Q3 2019 Earnings Call
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Hi, Chris over its your first speaker today Mr. Christian are now they keep these go ahead.
Thank you operator, Hello, everyone and thank you for joining us today, So young third quarter 2019 earnings release with distributed earlier today and is available on the IR website at <unk> Dot so young dot com as well too good newswire services.
On the call today from so young we have Mr. shrinking co founder and Chief Executive Officer, Mr. menu Chief Financial Officer.
Both be available to answer your questions during the Q and a session.
Just missed prepared remarks.
Before we begin I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21. He of the Securities Exchange Act of 1934 as amended in a defined in the U.S. Private Securities Litigation Reform Act of 1995.
Such statements are based upon managements current expectations and current market in operating conditions and relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the company's control, which may cause the company actual results performance or achievements.
To differ materially.
From those and the forward looking statements.
Further information regarding these and other risks uncertainties or factors are 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.
They did not my pleasure to introduce Mr. mean, you. Please go ahead.
Exceeding the high end at Lalor guidance range as we capitalized on the stress quality tend to stick needs of our platform.
Oh community of users continues to grow as a result of host user experience and the rich content offerings average mobile and they use and total number of purchasing use is growing rapidly.
Increasing 144%, 60% respectively from the same period, while she uses a increasingly finding value in our diversified content offerings, which has now extended beyond traditional beauty diaries on the recovery process just to include message.
Boats kidney function.
The news and the light vehicle costs.
This is reflected scheme of 75% year over year increase in aggregate study of medical aesthetic treatments transactions facilitated by our platform to RMB 976 million.
I would trust Paras pricing reviews, and the service provider credentials and convenient access to a diverse outbreak of content continues to host the user experience and he is creating a truly unique community medical service providers Oh platform.
Also continue to see the unique value proposition always set to custom acquisition services differentiated blending and ability to improve operating efficiency all foot in driving growth across the businesses.
The number of pain medical service providers, Oh platform increased by 34% year over year to 3230 haven't done both medical service providers subscribing to information services all platform increased by 52% to 2000 and 104.
We have been rodeos additional tools for medical service providers to enhance conditions. They strengthen the return on investments and the gradually increase monetization of all the services.
These tools what developed based on the enormous amounts of information, we gather all the platform and the recession, specifically customized with different user demographics mines, which will allow medical service providers to target uses more effectively and efficiently.
We continue to be strategic he monetizing services across our platform, which has not impacted our user base sticking that.
This is Keith we have seen the user experience then going Oh user base.
We are aware of the competition nature of the industry, but remain confident that's our differentiated platform technology co innovation will continue to drive operational efficiency, while we grow our community of users increased monetization and the kept lies on the network effect, we continue to do to our platform.
Out to skill weve diverse revenue streams, which will help strengthen and to support our profitability over the longer.
With that let me know.
Quickly go over all the financials for the quarter. Please be reminded that amongst quoted here will be on the please also refer to our earnings release for detailed information of our comparative financial performance on a year over year basis.
Well the third quarter 2019, total revenues were RMB 302 million up 80% year over year, we didn't total revenues information services revenue.
It was RMB 214 million up 87% year over year.
Reservations services revenue was RMB 88 million, 64% year over year.
Cost of revenues will be 54 million applying to 24% year over year due primarily to an increasing payroll costs associated with <unk>. Please operation those stuff headcount.
Gross profit was RMB 249 million up 72% year over year gross margin decreased to 82.2% from 85.7% during the same to Lafayette [noise].
Total operation for the operating expenses were RMB 228 million.
37% year over year sales and marketing expenses will be 157 million up 44% year over year due primarily to increase in marketing and a use acquisition expenses as well as payroll costs and the recognition of share based compensation expenses.
General and administrative expenses were RMB 32 million up 38% year over year, due primarily to increasing payroll costs and share based compensation expenses.
Research and development expenses only be 14 million.
Up 14% yoga, yet the decrease was primarily attribute attributable to the one of share based compensation expenses recognized the repeat.
Discoloration appoint either issues, how my one employee two series E preferred shares in a second quarter 2018.
That's a fee increase in the payroll costs associated with the expansion of research and development teams.
Income from operations was RMB 20 million compared the loss of RMB 22 million during the same period last year.
non-GAAP income from operations was RMB 29 million compared with loss of RMB 6 million for the third quarter 2018 income Teksid <unk> expenses were RMB 3 million compared with income tax benefits of RMB 1 million during the same period last year.
The change was primarily due to increased in taxable income during the third quarter of 2019.
Net income was RMB 32 million compared with net loss of RMB 20, Fiberlan during the same feud lots you.
non-GAAP net income was RMB 40 million compared to net loss RMB nine minimum during the same period last year.
Basic and diluted earnings per eight is attributable to ordinary shareholders, while I'm be zero point 31 cents.
And a and B zero point 29, respectively compared.
We lost on the 1.68, you Miss that quarter of 2018.
Next moving on to that balance sheet.
As of September 32019, we had total cash cash equivalents restricted cash and short term investments of RMB 2.7 to 8 billion compared with RMB. One point 21 billion as of December 2031st 2018.
The increase was primarily due to net proceeds from companies appealing make who's on the 19.
No no onto guidance.
For the fourth quarter 2019.
We expect total revenues to be between RMB 322, and be 340 million all U.S. sports.
44.82, 47.6 million U.S. dollars.
Which represents an increase of 75% to 85.8% year over year.
This forecast reflects the companies come into the premium in the reviews on the market and the operational conditions, which are subject to change [noise].
[noise]. This concludes our prepared remarks, I wouldn't know tend to the coal to operate an open the call today, operator, we're ready to take questions.
Ladies and gentlemen, we will now begin the question answer session. If you wish to ask a question. Please press star one on your telephone and wait for him to be announced if you wish to cancer request piece for us to town or Heskey.
Your first question comes from the line up should we can from <unk>. Please ask your question.
Thanks.
Question on congratulations on nice.
I've got two questions first Uh huh.
That's correct.
Correct.
Okay.
Explain.
The mechanics.
And.
John Reservation service revenue.
Like 1%.
So this is.
Okay.
Gross for <unk>.
Fourth quarter and going forward.
What do you see on competitive landscape behind this work has and what do you see on strategic focus next year for the management. Thank you.
Okay I.
I think I would leave the question well, that's a CEO and mr. teaching to answer the question.
Just to give us a minute to translate the question two to two Mr. ji.
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In the second quarter that.
The company that is our study a university and the schools.
So I'm I'm, a promotional programs and to the students.
Around the specific program called <unk>, London and at this particular program that you know because having students I actually had lower Asap and our usual a S.P. for the other on the other services and so which is why that you saw in Q3 that the actual paying customers.
The decrease our Q on Q. However, if you exclude these one off impact.
On the school promotional program are you actually you actually see that it'd be interesting uses I may you actually maintained like a good growth level and Q3. The overall, we had very strong and May you. It's because we actually the company's Dod is like a like a strong promotional on branding exercise.
And we believe that this promotional excise, we're having like a sustained positive impact going forward to our overall and they yield.
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[noise] so the answer to your second question is that.
There were two different expectations for the first why was that or the company had it many times Asian system upgrade.
Which has affected especially this small and medium service providers and they're spending on the information services I pod.
So we've actually put more resources into into this into this overall initiative actually look always actually to increase lundbeck have yet to penetration rate for these kind of service providers and so we believe that going forward, we should be able to see a good recovery in the right.
The information services, the second part what that for the reservation I services as you rightly pointed out that the growth for the third quarter was actually a higher than the growth for the information services part and partly because we.
We had a d. and 618 program, which was for the second quarter and there was a time lag between the omni recognition for some of the fees, which you know which would recognize actually in in quarter three and so I think overall going forward, we should be able to see quite good growth.
For both information services and for reservation services.
Next question please.
Sure. Our next question comes from the line of Vincent Yu from Needham and company.
Please ask your question.
[laughter]. Thank you Hi management, so I have well no two pressures or was it is on the progress I roll off a lot of utilization to us when they from major service segments.
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Well I really appreciate all agile.
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[noise] so the answer to your at two question and for the first one is that the actual D. Monetization I system is currently the upgrade some progress because he's out quite a complicated complicated system and which we had to discuss.
Our without service providers. So the actual timeline that we can see would be until the first half off of next year. As you know that the company and before I was transaction reservation I e-commerce focused but going forward.
You know.
And there's a company I would like to move to more early stage intends on monetization and to focus more on the south and east and to help our service provider institutions to secure much more customers already all in the whole purchasing a in whole picks in process.
The answer to your second question is that.
I am I do at the moment as steel has about 70% of the customers in terms of debt or the overall customer acquisition de <unk>. The MD in the medical aesthetics market I think for us so yeah and coal target at the moment Easter closeout gap with.
With Baidu and instead and for more where we can see that our key advantages. Although I do include Oh, our customer acquisition and Oh I reached out conversion rate is actually much higher as you mentioned about other platforms, such as Alibaba and.
Make <unk>, what we can see that our single mouth spending for all customers is around 6000, RMB and that is increasing.
Andy S. P is much higher then and then the two platforms, which you mentioned because we actually target.
Different customer bases silly, we don't see adult platform as our AD key competition, but rather than there is if I did.
Thank you.
Thank you.
Your next question comes from the line up Austin, well, though from Canaccord Genuity. Please ask your question.
Hi, Thanks for taking my questions I wanted to ask more about marketing and user acquisition first can you share the total marketing and user acquisition expense.
For Q3, and and the split between brand marketing and end user acquisition I think that Abstral are spending.
And second can you talk about what's driving marketing efficiency and and what your marketing strategy will be for the rest of the year.
Thanks, once like it will just transit quickly for CEO .
I often oh, we'll give you the answer for the fiscal <unk> first half of your question the split.
In terms, the sows marketing cost it for customer acquisition.
Quota, we total health 155 million RMB spending on sales marketing with him dot around 30 Minis Pedro the room anyone at 25 million is a actual customer acquisition cost.
And the we didn't want to 25 bundling once it is for traffic acquisition to says up Randy.
And I think for your second part of the question, what's the marketing strategy of customer acquisitions shred it would be to Mr. James.
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Students.
Mm Hmm.
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[noise] I intend, so oh, I didn't hiring and get promotion strategy. So if you can see that.
Just on the second half of this year and a company if that is quite an intensive I Brendan excite and that's always actually to increase the overall on the overall.
Ranking Andy reputation of a company not only within the.
He medical beauty users around the wider public and and climax Ah, Yes, I think you know the ace out Kigo Ace I'm fully on the that's gone on continued to add branding and advertising campaign would like to outcome, but some of those potential customer into actually.
Into actually.
Purchasing approximately and we've also started a you know I social media companies overall platforms, such as though has been by successful and also we have started easy and.
It's something <unk> you know the actual targeted all I stores and other information kind of channels, our Oh, our ratio Alfie advertising Smith, Oh still remain one to two branding versus others.
Thank you and if I could ask one quick.
Follow up I wanted to ask about average revenue per paying information service provider I think you mentioned a few factors to why it the growth might have accelerated this quarter, but wondering if you can.
To summarize some of the.
Main drivers of that growth acceleration in the information service.
Our put a number thank you.
[noise] [noise], Yeah, I think Oh try to answer the question here. So the you see there is the average ARPU for information. So this is a in terms for the institutions painful information system, a a little bit increasing third quarter compared to the second quarter. A the reason why I think it's mainly because of the.
Total number of information services, you just increased by 1% quarter on quarter, and if so quota, but Ah you do see the woman around 100 institutions less to spending or took quite a information services. The reason we explains a little bit early use because we have a strategic.
US monetization strategy upgrade, which we attempt we purposely to decreased a part of all water resources available for your best buy a institution.
Service providers and those was relatively low ARPU service providers. They just by.
Certain CPT resources at a fixed price and that we do have those resources being replaced or.
The decrease in a in the first page of a lap and because of that we do see the quarterly information services had a very well just to stay the same compared to second quarter, we don't see any increase quarter on quarter and ER and those low ARPU institutions. They are they tend to see.
We will change that investment incomes offending or buying commissions of is the spending in the third quarter and so we believe.
A company with.
Strategy or monetization strategy upgrades, we will have more tools.
All information services available for service providers to invest and it will help you no longer already in the future we will see the penetration.
Great for information. So this payment with a platform a leading the service providers would increase and we will see the recovery of increasing Tim's self service providers.
Who paying for information services.
So.
Yeah, that's hopefully I'll answer your question here [noise].
Yeah. Thank you very much and congratulations on the quarter.
Once again, ladies and gentlemen, if you wish to ask the question. Please press star one on your telephone and wait for him to be announced.
Your next question comes from the long enough Thomas Chong from Jefferies. Please ask your question.
Oh, Hi offense miniature monopolistic in my question I have a question about Oliver.
Alex.
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[noise] and be the answered your question is that on the content strategy. So for the last few years and the company has gradually being building up an ecosystem. After the content worse before it was predominantly a UGC and now.
Now you know we have extended.
To to include for example, doctors and now you can see all platform that you know and you can find deducted QNX action you can find on a short videos and you can have the online video consultation with adopt chair.
In addition to err on the doctors they owe sell consultants on the platform and where the consultants can come to help if to the design all of the actual I'm Oh, the actual beauty aspac at 40, a potential customer and also the asset and celebrities, which we have.
Motivating them to actually add to also to contribute to the content of our App and Ah linked to the actual content. We have actually also diversified outside the normal beauty beauty I said take channels into for example.
Into dental and to include higher income I need to include I operations.
And such as Lasik and also to include actually mean body treatment and also including dermatology to improve the skin.
And how to help the monetization Oh, there's a and b content strategy was that the content helps us to actually to build a bigger and bigger pull off the actual <unk> I'll be actual customer as you know you know one customer may only I do.
Why don't you or a single digit a number of times in terms of the.
Net income the number of a number of operations. However, we would like to increase at times when I tell you seem to sell young and I know sell to include there on stickiness on how are you using our app to include.
Improved that uses healing.
The same time, we take costs out of our other types of products for example, before if they only you see a magical beauty treatment and now maybe they can also look had you know hair dental et cetera.
Thank you.
Your next question comes from the line of Friant Gong from Citigroup.
Please ask your question.
Thanks.
My question.
Uh huh.
First is that measurements just mentioned.
<unk>.
Significant improvement.
That's right.
Just wonder if you will have.
Medical service providers.
Any position.
So.
Thanks.
The second.
Regarding the take rates all reservations services.
Okay.
I personally.
Water from <unk> point.
Uh huh.
Right.
Regarding.
No Sir.
Shares a trend.
Thanks.
[noise], yes.
Hi, Brian . This is me you I would try to answer.
No questions for the three questions since before the monetization strategy, we we did discuss the Latina freebies.
<unk>.
Previous question.
Well the monetization strategy, we are encouraged he's doing a in a developing the.
Shifting from that mainly focused on transaction monetization to lease monetization. So we are also in the developing the new agree then.
Providing new tools for example, like IBT broadcasting diagnoses and a lot of tools like testing youre asking testing of phase and we will generate leads and available for.
So these providers to invest and acquire the vetted movies in terms of different service type and the defense categories as for the customers.
We are not a monetization.
Aggressively potentially on the lease in the fourth quarter as I mentioned, a any mostly in the third quarter. We don't have any leads generated revenue.
And ER as mentioned by Mr. gene next to halt the next to you. The first half of next year, we probably would see more revenue generated or more information service revenue generated from these service needs.
Based.
Revenue type so but over the periods, we need to advocates I will be did it up team we need to.
Let the service providers.
Range the Oh.
Just a investment behavior and the tried to familiarize follow a available tools.
And the lease available for them to invest and it that neither type.
And we we will also start to.
Probably not seen a in the next few quarters, you'll see all information services generated from visa rather than just a from CPCN CPT and therefore, the take rates question.
Oh, the take rate still the same commission rate is 10%.
Around cross all different types of services and why you see.
The the change in terms of titrate take training quota.
It's also related to the question being mesh related to the also for the second quarter of why we have more push as he uses as mentioned, but I missed the gene we have a campus campaign.
Before you are talking.
University students to provide to those low ARPU a serious items.
And we provides red envelope or a discount to attract those users and lead to will have impact on the net revenue.
And the you will see that's will be have or did that in terms of from a the gross commission revenue we have.
But as usual, we don't have we didn't change and the commission rate is still flat around 10% across all different types of so this is under the the.
Change he is mainly contributed by our red envelope red envelope strategies being applied in different quotas.
[noise] handle your foot questioning about how many you growth.
Huh.
We provide a fourth quarter revenue guidance, but are we don't provide a are you bet is.
But from the previous as mentioned by Mr. Gene I'll marketing campaign has been quite effective and a across this year our customer acquisition.
Spending has been very efficient and we are and as a our key goal for companies K P. I used to increase.
Our user base and the increase our penetration rates in terms of medical aesthetics population. So we will still see the growth in terms of EMEA using the next few quarters.
Okay.
Thanks Mr.
[noise] once again, ladies and gentlemen, if you wish to ask the question. Please press star one on your telephone and wait for named to be announced.
There were no further questions at this time I would like to had a conference back to Mr. Christian are now for closing remarks. Please continue.
Thank you everyone for joining the call Tonight, if you have any further questions or comments.
Okay to reach out to our team. Thank you have a good night.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may all disconnect.