Earnings Transcript for TGL - Q1 Fiscal Year 2024

Operator: Good day, everyone, and welcome to Treasure Global Inc.'s First Quarter of Fiscal Year 2024 Results Conference Call. [Operator Instructions] This conference call is being recorded. A replay of today's call will be available on the Investor Relations section of TGL's website and will remain posted there for the next 30 days.

I will now hand over -- hand the call over to Sophia Bashford, Senior Account Director, Investor Relations at KCSA for introductions and the reading of the safe harbor statement. Please go ahead. :

Sophia Bashford: Thank you, operator. Good morning, everyone, and welcome to Treasure Global's First Quarter Fiscal 2024 Results Conference Call. With us on today's call are Sam Teo, Chief Executive Officer; Michael Chan, Chief Financial Officer; and Jeremy Roberts, Independent Director.

Before we begin, I would like to remind you that today's call contains certain forward-looking statements from Treasure Global's management made within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities and Exchange Act of 1934 as amended, concerning future events. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company's Form 10-K for the year ended June 30, 2023, and subsequent filings filed with the SEC. Copies of this document are available on the SEC's website at www.sec.gov. Actual results may differ materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update these statements through revisions or changes after the date of this call, except as required by law. :

Now it is my pleasure to introduce Sam Teo, CEO of TGL. Sam, please go ahead. :

Chong Teo: Thanks, Sophia, and thank you, everyone, for joining us today for our First Quarter of Fiscal 2024 Earnings Conference Call for the period ended September 30, 2023. I'm pleased to speak to you today to provide an update on Treasure Global business before covering our first quarter operational highlights. I want to discuss some of the exciting recent innovation we have announced to our key revenue stream as well as new market opportunity post quarter end, which we are confident will drive revenue and build value for shareholders.

We have continued to prove our capability as a dynamic technology solutions company that is able to follow shift in consumer demand to ensure we are in [indiscernible] with recent market trends, helping to further drive market share. Firstly, our [indiscernible] of the ZCITY app, a unique digital ecosystem that transform and simplify the e-payment experience for consumer, while also allowing them to earn reward. :

In October, we announced the introduction of an artificial intelligent robot through acquisition of AI technology of Tencent. The robot can contact [ extended ] our live commerce section on TikTok with users of our ZCITY app and can demonstrate products and services in real time on the TikTok platform. This innovative approach to marketing not only capture the attention of the TikTok community, but also create a dynamic and immersive shopping experience for users. :

The robot can answer query, provide product [indiscernible] and offer personalized recommendation, ensuring that every customer interaction is paired to that mix. It's ability to operate for extended hour on TikTok made it a game changer in the live commerce arena, allowing for unparalleled reach and engagement. We believe this development will not only drive significant revenue growth for ZCITY but also set new standards in the live commerce industry. :

TGL, [ will ] TikTok Live Commerce as a significant opportunity to diversify our revenue stream and showcase product on ZCITY in an innovative and engaging manner. TikTok status as the world highest traffic live commerce platform, make it the idea stage for ZCITY to unveil this groundbreaking technology. With millions of active user daily. TikTok provide an incomparable platform to showcase ZCITY product and services, reaching a global audience like never before. :

We also recently announced the launch of a merchant AI engine for ZCITY that can tell a highly personalized e-voucher deal for user, collaborating with Boost, the regional full-spectrum fintech arm of Axiata. Treasure Global will leverage Boost's expensive network of over 600,000 merchant spending diverse industry. :

The AI engine will redefine ZCITY offering of e-voucher deal by creating and deploying super deal e-voucher directly within the ZCITY app, within the ZCITY user community. The e-voucher deal will undergo a sophisticated personalization process, ensuring there is [indiscernible] with the specific user that is being targeted. This will drive ZCITY user base growth significantly and spread presence in the region while generating anticipated revenue growth. :

This personalization will draw from user behavior, spending pattern, preferences and transaction history, setting a new center for targeted marketing and value delivery. Furthermore, the rich data insights derived from user interaction and preferences will empower Treasure Global to further optimize its offering, driving additional revenue through targeted marketing campaigns and expanded merchant partnership. :

Next, for our second period, TAZTE. In October, we released TAZTE 2.0, which is an upgrade to our transformational digital food and beverage management system. TAZTE provide merchants with a one-stop management and automated solution to digitalize their businesses, allowing food and.:

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particular. We believe TAZTE provide a significant opportunity to drive further margin and profit growth for Treasure Global, which is a major focus for us. TAZTE will increase user stickiness and engagement. As the merchant, increase become reliant on the system for their business needs. This upgrade is focused on increasing functionality on both the merchant and customer side. Treasure Global has been focused on expanding TAZTE throughout Malaysia and also to new markets which we are confident 2.0 will have to do. :

The additional functionality will provide a complete solution offering, including merchant supply chain management and upstream purchasing, which we expect to attract merchants to the platform. It will also provide a more user-friendly interface for customer and merchant in a larger consolidated version. :

Thirdly, through our strategy to become a master franchisor, Treasure Global and to become the largest food and beverage chain, without owning any physical brick-and-mortar outlets. Under the subsidiary named Foodlink, we will manage brand loyalty and related intellectual property through lease, ownership or joint venture agreement with brands that we secure partnership with. :

Just last week, we announced that Abe Yus, a popular Malaysia food and beverage business under our umbrella of brands, is expanding its supply plan to distribute its best-selling curry puffs to the world's largest convenience store. This marked a significant milestone in diversifying the group product offering channels and extending its distribution reach. :

The first phase of expansion will focus on supplying the high selling curry puffs to 250 convenience stores in Malaysia. Subsequent phase, we encompass additional store location and introduce more products, signifying notable expansion into the food and beverage market, stepping into a new revenue stream through the extensive level of convenience store. :

To the brand we are acquiring into Foodlink, we will also provide food and beverage consulting, including market and product optimization as well as supply chain monetization. This unique business model allow Treasure Global to establish synergy with our technology solution, deepening our position in the food and beverage industry in Southeast Asia. :

Now we can be strategically grow our [indiscernible] user base as we adopt it into new restaurants. Additionally, we are securing a new revenue stream from monthly licensing fee and [ stock profit ]. And lastly, in a complementary move, we are unveiled a significant development this month that will help grow further into the new market of health and wellness. :

We announced a partnership with Malaysia leading Healthcare Group, UCSI Hospital, to promote the Malaysian Wellness Healthcare Tourism Program, ZCITY’s enogy, an e-commerce provider of health and wellness products are available in our ZCITY app, will spearhead health tourism and stem cell therapy with UCSI Hospital in the Indonesian, Hong Kong and China markets. :

We believe that this partnership will support additional revenue growth from new marketing and strategy alliances within the wellness tourism industry. This partnership will deliver a substantial new revenue stream from wellness healthcare tourism package and commission earned on health screening, exclusive sales and the upselling of enogy health care product and [indiscernible] stem cell therapy offering that Treasure Global will earn a commission on. Treasure Global expect a projected 100% overall gross profit growth every month from this partnership. :

As I have discussed above, we are consistently developing innovative products that complement our existing propriety offering, ZCITY and TAZTE, as well opening up new market opportunity. In particular, we have cemented our leadership position in the AI-driven e-commerce space with our major business peers as well as new market opportunity. We strongly believe we are well positioned to deliver value, innovation and growth. :

I would like to discuss the operational highlight in the first quarter of 2024, which show how we are executing upon our strategy plan and further growing our user base and addressable market size. Presently, the number of ZCITY user has further growth to over 2.66 million as for November 6, 2023. In the first quarter, we successfully integrated AI technology into our ZCITY app with a user-friendly chatbot, powered by our data analytics engine and ChatGPT.:

The next gen was on the light chatbot assistant, which we have named Jojo, went live in August for ZCITY user. Jojo uses AI and deep learning to track user personal preferences to recommend idea promotion and products for them. This allows ZCITY to offer consumer a more personalized and targeted reward experience. The enhanced functionality is expected to drive user retention and attract new customer to further grow revenue, while at the same time allowing merchants to capture expanded data on user behavior and spending pattern. :

During the beta phase, we gained a significant insight through market testing, showcasing strong user engagement and interest in the new features. This collected data will get us in refining strategy, improving user experience and providing merchant with variable insight into user behavior and spending pattern. :

During the quarter, we announced the company has signed a letter of intent to form an e-commerce venture in Indonesia with Harmoni Bagi Dunia or HBD. Under the agreement, Treasure Global will hold a 70% major stake in HBD and Treasure Global will grant HBD exclusive right to promote and operate ZCITY in Indonesia. The LOI marked the significant milestone of our expansion into the Indonesian market, aligning with our strategy to grow internationally with innovative local partner. :

The venture will provide Treasure Global and its proprietary app, ZCITY, with access to an extensive network of 200 merchants and data of 5 million users within the several industry in Indonesia. The Indonesian market has a substantial internet user base of 213 million out of a population of 276 million, providing a large opportunity for growing our total addressable market. :

In July, we announced a partnership agreement with VCI Global to develop an AI-powered travel platform as a new offering for traveler in Malaysia. Treasure Global and VCI Global will share ownership and profit from this collaboration, positioning the company to tap into the post pandemic travel bump, expected to contribute significance to the Malaysian digital economy by 2025. The offering will provide a high-tech portable concierge that can suggest real-time recommendation for travel, for flight, hotel and car rentals. It also offer advanced translation function to break down language barrier. :

During the quarter, Treasure Global signed an agreement with the Malaysia Retail Chain Association for TAZTE to become its exclusive partner as the recommended digital food and beverage management solution to its member in Malaysia. TAZTE is now the MRCA-preferred food and beverage system of choice, and it is recommended to its member to subscribe as TAZTE merchants. The MRCA has over 500 merchant members across Malaysia, representing more than 40 outlet, our second proprietary solution, which we were proud to launch during fiscal 2023. :

TAZTE provide an opportunity for Treasure Global to generate higher gross margin through increasing user engagement and stickiness. TAZTE is a product that merchant has come to realize for their business needs, making them less likely to stop using TAZTE . TAZTE continues to receive positive feedback from user as well as growing the number of merchants and users. :

In particular, observational feedback suggest that merchants who have adopted TAZTE has seen an increase in transaction and basket ratio as well as an increase in user retention and stickiness. TAZTE continued to enhance user engagement on the platform, achieving remarkable milestone in the current quarter. TAZTE has achieved a notable 1.5x increase in the gross merchandise value, or GMV, and continue to have a 2x growth in total transaction and 2.5x increase in monthly transaction user. This showcase the platform sustainably in driving both user activity, transaction volume and GMV. :

Next, we have also continued to secure several partnership during the first quarter, which are centered to our growth and strategy -- marketing strategy. In July, we announced a partnership with the Ministry of Domestic Trade and Cost of Living for the launch of the Package Rahmah program, which offer various financial saving initiative, reducing the cost of living for a lower income group, including the youth and university student. For the program, ZCITY offer package of living essential e-voucher on the app for either such as petrol, food and bills. The initiative demonstrated ZCITY leading digital ecosystem and attract new users, while also supporting this important social program. :

And finally in September, we collaborated with the Borderland Music Festival in Sarawak to offer the first cashless and ticketing platform-powered music festival in Malaysia, powered through the ZCITY app. Treasure Global also charge fees for the each ticket sold, providing a new revenue generation opportunity for the company as a result of the festival, ZCITY will see significant exposure during the [indiscernible] as a leader in ticketing solution as well as penetrating the new market of [indiscernible]. :

To sum up. We are pleased with the progress that we have met recently to progress our strategic propriety, grow our addressable market and develop innovative new revenue generation opportunity. We have established our leadership position in the area of AI e-commerce and continue to release innovative service offering, which are increasing user and [ cash ]. :

I will now pass the call over to Michael to discuss our financial results in greater detail. :

Meng Chan: Thank you, Sam, and good morning, everyone. Today, I will review our financial results for the first quarter of fiscal year 2024 ended September 30, 2023 compared to the same period in 2022.

For the first quarter, total revenue of $13.5 million compared to $15.6 million for the same period last year. Revenue were down year-over-year as we shifted our focus to growing our higher-margin business channel such as TAZTE. While ZCITY revenue stream are historically low margin, we are focused on growing TAZTE, which as Sam has explained, offer a new avenue for growth with a stronger margin. :

In addition to focusing on higher-margin revenue channel, we also intend to increase user engagement and stickiness by providing our user with new products and in the case of TAZTE, a product that merchants come to rely on for their business needs. We believe this objective will lead to increased revenue growth for the company in the long term. :

Gross profit for the first quarter of fiscal 2024 was approximately $163,000, up from $37,000 compared to the same period last year, demonstrating that the initiative to grow gross profit that we implemented have already started to work. Our net loss of approximately $2.1 million for the first quarter of fiscal year 2024 compared to approximately $3.7 million in the first quarter of fiscal year 2023. As of September 30, 2023, our cash balance was approximately $2.6 million compared to a cash balance of approximately $7 million as of September 30, 2022. As Sam mentioned, ZCITY have over 2.66 million registered users and over 2,026 registered merchants as of November 6, 2023. :

Quarterly active user for the quarter ending September 30, 2023 were 187,180 while paid users were up by 4.7%. The total of 1.33 million transactions were transacted by our registered users over the current quarter and quarter-to-date of fiscal year 2024, with paid user transacting 3 or more times in the quarter. As we have mentioned, we remain laser focused on increasing gross profit and margin. The measure we have introduced so far are already working, and we expect further improvement going forward as we continue to roll out this and other revenue-generating initiatives. :

Now I will turn the call back to Sam to highlight our growth strategy. :

Chong Teo: Thanks, Michael. Treasure Global is pleased with the progress we have achieved over recent quarter to grow our business domestically. We are now focused on further expansion, looking at executing on the next stage of our growth plan of moving into Indonesia and Southeast Asia more broadly. As I have discussed, we have taken several steps to develop new products to further expand our addressable market segment as well as enter new markets altogether.

Travel and health and wellness are examples of sectors that we have recently launched partnership venture into. Our domestic market of Malaysia has a growing population and solid near-term economic growth outlook. Our broader expansion opportunity are significant, which include entry into other Southeast Asian markets such as Indonesia, Thailand, Vietnam and Japan with much larger population and similar demographics. Particularly Indonesia, which we have already made headway into penetrating, has 10x the population of Malaysia. Treasure Global continue to develop innovative offerings to complement our core platform, which have cemented Treasure Global as a leader in the AI-driven e-commerce space. We are also focused on growing our gross profit through fiscal 2024 by increasing user engagement through new products and services development, which we are confident will generate higher profit and margin. :

Thank you again to everyone for joining us on today's call, and thank you, particularly to our investors for their continued support. We look forward to providing further updates soon. :

This concludes our prepared remarks. I will now ask the operator to close line. Thank you, and have a great day. :

Operator: Thank you. So ladies and gentlemen, thank you for joining us today. I will now close the lines.