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spk02: Good day, ladies and gentlemen. Thank you for standing by and welcome to Blue City's first quarter 2021 earnings conference call. Currently, all participants are in the 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 Lingling Kong, Head of Investor Relations for the company. Ms. Kong, please proceed.
spk03: Thank you, operators, and hello, everyone. Welcome to Blue Cities Fourth Quarter 2021 Earnings Conference Call. Joining us today are Mr. Bao Limah, Chief Executive Officer, and Mr. Jim Chenson, Acting Chief Financial Officer. We released results earlier today. The press release is available on the company's IR website at ir.blue-city.com, as well as from Newsline Services. A replay of this call will also be available in a few hours on our IR website. 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 Security Litigation Reform Act of 1995, forward-looking statements involving her 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 is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that during today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. Our GAAP results and the reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese renminbi. With that, let me now turn the call over to our CEO, Mr. Bao Lima. Mr. Mao will deliver open remarks in Chinese. I will then translate his remarks. After that, our acting CFO, Mr. Jim Jensen, will take over to discuss our financial highlights. Mr. Mao, please go ahead.
spk06: Thank you, Lingling, and hello, everyone.
spk03: Thank you for joining our earnings conference call today.
spk06: In this quarter, in terms of income diversification, we have continued to work hard and have received rich rewards. Health and health income increased by 297.7% to 12 million yuan. Employment and service income increased by 75.9% to 26.4 million yuan. We are very happy to see that the company's business line has grown strongly. Income and user participation have increased steadily. We kicked off 2021 with a great performance in strategy and operations.
spk03: This quarter, we achieved a total revenue growth of 30.7% year-over-year to $271.1 million. All app I may use reached $8.3 million, up 37.5% year-over-year. and total paying users increased 47.8% year-over-year to 640,000. This quarter's efforts in diversifying our revenue streams also proved to be very rewarding, with Heat Health achieving a 297.7% growth year-over-year to 12 million, and Membership Services bringing in 75.9% growth year-over-year to 26.4 million. We are pleased to see strong growth in all our business lines, which clearly illustrates our strategic execution on product innovation and improving user experience brings in solid top-down growth and user engagement.
spk06: In addition to the rapid growth of our business, Hezhen Health has made a major breakthrough in April. In addition to our strong organic growth this quarter, as we announced earlier, in April, we officially obtained an internet hospital license for heat house in mainland China.
spk03: laying a good foundation for us to build a comprehensive diagnosis and treatment platform for men's health. This marks yet another significant milestone for the company, as it presents a great opportunity to seize in the new and rapidly growing health and wellness industry.
spk06: We mainly promote prevention knowledge to the public through the corporate social responsibility platform, In order to further meet the huge needs of the male population in terms of personal health and health care, we officially launched the HR Health business in 2019, mainly providing HIV-related consultation and drug sale services. Over the past two years, HR Health has gradually expanded its business range from HIV prevention and treatment to the male daily health field, and achieved a three-year annual income growth of three. Our CISPA platform, Danlan Public Interest, has been committed to promoting HIV awareness and prevention
spk03: to a user base of tens of millions in China. In order to meet gaping demands for men's personal health and wellness, He Health was launched in 2019 with a focus on HIV-related consultations and merchandise. Over the past two years, He Health services has gradually expanded from sexually transmitted diseases, including but not limited to HIV, to the field of men's everyday brownness, and it has achieved triple-digit growth since launch. This quarter again reached close to 300% year-over-year growth, which not only reflects our great efforts in expanding our user base and our tailored health-related services for men, but also signifies the development of an underserved but flourishing sector.
spk06: China's male health and health care market will reach RMB996 billion, or $152 billion. We believe that with our huge LGBTQ users, we can take advantage of this huge industry opportunity. For a long time, men's health needs have not been effectively satisfied. There is a general lack of privacy protection, the limitation of purchasing channels, and the lack of sexual education awareness. We hope to provide users with a safe and reliable solution to meet the needs of the LGBTQ people.
spk03: According to a first and solid report commissioned by us for the company's fiscal year 2020 annual report, the scale of China's online health consultation as well as online prescription and pharmacy markets is expected to reach 523 billion RMB, equivalent to 80.3 billion US dollars by 2025. And the size of men's health and healthcare market in China is expected to reach $99.6 billion, then may be equivalent to $15.2 billion by 2025. We believe that with our large LGBTQ community user base and for smaller advantage, we're well positioned to capture this enormous industry opportunity. For a long time, the health needs of men have not been effectively met. with well-spread issues like insufficient privacy protection, limited drug-protection channels, and insufficient sex education awareness. We are here to provide solutions with our unwavering commitment to providing a safe and secure oasis to satisfy the needs of the LGBTQ community.
spk06: to create greater value for users, and to exert social influence in a broader range, to create a better tomorrow for everyone. Looking forward to the future, we will focus on integrated Internet hospitals, offline chain pharmacies, health management platforms, and resources, and through the combination of traditional medical services, help more users solve problems such as HIV detection and prevention, sexual health, chronic disease care, and so on. In the second half of this year, HR健康 has three major goals. First, it is the two-hour急速達 business of HIV drugs, Pipe. It is expected that by the end of this year, the coverage of services in China will expand from the original 40 cities to 100 cities. As the main source of HR健康 income, we expect that Pipe business will expand with the coverage of hell and achieve rapid growth. This is an opportunity
spk03: key for Blue City, making a wider impact and creating more value for our members and society. We want to make a better tomorrow for everyone. Looking further into the future, we will integrate internet hospitals, offline pharmacy chains, health management platforms focused on HIV testing and prevention, sexual health, and chronic disease management with general healthcare services. Our main objective for heat health in the second half of the year of primarily three sections. Firstly, by the end of this year, coverage for our two-hour PEP, post-exposure prophylaxis delivery services, will be extended from 40 cities to 100 in China. PEP is a major contributor to heat health revenue, and we expect rapid growth by expanding into more geographical coverage. Secondly, as domestically manufactured PrEP, pre-exposure prophylaxis medicine kits are more affordable. We foresee a boost in using numbers as we push up our efforts in PrEP awareness and promotions. Thirdly, we expect a full rollout of our online internet hospital services this year in July. A collaboration with doctors and health institutions Specializing in Men's Health.
spk06: 本季度,我们的海外业务也取得了有意义的进展。 我们始终致力于根据当地用户需求进行本土化的定制服务。 例如,我们于去年年底首次在拉丁美洲引入了照片验证功能。 一项调查显示,日本有65%的Blue D用户喜欢该功能。 So we quickly launched the photo verification function in the Japanese market to create a safer and more reliable platform environment. Latin America is our main expansion market in 2021. The language chat function has been widely welcomed in the region. Through cooperation with KOL in Latin America, we will continue to carry out promotional promotion activities related to the language chat. In April, the number of active users in Latin America doubled nearly twice before the launch of the new version, creating a new height in history.
spk03: In this quarter, we also achieved meaningful progress for our overseas business development. We remain committed to customizing our products based on user behavior and the needs of the local community in different regions. After a survey showing 65% of our blue app users in Japan want photo verification features, which was firstly introduced in Latin America late last year, we immediately launched that function to ensure a safer and more reliable platform. Latin America, a key expansion market for us in 2021, also had a positive reception to the voice chatroom function. we launched campaigns with local Latin American KOLs for further promotion, which led Latin American MAU numbers to nearly double since the new version introduced last year and reached a record high in April, with an over 10% engagement rate for the voice chatroom function.
spk06: In addition, we are also continuing to expand our brand's popularity and build global influence. For this reason, on Valentine's Day, Moreover, we continued building our global presence and expanding brand awareness worldwide. In this vein,
spk03: We held a number of online live streaming events for international holidays, such as Valentine's Day, Cherry Blossom Festival, Water Festival, and more. Each and every one of these live streaming events was a success, attracting a global audience and gathering international visibility. Moving forward, we were fully intent to organize various social events such as the Live Your Pride campaign to celebrate Pride 2021 for global community building and enhanced monetization capabilities.
spk06: In China, we will continue to focus on the development and innovation of new functions, constantly upgrading and perfecting existing products. Due to the optimization of application algorithm and operation, in the first quarter, the number of new attachments and interactions under the base function increased by 33% and 42%.
spk03: 我们将持续改进功能,进一步提高用户参与度以推动社区的增长。 In Mainline China, we will continue improving our existing products with new and innovative features and services. In the fourth quarter, new posts and interactions on the community function increased 33% and 42% respectively on a quarter-over-quarter basis. This growth was driven by enhancing app algorithms and operations, which we will continue optimizing for user engagement and community health.
spk06: At the same time, we will continue to insist on strengthening product governance through technology and market investment. We believe that Fanca's live broadcast service has a huge potential for growth. Large-scale live broadcast activities are an important strategy to accelerate brand growth and commercialization. In addition, we continue to strengthen user behavior analysis and continue to innovate and optimize products based on this to constantly improve the user experience of the following platforms.
spk03: Meanwhile, we maintain our commitment to leveraging our product portfolio through investments in technology and marketing. We believe Synca's live streaming service has great monetization potential. Earlier this quarter, Synca held its annual live streaming event, RealMe, with renowned live streamers, one of the primary operation strategies for accelerating brand growth and monetization capability. Both the engagement rate and paying ratio for live streaming channels nearly broke our record from the pandemic in the same period last year. Moreover, we are enhancing the analytics of user behavior and will continue to prioritize product innovation and optimization for continuously improving user experience on all our platforms.
spk06: We continue to strive to improve the public's understanding and understanding of the LGBTQ community. In March this year, we cooperated with the United Nations AIDS Planning Agency to carry out the 0 discrimination activity, which is only eliminating discrimination and inequality in the Asia-Pacific region. The United Nations AIDS Planning Agency and the Dalai Lama Project collaborated to launch a short video of anti-discrimination public opinion. Will you discriminate against me? By the end of May, the total number of video views on the Internet has exceeded 5 million times, and the number of readings on related Weibo topics has exceeded 10 million times.
spk03: we remained committed to drive LGBTQ awareness. In March, we partnered with UNAIDS on their Zero Discrimination campaign that aims to end discrimination and inequality in the Asia-Pacific region. Following the campaign, that non-public interest co-produced a promotional video, Would You Discriminate Against Me? with UNAIDS. which was uploaded on our Blue App and other social platforms in China. By the end of May, the video was played over 5 million times across all platforms, with over 10 million interactions on Weibo.
spk06: In April of this year, a series of activities was launched by the Beijing Animal Protection Foundation and the Dalian Industry to successfully develop the social platform under the Blue City Brothers, attracting the attention and participation of many LGBTQ users. We hope to make the world a better place, to pass on love and equal consciousness to those around us. Everyone should have a desire for a better life.
spk03: In addition to building a more diverse and inclusive LGBTQ community, we are also participants in a variety of other social advocate acts and community welfare activities. In April, the Street Animal Protection Campaign launched collectively by Dan Lan Public Interest and Beijing AITA Foundation for Animal Protection was a success on all Blue City social platforms. bringing together many from the LGBTQ community. We hope we can make the world a better place, showing those around us the same love, sense of equality, and yearning for a better life everyone deserves. In conclusion, we achieved yet another quarter of solid operational and financial growth with meaningful progress in all business sectors. We believe our market-leading position, strong executional capabilities, and sound growth strategy will maintain and grow from rapid consumer demand.
spk06: Now let me turn the call over to our acting CFO, Jun Chen, who will provide details on our financial performance. Thank you, Ms. Ma.
spk03: And thank you, everyone, for joining our call today. As Ms. Ma just mentioned, 2021 is off to a great start for Blue City.
spk04: We delivered another strong quarter with encouraging business development and solid financial growth. Now let me go through our financial highlights for the quarter. Before I go into details, please note that all numbers presented are in RMB and are for the first quarter of 2021, unless stated otherwise. All percentage changes are on a year-over-year basis unless otherwise specified. Detailed analysis is contained in our earning price release, which is available on our IR website. Total revenues increased by 30.7% to $271.1 million, driven by better monetization of our D-Word services offerings and our favorable revenue mix. Revenue from overseas contributing 10.7% of total revenue, slightly increased from 9.9% in the same period last year. Total paying users of Blue City's portfolio apps increased by 47.8% to 640,000. Revenue from live streaming services was 219.9 million, up 22.4%. As we previously announced, that we launched a new live streaming strategy, aiming to further drive our user engagement and paying habits, which has shown a good progress in the first quarter. Our quarterly paying users for live streaming services increased 6.3% to 189%. thousands from same period last year when the paying ratio reached historic high during the peak of COVID-19 in China. ARPPU was RMB 1,163, an increase of 15.1% compared to the same period of last year. Notably, in this quarter, Our continuous efforts in diversifying our revenue streams are bearing fruits. Revenue from membership services was 26.4 million, up 75.9%. Our quarterly paying users for membership services increased 75.5% to 517,000, while AIPPU was Renminbi, 51%. roughly flight compared to the same period of last year. We expect accelerated growth for our membership services as we continue to enrich and optimize our service offerings. Revenues from advertising were 12 million, up 113.7% as we continued to introduce new advertising and marketing solutions to attract more advertisers Revenues from merchandise sales of eHealth were 11.4 million, up to 197.7%. The increase was primarily due to the continuous expansion of our product and service offerings. As we follow and achieve our three main objectives in the second half of the year, we expect eHealth to achieve stronger momentum into the future quarters. and become the new driver of growth for the company. Cost of revenues increased by 33% to $185.1 million, growing in line with our total revenue. The increase was primarily due to the higher revenue sharing costs along with the continued growth of live streaming services. The increased cost of products in connection with the growth of eHealth merchandise sales The increase does cost as well as share-based compensation expenses. Gross profit was $18.6 million, up 26.1%. Gross margin was 31.7%, slightly down from 32.9% in the same period last year, but 6.8 percentage points higher than the last quarter. As we mentioned earlier, The operational adjustments of live streaming bring some short-term margin pleasure as we invested more on the supply side of live streaming. Look forward, we expect to gradually reduce the revenue sharing percentage as we solidify our market leadership and successfully implement the sustainable model for our live streaming service. Meanwhile, we will continue to accelerate the revenue contribution from our membership services with higher margin to achieve overall margin improvements. Operating expenses were $138.7 million, up 76.3% due to higher marketing expenses, higher staff costs, mainly from increased height count, the increased professional fees, as well as share-based compensation. Selling and marketing expenses were $65.3 million, up 69.2% due to higher advertising and promotions expenses, increased staff costs, and share-based compensation expenses. Technology and development expenses were $48.2 million, up 59.1%. The increase was mainly due to the higher staff cost in technology-related departments. The increase in content, server, and bandwidth cost, as well as the increased share-based compensation expenses. G&A expenses were 25.2 million, up 157.5%. The increase was mainly due to increased professional fees and staff cost, as well as share-based compensation expenses. Net loss was $52.1 million, compared with a net loss of $7.6 million in the same period last year. Adjusted net loss was $42.5 million, compared with adjusted net loss of $7.6 million in the first quarter last year. As of March 31, 2021, we had cash and cash equivalents and term deposits of $526.7 million compared to $611.8 million as of December 31, 2020. Now let me talk about this year's guidance. We reiterate our revenue outlook of RMB $1.41 billion to RMB 1.46 billion for the full year 2021, representing a 37% to 42% year-over-year growth. That concludes our prepared remarks. Let's now open the call for the questions. Operator, please go ahead.
spk02: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and write for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Please stand by while we compile the question and answer roster. Once again, star 1 for questions. Our first question comes from Laura Champagne from Loop Capital. Please go ahead.
spk01: Thank you for taking my question. Can you break out the acquired businesses and give us the revenues, preferably by segment for acquired businesses and the loss in renminbi from those two businesses aggregated in the quarter?
spk03: Hi, Laura. This is Lingling. Let me translate the question first, okay? Sure. Hi, Laura. This is Lingling, and I will answer your question directly. Actually, this quarter, in total, acquired business, let's do and think together, contribute around 8% of our total revenue. Okay, so if we look into further details, The vast majority of the acquired acquisition is come from FinCAS revenue. And for FinCAS, like we discussed earlier, they have much healthier revenue structure with less than 60% of revenue came from live streaming, around 30% from membership services, and the remaining part from advertising services. And actually for Let's Do, the revenue contribution is quite small and we do not in this stage to disclose the revenue contribution from each segment.
spk01: Got it. Can you provide a RIM and B loss from Finca and Lesdue in the quarter?
spk03: Hi, Laura. Yes. It's like we haven't officially disclosed, you know, each business line's profit and loss for each business line. But you know that as we... When we acquired Finca, it's like that. Well, Finca is on a break-even kind of situation, right? They are profitable, but it's like single-digit net income, net margin. And with Finca this quarter, actually, we actually invested more in technology development as well as less streaming cost side. So that's all we can provide at the moment.
spk01: Okay, thank you.
spk02: Thank you. Thank you. Our next question comes from Bo Pei from Oppenheimer. Please go ahead.
spk05: Hi, management. Thanks for taking my questions. 我先用中文問一下,就是首先想問一下就是我們一季度的MAU增長還不錯,想問一下海外和國內的增長分別是一個什麼樣的情況。 然後是第二個問題是關於我們直播的分層,雖然說我們相比於四季度已經降低了不少,但是和去年同期 還是有一個增長吧,就從三季度增長的可能就更高一點。 我想问一下刚才您那边也说了就说 预期未来这个直播分层会有所下降 我想问一下这个下降的幅度和整体这个发生的时间大概是一个什么样的情况 然后第三个问题是关于我们这个opaz的 我看这个季度的opaz的ratio好像都比之前要提高了不少 想问一下接下来几个季度我们会继续这种比较大的力度的投入吗 还是说会 So I will translate for myself. So I have three questions here. First question is about MAU growth. It seems our MAU growth in 1Q was robust. So can you talk about our overseas and domestic MAU growth? And the second question is, it seems our live streaming revenue sharing ratio is still relatively high compared with last year same period. You mentioned you expect the revenue sharing ratio to decrease from here, but can you talk about the magnitude and when that is going to have to happen? And the third question is about operating expenses. It seems our operating expenses ratio did increase quite a bit this quarter. I know that's because of our investment plan, so can you talk about this trend for the next couple of quarters? That's all my questions. Thank you.
spk03: Hi, thank you, Kaiguo. This is Lingling. I will answer your question directly. In terms of the MAU from overseas, it's around 44% of our total MAUs are from overseas. Because this quarter we integrated MAUs from our acquired business, which is Lester and Finca. Of course, Finca contributes the majority of MAUs. That's the first question. Secondly, regarding In terms of MAU growth, it's like that. Overseas MAUs grow about 30% year-over-year basis. And domestically, we still maintain the growth about 20%. And in terms of the revenue sharing in live streaming, it says that Okay, on a year-over-year basis, we do see a slight increase in percentage of revenue sharing, but you can see that, as we mentioned during the last conference call, it's like we're doing some adjustment in the live streaming structure, especially the supply side of the live streaming. And that means that we are investing more in the call side, so you can see actually a rebound in last quarter's revenue percentage sharing. It's like we are slightly down from last Q4. And you can see the trend. And we expect that that trend will continue into further quarters. And if we're talking about on a yearly basis, we're still looking for a slight decrease in the percentage of revenue sharing. Let me give you some more color about this, because we discussed before, it's like we are looking forward to see some dramatic decrease in share percentage of live streaming. But actually, for Finca, as we just mentioned, we are investing more in Finca's live streaming business. and especially on the supply side because Finca, as we said, is like their user profile is more trendy, more fashionable, so we need to, you know, compare. We need to compete with TikTok, Xiaohongshu, things like this. We need to attract high-quality live streamers to go into our platform. So currently, the sharing percentage of DINCA is actually relatively much higher than our original platform, which is BLUTE. So in this way, it can take all things into consideration. The blind date, actually, sharing percentage will be slightly lower compared to last year. Regarding the third question, regarding your OPAC, The increase in all PACs after this quarter can be separated into two parts. One is that on a year-over-year basis, as we integrate FinCA and LESDU, there are additional headcounts from FinCA and LESDU. That's over 100 already. So this actually contributed most of our headcount increase in the fourth quarter, as well as Blues also added headcount as well. And the second thing is for the staff costs. It's actually last year during the pandemic, we actually see some savings in the social insurance part. It's like throughout the whole year, last year, we see some savings in staff costs because the government is kind of varying a certain percentage of social insurance for all of our employees. So in this way, we can see additional two to three percentage points of total revenue sales that is related to the savings in social insurance. That's the second one. So in addition to the increase in staff cost, as we disclosed earlier, that we are putting more efforts in sales and marketing. you can see the sales marketing expense is like about 20% of our total revenue, and we expect this rate will maintain relatively the same level throughout the year. And regarding the G&A, it's actually record that the same year last year, last year Q1, we are not a public company. So it's like majority of G&A increase is actually professional fees. It's like professional fees related being a public company. So that's why you can see a surge in G&A. It's around 8% of our total revenue. And we think the percentage will remain kind of flattish throughout the year. I hope that answers all your questions.
spk05: Yeah, this was helpful. Thank you.
spk03: Thank you.
spk02: Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. Right, thank you. So seeing no more questions in the queue, let me turn the call back to Mr. Sun for closing remarks.
spk04: Thank you, operator, and thank you all for participating on today's call. And for your support, we appreciate your interest and look forward to reporting to you again next quarter on our progress.
spk02: All right, thank you. So, ladies and gentlemen, let us conclude our conference for today. Thank you for participating. You may all disconnect.
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