Ladies and gentlemen, good day and welcome to Yeahka Limited's 2024 interim results announcement 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. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I'll now pass the call to Mr. Vincent Chan, General Manager of Capital Markets for the company. Please go ahead, sir.
Thank you, and hello, everyone. Welcome to Yeahka's 2024 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'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 the floor for questions. Without further ado, I will now turn the call over to Luke.
Thank you, Vincent. Hello, everyone. Amid the macroeconomic volatility in the first half of 2024 , we remain steadfast to our long-term vision. Being an all-rounded commerce enablement services provider to merchants, we made more progress increasing synergies beyond payments into other business lines, more international expansion, and wider application of AI. We believe this provides a higher quality of a basis to seize more opportunities in the longer game and to deliver sustainable profits and value to our stakeholders. First, we advanced our one-stop payment services business model with wider regions covering underserved markets, further diversified and resilient set of vertical penetrating. More profitable customer segments served and a broader customer acquisition channels through deeper collaboration with strategic partners. We served more large and mid-sized merchants, leveraging the network and partnerships with over 100 banks and rescaled our product and region coverage.
Our one-stop offering of payments, plus other commerce enablement services, also give us a unique edge in digitizing for and satisfying the various demand of large and mid-sized merchants. We therefore maintain our market leadership with a strengthened foundation. Second, we upped both our non- payment services commercialization and the share of revenue and profit contribution. This make our service offering even more comprehensive and resilient than before, and underscores our commitment to be the one-stop commerce enablement services provider for merchants. This long payment business also enhanced our, their profit margins year- over- year. We also significantly increased sales efficiency in our in-store e-commerce services with agile approaches fitting the micro trends in the industry. This is the visible pathway to run with the profitability in the second half and a sustainable growth in the year to come for this business.
Third, we made great strides overseas, winning over 200 global brands, covering more than 20,000 stores. Our investment company, Fushi, offers proprietary and localized merchant solutions that satisfy demand from world-renowned customers. It is ramping up the latest products and vertical coverage. As many of you know, overseas markets have many pockets with attractive economics, and this paves the way for the very wide channels of profit to come. Fourth, we further integrated large language models for both revenue generating and cost optimizing purposes. Our new products helped merchants automate price setting to optimize monetization. We empowered them with precise pricing marketing and automatic content generation tools to raise sales conversion. We also applied to our own customer servicing system. Therefore, our selling and administrative expenses continue to decrease year- over- year by more than 10%.
And last but not least, our ESG efforts were recognized internationally. For instance, in S&P Global's 2024 Sustainability Yearbook, and ranked first in our industry in China. Our business uplifts underserved merchants and consumers in communities locally and abroad. In the first half of 2024, we increased the energy usage utilization rate by 7% through constructing green data centers, and traded 12 million risky transactions with wide adoption of AI. We remain committed to based on payments, beyond payments. Our proposition has always been to leverage our extensive payments platform to fully digitize merchants all around their commerce. Such full suite technology remains our edge over others. In building more agile, scaling up, and now it's increasingly about going global, as we play a more important role in global journey of digitization.
On this note, may I pass to Vincent to give a detailed business review?
Thank you, Luke. We sustained market leadership in one-stop payment services business, with foundation reinforced for all-rounded, high-quality growth. While industry-wide down trading consumption drove down every transaction amount per customer, enhanced GPV, our peak daily counts of app-based payment transactions maintained nearly 60 million, and our fee rate remained stable at 12.3 basis points in the first half of 2024. This demonstrates our pricing power as China's leading payment brand and merchants' preference for our services. Interchange fee adjustment also impacted our payment revenue in the first half, but such impact will cease in the second half. We therefore focused on intrinsic resilience of this business. First, we deepened into lower-tier cities, especially in North and Southwest China, to assess many underserved merchants. Second, we diversified our verticals into those with stronger economic resilience. For example, sports and fitness, healthcare, energy, and services.
Third, we selected collaboration with more profitable customers, including serving large and medium-sized merchants. Fourth, we adopted broader customer acquisition channels, such as our SaaS providers and over 100 banks. Such network and partnerships helped us win more large and medium-sized merchants. Our services that go beyond payments into many other commerce-enabling technology, also satisfy high demands from larger-sized clients. Our proactive overseas expansion also grew rapidly. For instance, our GPV in Singapore grew over 50% year- on- year. New global brands won over include Bulgari, Chow Tai Fook Jewelry, Rolex ,MIKIMOTO, TWG Tea, Fred Perry, and Bee Cheng Hiang. For products in overseas regions, we also expanded services such as local wallet, overseas wallet, credit cards, foreign exchange, and cross-border remittances to satisfy customers' demands in various regions. We collaborated with chain stores, large shopping malls, and food courts to improve the efficiency of acquiring payment transaction volume.
Our store competitive advantage overseas is our payment plus commerce enablement technology. This helps us present one-stop services to merchants overseas, and offer convenient solutions to the demands in changing circumstances. That allows us to capture more opportunities globally, where customers' willingness to pay is generally more attractive. Turning to merchant solutions business, we maintained our strong capabilities in providing tailor-made offerings to merchants specific to their different verticals. We provided a wider variety of value-added services to address our merchants' entire life cycle demands. We also increased monetization. Therefore, revenue from our merchant solutions grew 21.2% year- on- year in the first half of 2024. Our AI and data-driven tools are backed by our proprietary technology stacks, as well as our computing algorithm. And our big data models are continually trained by the sheer amount of transactional and behavioral data through our services.
We are well positioned to devise further application scenarios in various settings, geographies, and markets. As much of the R&D investments were made in the past, gross profit margin for our merchant solutions further increased to 90.9%. In terms of in-store e-commerce services, we strategically focused on higher quality and more profitable customers based on continual review of market dynamics in each locality, while phasing out those who are not generating as much. For example, we increased servicing key accounts and chain stores, such as Nigeria and Yuanji Yunjiao, from over 13,000 branded stores at year-end of 2023 to over 18,000 at the end of current first half, or an increase of 35%.
They have more demands for customized services in creative marketing through various forms of content channels, and these are met by our diverse range of services, including short videos, live streaming, and online store upgrades that boosted their store-level productivity, thereby increasing their stickiness to us and also willingness to pay for our services. As a result, sales efficiency grew. Both revenue per merchants and revenue per our employee increased during the first half of 2024 . Furthermore, we increased adopting upfront fees in addition to commission fees based on merchants' GMV. These fees in advance of our launch of services, helps protect profitability of each project we select. As a result, our gross margin further increased to 81.5% in the first half of 2024 . Both gross profit per merchants and gross profit per our employee increased during the period.
Net loss in the first half of 2024 also continued to decrease by 39.6% year- over- year to RMB 15.6 million. One rate profitability has become more visible by this second half. Such strategic upgrade also lays a more solid foundation for sustainable, high-quality profit growth in the long term. Our long-term international development strategies also made remarkable progress across business lines. We entered into economically attractive markets with customers' high willingness to pay, and that increases our profit quality. On the back of the 50% year-over-year GPV growth overseas, we believe the global customers in payments give us good opportunities to expand our broader commerce enablement offerings to merchants.
All our proprietary technology stacks, established payment routes, and big data algorithm as a result of experiences working with tens of millions of merchants for over a decade, are all ready for deployment further overseas. In fact, our Fushi business, e-commerce enablement platform in APAC, is already serving our merchant solutions overseas for over 200 global and regional brands, such as Starbucks, MUJI, Pizza Hut, Sunway, New Balance, and Levi's. Covering over 20,000 stores in Southeast Asia, including Indonesia, Vietnam, Malaysia, and Singapore. As these brands expand footprints in the region, Fushi is also naturally positioned to provide various self-developed products to these brands in the new geographies. For example, more customized applications are served for these same customers to improve their service efficiency, thereby increasing their stickiness to us.
We have our own local team overseas that understands very particular customers' preference by various verticals within these overseas markets. We are also expanding into more verticals, such as energy, real estate, and business services as we scale. And last but not least, as a company founded with tech DNA, we remain relentless using large language models for both revenue generating and cost optimizing purposes. We have our own AI laboratory and development and science center to coordinate such efforts across departments, so that AI usage in various commerce scenarios are optimized for merchants, both domestically and internationally. For example, we launched new products to help merchants automate price setting, perform precise marketing with tools otherwise more available to larger corporates, and generate automatic content with style consistent to their unique branding. All this increased our merchants' sales conversion and productivity, and lower their cost per head.
We also further applied AI usage to ourselves, too. We raised AI code adoption rates to enhance programming efficiencies. We integrated large models into our product upgrade to streamline workflows. We also stepped up language conversion tools for consumers servicing checkbox in multi-language environments as we scale overseas. Our automated customer service efficacy rate increased to over 80%, and our selling and administrative expenses continued to decrease year- over- year by more than 10%, which is yet another driver for our sustainable delivery of profitable return to our stakeholders as we scale along the global journey of digitization. On this note, I'll pass to John, our CFO, to reveal our financial results and be translated by our Director of Finance, Derek. Thank you.
Thanks, Vincent. [Foreign Lanuage] Hello, everyone. Let me introduce the financial performance of Yeahka in the first half of 2024. [Foreign Lanuage] Our revenue decreased by 23.5% from RMB 2.1 billion in the first half of 2023 to RMB 1.6 billion in the same period of 2024. [Foreign Lanuage] This is due to macroeconomic volatility, which lead to a temporary decline in the payment GPV. [Foreign Lanuage] In addition, we proactively eliminate customers and projects with lower profitability. [Foreign Lanuage] Although the total revenue decreased, our revenue structure was further optimized. [Foreign Lanuage] Besides, the revenue of non-payment business increased year-on-year. The contribution ratio of non-payment business revenue to the company's overall revenue has also increased from 11% in the first half of 2023 to 14.6% in the same period this year.
Yeahka's [Foreign Lanuage] unique advantage is that it can provide merchants with a full range of services, from basic payment facilities to digital solutions, which makes our business highly flexible and scalable. [Foreign Lanuage] In the first half of 2024 , our gross profit decreased to CNY 300 million, mainly due to the decline in revenue. However, the overall gross profit margin increased from 17.7% in the first half of 2023 to 19% in the same period this year. [Foreign Lanuage] This is mainly due to the increase in the proportion of non-payment revenue mentioned above. This gross profit margin is not only higher than that of payment business, but also has been rising in the past three years.
[Foreign Lanuage] The gross profit margin of merchant solution increased from 87.6% in the first half of 2023 to 90.9% in the same period this year. And the gross profit margin of in-store e-commerce services increased from 76.9% in the first half of 2023 to 81.5% in the same period this year. [Foreign Lanuage] All these results benefit from the continued cross-selling and synergies of our three business lines. [Foreign Lanuage] Non-payment business has always been an important part of our long-term strategy. The benefits of our early R&D investment have gradually begun to show. [Foreign Lanuage] This has helped diversify the company's profit structure, increasing the gross profit margin of non-payment business 52.6% from in the first half of 2023 to 69.1% in the same period this year.
[Foreign Lanuage] Our net profit in the first half of 2024 of RMB 32.6 million has exceeded three times of the annual net profit of RMB 10.1 billion in 2023. [Foreign Lanuage] This is because our costs and expenses have been further improved and optimized. [Foreign Lanuage] First, the in-depth use of AI has saved our labor costs. Therefore, the sales and administrative expenses in the first half of this year decreased by 11.2% compared with the same period last year. [Foreign Lanuage] Second, we reduced financing costs and optimized capital structure, resulting in a 6.2% decrease in financing costs [Foreign Lanuage] and a decrease in gearing ratio from 45% at the end of last year to 41% in the middle of this year, and it is expected to decline further in the second half of 2024.
[Foreign Lanuage] The above-mentioned layout provides a solid foundation for the company's continued high-quality profit growth, and can help the company develop healthily in the global digitalization process.
Thank you, John.
Thank you. With that, may we open up the call to any questions from the line? Operator, can you go ahead.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will take our first question, and your first question comes from the line of Thomas Chong from Jefferies. Please go ahead. Your line is open.
Let me translate myself. I got three questions here. The first one is the impact of the microenvironment on payment business, and the second, what's the future strategy on our local services? and the last one is, what's the latest update on overseas business? Thank you.
Thank you, Carol. It's good to hear from you. Regarding your first question about macro impact, the first half of 2023 , or 2023 as a whole year, is indeed a high base given the consumption recovery in China post-COVID. The problem in first half this year is macroeconomics in China and its impact on consumption pattern towards non-trading. That means decrease in average transaction value, which is consistent to many industry reports and narratives on results from other public companies and other reports that you might have seen. If that did not change, our GPV and revenue will be better because we kept up with the number of transactions served day in and day out, as well as the fee rate.
Our peak daily counts of transactions, as I mentioned earlier, remains at about 60 million per day, and our fee rate remains 12.3 basis points, which speaks about one, the frequency of transaction activities in China is still vibrant, bright, and large, and number two, our continued ability to garner this market share, given our brand and our product services capabilities, and generally, we also think that regulations are good for the industry long term. It provides a healthier environment for capable service providers to demonstrate their real edge. Merchants appreciate one-stop services addressing their genuine commercial needs. That sets us apart from the crowd, because there are many service providers out there, but not full suite payment and commerce enablement technology solution end-to-end, and across China and overseas.
With regard to your second question about in-store e-commerce strategy, we upgraded our model to focus on higher quality and more profitable customers. We continually reviewed the market dynamics in each locality. We also phase out some of the customers that may not be generating as much. And that's why some of the names that I mentioned earlier came into place. They're all chain stores. The number of stores served for them also increased by 35%. These type of customers, like Tastien and all the big name chains, they have more demands for customized services through short videos, live streaming, text, graphics, online store upgrades, and we provide all this end-to-end, and we help them do their business better.
And that's how we grow our sales efficiency, how we grow our revenue per head, revenue per merchant, as well as gross profit from each of these merchants. And another important upgrade is the way we receive revenue from them, by increasing the upfront fees portion. And that's very important, because it's loosening up the connection with the GMV with these merchants, as well as helping us to make sure that the profitability of each project we take on, it's good enough to fit into our long-term plan. And as a result, our gross margin increased, and the net loss for this business also increased by quite a large amount this year. And therefore, as we project further out, we are quite confident about runway profitability by the second half of this year.
That's very important because it lays a stronger foundation for us to deliver sustainable growth in many years to come. Your last question about overseas progress, there's a lot of remarkable progress to share. The GPV in Singapore grew over 50% year-on-year, for example. We won a lot of new global brands by serving these customers locally in these overseas regions. We also expanded our product offerings to make it as comprehensive as possible, ranging from local, international, foreign exchange, all kinds of payment methods, by collaborating also with more merchants, more chain stores, larger shopping malls, food courts that help us acquire larger transaction volume. We believe that our core proposition, being payment plus commerce enablement technology, also applies over there.
Because we present our one-stop services solution to these merchants overseas, and they have these demands, and they appreciate that, and therefore use our services also overseas. From our point of view, we are very excited about this overseas market. We see that customers offer higher attractive economics, and their willingness to pay is also higher. That's on the payment side. On the commerce enablement side, our full suite business is also serving many customers overseas. Names like Starbucks, you know, over 200 of these overseas, they are using our services already, and we are very excited about it, because as these brands expand footprint in the region, we are also naturally positioned to provide various self-developed products to these brands in the new geographies. For example, more customized applications are served for these same customers to improve their service efficiency and to increase their stickiness to us.
We believe that our local team overseas, that understands local demands, will also help us expand into further verticals going forward. So we believe all these global customers, in both payment and non-payment sides, give us good opportunity to expand along with them. Our tech stacks, our payment rails, our big data algorithm, all this would be very helpful for us to keep serving them overseas.
Thank you. We will take our next question. Your next question comes from the line of Vicky Wei from Citi. Please go ahead, your line is open.
Thanks, management, for taking my question. Will management share some color about the fee rate trend and the competition landscape for the payment business in the second half? Thank you.
Thanks, Vicky. Thanks for dialing in. On fee rate, first of all, as I mentioned before,2023 is quite a high base, but if you put into perspective, the fee rate in 2021 was 10-11 basis points, 2022 was 12-13 basis points, 2023 was 13-14 basis points. It would be unrealistic to forecast fee rates to keep growing in the macro environment facing us in China today. If you look at our churn on 3 basis points fee rate in the first half this year, remaining similar to our previous halves, even though the external environment was better last year, we think that it does speaks about our market share and leadership, by leveraging our full suite payment and digital tech services, and we enhance our ecosystem, leaving our partners with reasonable margins as well.
We are quite confident about our fee rate being maintained at low teens, even if we are to be conservative about the macro environment going forward. In terms of competitive landscape, the market continues to prefer service providers with full service, full value chain, you know, one-stop. That's our unique proposition. Those who are constrained by product range, regional coverage, or technological abilities, or ability to adapt in an ever-changing environment, would generally lose their places along the value chain, I believe. That leaves the relatively fragmented market today to be more consolidated going forward towards the top ones. That's the case in many other parts of the world, we see.
And therefore, in our overseas expansion, we adopt a similar approach, leveraging the tech stacks and service offerings we already have, as we believe high-quality services and channels are appreciated by merchants, and that's how we won our global names like Chow Tai Fook and MIKIMOTO. And we do see a lot of room to grow in these overseas markets, which offer attractive economics with high willingness to pay. And I also think AI will be another key differentiating factor on both revenue generation and cost reduction. We started to monetize through helping merchants automate price setting, launch precise marketing, generates content automatically, et cetera. It's not just about the tech, but domain knowledge about the verticals, about knowing your clients in each specific industry. And those who have this combination, we believe will have a unique edge in the long end.
Hopefully, that gives you more perspectives about how we look at the industry going forward.
Thank you. We will take our next question, and your next question comes from the line of Hang Su from CICC. Please go ahead. Your line is open.
„管理层，晚上好。感谢接受我的提问。我是中金公司的分析师，苏航。有两个问题想请教下管理层，一个是想问下，你们怎么看待国内支付行业的监管趋势，以及国内线下收单的发展前景？再一个，是关于海外支付业务的一个中期规划，包括目标市场和业务中心。" So this is Hang Su from CICC. I have two questions for the management. The first is how you think of the trend of regulation and the impact on offline POS payment business. And the second is, what's your midterm strategy of overseas payment business, including the target markets and focuses of business? Thank you.
Thanks, Hang Su, good to hear from you. I'll answer the first question, and Luke will take the second one. First, one about regulations. I think it is generally good for the industry on a longer term basis. Merchants do appreciate one-stop services addressing their genuine commercial needs, and regulation provides a healthier environment for those who are capable to demonstrate their edge. And I think that sets us apart from the crowd, because there are many service providers out there, but not all of them can provide the unique proposition that we offer day in and day out. I'm not too worried about regulations nor impact from the bigger picture, as we have demonstrated about our market share through the number of transactions, as well as our pricing power through the fees we see.
And internationalizing has been also our core strategies, because our global customers give us good opportunities to expand along with them with attractive economics and also good margins overseas. We think that paves the way for a very wide channel of profits to come, as we serve overseas like a local service provider. And again, AI is truly exciting. We started to monetize through it already, and we believe this is an early start in making tools more widely available to merchants, leveraging all these merchants' insights we have across different verticals, that even pure tech companies without the merchant's edge don't have. I'll hand over to Luke for the second question about our plan overseas and our focus.
Okay. For the overseas business strategy, if I can summarize it, it's we try to leverage existing products and experience in China to other regions. We are focused on the local customer and try to provide the product to the local consumers and merchants, not only targeting the Chinese tourists. I think this is a big difference between us and the competitors. Secondly, we want to provide a one-stop service for the merchant side. Not only the payment business, but also the digital solutions, marketing solutions, and the fintech services. You know, it's a blue ocean for a lot of regions.
It's hard for a merchant to find a full suite, I mean, service package that can get the order, I mean, the solution done. A lot of them can use the payment infrastructure, can use mobile payment, or they can collect money, but they cannot to, I mean, to automate their inner process of their stores or their shops. We can give them a, I mean, a high quality but lower cost solutions for you. I think it's also a unique advantage of us. We are still setting up the infrastructure so far, but we are confident that we one day can provide the whole services which we also provide in China. Thank you.
Thank you.
Thanks.
Once again, if you wish to ask a question, please press star one and one on your telephone. We will take our next question, and your next question comes from the line of Johnny Tsai from Deutsche Bank. Please go ahead, your line is open.
Hi, this is Johnny from Deutsche Bank. My question is about overseas expansion. So could you share more how much revenue and GMV as well as the profit contributed from overseas? And what's your expectation of the optimal percentage of contribution in the future? Second question is about the. I noticed that the company employees number continue to reduce. So could you share which kind of job function has been reduced, and how much more operating costs can we reduce in the second half? Thank you.
Thanks a lot, Johnny. Thanks for initiating coverage on us as well. First of all, in terms of our overseas business contribution, we are currently deriving revenue from a variety of countries from Singapore, Indonesia, Malaysia, as well as other in the region. We will continue to expand the contribution from a wider variety of sources. We do think that is a very important long game. This is a relatively early start of us but at the same time, there's a lot of growth opportunities in the overseas market, especially in the developed ones. We see that the economics are very attractive. The margins is also more so over there.
And we therefore, we are very focused, you know, on the type of segments and markets that we are entering into to ensure that as we grow further, there will be a meaningful contribution to our business model, as well as helping us to deliver sustainable growth delivery. Secondly, in terms of the lower number of employees, a lot of that are indeed replaced by our AI expertise. Giving examples, in the automatic content generation space, as well as the servicing space with customers, a lot of it we've replaced by chatbots, doing so based on our large language models. And therefore, we don't need as many manual labor as before.
We find that customer experience that we heard is also very satisfactory and therefore help us to deploy more AI technology going forward in this regard. We think that there's a trend. We think that there's more to be done and there's more to be harnessed. For example, if I take customer servicing rate right now, we have increased it to about 80%, but there's also, you know, more things to be done in this regard and in many other regards as well. Many more exciting things to come.
Thank you. This concludes today's question and answer session. I'll now hand the call back to management for closing remarks.
Thank you very much. I would like to thank you everyone again for joining our results today. 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. Thank you, and see you again soon.
This concludes today's conference call. Thank you for participating. You may now disconnect.