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MOGU Inc. American Depositary Shares (each representing 25 Class A Ordinary Shares)
Q3 2021 Earnings Conference Call
2/25/2021
spk02: Ladies and gentlemen, thank you for standing by, and welcome to MoGU third 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 will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Mr. Roger Hugh, thank you. Please go ahead, sir.
spk00: Thank you. Hello, everyone, and thank you for joining us today. MoGU's earnings release was distributed earlier today, and it's 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. These forward-looking statements are based upon management's current expectations in 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 risks and other risks Uncertainties 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 today from Mogu are Mr. Shark Chen-Chi, Chairman and CEO, Mr. Raymond Huang, Chief Strategy Officer, Mr. Le Li, Investor Relations Director, and Ms. Hui Xing, Ellie Wang, Financial Controller. Mr. Chen will review the business operations company highlights, followed by Mr. Huang, who will discuss the 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. Chen.
spk03: Please go ahead. Hello, everyone.
spk06: Thank you for joining us on the third quarter results announcement for the fiscal year 2021 today.
spk03: From 2011 to now, Mogu Street has been established for 10 years. For the past 10 years, we have insisted on making fashion meet everyone's mission. From innovation to shopping, e-commerce, live streaming, to short videos, Mogu Street has not stopped changing. Now, in the 10th anniversary of this historical moment, we have also achieved the EBITDA transfer that has been adjusted in a single quarter. We found Mogu 10 years ago in 2011. For the last 10 years, we have been very persistent on the mission of
spk06: make fashion accessible to everyone, we have been continuously innovating towards the new format of fashion shopping, from curation to e-commerce, from live e-commerce to short video e-commerce. At our 10th anniversary, we have also achieved positive EBITDA for this quarter on non-GAAP basis, reflecting our operating efficiency improvement and disciplined capital allocation in this severely competitive environment. This turning point made us made our development more sustainable and provide stronger foundation for our new business incubation. 直播的用户体验,主播的孵化培养,直播供应链等的建设等方面,
spk03: We continue to see a high growth rate in Mogulife. Mogulife GMV increased by 20.9% year-over-year to RMB 4.1 billion in the third quarter. Mogulife continuously maintains leading position in user experience innovation.
spk06: KOL incubation, and supply chain development, since we innovated live e-commerce in 2016. Its contribution to our overall GMB also jumped to 80.3% this quarter. MoguLive continuously drives our future growth opportunities.
spk03: MoguLive is a shopping platform, and a lively community. Whether it's in the live broadcast room or outside, People are always interacting with each other and helping each other. Mugu Street is like a street in reality. Because of the activity of this community, our users have been affecting more and more users to join Mugu Street. Our live shopping users have achieved a 9.4% growth. Between Double 11 and Double 12, which are the two biggest sales holidays, there are two streamers who made more than 100 million yuan on their own. They have become the top streamers in the industry.
spk06: Mogul is a shopping inspiration platform as well as a vibrant community. Inside and outside of our live showrooms, people connect, interact, influence, and support each other. Because of this vibrant community, our users have been attracting more users to join Mogul. Our active buyers of the live video broadcasting business has achieved a year-over-year growth of 9.4%. During the Double 11 and Double 12 promotions, Two KOLs on our platform have each achieved over RMB 100 million sales in these two festivals respectively, marking them top-tier KOLs of the live e-commerce industry.
spk03: Let the company face new opportunities and make new breakthroughs. Let us look forward to the next 10 years. Thank you.
spk06: In the future, we will explore new business opportunities, including cross-border e-commerce and offline business. We will make sure that we can leverage all the strategic assets we have built over the last 10 years and take advantage of opportunities emerged from the industry landscape change. Let's stay tuned for the next 10 years. Thank you. Thank you, Shark. Thanks again, everyone. This is Raymond speaking. Thank you for joining our conference call today. So now I'll walk you through our third 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 online basis. Let's review the financials first. Our GMB for the third quarter fiscal year 2021 was RMB 5,046,000,000. a decrease of 19.9% year-over-year. GMB for the 12-month period ended December 31st, 2020 was RMB 13,698,000,000, a decrease of 25.1% year-over-year. Our focus has been growing the GMB from live video broadcasting, which has increased by 20.9% year-over-year to RMB 4,051,000,000. LVB associated GMB for the third quarter of fiscal year 2021 accounted for 80.3% of the total GMB. Active buyers of LVB in the last 12 months and December 31st, 2020 grew by 9.4% year-over-year to 3.5 million. So let's now turn to revenues. During this quarter, total revenue decreased by 45.6% to RMB 146.5 million from RMB 269.5 million. during the same quarter of the fiscal year 2020. Commission revenue decreased by 29.8% to RMB 99.2 million from RMB 141.2 million in the same period of fiscal year 2020, primarily due to the restructuring of the company's business towards a LVB-focused model. Marketing services revenue, which is mainly generated from our marketplace business, marketplace business unit decreased by 75.9% to RMB 70.4 million from RMB 72.5 million in the same period of fiscal year 2020. The decrease was primarily due to restructuring of the company's business towards the LVB focus model. I will now walk you through our major costs and expense. Cost of revenue decreased by 48.3% to RMB 51 million from RMB 98.6 million in the same period of fiscal year 2020, which was primarily due to a decrease in the cost associated with decrease online direct sales and IT related expenses. Sales and marketing expenses decreased by 63.4% to RMB 73.4% 76.5 million for RMB 209.3 million in the same period of fiscal year 2020, primarily due to optimized spending on branding and user acquisition activities. R&D expense decreased by 14.5% to RMB 27.2 million for RMB 31.9 million in the same period of fiscal year 2020, primarily due to a decrease of share-based compensation expense. General and administrative expenses decreased by 32.4% to RMB 29.1 million from RMB 43.0 million in the same period of fiscal year 2020, primarily due to a decrease of share-based compensation expenses. Amortization of intangible assets decreased by 10.3% to RMB 113.5 million from RMB 102.9 million in the same period of fiscal year 2020. Loss from operations was RMB 123.2 million compared to loss from operations of RMB 1,594.9 million in the same period of fiscal year 2020, primarily attributable to a goodwill impairment incurred in third quarter of fiscal year 2020. Gain from investments was 91.2 million compared to loss from investments of 33.9 million in the same period of fiscal year 2020, primarily due to one of the company's investee repurchase a majority portion of the company's investment in October 2020. Net loss attributable to Mogul's ordinary shareholders was 36.7 million, compared with the net loss attributable to Mogul's ordinary shareholders of 1.634 billion and 634 billion million in the same period of fiscal year 2010. Adjusted EBITDA was RMB 1.2 million compared to a negative RMB 86.7 million in the same period of fiscal year 2020. Cash and cash equivalent restricted cash and short-term investments were RMB 820.1 million as of December 31st, 2020, compared with RMB 95.4 million as of March 31st, 2020. Stock market in 2020 has been very volatile and we have a view that Mogul's share price does not reflect the fundamental growth potential of the company. And we have successfully repurchased 8 million shares for approximately 17 million US dollar. representing 7% of the company's outstanding shares over the course of the last fiscal year. Looking forward, we are very confident that our product innovation and our dedication to KOL-centric system will deliver a very differentiated fashion shopping experience to our customers. So with that, I would like to open the call for Q&A. Operator?
spk02: Thank you. At this time, we will be conducting our question and answer session. To allow for as many questions as possible, we ask that you please limit your questions to one question with one related follow-up. If you would like 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. And as a reminder, if you would like to ask a question, please press star then the number One on your telephone keypad. Your first question comes from the line of Charlie Chen with China Renaissance. Charlie, your line is open.
spk05: Thank you. Hi, I'm Charlie. I have two questions. The first one is that EBITDA has turned into a small target since the first quarter. I want to know what kind of further development the company will have after EBITDA turns into a small target. uh... she should have had to go near and found it you should have to hold it that don't you know how she shot jessica you can't take a chance to do it you should have to talk about how do you know that uh... that you have to give me quite a time to talk with you could quite a chance to see you know what to do it so that's not a lot of time now hope you don't want to know just don't have to do a whole lot to do that you don't have to do it don't have to do it don't have to do it don't have to do it don't have to do it don't have to do it Thank you.
spk06: So Charlie has two questions. Charlie has two questions. The first question is about the EBITDA. So since the EBITDA has turned positive for this quarter, so what's the company's strategy going forward? Do we focus more on the revenue growth, revenue and GMB growth, or we want to expand the margin and improve the EBITDA margin? And the other question is about the growth on the user number. 3.5 million user number seems to be more conservative So what's the company's strategy going forward in terms of user acquisition strategy?
spk03: Okay, I'll answer the first question. First of all, we have a basic judgment, that is, the product form, operation mode, including customer habits, have gradually entered a relatively mature stage. Then, some major variables that will occur in the entire market should be eliminated So basically we're thinking that, okay, so live e-commerce is apparently we're thinking that the growth potential for the live e-commerce sector is very, very high. However, it has come to a relatively mature stage.
spk06: And most of the moving parts in the industry has been settled. And going forward, we'll be seeing that there will be more brands and more other business partners that will come into the live e-commerce space. Instead of just purely focused on KOL live streaming, we will be seeing more merchants or more brands to join live e-commerce as well.
spk03: So based on such a basic judgment, our main strategy will be to continue to invest in our live broadcast business and hope that in terms of customer experience, we can still have our own unique advantages compared to other platforms. But at the same time, as well as the entire live broadcast business gradually entering its maturity period, we will also to increase the investment. And then, among the many participants in the entire industry, the brand, the supplier, the anchor, the economic institution, the platform, the consumer, among all these participants, we hope to have a more balanced and more sustainable business model to be built. So this is our first strategy.
spk06: So of course we're definitely continue to invest in the lobby commerce segment of our business and to maintain and to enhance our competitive advantage over the other competitors. We'll continue to innovate and to optimize our user interface. However, we will also closely follow the monetization strategy as this is actually, we are on track to to have a stronger monetization in our live e-commerce business. And we also want to achieve a balance between different roles in the live e-commerce, different players in the live e-commerce space, including KOLs, merchants, brands, and also other supply chain partners. We want to strike a balance between all these different players while we achieve the monetization.
spk03: the long-term investment and continuous innovation in the live broadcast e-commerce industry. Therefore, we believe that in this industry, we have the leading advantage in terms of knowledge reserves and operating capabilities. We also hope that in the wider market, we can use the advantages of these years. Therefore, in the direction of future operations and development, We also pay more attention to the possibility of the overseas market and the offline market. We believe that our ability in this aspect is likely to get better opportunities in the new market. The details of this aspect may not be very detailed this time, but in the future there will be opportunities to inform you more about the situation here.
spk06: So since we have been continuously innovating in a lot of e-commerce space, we have accumulated a massive amount of knowledge and know-how in this space. And we do believe that we have more room to apply our knowledge. We would like to apply our knowledge in other spaces, including cross-border e-commerce as well as offline e-commerce. We believe that our experience and our know-how can definitely be leveraged to capture future business opportunities.
spk03: Then about the second question, most of them have already been mentioned, which is about the growth of customers and the new market. Then I will add a little bit, we think that the relatively traditional way and method of Internet customers is really going to be higher and higher, especially for this various e-commerce platforms. Everyone should be able to see the whole customer cost in the financial report of the e-commerce company. The entire industry is increasing rapidly and continuously. The purchase amount is far more than our previous stock price reduction. This is also a very important reason why we can use relatively low costs and maintain continuous growth. We will continue to do this. Secondly, we do not think that through the size of our platform and our cash deposit, we will invest heavily in this. So as you can see that the cost-to-market stream cost on average for the entire industry has been increasing rapidly over the last maybe a year or two.
spk06: So we're very much focused on the customer retention. I think as we mentioned on the previous learning course, existing users' retention is extremely important for us. As you can see that the live e-commerce part, the average users' uproar is way higher than the traditional e-commerce users. So we are seeing much higher uproar over there. So that's why we can, as you can see from the quarterly results, Our sales marketing expense actually decreased by 63%, so we can use much lower sales and marketing expense to maintain the growth. Going forward, given the magnitude and the scale of our company, we will not be using a cash-burning strategy to acquire customers. Instead, we will be leveraging our know-how, our knowledge, and use innovation to acquire our customers. and to use the money more efficiently in other spaces.
spk05: Okay. Okay. Thank you, Charlie.
spk02: 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: Hi. Thank you.
spk06: Okay, sure. The question from Lockie is that congrats to companies positive EBITDA this quarter. So he has two questions. The one is that what's the company's strategy going forward for category expansion? The other one is that can we elaborate a little bit more on the KOLs other than the top two?
spk03: These are two very good questions. First of all, In the past, the most important category of fashion is clothing. Clothing has always been one of the main categories in our sales. In the future, we have a very specific expansion plan. Overall, we hope to invest more resources in the short term. We want to invest more resources in the relatively high-performance products. As for clothing products, they have a lot of SKOs. As the seasons change, they can attract our users to keep repurchasing on our platform. But because of the characteristics of clothing products, In fact, the final horsepower is not particularly high. So we also hope to introduce more relatively higher horsepower by breaking the category. For example, cosmetics, skin care products, health products, etc. And for our young customers, they are very interested in these categories. So this is the first question for you.
spk06: So the question about category expansion, and of course we always want to expand categories, but our tactics in this, with regard to this question, is that our tactics is to expand into higher margin categories, because traditionally I think apparel has been a very good category to retain customers. Customers always like to come by and check out the latest release of fashion brands, so that's why they always come back. It's a retention category. But apparently the margin for this category is not as thick as we otherwise want it to be. And going forward we'll be expanding into high margin categories like cosmetics, skin care, and nutrition. So these categories are probably higher margin categories we can actually monetize more. And then the other question was about how we trade at the top. What's our tactics for the KOL incubation? And I think, as Shaq mentioned, last year the live e-commerce space was extremely competitive, so that's why we spent more time and effort to our top KOLs and to make sure that they can be extremely competitive with other platforms and with KOLs from other platforms. And as a result, we can see that the top two KOLs, they both achieved 100 million sales overnight during the W11 and W12 promotion days. respectively. So they have proven, they are proven to be the top KOLs in China over internet as of last year. These two KOLs are extremely important to us because they become the flag of Mogul live e-commerce and because of their influence and because of their very strong power to sales power, they can attract more merchants, more supply chain partners, and even more KOLs to join Mogul platform. So they're extremely important when it comes to expand our live e-commerce platform.
spk03: Yes, and then by this year, our strategy will indeed make some adjustments appropriately. As I just said, the entire industry has become relatively mature. So we certainly hope that our entire plate can become bigger. So in the process, the top of the head, in the market. Secondly, we still need to recruit more new anchors to join our platform, especially to cooperate with our expansion target. We may need more new anchors and fresh blood to join our platform. So, the specific operation and arrangement of these aspects have been implemented throughout the company before and after the Spring Festival. So, in the next few months,
spk06: So as we can see that in 2021, I think we are seeing that the market has been more stabilized and all the KOLs and their respective teams are actually more mature. So we don't need to spend as much effort as we used to be. And we can dedicate more resources to other KOLs and to help them grow. As we also mentioned earlier, category expansion is a very important priority for us this year. So we intend to recruit more KOLs this year, especially the KOLs that can help us to expand categories. We have spent a lot of time strategizing the plans to recruit KOLs before and after Chinese New Year. So we will be able to, you guys can see our effort in the months to come. So Lucky, do you have other questions? Okay, so then I guess we'll pass back to the operator.
spk02: Okay, and as a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. We do have another question. This comes from Sabrina Hugh with Jefferies. Sabrina, your line is open.
spk06: Hi, Sabrina.
spk01: So Sabrina has two questions. One is the competitive landscape of live e-commerce in China.
spk06: And the other one is she wants the management to elaborate a little bit more on the cross-border e-commerce opportunity. Sabrina, maybe I will just answer your question directly. For the competitive landscape in China, we are seeing that a lot of companies have been extremely focused on live e-commerce across different segments. Apparently, we, as the innovator of live e-commerce back in 2016, We have proved that we are very much a pioneer in terms of product innovation and continuously will do so because we believe that our strength is really the product innovation. We can make sure that our customers will have the latest and most cutting edge user experience when it comes to live e-commerce. So that's number one. That differentiates us from the other platforms. And number two, we are a live e-commerce dedicated platform. I think unlike other platforms who are actually more, I think, have other revenue streams and other things, we are very much a KOL-driven black e-commerce platform. That's why we're also very different from the others. We don't think the market is really driven by budget or driven by cash-burning capability. It's really driven by people who can actually innovate, understand users' needs, and innovate new features, new products, and new user experience to make sure that we can provide the most interesting and most immersive and the most interactive shopping experience for our customers. So we don't think it's specifically a budget-driven landscape. That's the first question. And second question is about cross-border e-commerce. So cross-border has been always been a very important opportunity we have been closely examining. So as you can see that we have been doing e-commerce in China for the last 10 years, and we have accumulated a lot of knowledge, experience, know-how, and human capital. And also our KOLs in China, they are extremely, extremely capable. They are very smart. They can provide a lot of supply chain capabilities. They have all this board world-class fashion curation capabilities, which we can easily leverage to influence customers and the audience overseas. So that's why we want to leverage what we have. We want to team up with our KOLs. We want to go out and to other countries and to leverage our experience over there.
spk01: Thank you.
spk06: Okay. Operator?
spk02: And again, if you would like to ask an audio question, please press star, then the number one on your telephone keypad. There are no further questions. I will turn the call back over to Roger Hugh for close remarks.
spk00: Thank you. And 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 MoGOO. This concludes the call today.
spk06: Okay, thank you.
spk02: Ladies and gentlemen, this concludes today's call. Thank you for participating.
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