Nisun International Enterprise Development Group Co., Ltd Q2 FY2024 earnings call

• Nisun International is a technology-driven provider of integrated supply chain solutions, founded in 2012 with headquarters in Shanghai. - Revenue streams include services (financial solutions for SMEs and supply chain financing) and supply chain trading. - In the first half of 2024, total revenue rose 52% to $192.5 million. - Operating expenses decreased due to reduced selling and G&A expenses, but R&D expenses increased. - Cash position was $47.8 million as of June 30, 2024, down from $114.6 million at the end of 2023, driven by advances to suppliers. - Approved a $15 million share buyback program.

Nisun International has two main revenue streams. The supply chain trading business saw significant growth, with revenue increasing by 114% to $142.1 million. The services segment includes SME financing services, which decreased by 16% to $48.5 million, and supply chain financing solutions, which dropped by 30% to $1.9 million. Cost of revenue increased by 64% to $175.3 million. Gross profit decreased by 13% to $17.2 million. Operating expenses declined by 31%, with selling expenses down 69%, G&A expenses down 14%, but R&D expenses up 27%. Net income was $10.3 million, down from $11.4 million the prior year.

• Plan to begin share repurchasing as soon as the trading window opens. - Remain focused on restoring shareholder value and building investment confidence. - Intend to expand into overseas markets and diversify the trading portfolio.

• Changing market conditions and competitive factors. - Regulatory and geopolitical risks. - Concerns over transparency affecting U.S. investors' interest in Chinese companies.

Q: On the operating expenses being down 31%, can you detail cost measures implemented and their sustainability?

A: Implemented measures like optimizing sales channels, reducing unnecessary expenditures, and improving efficiency. Selling expenses reduced due to lower revenue from SME financing solutions. G&A expenses fell due to cost controls. R&D expenses increased due to amortization of technology service fees. These measures are expected to continue driving efficiency.

Q: How do you foresee R&D expenses going forward?

A: R&D is important for cutting-edge technologies used in the online platform. Plan to continue enhancing AI-driven supply chain solutions and developing new technologies, with investment in R&D being a continual process for long-term growth.

Q: How is the supply chain trading revenue built out, and is expanding into other metals markets part of the growth plan?

A: For supply chain trading, use online platforms to link suppliers and customers. New CEO is experienced in international trading, and expansion into overseas markets is part of the plan. Aim to diversify the trading portfolio beyond core focus areas like metal industry. The trading segment creates synergy with high-margin supply chain financing services.

Q: Have you thought about cash dividends, and how about transparency concerns?

A: Cash dropped due to advances to suppliers for future growth. The company has a $15 million share buyback plan. Concerns over transparency exist, but the company is working on enhancing transparency through investor outreach, road shows, and improving governance standards to comply with U.S. regulations.