Yunji Inc.

Q4 2020 Earnings Conference Call


spk05: Good morning and good evening, ladies and gentlemen. Thank you and welcome to UNG's fourth quarter 2020 earnings conference call. With us today are Mr. Changlu Zhang, Chairman and Chief Executive Officer, Mr. Chenxi Zhang, Vice President of Finance, and Ms. Kay Liu, Investor Relations Director of the company. Now I would like to hand the conference over to the first speaker today, Ms. K. Liu, IRB of Yunji, please go ahead now.
spk00: Hello, everyone. Welcome to our fourth quarter 2020 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions and relate to events that involve known or unknown risks, uncertainties, and other factors of the industry. This forward-looking statement can be identified by a terminology such as will, aspects, anticipate, continue, or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our related document filed with USSEC. Any forward-looking statements that we make on this call are based on assumptions as of today and expressly qualified entirely by cautionary statements, risk factors, and details of the company filing with SEC. Yunji do not undertake any obligation to update this statement expect as required on applicable law. With that, I will now turn over to Shangyue Xiao, Chairman and CEO of Yunji.
spk02: Shangyue Xiao Hello everyone, and welcome to Yunji Bull's Call 2020. In the fourth quarter, our GNV increased to 1.17 billion yuan, and our total revenue was 13.3 billion yuan. At the same time, due to the increase in the number of customers, the platform service manager is more active. As of December 31, 2020, our transaction membership has reached 13.3 million yuan.
spk01: In the first quarter, we generated a total GMV of 11.7 billion RMB and a total revenue of 1.33 billion RMB due to our ongoing development of differentiated supply chain and upgraded merchandising mix. As a result of the augmented user service and increased activities of platform service managers, the number of trans-marketing members on our platform increased to 13.3 million for 12 months at the end of December 31st, 2020.
spk02: 2020 is a year when the internal and external environment have changed significantly. At the end of the year, we will take a look at this year's strategy and make a summary.
spk01: 2020 was a year of significant changes in terms of both the internal and external environment. At the end of the year, as usual, we will review our strategy and reflect on our achievements of the year. 在线上购物竞争越来越激烈的2020年,我们找准了适合云集发展的一条路,那就是差异化的供应链,和差异化供应链催生的是专业化的零售。
spk02: The advance of technology has led many fields to neutralize. Our marketing method does not rely on the price difference of single components, but relies on our expertise in products. Our service manager as the promotion of procurement, using professional services to satisfy users. Products from free brands, joint brands and innovative brands, etc. have a longer life cycle and can continue to improve, gradually becoming thousands of levels of single products and brands.
spk01: 我们的社群也随之变得更加活跃,不断有丰富的素材可以推广。 In 2020, under an increasingly competitive e-commerce environment, we identified a suitable path for Yunji to develop a differentiated alien supply chain which can be leveraged to make more targeted, customized, and specialized product offerings. As technology evolved, many industries embraced this intermediation And our business model is not about arbitraging the product price differential among various e-commerce platforms. Instead, we established our competitive strengths through researching the optimal merchandising mix, engaging service managers to act as shopping curators, and enhancing our users' shopping experiences. And our differentiated merchandise mix of some private labels, joint venture brands, and emerging brands enjoys a longer product life circle, can be constantly improved and may gradually develop into products and brands capable for generating tens of millions or billions of sales, aligned with the improvement of our product offering. Our community also became more active as our members and users had access to more materials about products to share and discuss in the community.
spk02: In the past year, we have achieved preliminary results in the chain of supply chain and free brand. We discovered that the product of weight loss took a short period of half a year to break through 600 million sales and join the cloud level record. At the same time, we will continue to improve this type of product according to the feedback and market needs of users, making our users more satisfied. In February this year, We also launched Yunji's first free food brand, Li Ba Tian. Li Ba Tian's first product is pure meat barbecue. It was launched in conjunction with the 5G Barbecue Research Institute, a professional research and development institution. We have updated two batches of pure meat barbecue before and after the year. It has been on the shelves and has been quickly sold out. In addition to food, we are also developing and promoting hair care, care products, and more health care products.
spk01: Over the course of 2020, our efforts in implementing supply chain differentiation and private label development strategies have achieved meaningful results. For example, one of our private labeled weight loss products joined the Yunji Million Door sales product category within half a year since its launch, as it has generated over 6 million R&B offer sales. We will continue to improve these products according to user feedback and market demand to further improve our user satisfaction. In February 2021, we also launched our first food safety-focused travel label called Li Ba Tian. Li Ba Tian launched its first product, Authentic Grilled Sausage. Zhiyuan Chengyang, Generally, with every now and the food research institute in China or the five K sausage research institution and on both sides of the 2020 Chinese New Year holiday season, we started selling two new batches of the authentic grilled sausage respectively. All of them sold out prematurely upon market introduction. Besides food, we are also developing and promoting additional merchandising categories, including health-selling, personal nail care, and health supplements.
spk02: At the same time, we believe in the ability and creativity of Yulin women. They are also the main force of our platform service manager. We are very happy to see that our service manager's activity has improved significantly over the past year. Service managers make more money and live a better life. They mainly do three things for community marketing. The first thing is to provide them with products that are easier to spread. These products are easy to produce rich and unique content, so that their distributed information is more attractive. The second thing is that we have established a vertical community in different fields to do professional sales in these different fields. In the makeup community, we promote our free brands. In the food community, we share the many ways that Li Ba Tian takes examinations. In the health care community, which is the hottest in the last half of last year, we guide members on how to adjust their lifestyle and diet habits, and how to cooperate with products such as weight loss and health care products to make themselves healthier and more beautiful. We have conducted professional training for these food community. The training involved the skills of broadcasting, professional knowledge in the field, Business products and products, and so on, so that they are more professional and trustworthy in the complex information flow. The third thing is that we have opened up more content distribution channels, including small videos and live broadcasts online and offline. The service manager of the three live broadcasts can get more attention and income through live broadcasts. The service manager of the three sharing services can generate consumption or commission through sharing live broadcasts.
spk01: Most of our service managers are either soon-to-be mothers or mothers of children under the age of 12. We believe in the self-reliability and creativity of these women when they work on our platform as service managers. By continuously improving our platform features, we provide our service managers with more competitive products to promote. In 2020, our service managers became substantially more active in sharing and promoting our products. In turn, they earned a better income and improved their own quality of life. We mainly focused on three growth initiatives for our community marketing. First, we provided our service managers with products that are easier to spread and share online. These types of products can easily motivate service managers to produce rich and unique content for them to attract more users. Second, we established communities for various product verticals and applied targeted marketing and sales strategies. For example, we promoted our private label products in the beauty community and shared different ways to cook Li Ba Tian's grilled sausage in the food community. In the second half year of 2020, in the popular health supplement community, We provided members with tips on maintaining a healthy diet and improving their life habits. In the meantime, we also introduced weight loss products and health supplements products to help our members in the community became healthier and feel better about themselves, to help the sharing from our service managers to stand out as trustworthy content above numerous news feeds. We provided service managers with professional training and training include communication skills, industry expertise, the product origin, etc. Third, we are cultivating more content distribution channels, including short-form videos and live streaming sessions on our own and partnered platform. Therefore, service managers that are good at live streaming can generate more attention and income through live streaming about our products while service managers who are good at sharing can earn commissions from promoting purchase transactions through sharing-related live streaming rooms.
spk02: Through partnerships and collaborations
spk01: We actively channeled user traffic from third-party platforms to our own platform. For example, our private label beauty brand, P&S, developed a joint label product in cosmetic through our collaboration with Moschino and established Italian Luxury Brand.
spk02: We actively explored the live channel. Yunji co-hosted Luo Yonghao and Xiong Bao. Our two live channels created a sales of 1.2 billion yuan. During the two-day period,
spk01: We also actively explored live streaming channels. For instance, we partnered with online celebrities called Luo Yonghao and Xiong Bao for two live streaming shows on a leading short-form video and live streaming platform in China. Both shows generated a total sales of $1. 120 million RMB. During the W11 Shopping Festival, we also partnered with Douyin's top-selling celebrity, Yige, to promote our products and achieved 50.90 million RMB of sales through a single live streaming show.
spk02: Our users are mostly women and mothers who have been working for the family for a long time. We have always valued the needs of these customers. Most of our users are women and mothers who take care of their families. We have always paid great attention to the demands of this type of customer group.
spk01: and it continues to cultivate our platform's capabilities to serve thousands of matters. Based on their demands, we also developed high quality products that the whole family could safely use and enjoy. On our platform, these matters do not just buy a course to effect a product, but also a challenge of it, a product that the whole family can enjoy at ease.
spk02: Looking ahead in the coming year, we will continue to do the right thing alongside the right members and finance and advance forward together.
spk01: With that, I will now turn the call to our Vice President of Finance, Mr. Chen Xizhong, who will go through the details of our financial performance in the fourth quarter.
spk03: Thank you, Xianglue. Hello, everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in Renminbi terms, and all comparisons are on a year-over-year basis unless otherwise noted. During the first quarter, we continued to focus on improving our margins by launching more private label brand products and to utilize our unique membership-based community to increase sales across different social channels. As a result, we continued to steadily improve our platform's operation efficiency during this quarter, with total operation expense decreased by 44% and loss from operation decreased by 54%. Now, let's take a closer look at our financials. Total revenue in the first quarter of 2020 was $1.3 billion, compared to $2.4 billion in the same period of 2019. Our GMV for the first quarter of 2020 was $11.7 billion, compared to $11 billion in the same period of 2019. Revenue from net sales of merchandise in the first quarter of 2020 were $1.2 billion, compared to $2.1 billion in the same period of 2019. Revenue from our marketplace business in the first quarter of 2020 were $152 billion, compared to 169 billion in the same period of 2019. The trends in our total revenue and GMV were in line with our ongoing efforts to improve both our internal operation efficiency and the operation efficiency of our merchants as we continue to transfer business activities to our marketplace business model while expanding our user coverage through innovative partnerships with other platforms. During the first quarter, the year-over-year decrease in our total revenue was mainly attributed to lower commission rates as a result of our efforts to protect platform memberships' value through providing subsidies to products from certain large brands in response to increased competition during the e-commerce shopping festival period. Besides, as we implemented our own coverage expansion strategy, Our commission rate during the quarter was also affected by our increased promotion for new partnerships on other platforms, such as the LiveDream event on our external LiveDream platform. Revenue from our membership program in the first quarter of 2020 was $40,000 compared to $146 million in the same period of 2019. Revenue from our membership program consisted entirely of deferred revenue from prior paying members as a result of our decision to refine our membership enrollment system. Growth margin in the first quarter of 2020 expanded to 26% compared to 24% in the same period of 2019. This increase was due to our decision to introduce more private label products with higher growth margin on our platform during the quarter as well as our improved product mix and enhanced operation efficiency. Now, turning to our operating expenses. Overall, total operating expenses in the first quarter of 2020 decreased by 44% to $368 million from $662 million in the same period of 2019. Fulfillment expenses in the fourth quarter of 2020 decreased by 52% to $92 million. This decrease was mainly due to decreased warehousing and logistics expenses resulting from lower merchandise sales and improved logistics efficiency. Decreased third-party payment transaction fee due to the lower charge rate that we secured Lower personal cost due to a headcount reduction, as well as decreased the share price compensation expense, which includes a previously recognized reversal of $6 million in the share price compensation expense. Sales and marketing expense in the first quarter of 2020 decreased by $45 to $167 million. This decrease was primarily driven by our reduction in measurement fee as a result of our improved member management efficiency, partially offset by higher business promotion expenses as a result of our increased business development activities in the period to attract more popular brands and merchants to our marketplace business. Technology and content expense in the first quarter of 2020 decreased by 41% to $44 million, mainly due to reduced server costs as we secured a better contract term with our server provider, as well as decreased the personal costs as we refined our staffing structure. General and administrative expenses in the first quarter of 2020 decreased by 26% to 64 million, mainly due to the ongoing refinement of our staffing structure. As a result, we reduced our loss from operating in the first quarter of 2020 by 54% to $22 million from $47 million in the same period of 2019. Net loss in the first quarter of 2020 was $77 million compared to $5 million in the same period of 2019. Adjusted net loss in the first quarter of 2020 was $63 million compared to adjusted net income of $25 million in the same period of 2019. The year-over-year decrease was primarily attributed to an income tax expense of $44 million in the first quarter of 2020 compared to an income tax benefit of $5 million in the same period of 2019. It was also due to a net financial loss of $7 million in the first quarter of 2020 compared to the net financial income of $39 million in the same period of 2019. AC counter-diluted net loss per share attributed to ordinary shareholders in the fourth quarter of 2020 was both 0.04. Now, turning to our cash and liquidity positions. In order to satisfy the ongoing demand of our operations, we continue to maintain a healthy level of working capital. As of December 21, 2020, we had a total of $1.3 billion in cash and cash equivalents, restricted cash and short-term investments. Looking ahead, we remain focused on growing our marketplace and merchandise sales model, expanding our differentiated supply chain, forgoing more partnerships and enhance our social community. Such efforts will help to fortify our financial performance, augment our total profitability, and feel the substantial growth of our operations over the long term. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
spk05: Certainly. 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 keypad and wait for your name to be announced. If you wish to cancel a request, please press found or hash key. Please ask your question in Mandarin first and repeat the question again in English. Once again, it's tar followed by one to ask your question. Thank you. We have the first question from the line of Terrence from first group. First Trust Group, please go ahead.
spk04: Thank you. 郭立成,晚上好。我是First Trust Terrence. What is the current situation of the company in terms of, for example, self-serve products, new products, and free brands? And does the company have any plans to optimize this ratio? This is my first question. The second question is, what is the goal of cloud-based platform transformation in the future? We would like to know. The last question is, Thank you for taking my call. This is Terence from First Trust Group. I have a few questions. My first question is, As we can see the increase in the proportion of Renji's marketplace business, so what's the separate percentage of your mainstream brands, emerging brands, and private labels, and how would you optimize the market metrics? My second question is based on the transformation toward the marketplace business, what would be the company's target for the future? My last question is we noticed the transaction members continue to grow. So would you please share some color on your monetization plan? Thank you.
spk02: Then we hope that in the process of our next business promotion, we hope that this mainstream brand's mainstream products can gradually reach about 60% of the proportion. Then these big brands, because they are on this online channel, in fact, the cost of traffic is also very high. Then in our process, they are very willing to to help us develop some of our channel's exclusive products. With these products, we have better pricing and greater rights for our members. So we hope that in the process of continuously promoting our free brand, we also want to increase this proportion. We hope that through our efforts, in the next three years or so, we hope that its proportion is 60% of mainstream brand apartment products. And then these big brands are willing to provide us with about 20% of exclusive products. The other 20% of the products may be our free brands. This is the first question to answer.
spk01: So thank you for your questions. And today most of our products are coming from the mainstream brands, and only 10% are our private labels. And as for our distribution, we hope that as our business grows, and we hope that we could increase the percentage of the products of the mainstream brands to 60%, and because we know that it is quite expensive for those mainstream brands, to attract traffic online. So later we hope that those mainstream brands are going to provide our exclusive products and they have our cooperation plans and for those exclusive plans from those mainstream brands and the price is going to be quite cost effective for our platform and also we would like to bring more interest to our members of our platform. So all together we are working on the private labels and the mainstream products. And we hope that by our efforts in the next three years, we could increase the percentage of the mainstream brand products to 60%. And among the 60%, 20% will be the exclusive products. And for the private label products, they're going to account for 20% of our products.
spk02: China has a group of 1.5 billion mothers. Yunji hopes that in the future, we can serve at least one-third of the mothers who focus on consumer development and quality of life. For us, the goal of platform transformation is to gather more excellent brands, including innovative brands, and gather excellent manufacturers and factory brands.
spk01: And for your second question, we know that currently in China we have 150 million mothers, and we hope that we could have our products help them to improve their quality, and hope that we could have one-third of those mothers as our members. And we know that currently for our platform, we hope that we could not only focus on those mainstream brands, also we could promote those emerging brands and together with the manufacturing, all together we could serve more families and bring better life for those families.
spk02: Helping these clients get more competitive products and better service experience, allowing them to have a different experience from other e-commerce platforms, allowing them to close their eyes and buy with confidence.
spk01: So for those customers, we hope that we could bring to them more cost-effective products and a better service experience. And we hope that they could just feel comfort in our platform when they are buying our products compared to other platforms.
spk02: They hope that through the Internet, they will be able to add value to their social values and share the responsibility of the family with their loved ones. Therefore, the individual business power of the Internet, which is likely to be released for this reason, We hope to be able to help them in this need for professional service, need some types of intermediate communication, so that they can get the expert's ability to better become a branch of a branch of a branch. uh, uh, We want to make it more comprehensive. We want to make it more comprehensive. But in the past two or three years, we have found that those who are able to continue to operate and have a fair share of income are more experts in a certain field. So we hope that through our super products, through our entire education and training system, we can train more professional service managers, and then let them better serve their fans and users on the Internet.
spk01: And also we find that a large group of our customers and our members, actually they have a lot of wishes. For example, they would like to change their destiny and increase their income and generate more social value for themselves and also share the responsibility together with their spouse. So for such group of our customers, we hope that we could provide them the professional service and also provide them the platform so as they could be a professional or expert in their differentiating area. And for example, if a member or sales manager, they could have a better knowledge in the cosmetic or beauty product, then 90% of the people around this person, they're going to be a professional. And so the same is for the professionals in the healthcare products. So we could, in this way, help them to increase their income and give them the Internet-based employment. And also, in the past several years, And we thought we have provided too large number of FPU or products for those group of sales managers. And then we find out they were busy promoting the products, but they still could not get much income. So in the last two or three years, we have find out only by providing the professional knowledge for this group of the sales managers. Can they become the professionals in their differentiating area? And so we are going to provide them more Medicaid products and also provide them the professional training so they could become the professional service manager in their differentiated area. So they are going to have more interaction with their fans and users and increase their sales and income.
spk02: Thank you for your question.
spk04: Thank you.
spk05: Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone keypad, wait for your name to be announced. If you wish to cancel your request, please press star or hash key. Please ask a question in Mandarin and repeat the question in English again. Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Ask your question in Mandarin first and repeat the question again in English. Thank you. If there are no further questions, I would like to hand the call back to our presenters for any closing remarks. Thank you.
spk00: Thank you for joining us today. Please do not hesitate to contact us if you have any further questions, and we look forward to talking to you next quarter. Thanks. Bye.
spk05: Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all disconnect now.

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

Q4YJ 2020