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.
Boqii Holding Limited American Depositary Shares, representing Class A Ordinary Shares
Q1 2022 Earnings Conference Call
8/20/2021
spk03: Thank you for standing by. Welcome to LCHIEF Fiscal 2022 First 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. I will now turn the conference over to Mandy Liu, Boqi's IR manager. Mandy?
spk05: Yeah, thank you, operator, and good morning, everyone. Welcome to Boqi's Fiscal 2022 June Quarter Earnings Conference Call. Joining us today are Ms. Lisa Tang, Co-Chief Executive Officer and Chief Financial Officer, Mr. Kai Fang, Chief Strategy Officer, and Mr. Loyal Dai, Financial Director of Boqi Holding Limited. We released our results earlier today. The press release is available on the company's IR website at ir.boqi.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 involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these 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 this 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 can be found in our earnings press release. Also, please be reminded that unless otherwise stated, all figures mentioned during the call are in Chinese renminbi. With that, let me now turn the call over to our co-CEO and CFO, Ms. Lisa Tang. Please go ahead, Lisa.
spk04: Thank you, Mandy, and many thanks to everyone for joining the call. We are pleased to reveal another strong quarter of solid financial and operational results for fiscal 2022. Overall, GMB continued to see strong growth, up 42.9% year-over-year to RMB 792.1 million. Total revenues grew 35% year-over-year to RMB 321.8 million. Within accepted exceptional revenue growth of nearly 20 times year-over-year from online marketing and information services and other revenues. These results illustrate recognition of the unparalleled working process and value proposition by industry partners. On the user engagement front, our active buyers reached a record-breaking $1.6 million this quarter, up 27.9% from 1.3 million in the same period last year. Apart from continued robust growth of the number of active buyers, active user engagement efforts are translating into higher spending. Our active buyer spent an average of RMB 418.4 in this quarter. up 11.7% year-over-year. AOV also grew 14.8% year-over-year to RMB 322.9. The way we attract more customers and encourage them to spend more with us is again evidence of our dedication to optimizing our rich user experience through building our content, products, and services. We always bear in mind our social undertakings. Building on our past charity work, we initiated a wild range of animal care events this year, with special attention to stray animals in universities and distressed animals during the Henan rains and floods. We worked with Fudan University and Heart Cat Association to jointly launch a semester animal rescue program. We partnered with Sina News and the Zhong'an Charity Foundation to collect 3.55 tons of pet food donations for animal shelter homes and the rescue organizations. We gathered over 10 brand partners for concentrated donation efforts and timely response to the flood-ravaged Henan Province. to rescue animals in early August. Providing 10 animal shelters across the province with nutritional, medical, and sterilization supplies worth RMB 1.15 million. We've always wanted to make the world a better place for pets as well as raise awareness for animal protection and care in China. As China's leading platform, we believe our commitment to social endeavors will resonate in the industry and create more profound influence. Now I will turn the call to our Chief Strategy Officer, Kai Fang, who will share more details on our strategy and financial highlights. Kai.
spk00: Thank you, Lisa. And thanks, everyone, for joining this call today. As Lisa mentioned, we delivered another quarter of strong growth and solid execution as our users continue to grow in numbers as well as trusting our products and service. Total active buyers increased 27.9% to 1.6 million, with 11.7% growth on average spending per user. We are excited to see this continued user growth momentum and remain committed to attracting more new users and to retain existing ones while growing their ARP value over time. Now let me walk you through four financial highlights for the quarter. Before I go into details, please note that all numbers presented in RMB end for the June quarter of 2021 unless otherwise stated. All percentage changes will be quoted on year-over-year basis, unless otherwise specified. Total revenue for this quarter was RMB 321.8 million, up by 35%. This is remarkable given the high base of the same period last year, boosted by China's rapid recovery from the pandemic. Keep top-line driver this quarter, including the expansion of our active customer base and increase in our average spending per customer. Revenue generated from Bo Chi Mo and other direct channel grew 20.5 percent to RMB 89.8 million, while revenue generated from third-party platforms grew 37.2 percent to RMB 203.2 million. Notably, this quarter, revenue from online marketing information service and other revenue reached RMB 10.3 million this quarter, up over 19 times for the same period of last quarter of 0.5 million RMB. We are pleased to see the growing endorsement by our brand merchants and users. This record-breaking growth was mainly driven by our raising brand visibility and influence in the path industry as well as our supply chain expertise. Quarterly gross profit was RMB 56.4 million, up 30.3% year-over-year, which led to a gross margin of 17.5%. Fulfillment expense further decreased to 32.9 million as compared to 33.6 million in the same period of last year. Fulfillment as percentage of revenue was 10.2% versus 14.1% for the same period year-over-year. Post-fulfillment growth margin increased to 7.3 percent compared to only 4 percent year-over-year. Our early investment in nationwide fulfillment infrastructure continued to contribute the reduction in fulfillment cost and improve in our operational efficiency. Our total sales and marketing expense for RMB 45.5 million, up by 30.2 percent from 34.9 million in the same period of last year. The increase was in line with our top line growth. Sales and marketing expense as a percentage of total revenue were 14.1 percent, down from the 14.7 percent in the same period of last year. We expect our sales and marketing expense will further cut down as we improve our brand influence and increase our user touchpoints. G&A expense for RMB 19.6 million, up by 16 percent from RMB 16.9 million in the same period of fiscal year 2021. The increase was primarily due to the increase in shared basic compensation expenses. G&A expenses as percentage of total revenue were 6.1%, down from 7.1% in the same period of fiscal year 2021. In addition to our top-line growth this quarter, we made meaningful progress in improving operational efficiency. Our net loss narrowed down to RMB 37.4 million, compared to the net loss of RMB 42.3 million in the same period of last year. Adjusted net loss, which excludes share based compensation and fair value changes from the derivative liabilities, was RMB 31.5 million, compared to adjusted net loss of 44.4 million of the same period of last year. We ended this quarter in strong cash, cash equivalent, and short-term investment of RMB 415.7 million, compared to RMB 416 million as of end of last quarter. To conclude, We delivered three solid quarters consecutively since listing in NYSE with meaningful progress across all our business lines. We believe our marketing leading position, strong executional capability, and sound growth strategy will help us ride on the market tailwinds and power customer demand in the pet industry. We are confident in our ability to lead this sector and are fully committed to create value for both our users and shareholders. Now, let's start the Q&A session, shall we? Operator?
spk03: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Darren Astahy with Roth Capital Partners. Please go ahead.
spk06: Yes, good morning, good evening, nice quarter. Good to see your fulfillment costs are staying relatively flat. I'd be remiss if I didn't ask this because I'm sure everybody kind of cares on the call, so forgive me. But, you know, obviously what's going on in the regulatory environment in China, I mean, have you seen any kind of changes to your business from what's been going on with the government and any kind of long-term risk you perceive going forward?
spk00: Thank you, Darren. That's a great question, but come on. If we read through the human history, from the pharaohs in Egypt to the dictators on the European continent to the kings and emperors in the East, when was the last time we saw any authority ban the adoption of the pets? And please don't forget, in Chinese fairy tales, the goddess went to the moon with her pets, not her boyfriend. But put all the jokes aside, in our sector specifically, we didn't see any new regulation by any government authorities at all. That's for the pet industry. And for the subject that concerns the general market, which would be the national security, and some of the specific industries that might in a way of encouraging people to have more keys, definitely we didn't see any kind of impact on us either. First of all, we don't hold any national level security data. We don't hold any personal financial data at all. And besides the telephone and shipping address, we don't hold any personal information. and we don't generate any content that has anything to do with ideology. So, yes, we double and triple confirmed with our legal counsels. We're 100% compliant with current old regulations, and we intend to continue to do so with any new regulations or regulations legal enforcement that might come in the future. So to sum it up, we are 100% compliance, and we didn't see any negative impact in our business or our sector or our customer at all. I hope that answers your question.
spk06: Yes, it did very well. Thanks. More on your fundamentals. So you guys talked about your membership business last quarter. I'm just curious, has that been formally launched? Is it still in beta? If it is still in beta, what is the data that you're seeing? Anything kind of encouraging from a data insight perspective?
spk00: Oh, yeah. Another good question. Thanks, Darren. Yes, as we mentioned that, we are about to formally launch our new membership program. And this membership program, based on the ideology that, based on the idea that the pet's adoption experience is not just kind of like you're buying an iPhone or buying a plasma TV. It's like you raise your kids. It's like you travel. your demand will be multi-dimensional. Therefore, the whole new membership is based on idea that as a platform, we're supposed to either we meet your demand directly or either we help you to improve your experience in the path adoption. We had our beta test version launched in July, and the first month of number was quite encouraging. It was encouraging in two fronts. One would be the cohort ratio of the active members that compare year-over-year base, quarter-over-quarter base, and even month-over-month base. It was amazingly good. Second would be all these points, the utilization ratio of the points was satisfying, and the utilization ratio of all the benefits were offered to the members was quite kind of encouraging. So we know that we are offering the things that people need. So we are doing the right thing. The only thing that, unfortunately, that for the beta version, the study group was quite small. It's about saying... slightly south of 100,000-ish. We need more data to say that that data is conclusive. But yes, to address your question, the initial beta version was quite good. And we intend to do the full rollout in the coming weeks.
spk06: So the... the beta will be expanded in the coming weeks or you'll actually formally roll it out?
spk00: We'll formally roll out in the coming weeks.
spk06: Got it. That's helpful. I noticed your fulfillment costs on a dollar basis actually fell, call it flat. How sustainable is that and the fulfillment network you have in place where you've added newer warehouses, is that enough to support further growth of your business? So said another way, like how much more operating leverage can you get as your sales grow? And then two, as your sales grow, how many more points of fulfillment will you need to support that growth?
spk00: I will leave that question to Loyal.
spk01: Thank you, Darren. In this quarter, our fulfillment expense as a percentage of total revenue is about 10%, and we are confident that the percentage will fall to 8% or 9% in the coming quarter. With the expansion of our business and the recovery from COVID-19 in China, we may consider to leave new warehouses in southwest China. We believe that the new warehouses will bring us much savings in logistic expenses, which can greatly exceed our new added need expense. So that's why we believe the fulfillment expenses percentage as of total revenue will continue to fall in the future.
spk06: Great. Just two more if I may. What was the private label branded mix in the quarter? And then I think when you went public, you talked about, you know, private label as a strategy. I'm just kind of curious what you're doing to kind of increase mix going forward.
spk05: Yeah, so Dara, maybe I can answer your question and ask Lisa to add some more. So in the past quarter, the private labels account for about 15% of total revenue. And this was because we have more growth or higher growth rate of third-party labels. And in the longer term, we see that private labels will still account for 15% to 20% of total revenue. And in terms of strategy, because we work with the upstream manufacturers, we have equity investment in some of them. We'll continue to seek to have a very attractive price point of products to our users. In the meantime, for our private labels, as we mentioned before, we have multiple labels which serve different user groups. So this will be the way we develop our private labels. If you have further questions on private labels, I think Lisa can answer them.
spk04: Okay. So actually we see a lot of competition in terms of labels in China because they are all trying to build up the trust and understanding or awareness among consumers.
spk05: So in this kind of backdrop, the way we do it is that we work with the manufacturers to try to reflect the user need we gathered from the market in a product and launch them timely with an attractive price. And in the meantime, because we are launching the membership program, we launched the membership program, we can understand more niche needs of the customers. in a quicker manner because we will talk to them more privately in smaller groups so in this way we might try out smaller batches of customization for example maybe some customization of fresh pet food and that kind of product innovation that is not seen on the market that we think what we can do with the private labels great that's helpful this last one
spk06: Thank you. Last one for me. So, Bochy Mall, I think in the past couple quarters, it trended up. It was sort of 40% of our overall product sale mix. I think this quarter it was 35. I'm just curious, as you roll out your membership strategy here in the near future, Is the thought to push more of your members towards Bochumal as opposed to third-party platforms?
spk05: Darren, let me quickly translate. 这个季度我们的自由商城的占比是大约占到35%,但是上一个Q是40%。 Hey, Darren, let me give you a quick answer.
spk00: The intention of the membership program definitely want to drive more flow to our direct channel. As I told you, like our teachers, like the Huazhou Hotel Group and the airline companies did, But that will take time. So right now, this breakdown and the balance pretty much kind of reflect the status quo. And in our current points policy, if you spend $1 on our direct channel, you'll get one point. But if you spend the $1 on the third-party channel, you only get 0.7 points. But you can see that we did not kind of do any abrupt like policy to drive people, but we just used very mild guidance to let people choose by themselves.
spk06: Thanks. Congratulations again.
spk03: Again, if you'd like to ask a question, please press star, then 1 at this time. Thank you. Our next question comes from Penny Son with Goldman Sachs. Please go ahead.
spk02: Hi, this is Penny from Goldman Sachs. Congratulations on the standard performance for this quarter. So question from our side is, can you please share your trajectory for I-5 2022 in terms of revenue and operating loss margin? and what are the key drivers for such projections? Thank you.
spk05: Thank you, Penny. She asked us about the guidance on revenue in 2022, as well as our overall margin performance, overall financial performance. I understand. Okay, go ahead.
spk04: The overall guidance is mainly based on the growth of the company, as well as the advantages accumulated in the past. Because in the past few years, our entire development has not been entirely based on to get a short-term flow, but more recognition from users of the brand. Yes. The second is that the sales system of the whole wave is increasingly diversified, including online. We believe that after this year, there will be more assistance from offline channels. The way of doing channel sales has also received more and more recognition from the brand, so we have accumulated more advantages of the supply chain at the supply chain end. This advantage and delay So, Penny, thank you for your question. So Lisa just talked about the drivers for our sales in the coming year. Actually, that's in two parts. The first one will be about the consumers.
spk05: Like for the consumers, we have seen that the continued growth in our sales revenue was not really linear with the growth in sales and marketing expenses. That means that we are not obtaining short-term traffic only from sales and marketing spending, but rather from the awareness of customers over the Bochi brand. And we will continue to leverage that legacy and build on it to improve the customer spending. And then the second part we will drive our sales is from the increased recognition from brand partners. Now we are distributing the goods into more channels, both online and offline, so that we have an omnipresence to the consumers. And this was recognized by the brand partners. And the way we work with them and the way we worked with them before can enable us to have a whole pipeline of new products and quickly iterate according to the emerging needs of consumers in this younger market and more energetic market.
spk04: 然后第三个点是,结合我们现在新推出的会员计划,我们来会更关注在核心指标上,包括像用户的AOV,Cohon. 对我们来讲,会员计划是一个很好的承接,能够让更多用户去获得养宠物的solution, 而不只是在单个产品的价格的比较少。 大部分的中国用户需要的是符合他们的宠物, And then the third point will be about the newly launched membership program.
spk05: In the coming reporting periods, we recommend you to look at indicators like AOV and cohort retention and things like that, because now through the new program, we are offering a whole solution of path raising instead of only providing products, because we think the way to distinguish among all the platforms is to provide a solution that is not single, that is not only monodimensional, that is not only about price. We are offering more services and privileges through our membership programs that can truly satisfy the needs of the parents in China to find a solution. And in turn, this kind of solution will also help us promote our membership programs because it is indeed very unique and valuable to the members. And about the margin trend, more of our margins or our gross profit will come from the two parts. The first one will be the middle to lower tiers of brands or new brands that are trying to obtain the market and are willing to give lower price points to us to educate the market. And then the second part of that will come from the medical and healthcare products for pets now because they are higher margin and this will help us to have a better margin profile. Thank you, Penny, for your question.
spk02: Thanks for the answer. That's all for my side.
spk03: 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 in today's call and for your support. We appreciate your interest and look forward to reporting to you again on our progress in the next quarter.
spk03: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer