Presenter:

Due to the recent epidemic situation, domestic demand for video conferencing has increased. At this conference, Suzhou Keda, the leader in domestic video conferencing, invited Mr. Long to introduce Suzhou Keda's current business situation.

Company Secretary:

Suzhou Keda (603660.SH), the predecessor of Keda, was established in 1995. In 2004, Suzhou Keda Technology Co., Ltd. was established; on December 1, 2016, the company was listed on A-shares.

At the beginning of its establishment, the company mainly provided communication equipment. Through continuous adjustments during development, the business continued to iterate and advance. In 2001, the company set up a video research and development center to launch video conferencing products.

In 2011, the company launched its public cloud business—Kodamo Cloud. Up to now, Suzhou Keda's video conferencing products have incorporated innovative technologies such as Chinese conference culture, cloud, security, and intelligence, and can provide nearly 100 products in the three major series of industry video, Netcheng, and Moyun. Using the video interaction capabilities provided by video conferencing, combined with specific application scenarios and customer business needs, Suzhou Keda proposed the “video conference +” concept to explore the innovative integration of video conferencing with the industry and build a personalized application experience.

Solutions with distinct industry characteristics, such as emergency command and dispatch, remote education, telemedicine, remote alerting, and remote interviews. Furthermore, Keda adheres to an open and expandable technical architecture. Relying on complete SDK and API solutions, Keda can provide convenient means for industry application expansion and help customers and partners to provide customized services.

Public cloud operations began in 2011 - Mo Yun laid the foundation for the company to accumulate in the field of cloud technology. In addition to public clouds, Keda can also provide private cloud and hybrid cloud models, which have been successfully implemented. During the epidemic prevention and control period, Kodamo Cloud adopted a completely free and open format to provide users with services such as remote communication and working from home.

The company takes “empowering industry customers with video technology” as its corporate mission and is committed to becoming a leading video product supplier and video information service provider. Therefore, the company has responded positively to customer needs and industry applications with many years of high investment in R&D. In addition to video conferencing, the company's main business is AI security products and big data application systems, which can provide users with end-to-end AI application solutions.

Investors ask questions:

1. The company's current customer composition and future industry growth prospects:

Currently, the company's business is dominated by government agencies, including public security, procuratorates, courts, emergency departments, etc. Currently, video conferencing and video surveillance are widely deployed in our key areas, but there is still room for development. Technology upgrades and application segmentation will provide more demand. During the current epidemic prevention and control period, users' demand for public cloud applications has increased very rapidly, which has boosted customer acceptance of shared clouds; government grid management is also more urgent for the application of video technology, and private clouds and hybrid clouds will also be more accepting. We will continue to cultivate in these fields in the future.

2. What is the impact of the current epidemic on product demand, good or bad

This outbreak of the epidemic is a major test of the country's control strength. The Chinese government has made full use of scientific and technological means to effectively prevent and control the spread of the epidemic, and has achieved remarkable results. The importance of video applications for networked management has been highlighted, and it is very obvious that video applications will be implemented in the industry in the future. Big data collection, transmission, accumulation, and data mining have effectively improved the accuracy of the government's analysis and judgment of the situation. The role played by the application of tools such as emergency command, video conferencing, and video surveillance in specific scenarios will also facilitate the transformation of our products into production and office tools for customers.

The current epidemic is likely to continue, which may have an impact on the industry, and macro factors may affect the ability of customers to pay. In the future, macroeconomic pressure is likely to be quite high.

3. In the field of telemedicine and education, the company's current products and solutions reach customers directly or through intermediaries

Currently, the quasi-direct sales model is mainly adopted, and most customers are directly connected to customer needs and initial sales stages. During the implementation process, the delivery of the project was completed with partners such as integrators and communication operators. Now that we are building sales channels in the education and medical industry, we will also do business through various forms such as distribution and distribution in the future.

4. The progress of the construction of the company's sales channels

The company mainly sells solutions, and establishes sales networks and channels through deep industry cooperation and regional cooperation. Since the first Partner Conference was held in 2016, resources and channels have improved.

5. What is the current competitive pattern of domestic video conferencing business

The main manufacturers on the government side include Keda, Huawei, and ZTE. The enterprise self-construction market mainly includes manufacturers such as Huawei, Polycom, and Keda. There are many manufacturers participating in the public cloud sector. Brands such as Kodamo Cloud, Xiaoyu Easylink, Yilian Network, Huichang Communications, etc. In addition to our professional vendors, Internet companies such as Tencent and Ali are also developing business in the field of public cloud video conferencing. Currently, various vendors have their own strengths in the field of public clouds, and in the future, as application scenarios are integrated, they will gradually focus on each other.

6. In terms of promotion of Mo Yun, what is the resistance and competitiveness

Moyun Video was founded and operated in 2011. Before 2016, the enterprise-level public cloud market did not open up. The main thing is that the enterprise market did not have a high level of awareness about cloud video conferencing, and customer delivery costs were very high. Beginning in 2017, there were gradually more cloud video conferencing applications at the government level, and more cloud video conferencing vendors also participated in the market to drive market growth together. In the prevention and control of the current epidemic, the application and experience of cloud video conferencing in working from home, online meetings, remote education, and telemedicine is conducive to promoting market acceptance and recognition of cloud video conferencing.

7. Will customers consider safety and cost

Safety: Government customers, military, public security and other customers will have higher requirements for confidentiality. C-end customers have higher requirements for convenience and low cost. Currently, cloud technology continues to mature, and the security of public clouds is also constantly improving. Private and hybrid clouds generally deploy specialized security solutions. The self-built video conferencing market also has professional security solutions.

The company attaches great importance to security issues related to video applications. In the field of video conferencing, in addition to supporting various encryption algorithms, Keda's national secret video conferencing products released by the company can provide customers with independent and controllable means for encrypting video communication content.

8. As the epidemic grows, how fast are public cloud users growing

This time during the pandemic, the company Moyun adopted a free policy and boosted the number of our users in a situation where everyone needed to stay at home. Future development also depends on customer retention after the pandemic is over.

9. The company's revenue has increased, but expenses and cash flow are not ideal. The reason for this is

Data issue: In 2019, the company increased strategic investment in fields related to integrated video applications, and increased R&D investment and new product promotion efforts in integrated communications, AI ultra-low light technology, Zhongtai software, mobile products and application platforms, etc. As a result, the cost growth rate incurred by the company during the reporting period greatly exceeded the growth rate of operating income. Expenses are rigid, and there is some pressure on cash flow.

10. Increase in inventory turnover days and accounts receivable days

The increase in inventory is mainly due to reasons such as increased strategic inventory and increased business inventory. There was no major change in the payback time of accounts receivable formed by most projects, but there were a few projects with larger amounts of money that had a relatively long implementation period, resulting in higher accounts receivable.

11. The company's two major businesses - video conferencing, future trends in video surveillance and changes in gross margin

The company's position is the application of video technology; it does not just set development goals based on security or video conferencing. In customer applications, products involving video acquisition, transmission, storage, and application will all be done. Many solutions have also broken the boundaries of video conferencing and video surveillance. There may be products that integrate the two, as well as hardware, software, and solutions formed by integrating the customer's business flow.

The gross margin of self-produced conference products such as video terminals and platforms remained stable. The gross margin of video conferencing was about 70%; the gross profit level of video surveillance remained 50%. In 2019, the company actively deployed new businesses such as command centers and integrated video command systems. Due to the impact of pioneering sales strategies in the early stages of new solutions and product promotion, gross sales margins were relatively low. Furthermore, the share of the company's video surveillance business increased, which led to a decrease in the company's overall gross margin compared to the same period last year.

Risk warning

The risk of increased competition in the industry.