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Boqii Holding Limited American Depositary Shares, representing Class A Ordinary Shares
Q2 2023 Earnings Conference Call
6/27/2023
spk00: Good day, ladies and gentlemen. Thank you for standing by, and welcome to Bo Chee's second half and fiscal year 2023 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. Now, I will turn the call over to Elle, Bochy's Head of Investor Relations. Elle?
spk01: Thank you, Operator. Good morning, everyone. Welcome to Bochy's Second Half and Fiscal Year 2023 Earnings Conference Call. Joining us today are Ms. Lisa Tang, Co-CEO and CFO, as well as Mr. Loyal Dai, our Financial VP. We released 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 involving current 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 is included in the company's public filing with the SEC. The company does not assume any obligation to update any forward-looking In the beginning of the meeting, please note that today's discussion will include the preemptive statement made by the Security Act of the United States 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. 有关这些及其他风险和不确定因素的进一步信息已经在于公司向美国证券交易委员会提交的公开文件当中。 除非适用法律要求,公司将不承担任何更新前瞻性声明的义务。 Please note that certain financial measures that we use on this call, such as non-GAAP net loss, non-GAAP net loss margin, EBITDA and EBITDA margin, are expressed on the 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, 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. Over to you, Lisa. Thank you, Elle. And many thanks to everyone for joining the call today. In fact,
spk04: fiscal year 2023 was a challenging year for e-commerce in China. Increasing geopolitical risks and the lingering COVID-19 impact have led to a wide range of changes in the global supply chain. That was subsequently translated to growing raw material and logistic costs. The rising inflation and uncertainties has also led to a general conversation among consumers. In the case of China, the COVID prevention policies have also created short-term problems on production and delivery. Thank you, Al. Thank you for attending today's phone call. In fact, for China's e-commerce, the year 2023 is a challenging year. The rising risk of hell COVID-19 has also had a short-term impact on production and shipping in China. In spite of this, we remain confident in our unique positioning in China's expanding pet market. We saw favorable increase in the number of pets and the growing penetration of pet economists that will support further pet consumer online. We also saw the trend of consumption upgrade supported by the strong growth in unique markets such as pet food and healthcare products. Over the years, we've tried to strengthen our group along the supply chain integrations in order to improve the operational efficiency and enhance margin. For example, in the post-COVID era, based on the system supporting, we switched from traditional warehousing to cloud warehousing management, allowing us to get better efficiency. We also relabored our upstream production and manufacturing network so that we can enhance our cost optimization, accelerating production, and varieties for group business. In the past year, we have increasingly strengthened the control over the supply chain integration, and improved the efficiency and profit space, such as by transforming the traditional warehouse into a cloud warehouse, to further improve the efficiency of the use of assets. At the same time, we have further marked the production network of the above-mentioned manufacturing industry, We are particularly encouraged by the fact that we see a strong monthly performance at the end of the fourth quarter. We are also happy to report that our net loss has significantly narrowed by 41.6% in fiscal year 2023. laying a solid foundation for a turnaround in fiscal year 2024. Looking ahead, we expect China's consumer sentiment to rebound as a result of post-COVID era, as well as the reducing market uncertainties and the inflation impact. We will continue to drive business development and financial growth through organic development and M&A, as we are confident that Boise will continue to grow in creating long-term values for our shareholders branded partners, and parents. Looking forward to the future, we expect that we will have confidence in the confidence of Chinese consumers, and we have confidence in the development of consumption after the reduction of uncertain factors and inflation. We will continue to promote business development and financial growth through internal and external sources. 有信心为股东品牌合作伙伴和养宠物父母去创造长期的价值。 As part of management team, we believe we are heading towards the right direction. Our team will continue to work with passion while keeping a keen eye on our operation and potential market opportunities. In order to repay our trust and confidence, let me pass the time to Elle to further update you on our operations and the private labels in fiscal year 2023.
spk01: Thank you, Lisa. Despite the obstacles we faced during the year, Buqi continued to focus on building its community and enhancing its supply chain proposition. Through our growing brand profile, comprehensive content, and an extensive selection of products, our Buqi Mall was able to maintain Even though consumer sentiment was relatively weak during the second half. 谢谢Lisa 纵使年内有一定的挑战 我们仍然致力于巩固我们的社区 并且不断地强化供应链的布局 通过不断提升的品牌形象 全面的样宠资讯 以及丰富的产品组合 我们的波及商城也可以在挑战中,特别是在下半年消费情绪相对疲软的时候,维持稳定的表现。 In numbers, our number of users demonstrated a satisfying increase of 16.2% year-on-year to over 5.8 million. This thickness was also reflected in the historic low CAC, down by 50%. 7.2% year-on-year to RMB 5.3 for the year. That showcases our ability to expand user pool at a low cost. And that should lay a solid foundation for our future growth. During the year, Boqi also saw excellent performance from its private label. Its GMB for the year was up by 6.2% year-on-year. Its revenue also recorded a remarkable increase of 19.2% year-on-year despite a weak second half. We saw strong growth across all product categories, including pet food, snacks, pet supplies, as well as medical and health products. Boqi also focused on promoting the development of free brands in the past year, and achieved better results. The GMV of free brands increased by 6.2% in the year, and the relative income increased by 19.2% in the year. Among the strong growth of all brands, Leveraging by our improving big data capability, we also took the opportunity to optimize our private label mix, so as to avoid carrying non-performing products which track assert efficiency, as well as to improve product quality to satisfy pet parents' needs. The reshuffle, along with the growing revenue contributions from private label from 15.4% to 19.9%, was able to drive a growth-level gross profit margin to 21.4%. That represents a modest enhancement of 90 basis points year on year. Coming from a period filled with serious supply chain and consumer market disruption. With the continuous improvement of our large data capacity, we have also been able to make some strategic adjustments to the product combination of free brands, thereby reducing some products that are not ideal for sales performance, and more suitable products to meet the needs of foster parents, and further improve our asset usage efficiency. In addition, the income ratio of free brands has been established from 15.4% last year to 19.9% in the year, We believe the private label business will be one of our key growth drivers in the future. Looking ahead, we will continue to refine our product mix, enhance product quality, and expand our distribution network so as to support our private label development. All in all, we believe it is important for us to enhance our value proposition, allowing ourselves to have more buffer regardless of the macro environment. To do so as the leading position of the pet industry, we will continue to find more opportunities to reinforce our closed-loop community by enhancing our coverage from upstream production, midstream warehousing and distribution, to downstream presence and offline touchpoint coverage. And as the pet market is still relatively fragmented, We look forward to creating an all-rounded ecosystem which brings value to pet parents and burn partners. After several years of experience, we learned that regardless of the market, we need to further strengthen our value chain to maintain the overall competitiveness of our group. In the current situation, the pet market is still slightly scattered, so we can't rely on the pet industry. Now I will turn the call over to our financial VP, Loyal, who will share more details on our financials. Loyal. Loyal. Thanks, Elle.
spk02: In the following, I'd like to share more on our financial performance for the year. Despite the marked difficulties brought by COVID-19, we still deliver year-over-year improvement for the year, supported by expanding margins and improving cost control. 谢谢, Elle. 我们仍然在毛利率以及成本控制上面取得了良好的进展, 带动了公司全年业绩的表现。 Our first year revenue was RMB 1.09 billion, done by 8% year over year. As a result of lingering COVID-19 disruptions and worsening market conditions, supported by the growing contributions from Baltimore and private label, Along with our effort in private label product mix optimization, gross profit margin recorded a 19 basis points increase to 21.4% with gross profit reaching RMB 233.5 million for the year. As compared to RMB 134 million last year, as a result of the decrease in GMV and revenue. However, benefited from the gross profit margin enhancement, post-fulfillment margin increased from 9.2% last year to 9.8% this year, in spite of the surging logistics costs and the COVID-19 pandemic. 由于本年 GMV和收入有所加降, 我们的履单费用有上个财年的 Total sales and marketing expenses for the year were RMB 124 million, significantly down by 27.5% from 171% Last year, sales and market expenses as a percentage of total revenue was 11.4%, down from 14.4%, mainly due to the decreasing advertising expenses amount to IMB 36.7 million, resulting from the increased proportion of revenue generated from more cost-efficient channels. 1.2 billion yuan decreased by 27.5% compared to last year's 1.7 billion yuan. The total sales income ratio is 11.4%, which is lower than last year's 14.4%. This is mainly due to the decrease in our promotion cost of 37 million RMB. This is due to our more income from our more economic efficiency sales channel. General and Unimigrated Expenses were RMB 46.6 million down by 38.9 percent from IMB 76.2 million in fiscal year 2022. General and administrative expenses as a percentage of total revenue was 4.3 percent, down from 6.4 percent in fiscal year 2022. The decrease was primarily attributable to the decrease in shared based compensation expenses. That came to a net loss of RMB 106 million for the year versus a net loss of RMB 132.8 million last year, representing a 20.2 percent reduction year-over-year. Impairment of goodwill of RMB 40.7 million was recorded in net loss in fiscal year 23 compared to near in fiscal year 2022, if excluding impairment of goodwill. Net loss of this year is RMB 65.3 million. compared to RMB 132.8 million of last year, representing a 51% improvement year-over-year. Non-cap net loss for the year also came to RMB 70.7 million, representing a 41.7% reduction year-over-year. RMB loss of RMB 1.33 billion decreased by 20.2%. The net loss of Q3 of Q2 of Q3 includes RMB 4,070,000 of commercial deficit. Q2 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of Q3 of On our financial position as of March 31, 2023, if excluding the RMB 102.8 million of the long-term debt, our effective debt to asset ratio stood at 39%. As we are in the progress of completing shareholders' ODIs, the company is expected to receive the equivalent amount in U.S. dollars from overseas which will be recorded in active after repaying the IMB of 102.8 million of the long-term debt. Moreover, as of March 31, 2023, our cash equivalent and short-term investment is IMB 160 million. operating cash outflow in fiscal year 23 was IMB 52.3 million, representing a significant decrease of IMB 95 million compared to IMB 147 million in 2022. With no major capex forcing and a strong credit line backup, we believe we are cash sufficient to support our operation and pursue new especially with our CAC achieving new low and as we get closer to our break-even point. 关于我们的财务状况, 截止到2023年3月31号, 如果撇除人民币1.03亿元的长期负债, 我们的实际自然负债率为39%。 由于我们正在完成股东的ODI, 预计我们在偿还人民币1.03亿元的长期负债后, 公司将从海外, will receive direct U.S. dollar capital from abroad and enter all kinds of subjects. At the same time, as of March 31, 2023, our cash and cash bonus and short-term investment are RMB 1.6 billion. In 2023, our net cash flow will be RMB 52.3 million, which is a significant reduction of RMB 9.5 million compared to the 1.47 billion in 2022. In addition, we do not have a significant capital expenditure expectation, Let's now move on to the Q&A session. Operator. 接下来我们进入问答环节,有请主持人。
spk00: 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. Again, press star then 1 if you have a question. At this time, we will pause momentarily to assemble our roster. Again, it is star then 1 to ask a question. The first question comes from Matt Ma with China Securities. Please go ahead.
spk01: Okay, thank you. Let me translate first. So Matt want to know, he saw that the revenue is down and understanding that it may be related to the COVID-19 last year. So he would like to know our forecast for the fiscal 2024 revenue. Loyal, please.
spk02: Yes, our revenue has slightly decreased compared to fiscal year 2022 due to COVID-19. After recovery of COVID-19, we expect our revenue growth will be higher than last year. Thank you. 谢谢,谢谢你的提问。 我先翻译一下。 Okay, let me translate first.
spk01: Max wants to know that the net loss for the whole year narrowed down by around 20%, which is lower than that of the first half of the year. So he would like to know about the reason.
spk02: Our net loss for the first half of the year is 1.33 billion. The net loss for the first half of the year is 1.06 billion. Our net loss of fiscal year 23 was RMB 106 million. representing a decrease of 22 percent from net loss of IMB 132.8 million in fiscal year 22. Impairment of goodwill of IMB 40.7 million was recorded in net loss in fiscal year 23 compared to near in fiscal year 22. If including impairment of goodwill, net loss was IMB 65.3% in fiscal year 23 represents a decrease of 51% from landlords of IMB 132.4 million of fiscal year 22. Thank you.
spk01: Thank you for your question.
spk03: Thank you for your answer. I have no more questions. Thank you.
spk01: Thank you.
spk00: Are you ready for your next question?
spk01: Yeah, of course, please.
spk00: Thank you. The next question comes from Yuqi Zhang with CICC. Please go ahead.
spk05: Hello, everyone. I'm Yuqi Zhang from CICC. I have two questions to ask. One is about free brands. We've been doing free brands for many years.
spk01: OK, let me translate first. She asked two questions. First is she said that we operated the private labels for a long time. And she saw that the private label performance is good in fiscal year 2023. And she would like to know our planning for the private labels and want to know the future forecast for the private label. the revenue and the gross profit margin.
spk04: Okay, let me answer. Thank you for your question. We have made a full plan for the entire strategy of the free brand. We rely on some of our original data and users' advantages. In the future, this will continue to grow. So we expect that the entire revenue ratio of the free brand in the future will exceed 30%, or even higher. Okay, let me translate first. Lisa answered that, yes, we have made a plan on the strategy of the private label, and relying on the original data and user advantages
spk01: It is expected that the proportion of the private label revenue will exceed around 30% in the future. And the gross profit margin rates will exceed 35%. And the second question, said that she saw that she would like to know the current cash flow of the company. She would like to know how long could the current cash flow maintain the business operation?
spk04: Okay, the second question is about the cash flow. Compared to before, the cash flow of the entire second fiscal year has had a significant improvement and has benefited from the joint efforts of the team. As of March 31, 2023, which is the end of this fiscal year, the company now has a total of $1.6 billion in cash. Compared to the previous year, the total sales of the company was 14.7 billion yuan. In 2023, the total sales of the company was 51 million yuan. And the number of sales will be further improved. With the improvement of the company's business and the adjustment of the layout, and the development of the whole market this year, the epidemic has also ended, and the whole consumption has stabilized. the growth of our income and the improvement of other further business data. So the current cash flow to support the company's business operation is not a problem at all.
spk05: Okay, thank you Lisa and Elle for your answer. Very detailed. I would like to ask a small question here. As you just mentioned, our free brand, this 30% ratio and Okay, let me translate first.
spk01: Firstly, I will translate the answer for the last question. For the second question, Lisa answered that the cash flow of the fiscal 2023 has been greatly improved compared with before, and also needs thanks to the efforts of the team. As of March 31, 2023, the company has RMB 160 million in cash and cash equivalent and short-term investments. And the operating cash outflow of RMB 147 million in fiscal year 2022 narrowed significantly to RMB 51 million in fiscal year 2023. and we believe that we expect that the narrowing range will be further improved and with the stable way of the market and conception and with the growth of income and the improvement of operating data which can support companies operation for a really long time and usually ask ask the third question is that when will the forecast for the private label will be achieved and what measures will the company will be take to achieve this guidance?
spk04: So, to answer your question about the 30% ratio, It is a mid-term goal. There will be further improvement in the future. Then, how to achieve a 35% net profit? It should still be achieved through different categories and combinations of brands of different free brands. In some categories, the net profit of free brands will even be higher. But there are also some categories Okay, let me translate first. The proportion
spk01: 30% is a medium-term goal, and there will be further in the future. At present, we could see that the industry is relatively scattered, and we have developed a series of strategies to cope with the current market situation and to use the big data to do label brand metrics and brand name. And for the gross profit margin, we think that the different categories and different brand combinations could help us to improve the gross margin. And some categories of rebrand in incubation stage will make profits to cultivate customer cognition. And we believe that the comprehensive performance will exceed the 35%. Okay, thank you.
spk05: Okay, thank you very much. I don't have any more questions. Okay, thank you.
spk04: Thank you.
spk00: Thank you. Seeing no more questions in the queue, let me turn the call back to Ms. L. Lai for closing remarks.
spk01: Okay. Thank you. 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 it to you again on our progress in the next half year. Thank you.
spk00: Thank you all again. This concludes the call. You may now disconnect.
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