2021 Year-end Letter to Shareholders
May 26, 2022
To all of Luokung's shareholders,
We are incredibly proud of our progress in 2021, which was highlighted by record revenue of over $145 million, more than seven times that in 2020. This was a milestone year for Luokung, and this is only the beginning of our plans in the years to come.
Over the past few years, Luokung has been dedicated to our R&D efforts, strengthening our technologies and portfolio of offerings while overcoming various challenges as a micro-cap, China-based company listed in the United States. In 2021, we made several strategic decisions to create a solid foundation upon which Luokung’s current and future growth are based. We anticipate continuing to build upon this positive momentum to accelerate our expansion in the future.
We believe that Luokung's three core business pillars: smart transportation and autonomous driving, carbon-neutral natural resource asset data services, and LBS smart industry services, are markets with significant untapped potential for rapid growth. Luokung wishes to be a leader in building an intelligent spatial-temporal big data Internet of Things (“IoT”) world in these markets.
Over the past three years, we have focused on leveraging Luokung’s leading technological capabilities to create new products and services that are assembled in a standardized and modularized way to improve service efficiencies and increase marginal benefits. We took on several customized projects to achieve productization while gathering industry insights to realize this goal. Financially, these projects have resulted in low technical service revenues and negative profit margins. However, we believe this was a critical and necessary stage of strategic investment and development of our value proposition.
In the first letter to shareholders that I shared in September 2021, we revealed our three-pillar business strategy for the first time. In these three fields, Luokung has commercialized some products using its technological competitive advantages and has begun providing these services for specific needs. The launch of platform-based, systematic, and modular AI data application products and services marks the return of our continuous investments and the emergence of the intrinsic value of these investments. We believe that upgrading from single-point customized services to centralized, streamlined and standardized services will enable us to lay a solid foundation for an accelerating growth trajectory.
Luokung considers 2021 as a milestone for our revenue ramp. While we saw significant revenue growth in 2021, Luokung did incur losses for the year due to the investments in R&D and a strong business foundation.
In 2022, we intend to continue to enhance our core capabilities through research and development, keeping with our commitment to ongoing innovation and constant improvement. We also expect to continue improving our product lines for all three business pillars to address various unfulfilled needs of our customers.
We anticipate our LBS business will continue to grow as the largest revenue contributor, supported by growing revenues from our smart transportation and carbon-neutral natural resource asset data services offerings. As market demand continues to increase, we are optimistic about the significant market opportunity presented by the smart transportation and natural resource asset management businesses. We expect revenues from these two lines of business will begin to grow as a percentage of total revenues in 2022 and beyond. Supported by business expansion and subsequent margin expansion from the smart transportation and natural resource asset management businesses, Luokung anticipates that operating cash flow will improve for the next few years.
In the first quarter of 2022, we announced the acquisition of Hongda Jiutong, a big data service company for the Internet of Vehicles, bringing in-depth expertise to our vehicle-road collaboration (“V2X”) business. We anticipate that after we finish the integration of Hongda Jiutong’s V2X insights into our current autonomous driving and smart expressway business, the launch of new products will generate notable service revenues starting this year. In 2022, Luokung has also increased investment in product R&D based on blockchain technologies to add value to our offerings in all three business sectors. BotAoit, an affiliate of Luokung, has recently signed a service contract to provide electronic blockchain data and certificate storage platform services. We expect to cover more than six million commercial vehicles and over 100,000 units of road-end metering and calibration-testing equipment annually. This contract is expected to bring significant contributions financially, and synergistic benefits to Luokung’s smart expressway V2X-related products.
As a public company, Luokung is committed to communicating with our shareholders and the greater investment community to allow them to have a clearer understanding of our business and vision. To that end, we plan to publish our strategic business plan soon. The plan will explain how Luokung’s spatial-temporal digital base, driven by our core technologies, empowers the application and interaction of our three business pillars, and their respective product-service composition and market objectives.
On behalf of our board of directors and management team, I would like to once again thank you for your continued trust in and support of Luokung, which has empowered us to expand our business. We are excited about our journey ahead and are focused on delivering on our growth initiatives.
Mr. Xuesong Song,
Chairman and CEO