Earnings

Introducing Protocol’s guide to a wild earnings season

We're going to focus on what the results can tell us about the wider tech industry.

Introducing Protocol’s guide to a wild earnings season
Photo: "Bearish" icon by Edward Boatman, from thenounproject.com

As coronavirus continues to ravage the global economy, this quarter's earnings season stands to give us a fascinating insight into the fortunes and future of the tech industry.

Tech earnings season kicks off in earnest this week, with Netflix, IBM, Intel and Snap all reporting results in the coming days. Many other big names will follow next week.

  • There will be big differences between how companies perform, from Netflix enjoying a potential boost from us all being quarantined at home, to Apple struggling as a result of its supply chain problems in China.

We're going to focus on what the results can tell us about the wider tech industry. Here are some of the big trends that we'll be looking out for:

  • Companies' Q2 guidance will be incredibly useful. With three weeks of data in already, they've got a decent sense of what the economy's like right now — and whether the worst is behind us or yet to come. As StockTwits wrote, "it will probably be a great quarter to listen to the earnings conference calls and a poor one to attend to earnings numbers."
  • We'll get clarity on China's supply chain issues, particularly in Apple's earnings. That has huge ramifications across the industry, particularly in the hardware space.
  • Cloud's big boost will be quantified when the larger providers report their earnings. And chipmakers, which also report this week, could give a sense of whether cloud companies are preparing for further growth in demand this year.
  • We'll find out how much ad revenue has dropped by. Analysts expect the biggest hit to be in Q2, but there was likely some pullback toward the end of March, when average daily ad spending fell over 20%, according to Pathmatics.
  • And we'll see if consumers are still spending. Some analysts expect Netflix and Amazon to report an uptick in demand from quarantiners: JPMorgan's Doug Anmuth said last week that Netflix is a "a clear beneficiary of stay-at-home." But a tanking global economy and soaring unemployment could lead consumers to cut back on spending. We'll get our first sense of that soon.

Stay tuned here to keep track of tech earnings as they're reported over the coming days and weeks.

Shakeel Hashim

Shakeel Hashim ( @shakeelhashim) is a growth manager at Protocol, based in London. He was previously an analyst at Finimize covering business and economics, and a digital journalist at News UK. His writing has appeared in The Economist and its book, Uncommon Knowledge.

earnings q1 snap apple ibm netflix intel
health tech
Protocol | China

Everything you need to know about the Yuanxin Technology IPO

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
health tech healthcare insurance
sponsored content
Sponsored Content

From Home to Hybrid: Asana’s COO Shares Back-to-Office Advice on Productivity

The way we work has fundamentally changed. COVID-19 upended business dealings and office work processes, putting into hyperdrive a move towards digital collaboration platforms that allow teams to streamline processes and communicate from anywhere. According to the International Data Corporation, the revenue for worldwide collaboration applications increased 32.9 percent from 2019 to 2020, reaching $22.6 billion; it's expected to become a $50.7 billion industry by 2025.

"While consumers and early adopter businesses had widely embraced collaborative applications prior to the pandemic, the market saw five years' worth of new users in the first six months of 2020," said Wayne Kurtzman, research director of social and collaboration at IDC. "This has cemented collaboration, at least to some extent, for every business, large and small."

Keep Reading Show less
Kate Silver

Kate Silver is an award-winning reporter and editor with 15-plus years of journalism experience. Based in Chicago, she specializes in feature and business reporting. Kate's reporting has appeared in the Washington Post, The Chicago Tribune, The Atlantic's CityLab, Atlas Obscura, The Telegraph and many other outlets.

sponsored content sponsored
Protocol | Workplace

How to make remote work work

Hofy made an early bet that COVID-19 would have a long-term impact on workplaces. The company recently raised $15.2 million for its remote workforce equipment management solution.

Hofy recently raised $15.2 million for its remote workforce equipment management service.

Photo: Jannis Brandt/Unsplash

It's your new employee's first day of remote work, but their laptop hasn't shown up yet. Not a good look.

This very 2021 persistent problem is part of why Hofy, a remote workplace management tool, recently raised $15.2 million to help companies deploy laptops, chairs, desks and other physical equipment to their remote employees. The idea for Hofy, which is launching out of stealth today, emerged in the early days of the COVID-19 pandemic — before lockdowns went into effect in the U.S. and the U.K. Hofy's co-founders, Sami Bouremoum and Michael Ginzo, had a feeling that COVID-19 would have a long-term effect on society.

Keep Reading Show less
Megan Rose Dickey

Megan Rose Dickey is a senior reporter at Protocol covering labor and diversity in tech. Prior to joining Protocol, she was a senior reporter at TechCrunch and a reporter at Business Insider.

remote work
Protocol | Policy

Tech giants want to hire Afghan refugees. The system’s in the way.

Amazon, Facebook and Uber have all committed to hiring and training Afghan evacuees. But executing on that promise is another story.

"They're authorized to work, but their authorization has an expiration date."

Photo: Andrew Caballero-Reynolds/AFP via Getty Images

Late last month, Amazon, Facebook and Uber joined dozens of other companies in publicly committing to hire and train some of the 95,000 Afghan refugees who are expected to be resettled in the United States over the next year, about half of whom are already here.

But nearly two months since U.S. evacuations from Kabul ended and one month since the companies' public commitments, efforts to follow through with those promised jobs remain stalled. That, experts say, is partly to do with the fact that the vast majority of Afghan arrivals are still being held at military bases, partly to do with their legal classification and partly to do with a refugee resettlement system that was systematically dismantled by the Trump administration.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

afghanistan big tech hiring refugees trump
n26
Protocol | Fintech

How European fintech startup N26 is preparing for U.S. regulations

"There's a lot more scrutiny being placed on fintech. We are definitely mindful of it."

In an interview with Protocol, Stephanie Balint, N26's U.S. general manager, discussed the company's approach to regulations in the U.S.

Photo: N26

N26's monster $900 million funding round announced Monday underlined the German startup's momentum in the digital banking market.

Stephanie Balint, N26's U.S. general manager, said the funding will be used for expansion and also to improve "our core offering to make this the most reliable bank that our customers can trust," she told Protocol.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

n26 neobank
Latest Stories