ECMOHO Limited

Good day and thank you for standing by. Welcome to the EC Moho 2021 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Yvonne Tsu. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us today for our third quarter 2021 earnings conference call. The company's results were released earlier today and are available on our IR website. On the call today from UC Moho, we have Ms. Zoe Wen, Founder and Chief Executive Officer. Mr. Daniel Wang, co-founder and head of capital market, and Mr. Xing Li, chief financial officer. Mrs. Wang will review the business operation and company highlights, followed by Mr. Li, who will discuss financials and guidance. They will be all available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you this conference call contains forward-looking statements. within the meaning of the Security Exchange Act of 1934 and the U.S. private security litigation reform Act of 1995. Those forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known risks, uncertainties, and other factors. of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's filing with the US SEC. The company does not undertake any obligation to update any forward-looking statements. except as required and via applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this call are in RMB. It's now my pleasure to introduce our Chairwoman and Chief Executive Officer, Ms. Zoe Wendt. Zoe, please go ahead.

Thank you. 大家好,欢迎各位参加EC Moho 2021年的第三季度业绩电话会。 Yiheng Health, as a comprehensive service provider for health consumer products, has always hoped to bring health mission to Chinese consumers, and we will continue to grow in the health industry. Yiheng Health's long-term vision is to create a health product-based, supply chain-based, digital-driven, consumer-healthy health platform that satisfies the consumer's health needs. For this purpose, We continue to work in three directions. First, this year, we are still deepening the core business of the health industry, focusing on and expanding the health of new products and products for consumer needs. Second, we continue to explore digital marketing, improve the marketing ability of the whole chain, consumer mobility and professional service, so we create new opportunities and new consumer services. Third, we are constantly improving our supply chain, CRM, and our organization's detailed operation capabilities. In the third quarter of 2021, we continued to optimize our strategy. The pandemic brought a huge shortfall to the supply chain. Of course, in this quarter, the impact of cross-border business has been basically eliminated. We have been continuously optimizing our products. We can see that our labor has been greatly improved. Through the increase in focus on health and health consumption, through the continuous innovation of digital marketing, in terms of performance, we achieved 1.83 billion RMB in sales this quarter. The total revenue of the previous three quarters was 6.35 billion RMB. The very good news is that our profit has increased by 5 points to 22.7, so we are moving in the direction of healthy profit. As of September 30, 2021, Our total number of users has reached 12.34 million. This is our paid users. The same amount has increased by 18%. The better news is that our user recovery rate has increased to 38.5%. Users' growth and stickiness continue to increase. The growth of functional health products and medical devices has also become the driving force of our business growth. We believe that through the three points we mentioned above, I believe that ECMOHO

在业务上是可以实现可持续和良性的增长的。 Hello, everyone, and thank you for joining us today for our third call, 2021 Earnings Call. As an integrated solution provider in healthcare and wellness market, eSIMO's mission is to improve health and well-being of consumers in China. With this aim, the company continues to strengthen business in the healthcare market. Our future vision is to build a healthcare and wellness management platform driven by digital, and it centers on the supply chain of healthcare and wellness products and encompassing a user's full lifespan for all healthcare needs. We have been putting great effort in three areas. Firstly, we continue to tap our core business of our healthcare product sales. focus on healthcare category and expand more adjustable category to satisfy consumers' health demands. Second, we strive for innovation in digital marketing. Johnson's capability of omni-channel coverage to gain new growth opportunities with our consumer insights and comprehensive operation solutions. Third, with Johnson's dedicated and refined operations, that include supply chain, CIM, and organization. During the third quarter, we saw the negative impact due to the weak cross-border supply chain were mainly offset by our optimization strategy. We were able to optimize our brand's portfolio with higher margin brands, expanded the new category by focusing on healthcare and well-being, and strengthened service capability by innovating in digital marketing. For the third quarter, we have generated revenue of RMB 183 million and achieved accumulated revenue, RMB 635 million as of September 13. Total margin rate increased by 5% year-on-year to 22.7%. We're showcasing the consistent progress we are making towards healthy profitability The number of cumulative paying consumers was 12.3 million as of September 13, representing a net addition of over 1.86 million compared with the numbers in last year, representing an 18-year over-year growth. Our repeat purchase rate has reached 38.5%. The increasing number of paying users seniors of users and category expansion related to functional products and medical devices have become the sustainable growth drivers of our business growth. I'm confident the efforts we mentioned will continue to be the engine for our sustainable and healthy growth. 下面我会进一步讲一下我们在增长和运营上的一些动作。

The first one is based on the need of Chinese health users to increase the number of new health products. As you can see from the data, the disease is getting younger and younger. More and more people choose to prevent the disease rather than go to the hospital when they have the disease. In the field of health consumer goods and family health services, there is a huge opportunity for growth in China. Through consumer demand analysis, we have improved the health of eye and digestive system. For these products, we have cooperated with many world-renowned pharmaceutical companies. We have introduced higher-quality and reliable eye and digestive products to our customers. We believe that in the future, we will continue to satisfy

Now I start to further share more insights given opportunities we saw. Firstly is healthy category expansion by consumer demand. With the rising prevalence of chronic diseases, more diseases should be preventable at an early stage. we see tremendous growth opportunities ahead for companies that can supply healthcare products and integrate family health solutions. Through consumer analysis, we expanded several new categories and offerings to support consumers' digestive health and eye health. We closely and strategically cooperated with leading global pharmaceutical companies to introduce premium and reliable products for consumers. according to these categories, which we will believe will not meet high expectations of consumers, but will also serve as an important growth driver going forward.

第二个呢,我们基于用户的精准分析, 我们给出了更多的健康的解决方案。 透过ECMO后自主研发的CRM系统, We have accumulated more than 12.3 million healthy paid users. 80% of these users are Chinese women. They usually spend more than men in China. At the same time, we found that the demand for health in China has become even younger. Since 1990, people have started to pay attention to health. At the same time, our data shows that after 1990, So we are targeting users' needs in different scenarios. We have implemented different products and health solutions for users. For example, we have sports fitness joint health, and then food-related products. For skin health, we have comprehensive nutrition and teaching combination products. 我们能够更精准地满足我们用户的服务和需求。 所以呢,我们的消费者的复购率已经提升到了38.5%了。 Second, personalized health treatment. Imported by our data-driven and self-developed CIM, we have accumulated more than 12.3 million paying users and 80% of the total paying users.

who spend more time reviewing and purchasing products than men. According to our consumer analysis, a growing number of young Chinese people are anxious about their health. They also bring diversified demands for healthcare markets. In a survey about post-19th generation health solutions, top three are health food, fitness, and diet. Among their health foods, traditional foods nourishing health food, and nutritional supplements are key options. According to scenarios referred to health consumption, eSIMOHO brings personalized health treatment for consumers. For example, we supply joint health meal replacement powder for scenario of improving physical fitness and enhancing the effect of exercise. Multi-nutrient replenish products Enzyme products for skin, anti-fatigue, liver protected, melatonin-related products for scenario of study and work, dietary fiber, enzyme products, multivitamins for an upset stomach, ginseng, iron, calcium supplements to compensate for daily deficiency, A diversifying consumer base with diverse needs is expanding our marketing opportunities. Most importantly, under our health treatment, our consumers' repeat purchase rate has increased to 38.5%. 第三呢,我们在新的流量上和营销上进行了创新。 那么根据KPMG和阿里的研究数据显示呢,

In 2020, China's telecommunications industry has already surpassed 10,000 billion yuan. In 2021, China's telecommunications industry has already reached 20,000 billion yuan. In this quarter, ECMOHO and thousands of KOL and KOC have conducted creative and collaborative work on health content. In Q3, we have conducted more than 3,500 live broadcasts. Therefore, Third is new growth for live streaming. According to the data by KPMG and Ali Research Institute,

e-commerce sales from livestream has been over 1 trillion yen in 2020 and will reach 2 trillion yen in 2021. We saw a substantial growth market and development opportunities for livestreaming. During this quarter, we collaborated with thousands of KOL and KOC to generate health content and launched more than 3,500 of live streaming events to drive health and wellness product consumption. We will continue to solid our e-commerce live streaming competitiveness by improving supply chain marketing influencer fulfillment and live stream operating. We are confident that we could deliver more business and more growth for live streaming platform.

之后基于EC Moho聚焦用户的需求, 相信公司的运营会更趋于健康和持续。 那我们的EC Moho的毛利率和消费者的复购率在不断的提升。 那我相信这些会让我们进入到更好的经营状况。 我们希望透过消费者的触达, 产业链以及核心技术, to continuously optimize our products and services, at the three levels of supply chain, channels, and consumers. At the same time, we hope that our better health services can reduce the difference in health between regions, so that people in lower cities can get better health products and services. Then, through the digitalized marketing and strategy of all channels, 我们能够均整地得到更多的用户的认可, 来进行更精准的匹配。 那么在未来,我们还是坚持希望能够围绕我们的用户, 围绕我们的供应链, 希望能够给消费者带来更优质的产品和服务。 同时我们相信EC Moho的生态, 在未来能够给更多的人带来健康, 给更多的家庭带来健康, 我们也希望为股东创造可持续性的价值。

Overall, our operation tends to be sustainable and healthy profitability with our increased growth margin rate and consumers' repeat purchase rate by focusing on consumers' demand, which also brings us more compelling business. Through leveraging our extensive consumer-rich, strong supply chain capabilities and technologies, we connect pharmaceutical companies, and healthcare product suppliers, distributors, and consumers. We improve the accessibility of affordable, high-quality healthcare and wellness products in China, especially for those who live in low-type cities with limited healthcare resources. Through an omni-channel strategy and digital marketing, we enable our brand partners to capture the consumers in a more precise and effective manner. Looking forward, we will continue to refine supply chain and introduce premium products and service to satisfy consumer's demand. We believe that EC Moho ecosystem we build will help to better provide healthcare for everyone and create sustainable volume for shareholders. I will now turn the call over to Mr. Li.

Thank you, Zoe. Hello, everyone. It's a pleasure to join the call. During the third quarter, against the backdrop of our brand portfolio optimization and past e-commerce peak season, we took deliberate measures to manage our budget, which, although led to revenue struggle, resulted in better growth margin of product sales. These optimization dynamics will gradually normalize. as we plan well for transition of this year's optimization strategy to next year's sustainable growth. Most importantly, we continue to grow our business in a sustainable and well-balanced manner as we optimize our brand portfolio, which we believe will better position us to drive growth over the longer term and allow us to generate value for our brand partners. Now, I would like to go over the third quarter 2021 for financial results. In more details, we believe year-on-year comparisons are the best way to review our performance. All percentage change I'm going to present will be on that basis, unless otherwise stated. Once again, please know that all figures mentioned will be in RMB. Total net revenue for RMB 182.8 million. The decrease in product sales revenue was mainly due to weakened demand for mother and children's care category and the impact of the company's growth strategy to optimize brand portfolio as they selectively cooperate with brands that have a higher profit margin. Total growth margin was 22.7 as compared to 17.7 in the same quarter last year. Growth margin of product sales was 21.9% as compared to 17.5% in the same quarter last year, primarily due to fewer lower-market brands. Gross margin rate of services was 55.1% as compared to 24.5% in the same quarter last year due to the increased proportion of high-market TP service revenue. Operating expenses. were RMB 64.9 million, representing a decrease of 44.5% from RMB 116.9 million in the same quarter of last year. As we continue to control costs and optimize our operations, the decrease was mainly attributed to the decrease of fulfillment expenses and sales and marketing expenses. Fulfillment expenses were RMB 13.4 million, representing a decrease of 42.9% from RMB 23.5 million in the same quarter of last year. The decrease was primarily due to decreased warehouse and logistics expenses as a result of lower product sales in the third quarter of 2021. Sales and marketing expenses were RMB 33.5 million, representing a decrease of 52.5% from RMB 70.6 million in the same quarter of last year. The decrease was primarily due to a decreased business promotion expenses and platform fees due to lower product sales revenue in the third quarter of 2021. and reduce employee-related expenses due to staff structure requirements. General and administrative expenses were RMB 16.1 million, representing a decrease of 23.4% from RMB 21 million in the same quarter of last year. The decrease was primarily due to decreased personnel costs due to staff structure requirements. and decreased professional service fees such as audit fees and consulting fees. Research and development expenses were RMB 1.9 million as compared with RMB 1.8 million in the same quarter of last year. Operating loss was RMB 23.4 million as compared to an operating loss of RMB 29.3 million in the same quarter of last year. Non-GAAP operating loss was RMB 16.2 million as compared to non-GAAP operating loss of RMB 27.5 million in the same quarter of last year. Net loss was RMB 24.5 million as compared to a net loss of RMB 28.6 million in the same quarter of last year as result of factor described above. Non-GAAP net loss, RMB 17.2 million as compared to non-GAAP land loss of RMB 26.8 million in the same quarter of last year. This concludes our prepared remarks. Thank you. We are now ready to begin the Q&A session. Thanks.

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Thank you, operator. In closing, on behalf of the EC Moho management team, we would like to thank you for your participation in today's call. If you require any further information or are keen to visit us, please let us know. Thank you for joining us today. This concludes the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.