iClick(ICLK) - 2023 Q3 - Quarterly Report

Executive Summary & Highlights iClick Interactive Asia Group Limited reported a significant decline in H1 2023 revenue and gross profit, with increased adjusted losses, as management strategically reduced high-risk marketing businesses and focused on cost control Company Introduction iClick Interactive Asia Group Limited, a leading enterprise and marketing cloud platform in China, announced its unaudited financial results for the first half of 2023 - iClick Interactive Asia Group Limited (Nasdaq: ICLK) is a leading enterprise and marketing cloud platform in China, providing full-stack consumer lifecycle solutions to global brands[1] - The company announced its unaudited financial results for the six months ended June 30, 2023[1] Financial & Operating Highlights For the first half of 2023, iClick reported a 21% decrease in total revenue to $67.1 million, with both Marketing and Enterprise Solutions declining. Gross profit fell by 34%, and the company recorded a net loss of $28.6 million. Adjusted EBITDA and adjusted net loss also showed increased losses Key Financial Metrics (Unaudited, US$ in thousands) | Financial Metrics | H1 2023 (US$ in thousands) | H1 2022 (US$ in thousands) | Change (%) | | :------------------------- | :------------------------- | :------------------------- | :--------- | | Revenue | | | | | Marketing Solutions | 45,595 | 55,921 | (18)% | | Enterprise Solutions | 21,538 | 29,533 | (27)% | | Total revenue | 67,133 | 85,454 | (21)% | | Gross profit | 16,764 | 25,251 | (34)% | | Net loss | (28,569) | (55,063) | N/M | | Adjusted EBITDA | (21,061) | (16,546) | N/M | | Adjusted net loss | (21,721) | (20,532) | N/M | | Diluted adjusted net loss per ADS | (2.13) | (2.06) | N/M | | Operating Metrics | | | | | Gross billing | 99,177 | 158,023 | (37)% | - The diluted adjusted net loss per ADS for H1 2023 was $(2.13), compared to $(2.06) in H1 2022, retrospectively adjusted for an ADS ratio change[2] Management Commentary The CEO highlighted the company's strategy to reduce low-margin, high-risk Marketing Solutions businesses and curtail costs for operational efficiency. Topline performance was impacted by a slow economic recovery and reduced customer demand post-pandemic, with a future focus on maintaining a balanced customer base and core offerings - The company continued its strategy of reducing low-margin, high-risk businesses within the Marketing Solutions segment and focused on cost curtailment for operational efficiency[3] - Topline performance was negatively affected by the slow recovery of economic growth and customer demand following the pandemic[3] - Management plans to maintain a balanced customer base and core products/services, anticipating improvements in the macroeconomic environment[3] Financial Performance for Six Months Ended June 30, 2023 This section details iClick's H1 2023 financial results, showing a 21% revenue decline, a 34% drop in gross profit, and an improved net loss due to no goodwill impairment, alongside increased adjusted losses and reduced cash Revenue Analysis Total revenue for H1 2023 decreased by 21% to $67.1 million, primarily due to the strategic scale-down of Marketing Solutions and a challenging macroeconomic environment. Both Marketing and Enterprise Solutions segments experienced declines - Total revenue for H1 2023 was $67.1 million, down from $85.5 million in H1 2022, attributed to the strategic scale-down of Marketing Solutions and the macroeconomic environment[4] Marketing Solutions Revenue Marketing Solutions revenue decreased to $45.6 million in H1 2023, driven by strategic reduction of lower-margin businesses and a broad advertising market slowdown - Marketing Solutions revenue declined to $45.6 million in H1 2023 from $55.9 million in H1 2022, mainly due to the strategic reduction of lower-margin and higher-risk businesses[4] - The decline was also influenced by a broad-based advertising market slowdown in China due to macroeconomic uncertainties[4] Enterprise Solutions Revenue Enterprise Solutions revenue fell to $21.5 million in H1 2023 due to weaker client demand for digitalization and competitive pricing - Enterprise Solutions revenue was $21.5 million in H1 2023, down from $29.5 million in H1 2022[4] - The decrease was driven by weaker client demand for digitalization products and services, coupled with competitive pricing offered due to clients' tightened IT budgets[4] Gross Profit and Operating Expenses Gross profit decreased by 34% to $16.8 million, with the gross profit margin falling to 25.0% from 29.5%. Total operating expenses decreased by 22% to $40.7 million, primarily due to reduced bad debt, share-based compensation, and promotional/consulting expenses - Gross profit for H1 2023 was $16.8 million, a 34% decrease from $25.3 million in H1 2022, aligning with revenue decline and pricing strategy adjustments[5] - Gross profit margin decreased to 25.0% in H1 2023 from 29.5% in H1 2022[5] - Total operating expenses decreased by 22% to $40.7 million in H1 2023 from $52.3 million in H1 2022, mainly due to lower bad debt, share-based compensation, promotional, and consulting expenses[5] Net Loss and Earnings Per Share (EPS) Net loss significantly improved to $28.6 million in H1 2023 from $55.1 million in H1 2022, primarily due to the absence of goodwill impairment in 2023 (compared to $24.9 million in 2022). Net loss per ADS also improved to $2.80 from $5.38 - Net loss totaled $28.6 million in H1 2023, a significant improvement from $55.1 million in H1 2022[6] - The improvement was mainly due to no goodwill impairment in H1 2023, compared to $24.9 million in H1 2022, which was fully impaired as of December 31, 2022[6] - Net loss attributable to shareholders per basic and diluted ADS was $2.80 in H1 2023, down from $5.38 in H1 2022[6] Non-GAAP Financial Measures Adjusted EBITDA showed an increased loss of $21.1 million in H1 2023 compared to $16.5 million in H1 2022. Adjusted net loss also increased to $21.7 million from $20.5 million over the same period Adjusted EBITDA Adjusted EBITDA loss increased to $21.1 million in H1 2023 from $16.5 million in H1 2022 - Adjusted EBITDA for H1 2023 was a loss of $21.1 million, compared with a loss of $16.5 million for H1 2022[7] Adjusted Net Loss Adjusted net loss increased to $21.7 million in H1 2023 from $20.5 million in H1 2022 - Adjusted net loss for H1 2023 was $21.7 million, compared with $20.5 million in H1 2022[8] Gross Billing Gross billing decreased by 37% to $99.2 million in H1 2023, primarily due to the ongoing strategy of reducing lower-margin and higher-risk businesses within the Marketing Solutions segment - Gross billing was $99.2 million for H1 2023, a 37% decrease from $158.0 million in H1 2022[8] - This decline was mainly a result of the company's strategy to reduce lower-margin and higher-risk businesses in the Marketing Solutions segment[8] Cash and Cash Equivalents The company's cash and cash equivalents, time deposits, and restricted cash decreased to $73.3 million as of June 30, 2023, from $105.3 million at the end of 2022 - Cash and cash equivalents, time deposits, and restricted cash totaled $73.3 million as of June 30, 2023, down from $105.3 million as of December 31, 2022[8] Liquidity and Capital Resources iClick reported a net loss and accumulated deficit for H1 2023, with management developing cash flow projections and assessing sufficient resources for going concern Financial Position and Cash Flow iClick has incurred losses since its inception, reporting a net loss of $28.6 million and an accumulated deficit of $450.6 million for H1 2023. Net cash used in operating activities was $17.6 million - The Company has been incurring losses from operations since inception, with a net loss of $28.6 million for the six months ended June 30, 2023[9] - Accumulated deficit amounted to $450.6 million as of June 30, 2023[9] - Net cash used in operating activities was $17.6 million for the six months ended June 30, 2023[9] Management's Mitigation Plans Management has developed a 12-month cash flow projection to mitigate adverse conditions, considering future operations, potential changes in performance, and available financing, while acknowledging uncertainties in economic recovery and banking facilities - Management has developed plans, including a 12-month cash flow projection, to mitigate adverse financial conditions[10] - The projection considers anticipated cash flows from future operations, possible changes in operating performance, and available financing, including banking facilities[10] - Uncertainties include the recovery of the Chinese economy and advertising market, availability of banking facilities, and achievement of targeted gross profit, cost control, and working capital[10] Going Concern Assessment Based on their plans, the Company's directors concluded that iClick has sufficient financial resources to meet its obligations and continue operations for the next 12 months, thus preparing financial information on a going concern basis - The Company's directors concluded that iClick has sufficient financial resources to meet its obligations and continue operations for the next 12 months[11] - Accordingly, the consolidated financial information is prepared on a going concern basis[11] Corporate Actions and Recent Developments iClick initiated a share repurchase program and entered a definitive merger agreement to become a privately-held company, with delisting from Nasdaq expected in Q1 2024 Share Repurchase Program iClick announced a share repurchase program in December 2022, authorizing up to $5.0 million in ADSs from January 1 to December 31, 2023. As of June 30, 2023, approximately $0.03 million in shares had been purchased - A share repurchase program was announced on December 28, 2022, allowing for purchases of up to $5.0 million in ADSs between January 1, 2023, and December 31, 2023[12] - As of June 30, 2023, approximately $0.03 million worth of shares had been purchased under the program[12] Definitive Merger Agreement On November 24, 2023, iClick entered into a definitive merger agreement to be acquired by TSH Investment Holding Limited, which would result in iClick becoming a privately-held company and its ADSs delisted from Nasdaq. The merger is expected to close in Q1 2024, pending shareholder approval - On November 24, 2023, iClick entered into a Definitive Agreement and Plan of Merger with TSH Investment Holding Limited and TSH Merger Sub Limited[13] - Upon completion, iClick will become a wholly-owned subsidiary of Parent, transitioning to a privately-held company with its ADSs delisted from the Nasdaq Global Market[13] - The merger is currently expected to close in the first quarter of 2024, subject to customary closing conditions, including an affirmative vote of shareholders[13] Company Information and Non-GAAP Explanation This section provides an overview of iClick's mission and operations, along with an explanation of its non-GAAP financial measures and their limitations About iClick Interactive Asia Group Limited Founded in 2009, iClick is a leading enterprise and marketing cloud platform in China, aiming to empower global brands with data-driven solutions for smart retail and business growth. It operates in eleven locations across Asia and Europe - Founded in 2009, iClick Interactive Asia Group Limited is a leading enterprise and marketing cloud platform in China[15] - Its mission is to empower worldwide brands to unlock the market potential of smart retail through proprietary technologies and data-driven solutions[15] - Headquartered in Hong Kong, iClick operates in eleven locations across Asia and Europe[15] Explanation of Non-GAAP Financial Measures iClick utilizes non-GAAP measures like adjusted EBITDA, adjusted net loss, and diluted adjusted net loss per ADS to evaluate operating results and aid decision-making, believing they highlight underlying business trends. However, these measures should not be considered in isolation or as alternatives to GAAP measures and may not be comparable to those of other companies - The Company uses adjusted EBITDA, adjusted net loss, and diluted adjusted net loss per ADS as non-GAAP financial measures to evaluate operating results and for financial and operational decision-making[16] - These non-GAAP measures are believed to help identify underlying business trends, provide useful information, and enhance understanding of past performance and future prospects[16] - Investors are cautioned that these measures should not be considered in isolation or as alternatives to net loss, may not be comparable to similarly titled measures from other companies, and should be reviewed alongside GAAP measures[17] Safe Harbor Statement This section contains forward-looking statements regarding iClick's business strategies, operations, and financial performance, which are subject to inherent risks, uncertainties, and other factors beyond the company's control. iClick disclaims any obligation to update these statements, except as required by law - The announcement includes forward-looking statements concerning the Company's business strategies, operations, and financial performance[19] - These statements are subject to inherent risks, uncertainties, and other factors, many of which are beyond the Company's control, that could cause actual results to differ materially[19] - The Company undertakes no obligation to update any forward-looking statement, except as required under applicable law[19] Unaudited Condensed Consolidated Financial Statements This section presents iClick's unaudited condensed consolidated financial statements, including comprehensive loss, balance sheets, and reconciliations of GAAP to non-GAAP measures for H1 2023 Statements of Comprehensive Loss The unaudited condensed consolidated statements of comprehensive loss detail the company's financial performance for the six months ended June 30, 2023 and 2022, showing revenue, cost of revenue, operating expenses, and net loss, along with other comprehensive income/loss components Unaudited Condensed Consolidated Statements of Comprehensive Loss (US$'000) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Revenue | 67,133 | 85,454 | | Cost of revenue | (50,369) | (60,203) | | Gross profit | 16,764 | 25,251 | | Research and development expenses | (3,298) | (4,418) | | Sales and marketing expenses | (20,105) | (22,569) | | General and administrative expenses | (17,283) | (25,344) | | Total operating expenses | (40,686) | (52,331) | | Goodwill impairment | — | (24,945) | | Interest expense | (618) | (1,313) | | Interest income | 739 | 649 | | Other losses, net | (4,653) | (2,133) | | Loss before income tax expense and share of losses from an equity investee | (28,454) | (54,822) | | Share of losses from an equity investee | (19) | (40) | | Income tax expense | (96) | (201) | | Net loss | (28,569) | (55,063) | | Net loss attributable to noncontrolling interests | 58 | 1,381 | | Net loss attributable to iClick Interactive Asia Group Limited's ordinary shareholders | (28,511) | (53,682) | | Other comprehensive income/(loss): Foreign currency translation adjustment, net of US$nil tax | 170 | (2,908) | | Comprehensive loss | (28,399) | (57,971) | | Comprehensive loss attributable to noncontrolling interests | 69 | 1,433 | | Comprehensive loss attributable to iClick Interactive Asia Group Limited's ordinary shareholders | (28,330) | (56,538) | | Net loss per ADS attributable to iClick Interactive Asia Group Limited's ordinary shareholders — Basic | (2.80) | (5.38) | | — Diluted | (2.80) | (5.38) | | Weighted average number of ADS used in per share calculation: — Basic | 10,178,966 | 9,984,505 | | — Diluted | 10,178,966 | 9,984,505 | Balance Sheets The unaudited condensed consolidated balance sheets present the company's financial position as of June 30, 2023, and December 31, 2022, detailing assets, liabilities, and equity, including a decrease in total assets and total liabilities Unaudited Condensed Consolidated Balance Sheets (US$'000) | | June 30, 2023 | December 31, 2022 | | :----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :------------ | :---------------- | | Current assets | | | | Cash and cash equivalents, time deposits and restricted cash | 73,297 | 105,307 | | Accounts receivable, net of allowance for doubtful receivables of US$39,110 and US$37,215 as of June 30, 2023 and December 31, 2022 respectively | 50,497 | 64,556 | | Other current assets | 36,252 | 34,797 | | Total current assets | 160,046 | 204,660 | | Non-current assets | | | | Intangible assets | 709 | 991 | | Other assets | 9,140 | 16,131 | | Total non-current assets | 9,849 | 17,122 | | Total assets | 169,895 | 221,782 | | Liabilities and equity | | | | Current liabilities | | | | Accounts payable | 34,185 | 41,728 | | Bank borrowings | 35,166 | 44,283 | | Other current liabilities | 46,473 | 51,705 | | Total current liabilities | 115,824 | 137,716 | | Non-current liabilities | | | | Other liabilities | 2,679 | 4,777 | | Total non-current liabilities | 2,679 | 4,777 | | Total liabilities | 118,503 | 142,493 | | Equity | | | | Ordinary shares – Class A | 44 | 44 |\ | Ordinary shares – Class B | 5 | 5 | | Treasury shares | (28,475) | (28,457) | | Other reserves | 75,527 | 103,338 | | Total iClick Interactive Asia Group Limited shareholders' equity | 47,101 | 74,930 | | Noncontrolling interests | 4,291 | 4,359 | | Total equity | 51,392 | 79,289 | | Total liabilities and equity | 169,895 | 221,782 | Reconciliations of GAAP and Non-GAAP Results This section provides detailed reconciliations of GAAP net loss to non-GAAP measures, including Adjusted EBITDA, Adjusted Net Loss, and Diluted Adjusted Net Loss per ADS, outlining specific adjustments made for each period Adjusted EBITDA Reconciliation This reconciliation details the adjustments from net loss to Adjusted EBITDA, including depreciation, interest, taxes, share-based compensation, and other non-operating items - Adjusted EBITDA is defined as net loss before depreciation and amortization, interest expense/income, income tax expense, share-based compensation, goodwill impairment, other losses (net of government grants), impairment of right-of-use assets, net loss attributable to non-controlling interests, share of losses from an equity investee, and new business setup/acquisition costs[26][27] Adjusted EBITDA Reconciliation (US$'000) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net loss | (28,569) | (55,063) | | Add/(less): | | | | Depreciation and amortization | 665 | 3,436 | | Interest expense | 618 | 1,313 | | Interest income | (739) | (649) | | Income tax expense | 96 | 201 | | EBITDA | (27,929) | (50,762) | | Add/(less): | | | | Share-based compensation | 534 | 3,144 | | Goodwill impairment | — | 24,945 | | Other losses, net | 5,225 | 5,056 | | Impairment of right-of-use assets | 1,014 | — | | Net loss attributable to noncontrolling interests | 76 | 1,028 | | Share of losses from an equity investee | 19 | 40 | | Cost related to new business setup or acquisitions | — | 3 | | Adjusted EBITDA | (21,061) | (16,546) | Adjusted Net Loss Reconciliation This reconciliation outlines adjustments from net loss to Adjusted Net Loss, primarily for share-based compensation, goodwill impairment, and other non-recurring items - Adjusted net loss is defined as net loss before share-based compensation, goodwill impairment, other losses (net), impairment of right-of-use assets, net loss attributable to non-controlling interests, share of losses from an equity investee, and new business setup/acquisition costs, with no material tax effects on these adjustments[28] Adjusted Net Loss Reconciliation (US$'000) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net loss | (28,569) | (55,063) | | Add/(less): | | | | Share-based compensation | 534 | 3,144 | | Goodwill impairment | — | 24,945 | | Other losses, net | 5,225 | 5,056 | | Impairment of right-of-use assets | 1,014 | — | | Net loss attributable to noncontrolling interests | 56 | 1,343 | | Share of losses from an equity investee | 19 | 40 | | Cost related to new business setup or acquisitions | — | 3 | | Adjusted net loss | (21,721) | (20,532) | Diluted Adjusted Net Loss per ADS Reconciliation This reconciliation presents the calculation of diluted adjusted net loss per ADS, incorporating non-GAAP adjustments to the net loss per ADS Diluted Adjusted Net Loss per ADS Reconciliation | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net loss: | (28,569) | (55,063) | | Add: Non-GAAP adjustments to net loss | 6,848 | 34,531 | | Adjusted net loss | (21,721) | (20,532) | | Denominator for net loss per ADS - Weighted average ADS outstanding | 10,178,966 | 9,984,505 | | Denominator for diluted adjusted net loss per ADS - Weighted average ADS outstanding | 10,178,966 | 9,984,505 | | Diluted net loss per ADS | (2.81) | (5.51) | | Add: Non-GAAP adjustments to net loss per ADS | 0.68 | 3.45 | | Diluted adjusted net loss per ADS | (2.13) | (2.06) |