Highlights of the interim results for the six months ended June 30, 2018:
- Success in implementation of AIoT Business Service Platform + IC Component Trading Platform dual business model" - profit attributable to equity shareholders of the Company increased by 657.2% as compared to the second half of 2017 to approximately RMB239.0 million; Non-GAAP profit attributable to equity shareholders of the Company amounted approximately RMB180.7 million, a significant increase of 223.4% as compared to the second half of 2017.
- INGDAN.com's AIoT ecosystem has registered over 38,000 companies on its platform to date.
- The Group strengthened its partnerships with emerging chip companies, and built new relationships with leading chip makers in China, Europe, and Japan.
- In June 2018, the Group entered an agreement to acquire 40% of GIPP Corporation. GIPP Corporation will be responsible for the overseas management and operation of about 100,000 patents from over ten top-tier Japanese technology companies including Sony and Toyota, etc., and providing business development advisory using INGDAN.com's wide industry resources.
- In May 2018, the Group signed an agreement with Europe's largest microelectronics research center to jointly build a microelectronics innovation center with INGDAN.com in Shenzhen, for world-class chip design, manufacturing, and application.
Cogobuy Group ("Cogobuy" or the "Company", stock code: 400.HK; with its subsidiaries (the "Group")), a platform providing artificial intelligence and internet of things ("AIoT") in China, is pleased to announce its unaudited interim results for the six months ended June 30, 2018 (the "Period").
Financial Highlights of the First Half of 2018
The implementation of "AIoT Business Service Platform + IC Component Trading Platform dual business model" corporate development strategy launched in Q4 2017 has been successful. During the Period, due to the adjustment of the Company's business structure, reduction in dependence on external funds, and a greater focus on quality to support long-term growth, the Group recorded total revenue of RMB2,961.2 million, a decrease of 51.6% year on year and a decrease of 15.2% as compared to the second half of 2017. Direct sales and INGDAN.com respectively generated 94.2% and 5.8% of the total revenue. Since a significant portion of INGDAN.com's profits it from business services and investment, INGDAN.com's contribution to the Group's profits is far greater than the foregoing percentage of revenue it generated. Meanwhile, INGDAN.com's new profit model helped drive profit attributable to equity shareholders of the Company to approximately RMB239.0 million, a decrease of 11.6% year-on-year and representing a significant increase of 657.2% and compared with the second half of 2017. Non-GAAP profit attributable to equity shareholders of the Company amounted approximately RMB180.7 million, a significant increase of 223.4% as compared to the second half of 2017. During the Period, the Company's gross profit margin was 7.5%. If the profit from the gain on INGDAN.com's incubated project were included, the Company's gross profit margin would have been at 13.6%.
With the high growth and rising commercialization of new technologies in China, including the Internet of Things ("IoT") and artificial intelligence ("AI" and together, "AIoT"), demand for chips is becoming more diversified. As a leading AIoT Business Service Platform in China, INGDAN.com is using its first-mover advantage to grow the available resources along the AIoT industry chain. During the Period, the number of companies registering on INGDAN.com's AIoT ecosystem exceeded 38,000; they included chip companies, AI computing companies, module companies, technical solutions providers, and IoT projects -- which often have high procurement demands, especially for smart cars, smart homes, robotics, smart healthcare and new materials. In the first half of 2018, EZ Robot, Inc. ("EZ Robot") incubated by INGDAN.com has become the first successful case of INGDAN.com industrialization.
The Group is gradually transitioning away from its IC component sales and marketing platform, to a more diversified, business services, investment, and strategic sales platform serving electronic companies in China. Cogobuy expects AIoT downstream projects will become the growth drivers for chip sales in China. In the first half of 2018, INGDAN.com enhanced its AIoT business services by upgrading the IngDan Lab into a Center for AIoT Hardware Innovation to better engage world-class AI researchers, as well as developing new patented AI modules. INGDAN.com has now expanded its presence in emerging industries such as robotic vacuums, payments via facial recognition, smart warehouse robotics, smart cars, and smart medical devices. The Company has also established strategic partnerships with chip manufacturers for blockchain and edge computing applications to build more synergies for INGDAN.com.
According to China Semiconductor Industry Association, sales of China's IC industry in the first quarter of 2018 reached RMB115.3 billion, an increase of 20.8% year-on-year. In the midst of the US-China trade conflicts, domestic IC chips substitution has become an irreversible trend. The Group has been well prepared for such trend and started establishing partnerships with domestic chip manufacturers since 2013. To date, the Group maintains long-term partnerships with 36 domestic leading chip suppliers to capture the market opportunities of domestic chip substitution, while also continues to build strong relationships with first-tier international chip suppliers, to better fulfill market demand for diversified chip types. Meanwhile, riding on national policies, vertical industry applications for IoT, AI, and 5G technologies are expected to grow at a fast pace. The Group's "AIoT Business Service Platform + IC Component Trading Platform dual business model" strategy facilitated the Group's AI module sales and its AIoT business services in the first half of 2018. During the Period, revenue generated from INGDAN.com represented 5.8% of the Group's total revenue. Its role in sustaining the Group's long-term growth in the fast-growing industries of chip sales has becoming prominent.
As at June 30, 2018, the Group's cash and bank balances (including pledged deposits) were RMB2,075.7 million. The number of basic ordinary shares outstanding was 1,456,354,000, and diluted common shares outstanding was 1,459,569,000.
- In view of the rising trade tensions between China and the U.S., the Group is actively entering into partnerships with leading, non-U.S. chip manufacturers. In May 2018, the Group signed an agreement with Europe's largest microelectronics research center to jointly build a microelectronics innovation center with INGDAN.com in Shenzhen, for world-class chip design, manufacturing, and application. The center has been successful in customizing chips for AIoT companies in sensing technology, sensor networks, communications, ultra-low power technologies, and ultra-low frequency radios.
- In June 2018, the Group entered an agreement to acquire 40% of GIPP Corporation. GIPP Corporation will be responsible for the overseas management and operation of about 100,000 patents from over ten top-tier Japanese technology companies including Sony and Toyota, etc., and providing business development advisory using INGDAN.com's wide industry resources. The GIPP Corporation will help introduce Japanese companies with core technologies into China, to further enrich INGDAN.com's resources.
- In April 2018, with the Group's proprietary technology based on the R16 chip technology from Allwinner, the IngDan Lab's K-system successfully developed the SLAM AI module for robotic vacuums, which officially entered into mass production. The Group continues to cooperate with Allwinner to optimize its SLAM technology to enhance its technical advantages. Furthermore INGDAN.com's strategic partner, Unisound, successfully developed an AI chip into a module with the help of INGDAN.com platform and released one of the world's first AI chips implemented in IoT industry, validating Cogobuy's leadership in domestic IC industry.
Mr. Jeffrey Kang, CEO of Cogobuy Group said, "Since implementing our new business strategy and corporate adjustments at the end of last year, Cogobuy has integrated all of its business segments into two major platforms, running our IC components direct sales through Cogobuy, and providing our AIoT business services through INGDAN.com.
Under the new 'AIoT Business Service Platform + IC Component Trading Platform dual business model', INGDAN.com realized its three monetization strategies in the first half of 2018: first, the sale of smart hardware, like chips and AI modules, to AIoT enterprises; second, the provision of customized chip design, proprietary AI modules, supply chain finance and other industrial chain services to generate revenue; third, realization of gain from equity investments in AIoT technology companies it incubated. EZ Robot is the first successful case for industrialization through INGDAN.com.