Q3 2020 Earnings Call

[music], ladies and gentlemen, today's conference call is due to begin shortly until such time. Your line will remain on musical lease can data standby well. Thank you for your patience.

Once again today's conference call is due to begin shortly until such time. Your libel are made on musical leads can be the standby with thank you for your patience.

[music].

For the third quarter fiscal years 2020 at this time all participants are in the listen.

Today's conference call is being recorded I will now turn to go over to your host and it's just barely song senior IR director upfront. Please go ahead.

Thank you.

Everyone welcome to hold and limited earnings conference call for the quarter of physical yet.

As a reminder, this conference is being recorded.

<unk> financial and operating result, what used to pursue these are just today.

Well in line you can download the earnings property on the file for the company email distribution list by visiting <unk> section of the company's website at <unk> Dot com.

Musical outbound untrammelled the board of directors on the mid Jackie Wall Art Deco, well begin with some prepared remark.

Following the prepared remarks, replacing our founder CEO on ERAPSCO auto drop for the <unk> session. Before we continue <unk> no doubt today's discussion will contain forward looking statement made under the safe Harbor provision of the U.S. Private Securities Litigation Reform Act up 1995.

They involve risks and uncertainties I thought the comedy <unk> actual results may be materially different from view expressed today.

The information regarding these and other risks and uncertainties isn't included in southern funding public company with a U.S. acuity change commission, including its annual report on form can show the comp the company doesn't assume an obligation to update forward looking statements, except as required by law <unk>.

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What did it non-GAAP financial matters.

How many properties it contains a reconciliation.

Non-GAAP matter.

Well they did most directly comparable GAAP matter.

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Hello, everyone. Thank you well drilling in earnings conference call for the caught out physical yard punted <unk>.

That's a phrase a corridor we continue with all the deals strategy diversify your money that they didn't handled on it did reaching out to our pool, allowing us to adopt to did you argue about topline growth on a healthy non-GAAP net profit growth.

Drives our business model, our powerful execution capabilities, Oh, the Vantiv I stepped foot more in Chinas Internet fill out you comment that's Oh field this outstanding performance.

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We are pleased to report another strong quarter, but do you have increasing 69% year over year to RMB 1700, and a 3.3 admitted on total net revenue increasing 25% year over year to RMB 482.1 minute.

In addition, we achieved adjusted net income attributable to <unk> R&D punch, a 1 million represented 35% year over year inquiries and visits another back to back profitable quarter following the last quarter.

Our non-GAAP basis.

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In addition out at a puzzle model <unk> E Commerce lots treatment business grew rapidly third for the quarter you calmer lots Jimmy it's not Mutu Han I'll kill out have been you did I think that live streaming to introduce our new womens apparel crops for several years I don't know food stuff model.

In the kind of caught her E. Commerce opinion has been extended to sort of talking much in under Brent from a winning a pile Brad on the we have received positive feedback from much of consumer.

Okay out cooperates with sub hockey much of on the right amount of product. So their fans through live streaming leveraging our powerful tail I'll put it fully opened a large scale often base.

Thomas live streaming business diversified Btwoc. Good result on the had generated an important part nearly 20% of the total southern its revenue I know the placement model.

Both kill out group matches different tied up much hands on a paradigm for that that month trading characteristics of product I know talking more Brent my follow up I will tell out how about large number of high quality fan who have converted to consumers about E commerce lots streaming business.

We will for the promote our E commerce lot streaming business on the cooperate with more third party much and fully explored him our competitive advantage you'd be area.

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Our constant innovation, but we're trying to develop new business area are driven by a in rigs and the diverse parallel portfolio, which is fueled by a strong capabilities can kill Allan keel Basin development I was off December 31 tons uniting the total number up till now signed by <unk> through long term agreements.

Reached 150, not be that I remember, a pent up about 200 million.

Many of our kill out are you different verticals I'm not really cover the major you cannot consumer sector.

Going forward will expand our own how cool while being more flexible in terms of our cooperation model with Palo Alto.

In addition, we'll cooperates with more third party OCO out there's a decent no cooperation models and the third party to out will help us reduce kill L. copy vision costs decreased <unk> out transaction costs and an increase the overall profit.

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You know decent okay, Alex Teresa I didn't catch basin. We also put great emphasis on that on a reach I'll kill al communication.

Where do you reckon fans from different social media platforms to crucial part of our monetization.

The channel lottery, reducing the potential Dol offense from content marketing support marketing as well I've successfully converting offense to consumer.

On the other hand weeks pen the reach up how connotation through building multiple social media portfolios, the powerful marketing capabilities and communication Dread <unk> out of trucks more Brent seeking population bid up as of December 31st Punky 19, we partner with 900 on.

61, Brent compared with 501 brand as of December 31st 2018.

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Well no sorry on eating into something you for the long useful when they like Jamie It won't be stopped Senza science, you know well known and that one of them you Hutchings of Cindy.

Looking at last year's double 11 that as the leading internet until our ecommerce platform in China. We achieved fruitful result, with JV, increasing significantly year over year once again, demonstrating the duall marketing capabilities under competitive strength off I'll kill out.

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Looking ahead, we will continue to expand our business model on the partner with more platform. We have to maintain I know, we will continue to maintain a close cooperation with Alibaba, how significant strategic decoder on a long term sheet and partner.

In addition, we'll continue to develop our platform business. We've won the beauty beauty to up all other important childhood and other social media platforms, such as 50, <unk> quite show an equal rights too.

Well for the exploring more monetization panels and areas.

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I'd now like to discuss the unfortunate Cardinal virus outbreak in China and its impact operation the outbreak, which started right before Chinese new year has a short term impact on the company's business during the fourth quarter after cons physical yet.

The overall upgrade has been controlled on the we have gradually resumed our normal operation since mid February 20 times.

Meanwhile, our cash reserves remain healthy on a sufficient weebly <unk> as a company that upgrade in the Internet fill out you common sector will achieve even faster growth in the latter lot.

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Gene paid on some won't be as I have you seen cost plus for the father.

For the we're also explore more on a new you imagine an opportunity you're trying to prosper internet fill out market and promote the healthy on a rapid development Internet. So our E commerce industry in China.

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With that I'd now turn the call over to track toward SAP off the company will provide an update on the financial performance for the third quarter fiscal year tons, you're trying to.

Thank you Ms. helpful last Dirty and Hello, everyone I will begin with some key financial highlights for our third quarter fiscal year 2020.

We are very pace do you have maintained the growth momentum units, though cultural fiscal year 2020.

Net revenue increase of 25% to RMB 482.1 Neely.

We'd somebody sees the revenue from the past four model, increasing 154% to RMB 110.7 Neely.

Gross profit increased.

18% year over year to RMB 174.9 mean in this quarter, we achieved adjusted net income attributable to one of RMB 20, whammy, representing an increase of 35% year over year.

Net cash provided by operating activities was RMB 89.9 million, representing an increase of 9% year over year.

Here I would like to Brazil discuss certain highlights of our financial performance for the nine month, Andy The Decemberthirty, one 2018, 1919 and 2080.

Now revenue increased 25 person to RMB, one point to one really weve services revenue from the PEPFAR Mondo, increasing 140 person to RMB 241 me.

Gross profit.

Increasing 42% year over year to RMB four hanjour. The 5.4 meet with gross margin increased to 38% from 33% for the same period of last fiscal year.

It's worth noting that for our platform mono.

Gross profit.

The increase a wide range of the 58% year over year to RMB 138 point Amy.

The gross margin increased two.

58% from 54 person for the superior last fiscal year.

Achieved adjusted net income attributable to kind of RMB 1.9 million compared to a loss of RMB 45.2 million during that same period of relapsed fiscal year.

Net cash provided by operating activities was RMB 98.21 million, representing a decrease of why handed a 14% year over year.

Before we move on to the detailed quarterly financial performance.

I would like to update everyone over some additional information regarding our profit from kill L. classification.

Additional matter to assess our pep lumpy or else performance.

We classify our perform quite well.

Based on the total services revenue generated by the tail ill.

And your the pair phone models during the previous telecom.

For example platform top tier healios generates it services revenue of RMB 10 million or more in the past tell month ended up half all modem, our pet from top tier killer whales increase from a one adds up December 31, 2018 do six as of December 31 20.

90.

Hi itself Decemberthirty, one 2019 total number off our platform top tier established in the emerging kill else increase a 106%.

He was 37 from 18 and stuff December 31 2080.

This demonstrates our capabilities in Pos incubation and the contribution you can refer to the earnings press release for more details.

Now, let's move onto detail the positive financial performance.

Net revenue increased by 25% year over year to RMB 482.21.

Primarily attributable to an increase in some cases revenues through the Praful model and to a lesser extent due to an increase in product sales.

The Fuso as model.

Revenue from the products to do the food service model increased by 9% year over year to RMB 371.4 million.

This increase was primarily attributable to the sales growth of the commentary it's a major unless those opened in the name of the company's top tier killing it.

And was partially offset by the transition of the business model Osama bin I stores opened in the name of the company, it's a lower tier healios.

From the foodservice Mando to pass on Monday.

As a result osats taxation.

The number off the companys unless those decreased to 22, that's up Decemberthirty. One 2019 from 91 as of December 31, 20 agent and the number off the Compressco else serving the Fuso tomorrow decreased to six as of December 31.

One 2019 from 25, that's up Decemberthirty one 2018.

On the other hand products, yes, the revenue from the company's unless does open end up top tier Healios. That's what you operation in both periods you Crisa by 31 person in the current period.

That's compared to the same Cuattro philosophy school yet.

Revenue from frontline services revenue through the pendulum model you increase the by 150 fault, but.

In year over year to RMB 110.7 million.

This increase was mainly attributable to several item.

For.

The Ukraine in the number of appeal else, serving the Companys platform model, which increased 44 press into why handed a 45, that's up and Decemberthirty one 2019.

100, a one as of December 31, 2018.

The improved the performance of such killer whales as evidenced by the you crazy in the aggregate number of the Pep off the top tier establish an emerging Pos to 37 as of December 31, 2019 from a gene as of December 31, 2080 and.

Sure Hey, you increase the number of a brand with the wage the company cooperated it's advertising and marketing basis.

Q3 hundred 32, and a third of cultural fiscal year 20 Twond.

From 238.

For the same quarter last fiscal year.

Cost of revenue increased by 29% year over year to RMB 307 upon to me, which was largely in line with the increase.

Total net Ren.

Gross profit increased by 18% year over year to RMB 174.9, you mean.

Gross margin slightly decreased to 36% pharma.

38% for the same quarter over last fiscal year.

The gross margin up services revenue remained relatively stable, it's 56% compared to 57% for that same quarter of last fiscal year.

Total operating expenses increased by 25 for Sandy Yoav year to RMB 166, Neely included in the total operating expenses wasn't angry gauge of RMB 10, tampons, just threemillion often noncash amortization.

Expanse of intangible asset.

In relation to exclusive cooperation right and the share based compensation.

And the litigation costs.

The current quarter compared to an elite for that same quarter last fiscal year.

Total operating expenses accounted for 34% under 35%.

The total net revenue for the three month ended December 31, 29, Tiet and the 2018, respectively.

Excluding the above mansion noncash charges and the litigation costs, there the percentage will be 32% and a 35% respectively.

Fulfillment costs increased by 13% year over year to RMB 43 million. The increase was primarily due to the increase in product sales during the three months and data Decemberthirty, one 2019 compare to the same quarter last fiscal year <unk>.

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Contain the full tail plus n. and the 11% of product sales to revenue during the three month ended at December 31 in 2019 to 2018, respectively.

Sales and the marketing expenses increased by 24% year over year to RMB 87.6 million.

Sales and the marketing expenses can see supply marry up fantasies fall keel l. intubation cultivation content production entertaining and the personnel costs related to support team.

For the company's pet from <unk>.

And the expenses incurred for our advertising marketing and the brand the promotion activities and the personnel costs of or Eighteight operation Pete ended the foodservice Amanda.

The increase what the increase was primary due to for us the noncash amortization expense I'll be intangible assets.

In relation to exclusive Corporation rights of RMB 5.2 me second the noncash share based compensation expense of RMB, One point for me and the third the Ukraine expense and the personnel costs.

In relation to kill L. intubation cultivation content production and the training Tusa, Paul you increased activities for the company's <unk> sales and net advertising basic business following the expansion of coil pool.

Sales and marketing expenses accounted for 18% and 18 Griffin.

I hope that total net revenue during that three months' Andy that Decemberthirty, one 2019 to 2018, respectively exclude exclusive of the aggregates of RMB 6.6 million noncash charges as mentioned above the percentage will be 17% 18 pricing risk.

Back to me.

General and administrative expenses, you creates a by 43% year over year to RMB 35.3 me. The increase was primarily driven by the increase a share based compensation expense of RMB 2.5 million.

Professional fees of RMB, five or Amy lean and a rental cost of RMB 1.1 general and administrative expense a come to the for salmon price and that 6% off the total net revenue during the three months ended December 31, 2900 2018, respectively.

Income before taxes was RMB 14.4 million compared to RMB 40, Twond Amy for their seen Khwaja of last fiscal year as always out of the fall vote fall going.

Income tax expenses was RMB 3.9 million compared to RMB 4.2 million for that same quarter of last fiscal year.

Net income attributable to non was RMB 10.7 Neely.

Inclusive of all of aggregates of RMB 9.2 million of noncash amortization expenses.

Intangible assets in relation to exclusive cooperation rights and the share based compensation expenses.

Compared to RMB 15.5 mean for the same quarter last fiscal year.

Adjusted net income attributable to <unk> was RMB 21 million compared to RMB 15.5 million for that same quarter last fiscal year, representing an increase of 35% year over year.

In terms of the interim us all.

Our balance sheet and the cash flow that's up at December 31, 29 team, we had cash and cash it with Cleveland restricted cash and short term investment of RMB 853.5, new.

Pierre to RMB 103 Pond, Amy SL from March 31, 2090.

Net cash provided by operating activities was RMB 89.9 million and RMB 98.1 me for the three and a nine month ended December 31, 2090, representing a year over year increase of 9% and why handed a 14% risk.

Activity compared to that same period of re last fiscal year.

Now turning to our outlook.

Despite the fact that as of today, the Corona virus, DC 2019 or outbreak in China has a shacham <unk> impact on the company's business.

During the fourth quarter fiscal year 2020 based on the Companys current expectation that estimate the companies do remain confident in the growth prospects and the rate eatery its outlook for the full fiscal year 2020.

For the full fiscal year 2020, we expect net revenue from product sales through the flu so as model to be between RMB 918 million and the RMB 1000, the why handed a 30 million representing a year over year growth Beach in full president and 20%.

And net revenue from somebody sees sued the PEPFAR model to be between RMB, 218, Neely and our RMB 380 million, representing a year over year growth between 86% and a 152% respectively.

This forecast reflects the comprise current and preliminary review on the current a basis situation and the market conditions.

We chase subject to change as well as to the comprise current estimate of the impact from the Kobe to 19 outbreak, which is also subject to change.

This conclude our prepared remarks, we'll now open the call folks again they operator. Please go ahead.

Ladies and gentlemen, we will now begin to question and answer session. If you wish to asked the question. Please press star one on your telephone now add weight training to be.

If you wish to cancel your request fleet suppressed without asking for the benefit of all participants on today's call. If you wish to ask your question to the company's management in Chinese lease immediately repeat your question English.

Your first question comes from the line of so they have open heimer. Please ask your question.

You mean management. Thanks for taking my question, what's in human tumor ones I. Just Oh go ahead go so you'll see built into say that's used to all come to accept prepared remarks, the men and women I knew that you leave Oh sure one thing <unk> opinion, but the good news outlets.

So once you know I was hoping woman year would you.

Sure.

Shocks and somebody on the function that shouldn't qualms soon you couldn't I'm teaching quality longwalls homes home here, but what I can on each country <unk> Google can die.

I'm, sorry to say myself. So congrats on another great quarter, just now in your prepared remarks.

Benson.

For the virus. So I was wondering whether in men's and then can share more details regarding that.

On the business operation and financial performance. So what is the performance real for longer term perspective. Thank you.

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Well, you're checking that was when we shot do you hope action that you can show.

Okay, No. Let me talk about specific impact on the company's business operation on how to take a longer term view of the epidemic and then Jackie we'll comment on that specific impact on the financial performance.

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Well certainly early on in your audience.

She said she spends on down the funding.

As mentioned above Idaho based on the current situation on accompanies expectations are for the future.

Stemagen only has a short term limited impact on the company a many in fabry twentytwenty. So the short term impact as many reflected a into as Pat.

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First in terms of the full service business due to the impact of that me an extension of the Chinese new year holidays, our supply chain has been greatly affected.

Other than we have more than 700 suppliers. So in fabric. They don't have any recommendation or introduction of our own brand new style women's apparel.

I've been time does especially I'll still fulfillment and logistics has that the Iraq impact our ecommerce business off the food service model.

Got you if I mean, you will notice on book some jobs.

No it wasn't sunny.

See you live in.

Regardless of the change other children buttons.

Each other coming through.

For the industry.

Well, hi, shipping shop, our yields through that teaching.

We'll go says I won't go up I mean, he comes looking mail sold all kinds of Asia. So you wait wait let you Cincotta goes you thought you eat Asia.

And in terms of the platform a business because well have a quite a lot of serve as much of that Brent. So if they belong to the E commerce sector. If sure Dave you encounter that same problem as our food service business, if they'd be lost to the offline business normal operations, it's not possible.

On the this meal I've a couple of the affect their need for various marketing activities Oh.

We will have some a branding and advertising business I had a you know addition does not tomorrow impact on accompanying scale out incubation, which has a beneficial impact on the company business operations in the future opt <unk> I mean.

Second question.

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I want to conduct will do if I'm each I'm wondering though cheapen platelets in top line going you didn't buy me.

Goes are you done functions, so using Jones people's attention.

No as you can see a the epidemic situation in China has been quite well I can chose reliance that a lot of work in terms of employee health and the 50.

I'll now there's not a any there isn't any suspected or confirmed type.

Ah actually our.

Our colleagues has been hop back to our headquarters office now hung doses.

Me, though favour at present, you can see that the logistics related our prisons has been olimus back to normal supply chain has gradually.

Because I know, we will resume our recommendations.

For our own brand new style women's apparel in the first of its business model you much.

Oh, hi, constantly chances of Golden age and gender.

There are lot cheaper question.

Well, that's always a btwob goals. So tell me. This is young injunctions other she was talking about.

Uh Huh guns do well in April in something I suppose the joking other told US general wage docile used so let's use of gene will follow.

Finally, you no longer on the EPS dynamics wheel full doesn't develop the online E commerce business in China, and consumers will be much more accustomed to online shopping in the social media platforms.

For <unk>, the mainstream E commerce platform and social media platform in China. The company will greatly benefit from the for the development of the trend.

[noise] Jackie please go on your part.

Okay.

Let me ask some impose regarding the impacts on financial performance.

As a result off the impacts all of the basis operation as discussed by mute your phone just now the financial performance during the fourth quarter fiscal year 2020, <unk> debt. They will be affected the fourth quarter. You are they will be that slack season. During the you know the choice.

These new year holidays in January and the operators and the extended holiday in February.

Will you know our resulting in decreased.

When you you February 2025.

However, you know Saket expects is like you know the personnel costs.

And the rental fee and the given certain professional fees based on you know and new framework right those item could not be saved and.

And but based on the current expectation estimate we do remain confidential number both prospects and though we reiterate our ran you all looks for the full fiscal year 2020. Aside just mentioned that you end up brief prepared remarks.

If you kind of banning she off and our cash flow efficacy. That's what we have adequate cash on hand, and we also generated positive cash flow during the past three quarters. So it's a very healthy.

And one more additional pawn type thing I want to mention is that during the current period or the cost into incubated should kilos like you know accumulate a fine it's a lower and ER, we achieved with it you know a batch or cost to see being resolved I see that will be.

See you vaccine another way of batch or for the financial performance for the fourth quarter.

Okay. Thank you.

All right.

Your next question comes from the line Vicki way of Citi. Please ask your question.

Yes, I mean, Benjamin Thanks for taking my question I have two small question.

First one is.

Revenue along how many percentage of revenue is from advertising revenue Ses and my second question. It's about that gross profit margin Chad. So what is the reason for that decline.

Well the revenue gross margin decline this quarter and blood management piece by some color on.

Gross margin Chen southeast well done that's corridor and the Longtan perspective, I think too.

Okay. Thank you, let me take your questions and a young for us when talking about or the service services revenue and the advertising revenue is yeah. It's a very important the monetization channel fault.

Our <unk> engine as a penfold model and talking about the percentage of the advertising revenue.

Compared to the total services revenue from the Pep on model and Uh Huh.

For the current quarter, it's a ball 46%.

That's a compared to I will also show you know the prior year, even though the comparative period of Fieger compared you 72, I think over 70% for that same quarter last fiscal year and further if you look at the nine month and data Decemberthirty. One 219, it's about so you know.

Oh over 50% I think it bought a 53% and again the current carrier as compared to 67% for that same period of last fiscal year. So you can see that the percentage, it's a decreasing gradually immediately as ever.

He is out of the company's efforts to explore all more and the molecule else kill monetization channels and as a platform model. So like you know the Jauntily operating page on last dollar so I'm going and sharing stall on E Commerce live streaming and so long.

And regarding.

Your second question talking about the.

Gross margin Chan.

Yes, you know a gross margin of our product sales under the food service model as compared to you know quite at the same quarter of last fiscal year. You know, it's a decrease right at the major reason a dash.

It's the major isn't it because of the way we utilize the E commerce live streaming for our own a we meet apparel brands.

Tended I mean, we have a different mastered away to utilize it previously you know Oh, we mentioned that she will be only utilized you know last streaming to introduce I've or new products. So there are no. There was no director CLC evolved so following the new channels the life.

Jamie right for the really a booming it's really blew me in China and we all know that allow told me you know anastasios are utilizing so now from the common culture. On we are also release you know the the product link kg in the juries are nice streaming so people all customer can bite.

Directly.

And in order to because even you it kind of a new pelephone right you ought to attracting new customers accumulate a fast in the last streaming platform. During this quarter. We eat you know strategically lower the the sale price.

During the last Jamie because it's not typical you know a character off the live streaming and the customer who want to buy products through the life, Jamie the I expect that you see a you know a big piece Comed and that's up the but the most important thing you know it.

The want if you want people to buys a two to follow follow you through the life screaming Praful you need to you know gave up you know a large discount.

Of course, you know I notice, even though in the fourth you end up there in the third clauser, either so departure. The overall computation environments are right, especially by considering all of you know computation is our company teachers, you know or the on now really fool ageing components Weve.

Related to tax laws. The my also affects our pricing in order to compete to we've done.

Regarding the long term trend off.

Such gross margin a I would I wouldn't see you know from the divided into food service model and up half on model and the full service model right. If you look at the.

If you look at a nine month end date of December 2019, the gross margin of the food service model. Its Oh 32 person you factor little bit higher then 31, plus and the for the same period of last fiscal year I. Just want you mentioned that the evidence to show that you know the low.

Our margin for the the departure, it's a candles a you know.

Kind of onetime and unlocks Jamie you know deed affects our current quarter gross margin by far long term right. We have implementation you know a internally annual certain matters, how to deal with that right and including right. We can design all manufacturer you know.

Different products you know for the last streaming. It means you know we have some you know spread <unk> product for the last streaming and the you know some other products you know for the.

Non live streaming you know sale.

And the in addition, I want to imagine that's because of the effectiveness of Chinese New E Commerce at all.

In 2019.

And the we expect you know the actual implementation might be complete heading in the near <unk> in the next maybe two or three years and though we believe will benefit from them because we have already fully you know compiled that we the related you know requirements and a gross margin.

Oh, we'll be increase.

In the future as compared to you know the common culture.

And for the <unk> for those services revenue and or the Pep on model.

So gross margin for the current plus or the 56% relatively stable you factor as compare to the scene.

Quarter over last fiscal year, and if you look at a nine month and it's a 58% as compared to 50, Paul a 54 person for the same period of last fiscal year, much higher and ER as the only costs are venue for Pelephone.

I know, it's a killer whale service feet. So it will be affected by several factors like you know that different cooperation mass or the l. Wade different appeal.

And the different a monetization channels for example, I, even though the hot topic last streaming money taxation channel. It's a one off the the channels and other people what I ended up half a models and kill LSC Eurone will be paid a higher service fee anyway. So you know.

The <unk> gross margin Oh for their revenue generated through the life streaming or will be lower as compared to other.

Channels.

And the in the future we probably will also cooperates. We you know well establish a Saar particular items, which my also affects you know a the gross margin.

But it will not being incurred the incubation costs fall such serp hockey kill ill because because it's already you know will establish the already accumulated a fast you probably do not really needs a unique craze basket.

And therefore, the overall operating margin, we will not be affected a maturity.

However, I believe the overall gross margin will still remain at a very high level for the food for the pebble models in the future.

Thank you.

Thank you.

Your next question comes from the line.

Oh Gee, mainly yes. Please ask your question.

Goes you're probably two non silicon <unk> since income, which not only going to smooth limit that she's always goes and sinful. Your you call. She pulled to tell you that you saw the boards in Tony Hawk number to look a little more competitive.

Well, that's how you are.

Do you guys have a systematic strategies to drive E Commerce, Jim beam, who loves Genie, how do we allocate resources she loves team. Thank you.

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What that well thought out based on the Sercel well meant that the let me answer shuffled the Tony.

Oh, Yes, you out crux nowadays are the E commerce, a lot premium has developed quite rapidly.

How many out.

We also formulated a very systematic strategy a in dispute you know.

Well have to wasn't well shouldn't that <unk> easy like just as a woman seeing yields will continue.

In the Honda, usually at home, but almost double the personalized treatment.

When you're talking about.

For the last trimming Ah you had a it is many the live streaming on top so that's why I'm you know on this has been a important part of the company's fool sub as a business model.

Okay, I always have been utilizing the lot premium on how about that from our to introduce our own brand new fell womens apparel up production.

Go ahead, sorry, sorry, it's all a shame that Sheldon.

As I look funny.

Actually yields on me.

Well then John function the tone was both radiancy, you've been talking pot so crazy.

Persons owns the just shot I wasn't going up on what kind of weapons you do focus I see James Schumm night.

Hi, good was.

The company also made a relevant adjustments into your business, it's many into as Pat.

First in terms of the first of it but business model. We are only you know recommend our own brand women's apparel up production through the last three me a you know that dreaming up pros that you know customers can a place older directly on the big Uncomplete the the purchase a pro.

That.

We have seen that to a significant part or consider global part of our JV is Ah Ah related surveys the live streaming Oh, you specialty in this fiscal quarter, including the double 11 a period.

But keep in high yield some yet so you ruins the unions assumption I use and Dorothy Somebody's I'm just looking.

We call. It doesn't really good question father, whether be century, though been sold all the sun job for shopping.

The board that what you said bunch in age. So you will show the Bell. She said she thought trade on a pintar Jim Peterson.

Well the sole yet we'll keep an eye so really shots on goal tools.

Sometimes its own so so far so the gene buttons us.

A second in terms of the platform business model off with a lot training business Oh, we have extended our from our own women's apparel brands onto the third party much as under Brent, which has been actor on the Sop William monetization tunnel for our <unk> out.

The we have received quite a positive feedbacks from much hands on the consumer.

I'll, let you comment lot printing business did give us quite a good without your short term a this has grizzly boost the JV increase in the platform model and it has generated an important part is merely a you know tons of assigned although total service revenue.

Another platform modem.

Cycles and somebody when he thought was on its own she shops you go from your franchise.

Are you in terms of the resource allocation.

I would like to share the follow you asked pack.

So it's all of them in schools is all about dollar Chung about either thoughts on somebody's home phone softly Gtone, So something goes.

In terms of the merchants resource ultra rich.

Oh, we have you know gradually build to two on the unified team fully exploiting our advantage of Suntrust lives to merchants resource outreach.

Well, how much youre talking about a whole intrinsic to eat well, it's useful so you didn't symbols on.

So Tim Hortons, she though that on Yelp to show.

You know addition, I you know all we have a very strong oh.

Our pool, so on the basis of the unified merchants, we thought it also rich I took some pent up all the top tier if that punished how out play of played a role to drive emerging house.

So for a minute goal so that change what's on the agenda.

She thoughtful in order that you got the only other watching <unk>.

Also you put your local slots as well if I shudder corner.

In terms of the Hell out incubation you know other companies signing on the incubation.

Team also regard the ecommerce a lot dreaming eyes on important and additional monetization channel you know the company also sign up for cooperation on including fill out.

Well I, especially in that direction I'll live streaming.

Right, but what do you know sometime well, let me go Oh, what pace, if I mean, it goes and what should I see she goes a little woman's as well. So you could change in the meat cheese was Oh Gee, so joking values on Chinese <unk> lead offensive.

So looking that well what sensible thing for yields on the shopping.

But.

Oh by the courses Peatland joke, it's often book.

In terms of the E commerce lot streaming and access to resource allocation no real high is quite different from other I'm since leveraging on the main <unk> competitive advantage of kill out incubation aren't real how you know our hill out a they have a very large number of high quality fan.

With very strong stickney on different social platforms. So they have converted to consumers of our E Commerce live streaming business.

With quite good conversion result component right. So that's way actual resource allocation from the company we are not be that's much.

For the will athletes as your Jolly intensive well booking not cheap.

In Trued up she.

In the future going out the company, we'll continue to focus on the E commerce lots dreaming cooperate with multiple platforms and the further enrich the money type isn't kind of fourq how else. Thank you. Thank you.

Thank you.

Your next question comes from the line of linear gel SWS research. Please ask your question.

Oh, Hi management team.

So.

Two questions one it's about <unk>.

Really.

Uh huh.

Oh.

As you mentioned before.

The home buyers alone.

I'd like it that people may tend to you come up.

Each have more into future.

But like I said.

Yeah.

So hmm.

Kids to set up their own MTN Oh.

Okay.

Yeah.

HM.

Okay, and my second one other puppet here well actually piece here.

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That.

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Oh.

That's what do you see.

Yes that hope.

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Hello.

Instead, they establish or imagine well.

Oh any spending.

Oh.

Thank you, Okay say, Oh, I think you think you lots of questions, let me take them and.

I think that's true you know as he mentioned the life.

Oh I know.

[noise] or will be will be changed your life because of the outbreak and Oh I see I want to punch AWS or the the operationally you know will naturally reverse or the current chanda in the future.

And the kind of being a way to accelerate the chance that chase you know if you're talking about people are moving their habits Chu from the offline to online for shocking will you know even worse for work all you have a entertainment and so on the China has been there for many years and a you know that they all look away.

We believe the we will further accelerated and of course, a rule has a leading company connecting the major E. Commerce, you know platform and their social media platform in China, you know through our self into beta all cooperate hit Q else, we will benefit definitely benefit allowed from the their choice.

And and.

But talk about yeah, you know because even though it's a booming right booming and a lot of you know newcomer and a human either you know cantos each hijacking badly in the you know M. A C N enter the talking about the computation.

If you choose actually you know are there we are seeing even though a lot of you know new cameras. All we all we can call is a follower that's how start either all we'll start to you know you invest in the killer whale knocking the acuity all you know a MCN company right and the the company does commutation unit.

Always exists and especially for such a hot topic in China and kill element.

And the let me share my view that as you know kill kill L. economy market is such a huge markets in China and based you know sort to reserve report I doubt lots of a research report and the it eight a. will have a you know a compound annual growth rate.

Overall at least the you know 40 plus end the year over year for the next several months or several years, and it's huge and developing really fast and or the PEO Maki can does she even though it's a highly you know diversified and no one a single MCN company can.

And sign off all can get all the you know potential kill else. So they are no new new customers do not compete so you know directly with the rule hang in fact from this perspective.

And nothing I want to add that Hulu has their largest so you know internet QL for a few tater in China and the we pioneered the commercialization of the kill L. you closed system like in China, you know that you know several years ago and a rule Honda.

Yes, atrocity the brand and it will not only a check so you know the third party you know margins all brands the to have odd help them to facilitates our to promote their their products, but also will attacks. The most a talenti. The you know you kill else Oh potential killed.

Yes.

And and also right rule case, probably the only one.

That's it could the manager you know so.

Diversify into you know monetize season channel and the fall different akhil else I imagine, it's just know that you know.

Channels, including right or or a sale for own I'm going to star I ended the food service model and the Jauntily operator, you know anastasios, all nice sharing stall all even though live streaming and.

We can call points with the you know our selfie into beta we have a you know the strong capability, he incubating or Tokyo else from amateur so that's a lots of you know advantage is he going to rule on have that we don't believe our company taser him. So we.

Now really can't up a concern about answer the computation.

And Oh, we Gotta Youre a next question and next question you talked about the you know tough Tokyo contributed to year and you know the merger the over about 50, 50% or GMB and.

I want to see that if you compare because we have food service model and the Pep on model you cannot really compare you know that GMB Jan you know the GMB because the the GMB you know it falls that certain top tier killer whale, who for whom we opened we opened.

When I start for them and or the food service model. The the GMB probably will be much higher but if you. Another we if you look had the you know I've or kill L. classification, and there's a pet phone model right. You can see you know, we grow really fast right and so.

So December 31, 31, 2019, we already got US you know a six top tier performed top tier killer whale and that's all end or the.

And are the PEPFAR model and the revenue generated a buys them if the service revenue and the public Oh, the majority of them. It's a advertising revenue. They are no associated a JV. So you can already just compare the JV and Ah if im talking about you know how.

How long should take how long does say take the to incubate a establish emerging coil I want to answer you Oh I answered the question their way this rights.

So Oh, we you know we we we signed a new con a new contracts, we have the potential Coelce every month, right and ER and base on the you know historical you know experience and we almost got a nearly 100% success.

The reason you could beating the UK what else is you know we we invest in the I'm in the initial you basin period and then after a certain period, we got all the U.S. and them back and after that you know.

Basically you know there and then no. New addition, additional you know costs incurred for them. If they are no revenue generated from the but you know we can't see that you know I guess it says it depending on we can sign more on the mall and Yukio Aeolus.

And they didn't you bet you could be them to have them you know gazda you've asked my initial your maximum bag and they will generate a profit for the company and up because the profit margin for each killer whale. If you look at an average of fieger. It will be the C. Four top tier all fall a lower tier coil the.

Gross margin generated a buy them would be a thing. So we don't really want to no not really want to either it's impossible to have everyone ever appeal to be a you know establish the all human top tier appeal will be what we would try to make sure I, 100% nearly 100%.

Ah successful rates again, you doing they can completion.

I'm talking about the long term the person who don't see all that's tequila attribute to attribute and as I imagine just now our policy is actually you know we it's now really you can already you know have and want to be a top tier Keno Hill and so if.

You look as a percentage in the future. If you look at the current period, yet you already you know, 50% and other PEPFAR model, but I believe in the future. If you look at the President page. It will be either you know stable over there or lower gradually because we have more and the mall you know kiosk.

So to be added to the killer whale pool, you often will happen and that's will account for the majority of their revenue generated and Ah.

And the in the future you know, we will will be more flexible mean.

If you expanding the upper QL right you know, we'll keep our you know normal pace to signed a new contrasted with the kill a all you know every month, we probably was sound bar you know five to 10, a you know Yukio at all but you. You know addition to that we will have you know more.

Flexible ways, you know yi, though cooperates with that our party well is well established acutely all all we all maybe what do you sense you know the kill ill leave fall.

The end there one monetization channel it's now for the full scope lacking a we can't sign some people who only doing the live streaming only doing the you know the advertising. So if you look our you know the future path for the next year I believe you know the overall.

You know edition of the new kill a all will be much higher than Ah Ah than the prior year. The prior I think the barge. So you know a 15 new additions if you you'd be Dr. You know currently at 150, 90 doctors or why hand judge it a 11 as of December.

He went 20 2018 and I believe there probably know several times of the the number off the new additions in the coming years.

Okay. Thank you I answer all your question.

As there are no further questions now I'd like to turn the call back over to the company for closing remarks.

Oh, thank everyone. Thank you again for joining us today, if that if you have any sort of Hudson corporate grip.

For two compared to Oh from all our lesser relations a information all up quite thank everyone Bye bye.

<unk>.

This concludes this conference call you May now disconnect. Your line. Thank you.

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