global TPV.
Domestic digital payments: Revenue surged by 117.8% year-on-year,or RMB91.7 million,mainly due to a 130.1% increase in domestic TPV.
Value-Added Services
Revenue from value-added services for 1H2024 amounted to RMB66.8 million,representing a year-on-year increase of 41.2%,or RMB19.5 million. This increase was primarily driven by the rapid expansion of digital marketing services.
Cost of Sales for 1H2024
Cost of sales over the period amounted to RMB292.5 million,representing a year-on-year increase of 71.6%,or RMB122.1 million,due to:
i. A year-on-year increase in payment costs of 79.6%,or RMB105.3 million,corresponding to the 35.4% and 130.1% year-on-year growth in TPV from global payment services and domestic payment services,respectively. Additionally,we expanded our payment solution capabilities to newer e-commerce platforms and more payment channels to better support the international trade of China products.
ii. A year-on-year increase of 50.6%,or RMB16.5 million,in the cost of value-added services,primarily attributed to the increase in service fees paid to channel partners resulting from the rapid expansion of digital marketing services.
Gross Profit and Gross Profit Margin for 1H2024
Our gross profit for the period was RMB324.9 million,representing an increase of 20.3% year-on-year. Gross profit margin was 52.6%,representing a decrease of 8.7 percentage points year-on-year. Specifically:
i. Gross profit from global payment services was RMB270.2 million,representing a year-on-year increase of 19.3%,or RMB43.8 million,with the global gross profit margin remaining stable at 72.6%.
ii. Gross profit from domestic payment services was RMB34.1 million,representing a year-on-year increase of 39.0%,or RMB9.6 million,with the domestic gross profit margin reaching 20.1%,reflecting a year-on-year decrease of 11.4 percentage points,primarily due to the changes in the composition of revenue,while the gross margin of the same services remained generally stable.
iii. Gross profit from value-added services was RMB17.9 million,representing a year-on-year increase of 20.7%,or RMB3.0 million. The gross profit margin was 26.9%,representing a year-on-year decrease of 4.6 percentage points,primarily due to the significant growth in digital marketing services,which have a lower profit margin.
Selling and Marketing Expenses
Six months ended June 30
2024
2023
Change
Change in %
(RMB in thousands)
Selling and Marketing Expenses
108,883
84,962
23,921
28.2%
Less:
Share-based Compensation Expenses
(7,497)
(3,453)
(4,044)
117.1%
Adjusted Selling and Marketing Expenses
(Non-IFRS Measures)
101,386
81,509
19,877
24.4%
Our selling and marketing expenses over the period amounted to RMB108.9 million,representing a year-on-year increase of 28.2%,or RMB23.9 million. Adjusted selling and marketing expenses on non-IFRS basis,excluding share-based compensation expenses,amounted to RMB101.4 million,representing a year-on-year increase of 24.4%,or RMB19.9 million. This increase was primarily driven by intensified promotional activities related to customer acquisition and industry coverage to expand our business.
General and Administrative Expenses
Six months ended June 30
2024
2023
Change
Change in %
(RMB in thousands)
General and Administrative Expenses
290,244
153,699
136,545
88.8%
Less:
Share-based Compensation Expenses
(93,075)
(30,513)
(62,562)
205.0%
Listing Expenses
(7,799)
(4,339)
(3,460)
79.7%
Adjusted General and Administrative Expenses
(Non-IFRS Measures)
189,370
118,847
70,523
59.3%
General and administrative expenses over the period amounted to RMB290.2 million,representing a year-on-year increase of RMB136.5 million. Adjusted general and administrative expenses on non-IFRS basis were RMB189.4 million,representing a year-on-year increase of 59.3%,or RMB70.5 million,excluding share-based compensation expenses and listing expenses. This increase was primarily attributable to an increase of 25%,or RMB29.7 million related to one-off listing expenses that does not meet the exclusion criteria of non-IFRS measures for one-off listing expenses. Additionally,the remaining 34.3% increase was primarily driven by increased investment in new strategic initiatives.
Research and Development Expenses
Six months ended June 30
2024
2023
Change
Change in %
(RMB in thousands)
Research and Development Expenses
147,469
119,377
28,092
23.5%
Less:
Share-based Compensation Expenses
(26,281)
(9,200)
(17,081)
185.7%
Adjusted Research and Development Expenses
(Non-IFRS Measures)
121,188
110,177
11,011
10.0%
Research and development expenses over the period amounted to RMB147.5 million,achieving a year-on-year increase of RMB28.1 million. Excluding share-based compensation expenses,adjusted research and development expenses amounted to RMB121.2 million,representing a year-on-year increase of 10.0%,or RMB11.0 million,primarily driven by continued investment in technological innovation.
Net Loss
We recorded a net loss of RMB350.0 million in 1H2024,representing a year-on-year decrease of 8.5%,or RMB32.6 million. Excluding share-based compensation expense of RMB127.6 million and listing expenses of RMB7.8 million,the adjusted non-IFRS loss was RMB214.6 million. This included a loss attributable to LianTong of RMB201.5 million and one-off listing expenses of RMB29.7 million that does not meet the exclusion criteria of non-IFRS measures for one-off listing expenses. Excluding the above factors,our business generated an ordinary operating profit of RMB16.6 million.
Cash Flow
During the period,net cash outflow from operating activities amounted to RMB102.9 million. This was primarily driven by a RMB122.1 million increase in working capital utilization,mainly reflecting changes in trade receivables,other receivables and other payables.
Conference Call Information
We will hold 2024 interim earnings conference call at 10:00-11:00 AM on August 21,2024,Beijing Time (10:00-11:00 PM on August 20,U.S. Eastern Time).
The conference call will be accessible by dialing the following numbers and entering the corresponding passwords:
Mainland China
400 810 8228 (Chinese)
400 810 8128 (English)
Hong Kong,China
+852 3005 1355 (Chinese)
+852 3005 1313 (English)
United States
+1 646 2543594 (English)
8666363243 (English)
Passwords:
Mandarin Channel:
829844
English Channel:
330278
Dial-in Details:
You are encouraged to dial the access number approximately 10 minutes before the scheduled starting time.
Your call will be answered by an operator who will take down your name and your company name. Then,you will be placed on hold with music played until the conference begins. Please do not hang up.
Please redial the access number if your line is disconnected during the conference.
Additionally,a live webcast of this conference call will be available via the links below. If you intend to ask questions,you may choose to participate in the conference call or raise them during the live webcast.
Mandarin Channel:
https://www.roadshowing.com/roadshowing/info.html?id=97773
English Channel:
https://www.roadshowing.com/en_US/roadshowing/info.html?id=97773
Forward-Looking statement
This press release may contain projections and forward-looking statements that may reflect the company's current views with respect to future events and financial performance. You are cautioned not to place undue reliance on these forward-looking statements which are subject to various risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements,whether as a result of new information,future events or otherwise.
Non-IFRS Measures
We believe that Non-IFRS measures facilitate the comparisons of operating performance from period to period and company to company and provide useful information to investors and others in understanding and evaluating our operating performance in the same manner as it helps our management. However,our presentation of Non-IFRS measures for the years/periods may not be comparable to similarly titled measures presented by other companies. The use of Non-IFRS measures has limitations as an analytical tool,and investors should not consider it in isolation from,or as a substitute for analysis of,our results of operations or financial condition as reported under IFRS Accounting Standards.
About Lianlian DigiTech
Lianlian DigiTech Technology Co.,Ltd. ("Lianlian DigiTech") was founded in 2009. As a leader in China digital payment solution market and an enabler of global commerce digitalization,Lianlian DigiTech leverages the global payment network built upon global license layout,proprietary technology platform and extensive network of partners to provide a full suite of digital payment services and value-added services to customers in China and around the world. The digital payment services include pay-in,pay-out,acquiring,foreign exchange,virtual card and payment aggregation. The value-added services include digital marketing,operation support,referral services,account and e-wallet services,and software development services.
As of June 30,Lianlian DigiTech had built a global license layout consisting of 65payment licenses and relevant qualifications. Lianlian DigiTech's business covers a digitally integrated ecosystem of global payments and services,bank card clearing,and other services. The Company served merchants and enterprises from various industries,including trade,e-commerce,retail,travel,logistics,education,real estate and manufacturing,with services covering more than 100 countries and regions,and supporting transactions in over 130 currencies.
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