Xuan Wu Cloud Announces Interim Results for 2023

Delivers Solid Revenue Growth of 18.0%, Steadily Advancing "AI + FMCG" Strategy

• Achieved revenue growth of 18.0% to RMB 530.0 million (same below) in the first half of 2023
• The Average Revenue Per User (ARPU) of total core customers reached RMB 1.8 million; Net Revenue Retention (NDR) for core customers improved to 121.4%
• SaaS customers continued to increase year by year, with a growth of 27.5% to 1,551, an increase of 335 compared to the same period last year
• Attained the highest-level certification in the global software field - CMMI Level 5 Certification
• Introduced the inaugural AIGC product "Intelligent FMCG Assistant". The "AI + FMCG" strategy is steadily advancing, driving a 50.0% year-on-year growth in Sales Cloud contract order value and achieving 13.8% revenue growth
• The core product ICC (Integrated Communications Center) of the Marketing Cloud has achieved full domestic adaptation, resulting in a 61.9% revenue growth and propelling an 18.0% increase in the overall revenue of the Marketing Cloud
• We have achieved business cooperation with a number of leading FMCG enterprises, such as Uni-president Enterprises(China)Investment Co.,Ltd. , Sichuan New Hope Dairy Co.,Ltd. and Nanjing Pepsi-Cola Beverage Co., Ltd.,

GUANGZHOU, China, Aug. 30, 2023 /PRNewswire/ -- China's leading domestic intelligent CRM service provider, Xuan Wu Cloud Technology Holdings Limited ("Xuan Wu Cloud" or the "Company," stock code: 2392.HK), announced its interim results for the six months ended 30 June 2023 on August 29th. During the reporting period, the company achieved not only a solid year-on-year revenue growth of nearly 20.0%, but also expanded its presence in technology fields like AIGC, which will pave the way for future breakthroughs in its performance.

Data reveals that Xuan Wu Cloud recorded a revenue of RMB 530.0 million in the first half of the year, marking a 18.0% year-on-year growth. Notably, the revenue contribution from the high-margin SaaS segment accounted for 49.4%, generating RMB 261.6 million in revenue with a 17.9% year-on-year growth, demonstrating a steady upward trajectory.

Concurrently, the number of Xuan Wu Cloud's SaaS customers also exhibited rapid growth. During the Reporting Period, the number of Company's CRM SaaS customers base grew 27.5% to 1,551，representing an increase of 335 compared to the same period last year. Meanwhile, the Company's Average Revenue Per User (ARPU) contributed by core clients increased by 28.2%,  reaching RMB 1.8 million, and the core clients' net dollar retention rate improved to 121.4%.

Regarding the Company's performance in the first half of the year, Mr. CHEN YongHui, Chairman of the Board of Directors of Xuan Wu Cloud, said in the report that，"As a leading intelligent CRM services provider, we always maintain the innovation vitality as a technology enterprise, and continue to dive deep into the track of facilitating enterprises to realise high-quality digital intelligent transformation. During the Reporting Period, we focused on our technology research and development ("R&D") investments on Artificial Intelligence ("AI") and Data Intelligence ("DI") ability, 5G message application and AI Internet of Things ("AIoT"), and empowered our" Three Clouds" (Marketing Cloud, Sales Cloud and Service Cloud) products to help our customers in their consumer business scenarios, and explored diversified application scenarios of AI Generated Content ("AIGC") in the FMCG industry. As our focus on SaaS pays off and our "AI + FMCG" second growth curve strategy continues to advance, we anticipate the company will turn losses into profits in the year of 2024."

Advancing Steadily with the "AI+FMCG" Strategy and Establishing AIGC Product Applications

In the current landscape, the digital economy has emerged as one of the key battlegrounds in the domestic economic market. Despite the realm of China's consumer goods sector has the immense potential of a market of RMB 44 trillion, businesses throughout the industry are contending with a range of challenges, such as low levels of digitalization and the intricate nature of lengthy marketing chains. These factors underscore the pressing need for a swift transition towards digital intelligent transformation.

In response to the current market landscape, Xuan Wu Cloud，while focusing on SaaS , particularly positions its Sales Cloud, aligned with the "AI+ FMCG" strategy, as the company's second growth curve. Mr. CHEN YongHui stated, "For over a decade, FMCG have been a vital sector we have deeply cultivated. Building on this foundation, we have accumulated substantial industry expertise in the FMCG field. Presently, we are merging our practical experience with our self-developed AI technology to drive our intelligent CRM products and services. This synergy empowers our customers with stronger momentum for digital intelligent transformation and upgrade, ultimately capturing more market share."

Data reveals that the Sales Cloud achieved a revenue growth of 13.8% in the first half of the year. At the same time, its overall contract order value saw a 50.0% year-on-year increase, thereby establishing a robust foundation for revenue growth in the latter half of 2023.

Behind the steady revenue enhancement lies the driving force of Xuan Wu Cloud's technological innovation. According to the announcement, the Xuan Wu Cloud AI Lab, established as early as 2016, continues to exhibit strong research and development capabilities. During the Reporting Period, we have upgraded the R&D of multi-model infused video stitching technology, on-device AI model, and high precision price tag recognition technology, and the coverage rate of on-device model and the overall recognition rate of price tags can reach over 92.0%, which maintains leading position in FMCG vertical field, ensuring that the Sales Cloud products and solutions maintain a competitive edge in the market.

Taking the core product "Smart 100" under the Sales Cloud as an example, during the reporting period, Xuan Wu Cloud approached from the perspective of how customers can transform existing resources into incremental growth. The "Smart 100" was newly upgraded, starting with "Smart Store Expansion" and "Smart Direct Control," driving enterprises to efficiently expand high-value terminals, enhancing coverage of high-potential terminals, and establishing a high-quality brand terminal operation system. This truly embodies the role of digital intelligent transformation in boosting brand merchant marketing growth.

The driving force behind the continuous upgrading and iteration of products like"Smart 100" stems from the accumulated AI technology of Xuan Wu Cloud. As a pioneer among domestic CRM providers with a comprehensive self-developed AI technology stack, Xuan Wu Cloud not only empowers CRM products with AI but also strategically expanded into the AIGC technology application field in the first half of the year. We have recently launched"Intelligent FMCG Assistant", the first AIGC product of Xuan Wu Cloud, aiming to use the five AIGC generative functions to provide FMCG sales personnel with intelligent assistance and suggestions for the whole workflow, and at the same time, assisting FMCG enterprises in enhancing the manpower efficiency of FMCG sales personnel, reducing the waste of costs, improving the quality of terminal shop display.

Mr. CHEN YongHui Said: "The Intelligent FMCG Assistant , which infused with AIGC technological innovation, will help FMCG enterprises to manage the all-chain business in a closed loop and create a brand new example of intelligent FMCG industry."

Meanwhile, our AIoT intelligent fridge and solutions also made a push in the first half of the year.During the Reporting Period, we have achieved business cooperation with a number of leading FMCG enterprises, such as Uni-president Enterprises(China)Investment Co.,Ltd. , Sichuan New Hope Dairy Co.,Ltd. and Nanjing Pepsi-Cola Beverage Co., Ltd., which in turn constitute a new engine for our business development in the FMCG field.

In addition to advancements in products and technology, Xuan Wu Cloud established the Industry Research Institute last year, actively driving the digital intelligent transformation and innovative models in the FMCG industry, and is dedicated to establish this institute to become an influential research hub for the sector. During the reporting period, Xuan Wu Cloud Industry Research Institute published "Xuan Wu Cloud's White Paper on Omni-Channel Marketing and Digital Solutions in the Beverage Industry", providing comprehensive support for clients' digital intelligent transformations.

Mr. CHEN YongHui expressed, "With the advent of the new era of consumption, [omni-channel + digital intelligent transformation] represents the developmental trend and shared challenge facing China's FMCG enterprises. Our business empowerment through the expansion of AIGC technology applications, upgrades to core products, and the strengthening of the Industry Research Institute's intellectual resources, along with leading management reforms, enables us to create a"combination of market-winning punches". Based on this, while creating greater value for our clients, we are also enhancing our industry competitiveness, enabling business standardization, improving win rates, and fostering new momentum for an intelligent FMCG industry."

Benefiting from the surge of information technology application innovation(ITAI), revenue from our core intelligent financial products has grown by over 60%

While steadily advancing along the second growth curve of "AI+FMCG," Xuan Wu Cloud is also delving deeper into the realms of intelligent finance and public utility entities and government organisations (Government-related) sectors with its Marketing Cloud and Service Cloud. In the first half of the year, amid the substitution trend of information technology application innovation and localization, the company showcased commendable performance in the market. Data reveals that during the reporting period, its Marketing Cloud achieved a year-on-year revenue growth of 18.0%, while its Service Cloud witnessed a 26.6% increase compared to the previous year.

Aligned with the growth factors of the Sales Cloud, the revenue expansion of Xuan Wu Cloud's Marketing and Service Clouds also result from the intersection of technological innovation and insights into customer business needs. This continuous enhancement has augmented the market competitiveness of its products, earning the recognition of their clienteles.

In the realm of Marketing Cloud, the company is consistently enhancing its core product - the Integrated Communication Center (ICC) - through information technology application innovation and localization. Throughout the reporting period, ICC achieved full compatibility with operating systems, databases, middleware, cloud services, and other critical components, collaborating with major domestic manufacturers. Additionally, numerous customers have successfully undergone the upgrades in information technology application innovation. Concurrently, Xuan Wu Cloud has been deepening its collaboration with prominent players like Huawei Cloud, earning the "Outstanding Ecological Partner" award from Huawei Cloud during the reporting period.

In the meantime, we responded proactively to customers 'demands. The Rich Media message business module launched by ICC significantly enriched the forms of messaging, which pushed our overall contract winning rate to 74.0%. In addition, we adopting a product portfolio strategy of stacking multiple standardised messaging plug-ins, value-added business plug-ins and all-chain domestic substitution on a single base platform. The above initiatives have been effective in increasing ICC's multi-phase project tie-ups with existing customers, resulting in a rapid revenue growth of 61.9% during the Reporting Period.

During the Reporting Period, we have upgraded Service Cloud to a new generation in regards of contact centre, intelligent quality control, intelligent voice robot and other intelligent product matrix, while also actively explored the integration and innovation of the Company's Service Cloud products and AIGC. With the support of this innovative power, we reached a million level co-operation with a world's top 500 cosmetics group in the first half of 2023, and further achieved a breakthrough with banking and consumer finance customers in the financial sub-sector.

According to data from renowned consulting platform iResearch, the scale of China's information technology application innovation industry reached RMB 1.4 trillion in 2021, with a projected growth to RMB 3.7 trillion by 2027. This forecast indicates that Xuan Wu Cloud's SaaS product series—Marketing Cloud and Service Cloud—stand to benefit from the dividends of information technology application innovation and localization, poised for a new phase of rapid development.

Mr. CHEN YongHui remarked, "Since our inception, we have remained steadfast in our commitment to independent research and development of technology, amassing a wealth of technical accomplishments and successful experiences. In the current trend of information technology application innovation and localization within the SaaS industry, our deep-rooted strengths in sectors such as finance and Government-related will be further highlighted. In the domains of Marketing Cloud and Service Cloud, we are poised to amplify our product competitiveness through innovative research and development, empowering the intelligent transformation of industries like finance."

Notably, Xuan Wu Cloud has recently achieved the highest-level global certification in the software field - CMMI Level 5 Certification. This reaffirms Xuan Wu Cloud's position at the forefront of international standards in software development management systems, implementation and delivery services, project management capabilities, etc. Simultaneously, it signifies the company's elevation to a new level of technological innovation strength and product competitiveness, laying a solid foundation for accelerating future business expansion.

Continuing the Deepening of the "AI + FMCG" Strategy, Expect to Turn Losses into Profits by FY2024

During the 14th Five-Year Plan period, the digital economy has ascended to a national strategic priority with expansive developmental prospects. According to the Digital China Development Report released by the Cyberspace Administration of China, the scale of China's digital economy reached RMB 50.2 trillion in 2022, securing its position as the world's second-largest. In 2023, China's digital economy is poised to embark on a new decade of simultaneous quantitative and qualitative growth. As projected by the China Academy of Information and Communications Technology (CAICT), it is estimated that by 2025, the scale of China's digital economy will surpass RMB 60 trillion, and by 2032, it will exceed RMB 100 trillion.

Returning to the business market level，In the digital economy，AI technology, as an important infrastructure as well as an empowering engine in the era of digital economy, will act as a core driving force for the transformation and upgrading of various industries and the development of digital economy in the PRC in the long term. According to data from the China Academy of Information and Communications Technology (CAICT), the scale of core AI industry in the PRC reached RMB508 billion in 2022, an increase of 18.0% year-on-year, and the number of AI patent applications accounted for 53.4% of the global amount.

Amid this backdrop, Xuan Wu Cloud, dedicated to providing high-quality digital intelligent transformation, is poised to seize an extended period of development opportunities through its stronghold in intelligent CRM.

Looking ahead to the second half of the year, for industries such as finance, in which the company has long been deeply engaged, Mr. CHEN YongHui said，"We will strive to make breakthrough in ICC product matrix, and create a multi-phase project cycle through business optimisation and overlaying of standard products, to help our banking clients automise the management process of their marketing campaigns, and promote the modernisation, digitalisation and social-mediatisation of the communications between their end-users."

As for the company's second growth curve - "AI + FMCG", Mr. CHEN YongHui said, "We will continue to commit to the business and technology dual-wheel drive in the second half of the year, and steadily promote the "AI + FMCG" strategy. We will keep focusing on the following key areas: Firstly, vertically committing to major industrial clients, with business+technology as driven forces, assisting the brands to achieve all-chain digital intelligent transformation; Secondly, keep focusing on AI+FMCG and implementing more application scenarios of AIGC, and exploring a large-scale multi-modal FMCG model; Thirdly, building diversified product matrix of FMCG chain by promoting standardised products to mid-tier clients, and leading industry business and management model innovation; And expanding overseas market and deepening the strategic cooperation with Huawei Cloud and other parties to build the industrial collaboration ecosystem together. We anticipate to realise a steady and continuous growth in the revenue scale and gross profit margin by the aforesaid initiatives.

As of the disclosure date of this announcement, Xuan Wu Cloud has steadily embarked on its development roadmap for the latter half of the year. Firstly, in recent times, it has launched the standardized product of DI (Data Intelligence) Store Expansion System, which aids FMCG brand manufacturers in expanding into high-potential markets. Currently, this product boasts an actual recommendation rate for terminals exceeding 92%, positioning it at the forefront of the industry. Secondly, a strategic partnership has recently been established with TI Cloud, leveraging each other's resource advantages, particularly in AIGC technology research and development. This collaboration is geared towards jointly offering more comprehensive and superior digital intelligent transformation solutions to more corporate clients.

"We hope that through the initiatives mentioned above, we can further support the company in achieving stable and sustained growth in revenue scale and gross profit margin. As these measures continue to deepen, we anticipate the company will turn losses into profits in the year 2024," Mr. CHEN YongHui candidly stated.

Financial Results

About Xuan Wu Cloud:

Xuan Wu Cloud Technology Holdings Limited, the largest local intelligent CRM service provider in China(stock code 2392.HK), which was successfully listed on the Main Board of The Stock Exchange of Hong Kong Limited on 8 July, 2022. The company's domestic operating entity is Xuan Wu Technology, which has established a marketing service system covering 34 provinces and cities across China. Xuan Wu Cloud has aPaaS, cPaaS, AI, and DI platform as technical base, with Marketing Cloud, Sales Cloud, Service Cloud as core SaaS product applications, aiming to provide customers with multi-touch, all-channel, entire business cycle management of intelligent CRM products and services.