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MOGU Inc. American Depositary Shares (each representing 25 Class A Ordinary Shares)
Q4 2021 Earnings Conference Call
5/28/2021
spk05: Ladies and gentlemen, thank you for standing by and welcome to the Mogul Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. 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. I would now like to hand the conference over to your speaker today, Mr. Roger Hu. Thank you. Please go ahead, sir.
spk01: Thank you. 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 BusinessWire 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 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 to ask for results, performance, or achievements to differ materially from those in the forward-looking statements. Further, information regarding these 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 Qi, Chairman and CEO, Mr. Raymond Huang, Chief Strategy Officer, and Ms. Feng Qi, Financial Controller. Mr. Chen will review the business operations and company highlights, followed by Mr. Huang, who will discuss financials. They will be available to take your questions during the Q&A session. Now, it is my pleasure to introduce our Chairman and CEO, Mr. Chen. Please go ahead.
spk03: Hello, everyone. Hello everyone, thank you for joining us today on our first quarter fiscal year 2021 earnings conference call today. In the past one quarter, our live streaming business has continued to grow. This quarter, the Gmv of live streaming has increased by 42% to 22.45 billion yuan. The Gmv of live streaming business has increased by 87.2% During the past quarter, we continue to see a consistent and steady growth in the live e-commerce business. the GMV from live e-commerce increased by 42% year-over-year to RMB 2.245 billion in the fourth quarter, contributing to 87.2% of the total GMV during this period. This demonstrates that Mogul has successfully executed on the transformation of its business and has essentially become a pure-play live e-commerce powerhouse. As an early mover in live e-commerce, we have witnessed the advancements in the live e-commerce business in China during the last five years, and have established a very differentiated shopping experience for our users. This allows us to continue capturing new growth opportunities in the e-commerce space in China. Wujie is a company that continues to innovate. After the invention of live e-commerce in 2016, we have now invented short-wave. And in the past few months, we have made some breakthroughs. So continuous innovation is an essential quality in mobile's culture. After establishing our live e-commerce business in 2016, we have also developed a product feature called Short Live, which has really begun to make a breakthrough over the past few months. Short Live is basically a short video clip produced by KOLs in Mogul Live Room and can be distributed as a structured and tagged information to a wider audience in public. This information can be searched, structured, categorized, and recommend in the feed. Different from the one-off performance in the live show, short live can have very long shelf life for consumers to browse and purchase. For MuguJie users, short live greatly improves the user experience of live broadcasts and also reduces the threshold of new users of live broadcasts. The connectivity of live broadcast users is very strong, but live broadcasts consume more time And the flow of live broadcasts allows users to enter the live broadcast room at any time. Its experience is also unstable. This is also the reason why the penetration rate of live broadcasts in the e-commerce industry has increased relatively slowly. We invented a short broadcast that is different from other platforms. The product explanation is that the live broadcast is self-recorded and the quality is stable. This kind of live broadcast content is the goal of the live broadcast. It greatly reduces the threshold for users to accept live broadcasts. As for our users, Shor Live has significantly enriched their live mobile shopping experience. It has also lowered the entry barriers for new users in our live e-commerce business. Although the user stickiness of live e-commerce is very strong, it's also very time consuming and presents a higher entry barrier for new users. That's what makes it difficult to fully improve the penetration rate of live e-commerce in e-commerce space. Short video is not just a simple recording of product presentation. It also captures the best moment of the host, of the live host, and also the personal touch on the product issue. For small and medium-sized streamers, short-streaming is a good path for them to grow. Even without the advantage of streamers in the live broadcast room, they can also compete fairly by short-streaming participation. Low thresholds get new fans, get stable and considerable short-stream revenue. After we launched short-streaming, in just a few months, more than 100 new streamers have started through short-streaming. And for business and brands, in addition to explosive sales cooperating with streamers, As for our partners, our short-life product is also a disruptive innovation. Short-life can be easily recorded during the mobile live shows, and their production costs are very low. Apart from real-time sales in the live showroom, short-life allows for KOLs to fully expand their sales channels in the long term. Furthermore, ShoreLife also provides an excellent growth path for small and medium KOLs. By leveraging the lower entry barrier for gaining new fans, they can generate stable and considerable revenues from the ShoreLife business. Just a few months after launching this product, we have already seen hundreds of KOLs growing their presence. as for brand partners, short-life now enables them to generate continuous sales volume over an extended period of time, in addition to generating explosive sales alive. We have achieved our early success with our short-life product and believe that it will be a breakthrough in live e-commerce industry. Going forward, we'll continue to expand the ecosystem of short-life and to help accelerate our live e-commerce growth. We believe that there will be unlimited possibilities for live e-commerce in the future. And Mogul will be a continuous innovator and a beneficiary of the industry. Thank you. Thank you, Sha. Thanks again for everyone to joining our conference call today. I will now walk you through our fourth quarter and fiscal year 2021 financials. We believe year-over-year comparisons are the best ways to review our performance. Therefore, unless otherwise stated, All percentage changes I'm going to mention will be on that basis. So let's review the financials first. Our GMB for the fourth quarter of fiscal year 2021 was RMB 2,576,000,000, an increase of 6.5% year-over-year. GMB for the 12-month period ended March 31, 2021 was RMB 13,855,000,000, a decrease of 18.8% year-over-year. Our focus has been growing the GMB from live video broadcasting business, which has increased by 42% year-over-year to RMB 2.245 billion. Live video broadcasting associated GMB for the fourth quarter of the fiscal year 2021 accounted for 87.2% of the total GMB. Let's now turn to revenues. During the quarter, total revenues decreased by 23.6% to RMB 90.9 million from RMB 119 million during the same quarter of fiscal year 2020. Commission revenue decreased by 1.7% to RMB 65.2 million from RMB 66.3 million in the same period of fiscal year 2020, primarily due to the restructuring of the company's business towards an LBB-focused model. Marketing services revenue, which is mainly generated through our multi-place business unit, decreased by 34.5% to RMB 11.9 million from RMB 18.2 million in the same period of fiscal year 2020. The decrease was primarily due to restructuring of companies' business towards LVB-focused business. I will now walk you through our major costs and expense. Cost of revenue decreased by 35.4% to RMB 37.9 million from RMB 58.6 million in the same period of fiscal year 2020, which was primarily due to a decrease in the cost associated with the lower online direct sales. Sales and marketing expense decreased by 44.5% to RMB 43.4 million from RMB 78.2 million in the same period of fiscal year 2020, primarily due to optimized spending on branding and user acquisition activities. Research and development expense decreased by 40.3% to RMB 19.6 million from RMB 32.8 million in the same period of fiscal year 2020, primarily due to the optimization of headcount. G&A expense increased by 124.4% to RMB 25.7 million from IMB 11.5 million in the same period of fiscal year 2020, primarily due to the reversal of share-based compensation expense in the fourth quarter of fiscal year 2020. Amortization of intangible assets decreased by 5.7% to IMB 82.1 million from IMB 87.1 million in the same period of fiscal year 2020. Loss from operations was 110.3 million compared to loss from IMB a loss from operations of RMB 149.1 million in the same period of fiscal year 2020. Net loss attributable to Mogul's ordinary shareholders was RMB 108.6 million compared with the net loss attributable to Mogul's ordinary shareholders of RMB 141.9 million in the same period of fiscal year 2020. Adjusted EBITDA was RMB 20.1 million, compared with a negative RMB 83.6 million in the same period of fiscal year 2020. Cash and cash equivalent. Restricted cash and short-term investments were RMB 803.1 million as of March 31, 2021, compared with 1,095.4 million as of March 31, 2020. So let's now move the financials to the entire fiscal year of 2021. Total revenue came in at 482.4 million, a decrease of 42.3%. So the commission revenue came in at 318.6 million, a decrease of 27.3%. Marketing services revenue came in at 71.3 million, a decrease of 70.6 million percent. The overall decrease was primarily due to companies restructuring or transformation of its business towards the LBB focus model. Cost of revenue decreased by 37.7 percent to 183.1 million. Sales and marketing expense decreased by 62.5 percent to 229.8 million. primarily due to optimized spending on branding and user acquisition. R&D expense decreased by 39.5% to 103.5 RMB, and the G&A expense decreased by 19.6% to 103.0 million. Loss for operations was 428.9 million, compared with the loss of operations of $2,072.9 million in the fiscal year 2020. Net loss attributable to mobile's ordinary shareholders was $328.0 million compared with $2,223.6 million in the fiscal year 2020. So adjusted EBITDA was negative $51.5 million compared with a negative compared with negative 320.1 million in the fiscal year 2020, our net loss and adjusted EBITDA improved remarkably by 85.3% and 83.9% respectively, which showcase the positive effects from our effort to optimize customer acquisition and operating efficiencies. By the end of fiscal year 2021, we'll have reached a major milestone in the execution of our strategic transition to a live video broadcasting e-commerce company. Our breakthrough in short video further expands our live video broadcasting ecosystem and is a new revenue growth generator. Going forward, we'll continue to execute on our disciplined approach in terms of customer acquisition, and we'll partner with more capable and innovative KOLs so that they can deliver the best products and the best shopping experience to our consumers. So with that, I would like to open the call for Q&A.
spk05: At this time, I would like to remind everyone, in order to ask a question, you may press star then the number one on your telephone keypad. Again, it's star one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Sabrina Hu from Jefferies. Your line is open. Please ask your question.
spk00: Thank you for taking my questions. I have two questions. The first one is how should we see the competitive landscape going forward to ensure the video platform's step-up efforts in live streaming and commerce? The second one is how should we see the live streaming commerce growth rate this year for both industry and mogul, where the new form short line boosts their revenue growth. I translate myself. I will answer the question directly in English. Number one, speaking of competition, of course, we are seeing that the e-commerce space in China is extremely competitive.
spk03: But we do believe that Chinese consumers are very demanding. They are always asking for more innovative and more interesting, more immersive, more interactive way to shop. China is becoming a very strong country with very open society. So our shoppers have many different options. They're not just going for the cheapest products or they are going for the massive products. They're actually asking for different shopping experience. So that's why Movu will stay very, very focused on product innovation and to give our consumers the best experience. And we believe that our KOL partners, they know our consumers the best. They can find the best product that is suitable for our consumers, and they can actually deliver the best experience. So speaking of maybe other competitors, we are seeing that the other maybe short video platforms, they are very, very strong in terms of traffic or in terms of entertainment content. But we are a live e-commerce platform. So that's the fundamental difference between us. And we do believe that we can provide a more holistic shopping experience in terms of refund, return, and also quality control, brand authentic brand, and all these are very important elements with our consumers to make a purchase decision. So that's why we're different from short video platforms. And also, compared with other big shopping platforms, I think we're very much focused on the human element. We want our KOLs to become the front face of our shopping experience so they can interact with our consumers. So instead of people go to a certain platform and search for products, they will be actually connected with our KOLs to buy whatever products that actually our KOLs think is actually suitable for our fans. So I think this basically differentiates us from the other shopping platforms. And we believe that our users, as you can see from the retention data, is showing their vote to support our platform. And the second question is about short life and the revenue So we are of the view that short-life is a very, very important product feature that can help all their PLLs to grow faster on the platform. All their suppliers can benefit from the growth of PLLs, and our consumers will be attracted to us because of the diversified and massive supply of PLLs and, substantially, the products behind it. So we believe that this is a very important growth engine for us in terms of users and in terms of QLs. So over time, our supply will be increasingly diversified, and our experience will be increasingly diversified. And therefore, revenue or any financial numbers as a result will come after that. We'll get the phone again. From the perspective of our customer experience and industry comparison. Another point I would like to point out is that from the perspective of competition, it is often caused by internal factors. I think in the past period of time, the proportion of live broadcasts is getting higher and higher. The operation of the company is actually getting more and more focused and efficient. This can also be seen from the structure of our revenue cost. In fact, the live broadcast e-commerce is still a relatively complicated business. Because it not only needs to complete a series of long-term work related to e-commerce, but also needs to cultivate and develop and manage so many live broadcasts in the live broadcast section. So it is actually a relatively complicated business. As our live broadcasts have already reached 87%, so for the company, this is almost The only thing that needs to be done. So the company will become more and more focused from top to bottom. I think the corresponding competition rate will be relatively high. In fact, this short wave is also under such a background. A product that has been developed by such a person. It can only be effective when the company's value is so high. So compared to other platforms, So when we examine the competition landscape, we also need to look at our internal reasons. So I think our dedication to live e-commerce and our Very extremely efficient operation is a very important differentiating factor. So we know that e-commerce is a very complicated system. Everyone needs to do a lot of work around the system to make sure that system doesn't fall apart. And live e-commerce is actually more challenging. And as we can see that live e-commerce is accounted for 87% of our total GMB. We're not effectively a pure player of live e-commerce. We have been dedicated to live e-commerce segments for a very long time and our investments and our dedications in this segment will definitely pay off. Our focus on the live e-commerce segment is a big differentiating factor that differentiates us from competitors. And the short life, as a result, was also the fruit of our dedicated effort in this segment. So without this level of dedication, we wouldn't be able to innovate a product like this. And we believe that this is actually a very big breakthrough of the live e-commerce industry in China.
spk05: Your next question comes from the line of Charlie Chan. Your line is open. Please ask your question.
spk02: Thank you for answering my question. I have a question now. I want to know more about the difference between live broadcast and live broadcast. First of all, I want to ask, in my own industry, if it is a live broadcast, there is a lack of interaction with users. You may answer some questions in this regard. So from this point of view, will it be said that its purchase transfer rate will be relatively low? But the transfer is because after one recording, it can be played in reverse. Although it may be the same transfer rate, the purchase transfer rate may be low, but as a cost effect, Let me ask this question first.
spk03: OK. Charlie, we'll find you . OK. So basically, the question is very simple. It's basically about the ROI of short live versus live in terms of incorporating all different factors, including user interaction in the showroom, and also how many times we can actually use the short live video. So the company's answer is, Yes, that's a very good question. So show live. Show live is meeting the user interaction. So that's actually not the best part of the show live. So our users tend to find better user interaction in the live showroom. So that's where most of the interaction happens. That's where the immersive and interactive experience takes place. However, the pros or the advantage of show live is that it can be used forever. We are seeing that our host can be, they recorded a short live from last year, maybe from 12 months ago, can be still seen by our audience. And people are still making purchase of that item that she introduced or she presents 12 months ago. So it has a very, very long short time. So people can always go back to the product and buy that. So apparently, the return on investment on that, or I guess the sales they can generate per SKU, or the sales they can generate per Shoreline is very, very high. And speaking of the interaction, or I guess the specific things about Shoreline is in Shoreline, you can see all the previous product reviews posted by previous buyers. So in life, you actually cannot see all the user reviews at the same time because the product is actually new, and it's actually new to the audience. But in the short life, because it has a very long shelf life, so you can actually see all the reviews from previous buyers and then make a more informed decision accordingly. So therefore, the conversion rate, given all the assistance from previous buyers, make the conversion rate even higher. So that's kind of what we have observed over the course of the last few months.
spk01: OK, thank you very much, . Thank you.
spk05: Again, to ask a question, press Start, then the number 1 on your telephone keypad. Your next question comes from the line of Lucky Lau. Your line is open. Please ask your question.
spk04: Hi. Hi.
spk03: Okay, so the last question is about the GMV growth for the last quarter and for the quarter going forward. So I think as Sabrina mentioned earlier, China is actually in an extremely competitive situation. The last year, e-commerce is growing really fast in terms of the entire sector growth. So it's also extremely competitive. So at this juncture, we wouldn't be able to give forward-looking guidance on the GMV growth, but we do believe that The live streaming e-commerce segment has very, very high potential, and we are only at the beginning. So we are optimistic and positive on this side. So we'll continue to invest in the live e-commerce business to make sure that we can capture all the world's opportunities going forward. OK. So operator, do I have the next question?
spk05: There are no further questions at this time. You may continue.
spk03: OK, great. So if we do have further questions on the floor, we can end the call today. So thank you again, everyone, for joining the conference call today. We'll look forward to seeing you next quarter.
spk05: This concludes today's conference call. Thank you for participating. You may now disconnect. Presenters, please stand by.
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