spk03: Good day, ladies and gentlemen. Thank you for standing by, and welcome to BOCHE's Fiscal 2021 Fourth Quarter and Full Year Earnings Conference Call. Currently, all participants are in a 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. I will now turn the conference over to Mandy Lowe, BOCHE's IR Manager.
spk06: Thank you, Operator, and hello, everyone. Welcome to Borchers Fiscal 2021 Fourth Quarter and Four-Year Earnings Conference Call. Joining us today are Ms. Lisa Tang, Co-CEO and CFO, Mr. Tai Fang, Chief Strategy Officer, and Mr. Loyal Dai, our Financial Director. We released our results earlier today. The press release is available on the company's IR website at ir.ochi.com, as well as from Newswire Services. A replay of the call will be available on our IR website 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 involving heavy 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 the 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. Also, please be reminded that unless otherwise stated or figures mentioned during the conference call are in Chinese renminbi. With that, let me now turn the call over to our co-CEO and CFO, Lisa Tang. Please go ahead, Lisa.
spk04: Thank you, Mindy, and thanks everyone for joining the call. Physical 21 was an exceptional year, and we paid more attention to the core demands and pain points of parents, as well as the core values and strategies of Boqi, and we achieved encouraging results despite the challenging macro environment. In brand incubation, with the help of accurate traffic and private domain users, we have strengthened the support of emerging brands and middle-sized brands so that pet owners have more choices. We now provide more than 20,000 SKUs and 605 brands on our platform. On the supply chain side, we continue to strengthen the layout of warehouses and logistics. And now we have five large warehouses and three bound warehouses in China. These warehouses will become distribution hubs to meet the needs of pets from food supplies and medical products. including domestic and global pet products. On the operating side, we have continued to reduce the CAC and the fulfillment expenses and significantly improved the customer acquisition efficiency and probability. In the final quarter of fiscal 21, our GMV growth 15.7% year-over-year, reaching RMB 500 and 53.7 million. Our total revenues grew 47.1% year-over-year to RMB 213.4 million. On the user engagement front, our active buyers reached 3.8 million in the fiscal 2021, up 17.4% from 3.3 million in the fiscal 2020. Notably, our users remain highly engaged and our active buyers spent an average of RMB 630 and 35 in fiscal 2021, growth of 33.2% from fiscal 2020. In addition to our strong organic growth, we continued to develop a seamless and satisfying customer journey by building out an extensive portfolio of quality content, products, and services. Earlier in April, we announced a strategic partnership with one of China's top content communities, Kuaishou Technologies. The partnership will generate more content in the pet category, will incubate more care hours, and in general help raise awareness of pet care. Together we can raise awareness of pet care and education for pet parents. This is core to our mission, and we look forward to working with Kuaishou on a variety of initiatives to educate the pet parents, optimize our pet content offering, and further promote our pet ecosystem. Most excitingly, we came even closer to pets and pet parents in May by opening our first flagship offline store in Shanghai. This expands our influence and encourages our customers to stay and experience our ecosystem, online to offline products to services, building our strong digital assets and established pet products purchase platform. This offline shopping experience can give us more opportunities to meet pet parents face to face, resolve their concerns and provide carefree solutions. Looking further down the road, we intend to provide pet services and products via a comprehensive physical store network, which will include directly operating flagship stores and franchised community stores. Now I will turn the call over to the CSO Kaifeng and give you more details on our strategy and financial highlights. Kai, please.
spk02: Thank you, Lisa, and thanks everyone for joining the call today. Despite the unprecedented challenges brought by COVID-19 in the past fiscal year, we delivered four strong quarters with a phenomenal growth trajectory. The solid results underscore the sustainability of our ecosystem, and all it has to offer. We expanded our service spectrum and touch points with pet parents. We are determined to develop satisfying all-around experiences for our customers. A key move to complete the circle of our ecosystem is physical pet care network. On May 1st, we opened our first offline flagship store to offer our comprehensive service and products, including the pet adoption, training, grooming, boarding service, and the selling of merchants. This is one small operational step, but one giant strategic leap. We are facing a highly fragmented physical pet service market in China. We are over 99% stores operated by mom and pop shops or small franchises with less than five stores. Leveraging our own parallel user base and data, solid supply chain capability, and our partnerships with the leading brands, we are confident to reshape the traditional brick and mortar pet service industry. We aim to build a fully integrated, multi-channel approach that is disrupting the pet sex market and providing pet parents with a differentiated solution for all their pet needs. Now, let's go down to detail to the numbers. As Lisa mentioned earlier, we had a solid fourth quarter. Revenue grew to RMB 230.4 million. The 47.1 year-over-year growth rate was the highest growth rate in the past three years. Our quarterly active users also increased by a record high rate of 35.2% year-over-year to 1.3 million. Revenue generated from our Boqi Mall was RMB 87.4 million, up by 52.5 year-over-year, while revenue generated from third-party platforms grew 39.1% to RMB 137.6 million. Through our self-operated platforms, we offer a tailored product assortment, as well as a community shopping setting that further improves the customer experience. Our strategy is validated by the increase in revenue mix from Bochi Mall, which was 37.9% of total revenue versus 36.6% in the same period of last year. Revenue from online marketing, information service, and other revenue grew more than tenfold to RMB 5.4 million. This reflects the growing recognition in the industry of Boji's influence on the pet parents and our supply chain expertise. This recognition will help us to strengthen our strategic partnerships and diversify our revenue streams. Quarterly gross profit was RMB 45.3 million, up by 46.7 year over year, which lead to a gross margin of 19.6%. Fulfillment expense were 24.0 million, which was 10.4% of the revenue. For the same quarter of fiscal year 2020, This number was 15.3%. Post-fulfillment growth margin increased to 9.2%, which again was record-setting. We demonstrated our capability to achieve high-quality top-line growth without compromising our operational efficiency. Our early investments in the nationwide fulfillment infrastructure is paying off. Our total SG&A expense for RMB 57.4 million, which was higher than last year. The increase was mainly due to the share-based compensation expense and the increased staff overtime expenses to operate during the Chinese New Year holiday. We operated during the full holiday because the central government discouraged people from traveling to their hometown as a COVID-19 precaution. Net loss was RMB 41.5 million compared to a net loss of RMB 28.2 million in the same period of last year. Adjusted net loss, excluding the share-based compensation and the fair value changes of derivative liabilities, was RMB 38.9 million compared with adjusted net loss of RMB 35.7 million in the same quarter of last year. Now let's review the numbers for the full fiscal year. For the fiscal year of 2021, our performance set many records. Revenue reached RMB 1.1 billion for the first time and GMV exceeded RMB 2.4 billion. These excellent results were powered by our 3.8 million spending customers. Further into the details, Starting from Q2 fiscal year 2021, the per quarter year-over-year revenue growth rate was 26.2, 34.3, 23.2, and 47.1 respectively, demonstrating a strong top-line growth trend. Revenue generated by Bo Chi Mo was RMB 385.6 million, up by 60.7% year over year, while revenue generated from third-party platforms grew by 17.1% to RMB 617.6 million. Gross profit for the fiscal year of 2021 was RMB 187.3 million, up by 18% year over year. Growth margin was 18.5 versus 20.6 in the fiscal year of 2020. Meanwhile, fulfillment expenses as a percentage of revenue dropped from 15% to 11.9%. Our post-fulfillment growth margin improved by 100 base points on annual base. With the improvement in fulfillment efficiency, we're able to share cost savings with our customers through more favorable pricing while maintaining margins. Expenses on sales and marketing as a percentage of revenue dropped by 80 bps from 16.7 to 15.9 this year, which was driven by lower customer acquisition costs for our platforms. and increasing brand recognition. General and administrative expenses as a percentage of the total revenue was 11.3 compared to 7.0 last year. The spike was primarily due to a share-based compensation expense of R&D 42.1 million. Excluding the one of share-based compensation expenses, our adjusted net loss was RMB 149.6 million, representing our RMB 39.7 million improvement versus RMB 189.3 million in the fiscal year of 2020. We are on the right track towards profitability. We ended the fiscal year of 2021 with RMB $460.8 million in cash, cash equivalent and short-term investment, compared to our previous cash position of $88.3 million as of March 31, 2020. Our solid cash position gives us extra strength and flexibility to further invest in our products, our strategy, and expand our portfolio offering to address a broader user base and needs. To conclude, we deliver strong performance with solid operating and financial growth. Demonstrating the soundness of business strategy, we will continue to devote resources to further optimize our product assortment and prudently expanded our brick-and-mortar presence to capture the immense opportunity in the pet industry. We entered the new fiscal year with a tangible larger and more valuable pet parent space. We are confident in our ability to lead this industry and fully committed to creating a value for both our users and shareholders. Now let's start the Q&A session. Operator?
spk03: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Darren Aftani with Roth Capital Partners. Please go ahead.
spk00: Hi, good evening. Thanks for taking my questions. Just a few, if I may. First on your Kaishu partnership, can you just talk in general how that's going to change your social e-commerce strategy going forward and how much of a strategic emphasis is this as part of your overall strategy?
spk02: Thank you, Darren. That's a great question. So, yes, as you noted that, we enter into a strategic partnership with one of the China's leading short video social networking platform, Kuaishou. We fully cooperate with Kuaishou in many three areas. First, on content. We are working with the KOL and KOC Siam Quiet Show to incubate more pets-related content to attract more traffic. Also, we hope by this high-quality content, we can promote the caring for the health and wellness of pets to more pet parents and parents-to-be. Second, on the e-commerce front, as we all know that for the last quarter, Kuaishou's e-commerce GMV grew more than doubled last quarter, which indicates the dedication of Kuaishou's strategic focus. We hope this partnership will empower Kuaishou with our supply chain expertise and our broad reach to mold the PEPS brand so that the PEPS parents will benefit in more diversified e-commerce settings. Last but not least, to mention that, to us, this is definitely our landmark partnership with the new content platforms. It will be our focus. Having that said, this partnership is not exclusive. We will also keep embracing all other social networking or new media platforms, such as TikTok, Little Red Book, Bilibili, Weibo, and all others. to optimize our reach to our customers. I hope that answers your question.
spk00: That's great. Thanks, Kai. Another one, if I may. On the last call, you talked about kind of a revamped membership strategy. Any updates there? Is it launched? If so, what kind of engagement, retention, or spend metrics are you seeing from those members?
spk02: Thanks, Darren, for another quick question. Yes, we are putting some final touches on this new membership program. We target to launch the new membership program by the end of this quarter. As I mentioned before, it will be cross-channel, cross-offline, and online system. We're confident about it, about our own products, about our own system. We will share more details, operational numbers in fully speed mode. On the data matrix we will be observing would be, one, the impact on our members' behavior, which will be the absolute number of our members as a percentage of total spending customers, each member's cohort rate, ARC value, AOV, And I believe with all this operational matrix, the data, it will boil down to the impact on our company financials. Our total revenues should increase. The sales and marketing expense as a percentage of revenue should decrease. At the end of the day, we are a 2C platform. Our revenue should be multiple spending customers and the value is spent. That's our ultimate target. Thank you.
spk00: Brandon, just one last one. It looks like your fulfillment costs were in the 10% range again this quarter. How do we think about that percentage kind of going forward as your business grows? Should it be stable in that 10%? you know, go down? What's kind of your overall strategy? Can you get more efficiencies out of your fulfillment network?
spk05: Thanks. Yeah, thanks, Darren. I will quickly translate for Loyal. Yeah.
spk01: Yes, so Darren, I have a question. As you can see from the latest earnings release,
spk06: our fulfillment expenses as percentage of revenue was already lowered to 10.4% for the new quarter. And in the coming year or the few quarters ahead, we see that as we lay out our warehouses in the southwest part of China, This number can be further reduced to below 10%, and we see the trend to continue long into the future, and we hope that answers your question.
spk00: Great. Thank you all.
spk06: Okay. Thank you, Darren.
spk03: As a reminder, if you have a question, please press star then 1 to be joined to the queue. Thank you. Seeing no more questions in the queue, let me turn the call back to Ms. Lisa 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 are looking forward to reporting to you again next quarter on our progress. Thank you.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer

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Q4BQ 2021

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