Datasea Intelligent Technology Ltd.

Datasea reported FY2022 revenue of $17.08 million, up from $0.17 million in FY2021, a $16.9 million increase or 9,653% year over year. Revenue was mainly from 5G messaging, including $11.93 million from 5G SMS, $1.8 million from 5G IN MPP, $3.26 million from message cloud/value-added services, and $56,000 from Smart City projects. Gross margin was 5.6% for the 12 months ended June 30, 2022. R&D expense rose to $1.26 million from $0.85 million, and total liabilities were $2.1 million, down 43.52% year over year. Accounts receivable was $259,000 and accounts payable was $197,000. Management also cited a debt-to-equity ratio of 1.34 as of June 30, 2022, versus 49.12 a year earlier. For guidance, management said it expects commercialization of 5G messaging in China in the fourth quarter of 2022 to help broaden products and improve margins, and it said the company’s objective is to achieve annual profit in the new fiscal year.

Fu Liu said Datasea is well positioned because China’s 5G messaging market is very large, the company has authorization from the three major Chinese operators, and it has built a comprehensive product portfolio and early-mover relationships. He also said acoustic intelligence has broad applications across healthcare, agriculture, smart home, environment protection and manufacturing, and that the company is a trailblazer supported by its white paper and research partnerships. His tone was optimistic and confident, with an emphasis on strategic positioning, synergies among the three businesses, and long-term growth opportunities.

Cathy Sun focused on the financial inflection in FY2022, tying the revenue jump to expansion in 5G messaging. She said gross margin was 5.6% and argued that scale, stronger brand recognition and the expected commercialization of 5G messaging in Q4 2022 should improve pricing power and profitability. She also highlighted R&D of $1.26 million, total liabilities of $2.1 million, accounts receivable of $259,000, and accounts payable of $197,000, saying working capital was well-positioned and the company intends to invest approximately $10 million in technology development over the next three years.

In the webcast Q&A, the main investor questions asked about competitiveness in 5G messaging and acoustic intelligence, and why Datasea continues to keep Smart City if it is not yet a major revenue contributor. Management answered that 5G messaging is attractive because of the huge addressable market, operator authorization, a broad product portfolio, and first-mover relationships with major industry players. On acoustic intelligence, management pointed to its white paper, wide application potential, and claimed disinfection performance, and on Smart City it said the business creates synergies when combined with 5G messaging and acoustic intelligence rather than being a standalone revenue driver.