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MOGU Inc. American Depositary Shares (each representing 25 Class A Ordinary Shares)
Q2 2021 Earnings Conference Call
11/30/2020
spk06: Ladies and gentlemen, thank you for standing by and welcome to MoGU second quarter fiscal year 2021 financial results. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to turn the call over to Mr. Rene Van Susteyn. Please go ahead.
spk00: Thank you, Amy. Hello everyone and thank you for joining us today. Mogu's earnings release was distributed earlier today and is available on the IR website at ir.mogu-inc.com as well as on the Business Wire services. Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements are based upon management's current expectations and the current market and operating conditions and relate to events that involve known or unknown risks, uncertainties or other factors, all of which are difficult to predict and many of which are beyond the company's control. which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks and certainties or factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under applicable law. On the call tonight from Mogu are Mr. Sha Qianqi, Chairman and CEO, Mr. Raymond Huang, Chief Strategy Officer, Mr. Le Li, Investor Relations Director, and Ms. Wei-Ching Ellie Wang, financial controller. Mr. Cheng will review the business operations and company highlights, followed by Mr. Huang, who will discuss financials. They will all be available to take your questions during the Q&A session. Now it is my pleasure to introduce our chairman and CEO, Mr. Cheng. Please go ahead.
spk02: Hello, everyone. Hello everyone, thank you for joining us on the second quarter results announcement of the fiscal year 2021 today.
spk01: 过去的一个季度,我们的直播业务继续保持高速的增长态势。 这个季度,我们直播的GMV同比增长了42.2%,达到了23.16亿元。
spk02: The GMV of the live broadcast business has increased to 74.4%. The live broadcast business has now become the core driving force of our company's performance growth. Mogu Street, as the inventor of live broadcast e-commerce, in the construction of live broadcast businesses in the past four years, we have also built our own deep Fuchun River in all dimensions of the human resources factory. In the process of rapid development of the live broadcast industry, we are gaining more and more development opportunities.
spk01: In the past quarter, we continue to see a high growth rate in the live video broadcasting e-commerce. The GMB increased by 42.2% year-over-year to RMB 2.3 billion in the second quarter, contributing 74.4% of the total GMB. Mogulive has essentially become our growth engine. As a first mover of live e-commerce, During the last four years, we have established a very differentiating shopping experience, which enables us to capture more growth opportunities in the e-commerce space in China.
spk02: as well as the spiritual satisfaction of social interaction and companionship, etc. These added values make the users of MobuJet very connected. The value of the single UV is very good, and the second quarter is also the low level of our fashion e-commerce. In the case of controlling the market investment, our live purchase users have still achieved 20.7% of the same growth.
spk01: Not only do we provide quality and affordable products directly from the manufacturers to our customers, we also offer much more through our KOLs, such as diversified fashion content, immersive interaction, and companionship. This experience strengthened our customer engagement. Customers continue to spend longer time on our app and shop with higher frequency. Second quarter is a typical quarter with seasonality. Despite that, we have adopted a more prudent approach in terms of sales marketing. The number of our LVB active buyers grew 20.7% year-over-year, in addition Our social sharing and referral program is working very well to acquire more customers with precise targeting and higher cost efficiency.
spk02: We have been constantly innovating and exploring the experience of users. In this period, we have launched a new form of short video thinking. We present the best products in the live broadcast room to users in the form of short videos. We're continuously enriching the mobile shopping experience. We have launched a version of short video detail page, which captures the best product presentation.
spk01: by our KOLs in their live shows. Different from the traditional static detail page, this innovation allows our users, allows our customers, no matter inside or outside of the Mogul live room, to enjoy KOL's explanation, fitting and matching advice, and creating a more efficient and effective live shopping experience.
spk02: In the construction of the live environment, We are still providing them with opportunities, whether it's the head or the central department or the small streamers. And through a more in-depth supply chain, rich energy and manpower combination, we ensure the continued growth of our streamers. In the Double 11, our head streamers continue to break through the top line. We have two streamers who have achieved 200 million single streamers, becoming one of the top streamers in the Double 11. Our streamers' fan base value is currently the highest on the whole network.
spk01: To build a more sustainable live e-commerce ecosystem, we'll continue to focus on new KOL incubation and supply chain empowerment. During the Double 11 promotion, our top KOLs continue to break the record. Two KOLs have each achieved over 200 million sales over one live session, marking them the top KOLs in the whole industry. Our KOLs also have the highest value per fans across all the live e-commerce platforms. Our supply chain empowerment plays a critical role in empowering KOLs and benefiting our consumers. In early November, we conducted live video broadcasts to trace seven major apparel production zones in China. This activity helped local manufacturers sell more products in a single live session than they otherwise needed to over a few months. Mogul Live simplify and accelerate the product circulation, improve the efficiency of various parties, and deliver great value to our customers. 用户价值是我们的核心追求,我们会继续在直播生态的各个方面巩固优势,持续创新,充分发挥直播电商的优势,为用户提供更好的购物体验。 We aim to deliver more value to our customers. We will continue to innovate mobile life and establish a better fashion shopping experience for our customers. Thank you, Shark. Thanks again, everyone. This is Raymond speaking. Thank you for joining our conference call today. So now I will walk you through our second quarter fiscal year 2021 financials. We believe year-over-year comparison is the best way to review our performance Unless otherwise stated, all percentage changes I'm going to give you will be on that basis. Let's review the financials first. Our GME for the second quarter of fiscal year 2021 was RMB $3,112 million, a decrease of 25.3% year-over-year. GME for the 12-month period ended September 2020 was RMB of $14,951 million, a decrease of 16.1% year-over-year. Our focus has been growing the GMV from live video broadcasting, which has increased by 42.2% year-over-year to RMB 2,360 million. LBB Associated GMV for the second quarter of fiscal year 2021 accounted for 74.4% of the total GMV. Active buyers of the LBB in the last 12-month period and the September 30, 2020, grew by 20.7% year-over-year to $3.5 million. So let's now turn to revenues. During this quarter, total revenues decreased by 43.1% to RMB $112.5 million from RMB $197.9 million during the same quarter of the fiscal year 2020. Commission revenue decreased by 32% to RMB 68.9 million from RMB 101.3 million in the same period of fiscal year 2020, primarily due to the restructuring of the company's business towards a LBB-focused model. Commission revenue from the LBB business grew year-over-year continuously and was in line with the continued year-over-year growth in the LBB-associated GMB. Marketing services revenues, which is mainly generated from our marketplace business unit, decreased by 71.5% to RMB 18 million from RMB 63.1 million in the same period of the fiscal year 2020. The decrease was primarily due to restructuring of the company's business towards a LVB-focused model. I will now walk you through our major costs and expense. Cost of revenue. decreased by 40.1% to RMB 45.5 million from RMB 76 million in the same period of fiscal year 2020, which was primarily due to a decrease in the cost associated with decreased online direct sales and IT-related expenses. Sales and marketing expenses decreased by 73.5% to RMB 47.9 million from RMB 180.8 million in the same period of fiscal year 2020, primarily due to optimized spending on user acquisition and the user incentive programs resulted from the restructuring of the company's business, and also as a measure we conducted to counter the adverse impact of COVID-19. Research and development expenses decreased by 45% to RMB 27.7 million from RMB 50.3 million in the same period of fiscal year 2020. Primarily as a result of HACOM optimization, we conducted to counter the adverse impact of COVID-19. General and administrative expenses decreased by 37.4% to RMB 24.7 million for RMB 39.5 million in the same period of fiscal year 2020, primarily due to a decrease of payroll expenses. Amortization of intangible assets. decreased by 1.4% to RMB 75.8 million from RMB 76.8 million in the same period of fiscal year 2020. Lost from operations was RMB 100.5 million compared with lost from operations of RMB 223.6 million in the same period of fiscal year 2020. Net loss attributable to Mogul's ordinary shareholders was RMB 93.7 million, compared with net loss attributable to Mogul's ordinary shareholders of RMB 326.6 million in the same period of fiscal year 2020. Cash and cash equivalent, restricted cash and short-term investments, were RMB $800 802.5 million as of September 2020, compared with RMB 1,095.4 million as of March 31, 2020. In summary, we also have a subsequent event. In October 2020, one of the company's investors repurchase a majority portion of companies' investments in the investees for a total cash consideration of approximately US $16 million, equivalent to RMB $107.1 million, of which from the US The $14.4 million was received in October 2020. As a result, again, from the investments will be recognized in the quarter ended December 31st, 2020. In summary, from financial performance perspective, we are still in the progress of business restructuring. Shifting our growth engine from traditional e-commerce to live e-commerce Looking forward, our product innovation and our dedication to supply chain development will deliver a very differentiated fashion shopping experience to our customers. Mogulife will drive our growth going forward. So with that, I would like to open the call for Q&A.
spk06: Thank you. At this time, we will be conducting our question and answer session. In order to ask a question, please press star, then the number one on your telephone keypad. We'll pause for a brief moment to compile a Q&A roster. Your first question comes from the line of Laki Lau. Sorry, your first question comes from the line of Charlie Chen with China Renaissance. Charlie, your line is open.
spk03: Thank you very much for your time to answer my question. I have two questions. One is that from the second quarter, it seems that the GMV rate of live broadcasting seems to have a relatively obvious slowdown compared to the previous quarter. I would like to ask this question. Thank you. The first one we just talked about is
spk02: This is the first wave of the pandemic. Secondly, the pandemic will have an impact on the situation. During the pandemic, the workers were not prepared for the summer and autumn. This will have an impact on the summer and autumn. This is the second impact. The third impact is It's true that last year compared to the previous year, the previous year's rate was relatively lower. I think this may also be an impact. Yes, so under the influence of a few different factors, it looks like the rate will drop a little. And then the second quarter you mentioned, and then in the new quarter, it looks relatively strong at the moment, especially our double 11 performance.
spk01: Maybe I would just translate the question and the answers for the benefits of the audience. So the question is about the slower growth rate of the GMV from the LBB associated business over the last quarter. And Chuck's answer to that was, number one, the Q2 was actually a quarter with seasonality. And number two, apparently we're still seeing some death over effect from the COVID-19 situation, because a lot of apparel factories are actually not 100% prepared, and sometimes they are running out of capacity, as well as raw materials they need to produce the apparels. And number three, compared with the previous quarter, I think the previous quarter from 2019 was actually a quite strong quarter. So the previous quarter was actually a grow out of a lower base, And this quarter is actually compared with a stronger quarter of last year. So that's the three reasons that SHARC addressed the question about the slower growth rate. And going forward, I think we have achieved a very good result on the double 11 promotion. And we are seeing very strong performance from the non-video broadcasting business. And we are very confident with this quarter. And as we have achieved our goals in the double 11 promotion, And we are seeing very, very good results from this quarter so far.
spk03: Thank you.
spk01: Thank you.
spk06: And again, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Lockie Lau with AJ Asset Management. Lockie, your line is open.
spk04: Hello, Mr. Guan. I have two questions. First, I would like to ask about the situation of 31. How did it go compared to the same period last year? What is the trend in the future? And the second question is, I saw that the company received an investment of $16 million. Can you talk about what kind of investment it is? Thank you. Let's continue.
spk01: So maybe, Loki, I'll just translate the question and answer at the same time for you. So the question was about the W11 performance we have, maybe basically just one month ago. And the other question is about the cash we have received from the investee's repurchase of the investment. So number one on the W11 promotion, apparently it's a very important promotion for all the e-commerce platforms in China. And this year, Again, our focus is really on the mobile life, our live media broadcasting business. And apparently this year we have delivered very, very strong results. I think a few key points I want to emphasize is that, number one, our top KOLs, they have each delivered over 200 million sales over one live session. So that's a very, very impressive result. That's basically 200 million sales over just a few hours. That's extremely competitive results compared with all other KOLs from all other live e-commerce platforms. And that shows our, that's basically a result of our long-term dedication to live business and our long-term dedication to the supply chain empowerment and how we empower our KOLs. And the other question was about the repurchase of the investments. So basically, this investment has nothing to do with other share repurchases or other decisions we have made in capital markets. It's purely driven by, because you know we have actually made some investments in relevant companies and in relevant industries that we see appropriate. So one of the portfolio companies we have achieved very, very good growth over a few years. And they have an event that we can potentially exit part of our holdings from the company. So that's why we receive some of the cash from this portfolio company. And that's why we receive the cash. Apparently, this cash will also be reflected in our cash balance as of end of December 31 of 2020. But we can assure you that this has nothing to do with the timing of the repurchase of our own shares. We repurchased our own shares last quarter was primarily because we have a view that the company's market cap as of today does not reflect or does not fully reflect the the full market cap or the full value of the company or the long-term growth prospect of Mogul Life's business.
spk04: Thank you.
spk06: Your next question comes from the line of Veronica Shen with China Renaissance. Veronica, your line is open.
spk05: Thank you, Shark Raymond. I have two questions. The first question is about active users. I also see that our year-over-year growth is about 20%. But if you look at it from Q over Q, the active buyer for 12 months seems to have a decline. I want to ask what is the reason behind this. I also understand that we mentioned that the third quarter may be a lower season. But I still want to see Okay. Okay. Oh, thanks, for taking my question. My question is regarding the number of active buyers. We have seen 12-month active buyers decline on a quarter-over-quarter base. I'm just curious about what is the reason behind, and how should we look at the user growth going forward? Well, I understand the third quarter is low season for us. So any color about the fourth quarter and the coming year will be helpful. Thank you.
spk02: This question is like this. Actually, we have mentioned this question several times before. Because we have been in the process of transformation of core business for the past two years. From the previous freight-oriented e-commerce to live-streaming e-commerce transformation. Then, because of the annuality of the live-streaming e-commerce customers, including their app value, etc., are several times higher than the original freight-oriented e-commerce. We haven't disclosed the details yet, but the value of a single customer is several times higher than that of the original e-commerce. So, in terms of our customer acquisition strategy, there have been some changes compared to the past. First, we will pay more attention to the acquisition and maintenance of live customers, because the value of a single customer is much higher than the previous model. So, it will be more helpful for our financial situation. Secondly, due to various external competition, the cost of single customers has increased a lot in the past three years. Especially for the expatriate e-commerce, the cost of participating in the competition with these giants and the expatriate e-commerce users is really too high. So everyone can see that in the recent period, In terms of sales, the cost has dropped significantly. The main reason is that we have reduced our participation in the competition in the commodity market. Because there is really no way for us to even out the cost of our customers and the value of our assets. You're going to get a little too close. You're going to get a little too close. You're going to get a little too close.
spk01: Maybe I will just quickly translate the Chuck's answer. Number one, as you can see that we are actually going through a transition from the traditional e-commerce to the live e-commerce. Apparently, we need to change our tactics as well. We're seeing that the live users tend to have much higher output and much higher frequency. and a very, very strong loyalty to the platform. So we actually value these customers more than the traditional e-commerce customers. Honestly, due to the competition, I think in lots of years you can see that the cost of customer acquisition has been increasing quite rapidly. So we reduce our marketing and sales marketing expense in the traditional competition in the traditional competition for e-commerce customers. We're actually more focused on the customers from the live video broadcasting channel. So this change of tactics, as you can see, has two results. Number one, we are seeing that our total number of active buyers of LVB has been increasing. And number two, the total expense of the social marketing has declined dramatically.
spk05: Well, my next question is about the take rate. I have seen our take rate shows a downtrend in this quarter. So could you please elaborate more about it and how's the trend going forward in the following quarters? Thank you.
spk02: Let me give you a quick answer. It's similar to my previous question. Tickerade comes from two businesses. One is a freight e-commerce and the other is a live e-commerce. To put it simply, the Tickerade of freight e-commerce is relatively high. In that part of the business, in the process of reduction, the overall tick rate will have a certain decline. But at the same time, is it that after our live broadcast business grows, our tick rate will not go up? I don't think so. One is that our live broadcast business does need some time to cultivate, and then there are some external competitions. Although I think the competition is not particularly the same as in the past, because the live streamer and the customer are very close, so the competition is not as fierce as before. Therefore, we are still optimistic about the online space of the live streamer Techread. On the other hand, the live stream brings us a very important impact. In fact, it is our cost that continues to decline. The cost decline is mainly due to the cost of human resources. The reason is that many of the services that we need to provide to our platform and the things that the platform does, are actually taken over by the anchor and the anchor team. For example, our headquarter, we just talked about the anchor that can break 200 million. In fact, their team is already quite large. They are actually taking on a lot of costs.
spk01: Sure, I will just quickly translate Shark's answer. So the question was about the decline of the take rate of last quarter. And apparently, we are seeing a few reasons behind it. Number one, we are seeing the restructuring progress of shifting from our traditional e-commerce to live e-commerce. The take rate for the traditional e-commerce usually was much higher than the live e-commerce. And we're seeing that as the live e-commerce takes up a greater percentage of the total GMV in last quarter. So that's number one. We're seeing that the live e-commerce has a lower take rate, which actually drags down the overall take rate. And secondly, going forward, we are thinking that the take rate from the live e-commerce part has room to improve because the KOLs are actually very loyal to the platform. And their fans are very, very sticky to the platform as well. And we have all the exclusivity agreement with them. So going forward, it's possible that our take rate can potentially go up. It has room for improvement. And number three. If we don't look at the revenue side, if we don't look at the takeaway side, and we just look at the cost side, we can see that the platform cost has been decreasing over the last two years. KOL is actually taking over a lot of the organization burden from the platform. They are hiring a lot of people to do all the product curation, product selection. They are hiring a lot of people to do all the quality control so that we, Mogul, the platform, doesn't need to hire as many people as we used to. which is evident in our cost of revenue decreased by 40%, and in our research and development, decreased also by 45%. You can see that the platform expense and cost has been coming down over the last few years.
spk05: Thank you, Rayman. This is Shaq. And finally, I'd like to follow up on a small question about the savings that we've just mentioned. We've controlled it very well. And I'd like to ask how we're looking at the break-even issue. Because I remember talking to the company before, maybe there's hope that by the end of this year, we'll be able to reach the break-even. I also saw that the gap, the net loss, is now gradually shrinking. I'd like to ask if the current target is unchanged. Let me translate my question first. In this quarter, we can see we did a good job on cost control, and our non-GAAP net loss has narrowed. So should we expect a break-even point within this year? Thank you.
spk01: Okay. Thank you, Veronica. I'll just answer the question directly. So I think brick-even is a very important goal for our company in 2021, fiscal year 2021. I think it's a very important milestone, but we don't limit our financial performance because of the brick-even point. We're actually thinking of From a long-term perspective, live video broadcasting e-commerce has a very, very long runway, and there's a lot of things we can do to grow this business, to make this bigger. So brick-evening is a very important milestone, but we don't provide a very specific guidance in terms of timing or in terms of when we can or how the specific timing that we will definitely do that. From a big picture perspective, you can see that the loss from operations has been decreasing dramatically. And the company's cash positions or against cash flow positions is getting increasingly healthy. So we think our financial positions are in much better shape than a year ago. We definitely will keep in mind that we want to make sure that the break-even is possible in the future, but we don't give very specific guidance. But we want to assure all the investors that we are trying our very, very best to capture all the potential possible growth opportunities in the live e-commerce space in China.
spk05: Okay, thank you, Raymond.
spk06: And again, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Charlie Chen with China Renaissance. Charlie, your line is open.
spk03: The head anchor did a pretty good job. It's more than 100 million RMB. I'd like to ask if the company has any indicators to measure the growth of the anchors in the central and central departments. For example, what is the average amount of RMB in a single factory, or what is the amount of RMB in a single factory that can expand to millions? Do you have any indicators to measure the overall growth?
spk01: So the question was about the incubation of the new KOLs. So basically, as we can see that the top KOLs in our mobile platform are doing very, very well. So what's the company's strategy going forward for the KOL incubation?
spk02: Thank you, Charlie. Of course, there are very clear indicators inside. We also have a very clear system from the small streamers to the leading streamers, and a system of division of management and supply. We have a very important indicator in our internal economic and operating teams, which is the growth of our central streamers. We are very clear that our central streamers This is the main focus of our platform. So this is very clear. Regarding the specific data, for example, the data of millions or tens of millions, we have not announced it yet. But overall, we are relatively optimistic. There are still a lot of new faces this year, and the growth rate is still good. And then I mentioned Double 11 just now. As for Double 11, both of our heads are indeed very strong, as well as our entire strategy. We are relatively inclined towards our heads. We hope that our heads will be stronger and have stronger competitiveness in the industry. When it comes to Double 12, our entire resources will be relatively close to the combination of our central and central departments. We hope that these experiences that help our heads succeed will become our daily means of operation. Thank you, Chuck. So I'm going to translate the answer very quickly.
spk01: So the question is about the KOL incubation. Apparently, I think Mobu is the platform that has been extremely dedicated to KOL incubation. we have all the very comprehensive tiering and empowerment training system to make sure that KOL can grow and can thrive on our platform. So our operation team, Their key KPI or their key objective in their day-to-day operation is to make sure that the KOL can grow and thrive on our platform. They are definitely the majority of our GMB contributor on the mobile platform, and they definitely will be the key growth driver for us going forward. So we don't disclose a very specific number of how many KORs actually deliver more than 10 million cells. over whatever period. But we are seeing that a lot of new faces are actually popping out on our platform. We are seeing new KOLs are performing very well on our platform thanks to the very strong empowerment of our supply chain team. And they can actually deliver very, very affordable and at the same time very differentiating products to our customers. And they can be recognized and they can also be well received by our customers. So as you can see, the W11 was a major event that we dedicated a lot of resources to our top two KOLs. But going forward, when it gets to the December promotion event, we will actually replicate our experience, replicate our operational out with more meat to long tail KOLs and to make sure that they can grow and thrive as well. They can actually sell more. So that's our goal going forward. And that's the key KPI of our operation team going forward.
spk03: Thank you.
spk06: There are no further audio questions. I will turn the call back over to Mr. Rene Van Gusten for closing remarks.
spk00: Thank you, Amy. Thank you, everyone, for joining the call today. If you have any further questions or comments, please don't hesitate to reach out to any one of us here at Mogu. This concludes the call. Good night, all.
spk06: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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