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Boqii Holding Limited American Depositary Shares, representing Class A Ordinary Shares
Q1 2023 Earnings Conference Call
9/15/2022
spk07: Good day, ladies and gentlemen. Thank you for standing by, and welcome to BOCES fiscal 2023 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. If you require operator assistance, please press star then zero. Now, I will turn the call over to Elle, Bochie's Head of Investor Relations. Elle?
spk05: Thank you, Operator. Good morning, everyone. Welcome to Bochie's Fiscal 2023 First Quarter Earnings Conference Call. Joining us today are Ms. Lisa Tong, Co-CEO and CFO, and Mr. Loyal Dai, our Financial VP. We released results earlier today. The press release is available on the company's IR website at ir.bochi.com, as well as from Newsware 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 four looking statements made under the Steve Haber 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 findings with the SEC. The company does not assume any obligation to update any forward-looking statement except as required under applicable law. Before the meeting, please note that today's discussion will include the preemptive statement made by the Security Act of the U.S. private securities lawsuit reform bill in 1995. The preemptive statement involves the risk and uncertainty of the employer. Therefore, the actual result of the company may be different from what is expected today. There is further information about these and other risks and uncertainties. Please note that certain financial measures that were used on this call, such as non-GAAP net loss, non-GAAP 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. 同时也请注意本次电话会议上使用的某些财务指标, 如non-GAAP净亏损率,一笔打和一笔打利润率是以non-GAAP的形式呈现。 有关我们GAAP的业绩结果以及GAAP与non-GAAP标准之间的调和, 请参考我们的业绩新闻稿。 And also please be reminded that unless otherwise stated, all figures mentioned during the conference call are in Chinese RMB. With that, let me now turn the call over to our co-CEO and CFO, Ms. Lisa Tang, to go over our Q1 performance and highlights. Over to you, Lisa. Thank you, Ella, and many thanks to everyone for joining the call today. Looking back into the last quarter, booty is also staying the pressure from COVID-19.
spk02: across its entire supply chain, ranging from disrupted local production to changes in logistics. Thank you, Ella. And thank you to everyone who attended today's phone call meeting. In the past three months, the COVID-19 pandemic has continued to impact the supply chain. Whether it's local production or logistics transportation, we have faced certain obstacles and difficulties. Weibo's performance has also brought some pressure. Despite all the challenges, Bozi remains committed to its mission of serving as a reliable and trusted platform to connect parents and brand partners. Supported by its extensive product range, extensive channel, engaging community, and rich content, as we continue to strengthen our brand among our parents, we were able to achieve a recovery in GMV and a revenue of 20.7% and 27.1% from the last call, respectively. Despite this, Boqi has been able to rely on a wide range of product types, a wide range of channels, a high-level community of interaction and rich content, effectively linking users and brand partners, becoming their most reliable platform. With the further improvement of Boqi's brand influence, We also continued to invest and enhance our big data analysis capability so that we can become one of the major go-to places for industry partners for a forward-looking perspective on pet market trends allowing them to quickly identify further market trends and capture the subsequent market opportunities. Hence, on our high-margin online marketing and information services, we were able to continue this growing trend, reporting at a 14.7% year-over-year growth in revenue during the quarter, highlighting the increasing marketing adoption. Our private label also performed well. Writing on our improving big data analysis capability, we identified growth potential in product categories, such as pet supplies and healthcare products, and have subsequently made adjustments to our existing product portfolio. As a result, we were able to report a satisfactory increase in revenue of 27.3% year-over-year. The growth has not only demonstrated our ability to respond to market needs, but more importantly, highlighting our resilience despite operating on a downward cycle. Our strong performance in private label together with continued efforts to enhance infrastructure further improve warehouse efficiency and expand the online marketing capability. led to a satisfactory margin expansion of 313 basis points in LVM, with post-fulfillment margin hitting 10.6%, reflecting our outstanding operational capabilities. 自由品牌的理想表现也和我们持续加强基础设施建设分不开。 我们进一步提高了仓储效率并且扩大了在线运营能力, 使得我们的履当后的毛利率同比大幅提升了3.3个百分点到10.6%, 体现了团队的出色运营能力。 Any hours changing cost control, reporting the loss from operations were RMB 9.8 million, narrowing by 76.4% year-over-year. and the net loss was significantly dropped by 66.8% year-over-year to RMB 12.4 million for the quarter, which is the best quarter so far. The improvement on cost control also gives us a much leaner structure to go forward, as we fully validate our ability to achieve profitability. 期间我们同时严格控制成本, Boji being the leading platform in China shall become one of the key beneficiaries As we continue to expand and strengthen our ecosystem and enhance our value proposition to parents and industry partners, Boqi, as China's leading pet platform, will continue to expand its ecosystem to create greater value for pet parents and industry partners, and thus become a major beneficiary of industry growth. Now let me pass the time to Ella to update further on operational and community engagement during the quarter. Okay, thank you, Lisa, for the market insight and business highlights.
spk05: On a long-term horizon, we believe in the potential of China's pet market as it remains under-penetrated and underserved. According to the White Paper on China's Pet Industry in 2021, its market size is expected to reach RMB 269.3 billion in 2022. and RMB 445.6 billion in 2023. For us, the strong growth as well as the low industry concentration should leave ample space for us to grow and capture. Based on data from the Chinese pet industry in 2021, China's pet market is expected to reach RMB2,693 billion by 2022. In 2023, it will reach RMB4,456 billion. For Boqi, the market's rapid growth and the current low concentration of the industry will bring enough room for growth for Boqi, which will give it more opportunities to grow. As a platform that aims to become an end-to-end connector between brand partners and pet parents, we have been striving to expand our offering and community so that on the one hand, we can become the one-stop destination for pet parents that will satisfy their information, interaction, products, and services needs. And on the other hand, becoming the preferred option for brand partners to reach pet parents. Writing on our growing brand equity as well as established infrastructure, we were able to attract a growing number of brands to join our platform during the quarter, with the number of brands increasing by 14.1% to 745 in the quarter from 653 in the same period last year. SKU also reported an increase of 25.9% from 22,000 732 in the same period last year to 28,620 this quarter. SKU也从去年同期的22,732个增加到本季度的28,620个,增长达25.9%。 The growth of product category and selections, along with our comprehensive outreaching channels layout combined online and offline, enabled us to continuously enrich our highly sticky traffic pool. In this quarter, our active users increased by 11.4% year-over-year, and 20.8% quarter-over-quarter to 1.83 million. Our customer acquisition cost also hit a new low of RMB 5.2 compared to 12.8 in the same period last year. 产品种类的增长加上我们线上线下结合的全渠道布局, We believe the record low CEC highlights our high customer stickiness, as well as the potential in user organic growth. The expanding community should also lay a solid foundation for our future product sales and service revenue growth. All in all, along with our product portfolio optimization and cost control effort, We were able to report the loss from operations with RMB 9.8 million, narrowing by 76.4% year-over-year. As we are now really close to break-even and in a much better position to generate long-term value for our shareholders. 产品组合的优化以及有效的成本控制使我们期内的运营亏损同比收窄76.4%, Now, I will turn the call over to our financial VP, Loyal Dai, who will share more details on our financials. Loyal. Thank you, Ella. Now, please allow me to walk you through our...
spk01: financial highlights for the quarter. Before I go into details, please note that all numbers presented are in IMB and are for the first quarter of fiscal year 2023, unless stated otherwise. All percentage changes are on a year-over-year basis, unless otherwise specified. In this quarter, our total revenue slightly decreased 2.1% to RMB 315.1 million, primarily due to the decline in revenue from product sales, which dropped 2.7% from RMB 311.5 million to RMB 303.2 million due to the impact of COVID-19. However, revenue from the higher margin online marketing and information services increased by 14.7% to RMB 11.9 million. The increase in contributions from service income as well as improvement of Private labels and enhancement in product portfolio have gathered an increase in gross profit from RMB 56.4 million to RMB 17.7 million, up 25.3% year-over-year. Gross profit margin also enjoyed a significant enhancement of 419 basis points to 22.4%. Due to the increase in our service income and the development of free brands, as well as the improvement we have made on product combination, we have driven the growth of the interest rate this quarter. During this period, our interest rate has increased from RMB 56.4 million to RMB 70.7 million, and has increased by 25.3%. The interest rate has also increased by 490 points, reaching 22.4%. In terms of expenses due to the supply chain disruption as well as lockdown from COVID-19, our fulfillment expenses for the quarter slightly increased from 10.2% of revenue last year to 11.8% of revenue this quarter, largely maintained at RMB 37.4 million. However, as we were able to greatly increase our gross profit margin, our post-fulfillment gross margin also increased to 10.6% compared to 7.3% over the last year. 本季度的履单费用占收入的百分比略有增加,增加到了11.8%,那去年同期为10.2%。 Last year's total was 7.3%. Our total sales and marketing expenses were RMB 31.7 million, down by 30.3% from RMB 45.5 million in the same period of last year. Sales and marketing expenses as a percentage of total revenue was 10.2%, down from 14.1% in the same quarter of last year. The decrease was primarily due to the decline of advertising expenses amount to RMB 14 million, resulting from the lower expenditure for cost of saving and the increased proportion of revenue generated from more cost-efficient channels. Our total sales cost is RMB 3,170 million, which is 30.3% lower than last year's total 4550 million. 41% from IMB, 19.6 million in the same quarter of fiscal year 2022. G&A expenses as a percentage of total revenue was 3.7%, down from 6.1%, primarily due to the decreases in SBC expenses. That came down to a net loss of IMB 12.4 million for the quarter versus a net loss of IMB 37.4 million last year, representing a significant drop of Ebitda-wise, it also dropped 74.6 percent year-over-year from RMB 35.6 million last year to RMB 9 million this quarter. Now, gap net loss narrowed significantly by 66.7 percent year-over-year to RMB 10.5 million from RMB 31.5 million last quarter. To sum up, the net loss of this system is RMB 12.4 million. In 2022, the net loss of the same period, RMB 37.4 million, was greatly reduced by 66.8%. EBITDA's net loss of RMB 3.560 million from the same period last year was also greatly reduced by 74.6% to RMB 9.04 million. NUNCAP's net loss from last year's RMB 3.154 million On our financial position as of 2022, if excluding the RMB 159 million of long-term debt, our effective debt-to-asset ratio stood at 48.9%. As we are in the progress of completing shareholders ODI, the company is expected to receive the equivalent amount in U.S. dollars from overseas, which will be recorded in equity after repaying the IMB 159 million long-term debt. We ended this quarter with cash equivalent and short-term investment of IMB 247.4 million. With our strong cash on hand, stable current ratio, healthy gearing, as well as the closing gap with a break-even point, we believe we are sufficient in our operation and continue to be solid. Regarding our financial situation, as of June 30, 2022, If the long-term debt of RMB 1.59 billion is paid off, our actual asset debt rate is less than 50%, which is 48.9%. Since we are completing the ODI event of some shareholders, we expect to repay the long-term debt of RMB 1.59 billion, and the company will receive a large amount of U.S. money from overseas, and send it to all kinds of accounts on the account. At the end of this quarter, our cash, cash and short-term investment totaled 2.47 billion RMB, Last but not least, as Lisa mentioned, Boqi's values always go beyond a business, with its mission of carrying past to best our ability, especially during the challenging times, we went one step ahead during the quarter through a series of donations and activities that promote pet dogs as well as stray dogs and cat-carrying. Spotted by our angel supply chain, we were also able to donate pet supplies to various carrying centers such as Niayi in Shanghai and Ai Zhijia in Chengdu, satisfying the daily needs of thousands of stray dogs and cats. Looking ahead, we will continue with the good news as well as we see equal importance between business growth and the past well-being. Finally, as Lisa mentioned, the value contribution of BoQi has surpassed the commercial sector itself. Our mission is to make the most effort to care for pets, especially in this challenging period. Therefore, we continue to promote this mission in this quarter. Through a series of donations and charity activities, we help guide dogs and dogs, Here is my summary. Let's now move on to the Q&A section operator.
spk07: 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 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. Once again, it is star than one to ask a question. At this time, we will pause momentarily to assemble our roster. The first question comes from Darren Aftahi with Roth Capital Partners. Please go ahead.
spk06: Yeah, good evening. Thanks for taking my questions. Good to speak with all of you. A couple, if I may, I just want to start your gross margin continues to kind of improve. Congratulations on that. Where do you think the upper limit is on gross margins as you go forward and what are the initiatives you can put in place to kind of get there?
spk01: Hi, Darren. Thanks for your question. We expect that our cost margin can go up to 30% in the future.
spk06: And how do you get there from kind of that 22 level today?
spk01: Firstly, we expect that our Our proportion of service revenue will continuously increase, and the service revenue gross margin is much higher than the product sales. Secondly, we expect an increased proportion of our private labels, and the private label gross margin is also higher than the non-private label brands.
spk06: That's helpful. And then can you talk about what spend was for members versus non-members in the quarter and kind of how that's trending over the last couple of quarters?
spk01: About the spending or spending difference between the members and non-members. We find that spending of members is about twice as non-members of this quarter.
spk06: Got it. And then last one for me. On the supply chain, I know in the last couple quarters you kind of talked about how it's a little bit of a challenge to procure some international brands. I'm curious, either in the June quarter or kind of what you've seen in July and August and part of September thus far, are you seeing any loosening in the supply chain and your ability to procure international brands? And if not, are you substituting those with domestic brands?
spk05: Okay. Thank you, Darren. Thanks for your question. The link and the timeliness of overseas brands entering China really have not recovered significantly. We plan to make up for the demand of this part of products through our private labels and domestic small and middle-sized brands. And we can also see during this quarter the share of the appropriation of the private labels increased from 13 percent to 17 percent, while the appropriation proportion of the top 10 brands fell from 51 percent to 48 percent. So, we think Through this, by leveraging this strategy, we think we can decrease the influence of the overseas brand stuff.
spk06: Just one more, if I may, Al, on that comment. What's the gross margin you're seeing on your private label versus any kind of brand for that matter?
spk04: Hi, Darren. You mean the private labels, the gross margin?
spk06: Yeah, I guess what I'm asking is what is the gross margin you're seeing on private label versus branded product?
spk01: Darren, at this quarter, our private label gross margin is about 33%. and the non-private label's gross margin is about 20%. In the future, we expect our gross margin of private labels will achieve 35% to 40%. So that's why we expect our total gross margin will achieve 30% in the future. That's helpful. Thank you, Loyal. Appreciate it.
spk06: Thank you.
spk07: Again, if you have a question, please press star then 1 on a touch-tone phone. The next question comes from Shen Wanli with CITIC Securities.
spk00: Please go ahead. Hello, Mr. Guan. I would like to ask two small questions. The first one is, I would like to ask about our company's next free brand What is the development strategy? And the second small question is, I would like to ask the company to share again, what impact does the epidemic have on our business? Just these two questions. Thank you, manager. Thank you, Lisa.
spk02: Thank you for your question. Let me answer it. The strategy of the free brand and the machine, we mainly use big data to judge and discover some of the problems uh, uh, uh, uh, Then the second epidemic, to be honest, from April to June, when the epidemic was more serious in Shanghai, it had some impact, mainly on the service of users in Shanghai. During that time, in addition to the public service, the business of our other retail and sales have basically been suspended. Then this situation also affects the entire industry, even perhaps more than the pet industry. I believe it will have some impact this year. But what we see better now is that after the pandemic, although there are still some measures in place around the world to prevent the spread of the virus, but the demand of users in the entire industry, the closeness of people and pets, and the time and love that users have invested in pets, some new pets that can be discovered actually already exist. but we don't have much time to accompany them in the past, so some needs may be ignored. So users' professionalism and attention to the health of pets will actually be further improved. So in the future, we will also do more digging on the professional product line to match and meet the needs of users. Thank you.
spk07: Did you have a follow-up, Zhenhuan Li?
spk00: Okay. If you're ready for the next question, the next questioner is Carol Yang with Guafu Securities. Please go ahead.
spk03: Hello, I would like to ask a short question. Under the current stock price, will the company return or increase a plan in the future? Hello, thank you for your question. It's like this.
spk05: We actually hope to put more money into our company's operation under the relatively sufficient premise of free funds. Okay, thank you, Ms. Lisa.
spk07: Okay. Was there a follow-up, Ms. Ling? Okay. This concludes our question and answer session and BOCES fiscal 2023 first quarter earnings conference call. Thank you for attending today's presentation. You may now disconnect.
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