Boqii Holding Limited Class A Ordinary Shares

Good day, ladies and gentlemen. Thank you for standing by, and welcome to BOSHE's fiscal 2022 second quarter earnings conference call. Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I will turn the call over to Mandy Lowe, BOSHE's IR manager. Mandy?

Thank you, Operator, and good morning, everyone. Welcome to Boqi's fiscal 2022 September quarter earnings conference call. Joining us today are Mr. Louis Liang, CEO and Chairman of Boqi, Ms. Lisa Tang, Co-CEO and CFO of Boqi, Mr. Kai Fang, Chief Strategy Officer, and Mr. Loyal Dai, Financial Director of the company. We released results earlier today. The press release is available on the company's IR website at ir.wochi.com, as well as from Newswire Services. A replay of the call will be available on the site later today. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements will involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties are included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statement except as required under applicable law. Please also note that certain financial measures that we use on a call such as adjusted net loss, adjusted net loss margin, EBITDA and EBITDA margin are expressed on a non-GAAP basis. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. Please also be reminded that unless otherwise stated, All figures mentioned during the call are in Chinese R&B. With that, let me now turn the call over to our co-CEO and CFO, Ms. Lisa Tang. Over to you, Lisa.

Okay, thank you, Mandy. Thank you very much for participating in the second quarter of the 2022 fiscal year. At the end of the second quarter of the fiscal year, we successfully signed with New Jiao. We celebrated a new milestone and entered a new stage of development. Thank you, Mindy. And once again, we welcome for everyone attending the call today. We celebrated our new milestone at the end of Q2 of the last fiscal year. As we have successfully admitted on the NYSE, It opened a new chapter for us. Shouldering the expectations of investors on the pet industry at large, we continued to strengthen Fortis positioning in pet vertical by enhancing our group along the value chain and improving our product and service offering with the goal of creating more values for end users and shareholders. In this quarter, we continued to deliver satisfied orders on the top line, achieving 23% of the same price increase. This growth is also of high quality. Our net profit rate increased from 18.6% in the same period last year to 19.7%. The net profit rate after retailing increased significantly from 5.9% last year to 9.2%. Behind the bright data reflects the recognition of the supply chain on both ends of the wave ecosystem chain. In this quarter, we delivered solid financial results with top-line reporting of YY growth of 23.1 percent, and our gross profit margin have improved from 18.6 percent to 19.7 percent this year. Post-fulfillment margin also increased significantly from 5.9 percent to 9.2 percent. Behind all these daring numbers, They also point to the fact that Boqi is enjoying growing recognition from both ends of the supply chain, effectively connecting their parents with vendors. For users, we can provide a solid supply of purchase demand, selection of brands, and competitive price sales. And through various animal-friendly ecological extensions, we can deepen the recognition of Boqi by pet and non-pet users. For a user perspective, we are a one-stop shop with extension products and service assortment. Our premier quality is being competitive in prices. Through our established ecosystem, We are also able to strengthen our brand name as well as inference to patch or non-patch owners. Ever since our listing, we have achieved a growth of more than 20% in the number of active buyers for five consecutive quarters. This was no exception in Q2, as we saw a worldwide growth of 23.5%. With the continuous selection of brands and products, we have provided 690 brands until 930. The total number of SKUs has reached 24,000. Compared to the number of brands at 630 last year, the number of SKUs at 750 is 17,000. There is a significant growth. In addition to exploring new products and new brands for users, we have also increased the support for small and medium-sized brands. By operating experience for pet precision flow, we can help these brands grow more efficiently and healthily. It also allows our users to enjoy the benefits of more high-quality brands. Because of this, our service revenue has maintained a three-fold high-speed growth in the past few seasons. In the past one season, it has also completed a 11-fold equal growth, reflecting the value of Boqi's brand promotion for the brand's output, including high-efficiency investment in new media channels such as Douyin, warehouse delivery, and distribution and transportation management capabilities. At present, this part of the revenue accounts for 5.7% of the overall revenue, Meanwhile, we continue to expand our brand and product selection. At the end of September, we were providing 24,000 SKUs from 690 brands, compared with more than 17,000 SKUs from 516 brands at the end of June last year. revenue from online marketing and information services has more than doubled over the past few months. Specifically, in Q2, we also saw an 11 times worldwide increase in this segment of revenue, showcasing the recognition of BOTI's capability in brand incubation as well as in effective marketing on new media channels such as TikTok. Currently, revenue from online marketing and information services has already reached 5.7% of total revenue, and we believe this will continue to contribute to our gross margin and constitute one of the key differences in terms of our ecosystem when compared to the generic platforms. 目前中国宠物行业相处的阶段相较于其他的大类目依然处于相对早期。 A large number of mid-to-low-end brands are in the rise of tens of millions. For the brand, under the industry situation of more than 25% of the market share, in all corners, whether it is comprehensive e-commerce, offline stores, pet hospitals, it is difficult to obtain a precise flow with a large scale. On the line, the flow of platforms is not precise enough. The flow cost of flagship stores is more or less the same, suppressing the profit space of the brand. Even so, when it reaches a certain volume, As China's pet industry is still in its early stages, especially when compared to the other mature categories, like women apparel. These are numerous small and mid-sized brands that are living on terms of million RMB in GMB. Combining the fact that pet owners are just above 25% of the total population, it is difficult for most of the pet brands to secure sizable yet effective traffic. Let it be integrated e-commerce platforms, offline stores or hospitals. For online channels, the much diluted pack traffic on generic platforms and the high setup cost of flagship stores are squeezing the profit margin of rent. Even if they have made huge investments in the store, once they reach certain GMV scale, the growth rate is very likely to stay flat. Talking about offline, Although the in-store traffic is exactly what the brands want, stores are scattered around the country and lack of chain management requiring brands to invest heavily in sales team to build up to offline channel no matter through direct sales or distributions. The sales points are hard enough to engage, let alone brand awareness or education. The one-stop service provided by Boqi and the accurate flow are exactly what these brands need. With the full adjustment of the channels, the ratio of our private channels and the third-party channels is stable at about 4 to 6. We can continue to acquire new pet users through the East Fire platform, and we can generate users through multiple benefits in the private channel, and create emotional connections through content deepening with users. Because Boqi provides a large number of brands with different consumption levels and products across various categories and chains, Whether it is inside or outside the station, the cost of goods can be effectively reduced. Until this year 930, our single-user cost of goods has dropped to 9.9 RMB, creating a historical low. This should also create the lowest cost of goods in China since then. In such a cooperation mode, the brand can invest more effective resources into brand construction, formula optimization, and polishing products. And Boqi can pass Hence, we believe Winsdorf Supply Chain and Marketing Solutions is the way to go for such small to medium size. After a short period of adjustment, Booty is now on a 14 to 16 split between self-operating and third-party channels. We believe such mix will enable our brand owners to attract new pet parents through the use of integrated platforms. While branding customer loyalty through consistent and educational content to Boise's self-operating channel. Riding our extensive brand mix and SKU selections, we have demonstrated our ability to effectively lower user acquisition costs. As of 30 September, our user acquisition cost has gone further down to a historical low of RMB 9.9 per user. which shall also have broken the record as the lowest customer acquisition cost among all vertical platforms in China. Under such flexible arrangement, brand owners can devote more resources to brand DNA as well as formulation and product development. And Bozi will handle customer origin supported by its 100 plus 2C channels and extensive distribution network as a patch vertical player. We see more of our values in helping industry to grow and providing a localized and professional solution that is down-to-earth and cost-effective. 接下来我想把时间交给公司的CSO房凯,让大家进一步去解析和业务和财务亮点。 And now I shall pass to our CSO Kai, and she will tell you more about our business and financial highlights. Thank you, Lisa.