Q4 2019 Earnings Call
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No like data conference over to your first speaker today, just said he lead director of IR. Thank you. Please go ahead.
Thank you Rachel.
Everyone and thank you for joining us today.
Earnings release, a distributor earlier and is available on the IR website, that's I don't think.
As was three movies like.
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Oh, maybe before.
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Amazing, usually that's all otherwise except as required under applicable.
They call RC Oakland walk will make some general remarks performance last year.
Occasion off the ongoing Corona virus outbreak and outlook with weekly.
Oh VP of tragedy that new well that elaborate on a specific strategic initiatives as well pick up through <unk> financial results for the fourth quarter and the fiscal year ended December 31st 20 Nike.
It's my pleasure.
<unk> Chief Executive Officer, holding what is the one please go ahead.
Thank you Shirley.
Hello, everyone and this in Q4, joining us for fourth quarter and fiscal year 2019 results announcement.
Before we begin.
Allow me to first extend our deepest to condolences to those whose lives have be affected by the corona virus outbreak.
And to those raising the from offline to save others.
We salute to you.
The recently that reminded me of what I wrote at the beginning of our letter to shareholders a year ago.
The world is changing at an unprecedented a pace.
Good and bad change simultaneously unfolding met up which all expected.
Set of so many of them these people extras or in disability.
2019, well the important formative years for Pandora.
We are beautiful tell what capacity or capabilities.
No redid, our offerings and a continued reinvesting our users to your house engagement and a job scaling our business.
Perhaps well recognized by users without on your active buyers exceeding 585 minutes at our monthly active users, reaching 482 minutes.
Extra ongoing support of our users merchant Santa populous we're also crossed a new milestones.
Our two.
2019 GMB.
Pod arm B one trillion.
Representing a year on year growth of 113%.
I will order volume also grew 77% year on year to 19.7 billion.
In 2000, launching our team expanded to around 6000 employees.
Built out our key internal systems and infrastructure.
We continue to execute our open platform strategy to prioritize the interest of our users and to benefit to all the participants our ecosystem.
Specifically.
We invested in sourcing kind of supply chain management, you see two m. and agriculture, and any strengthening our IP rights protection.
And David will elaborate on these later.
I'm pleased to know that as a company we emerging from took 2019 lodging scale and a stronger in capabilities.
Better equipped to season, you opportunities to come all expected challenges and show the group's social responsibility.
Oh, such recent challenges because the cobiz inviting epidemic bodies impacting the won't know.
This has being one of the most intense I'm talking purely assets, we have experienced as a team.
The cool Novara.
Okay and do their lives.
We knew.
That affected the other one trial.
Hearing Shanghai, well felt so some notion to flights epidemic alongside the ramps up the nation.
As a platform that provides all the daily needs.
Nearly 600 million people.
We show the greater responsibility crusher.
As we raised the gets to the clock to stabilize courses source essential supplies and deliver them to those that Darren.
But also it's all the cool in the wireless outbreak in China.
We saw them all could afford daily necessities personal protective equipment for me into serious just so right.
Prices. So it's a demand defaults dropped to supply the mismatch was compounded by the Thompson you'll get holidays.
Todd where much off the workforce was a way of most of businesses were shot.
In the face of surgeon process, well felt a duty ball to step in and do our parts to relieve consumer anxieties and help our business populous.
So I'll talk about to the limit to the resources, we've put the mobile I'd suggest the situation that took place.
We decided on directly subsiding subsidizing the daily necessities and the protective equipment to do all apart is stabilizing prices.
Of course, these subsidies might impact the company's a piano and its shareholders would try in a short term.
Second if it can to shareholders L.P.D., the core measured and cool none of them team has fought forwardly about this since the start up the outbreak and it would deeply believe this is something we must do.
During this time of crisis.
We have multiple few our social responsibility at a prototype.
Interest of our consumers.
Because without that.
Yeah, I want to be Pandora.
As such we remain focused on helping our users getting together through this difficult time.
I believe in the market.
I also believe the consumers have they're all waiting scales in their hearts.
It will be the judge of our conduct during this time.
Here I'd also like to take this chose to set our team for their exceptional commitment by the efforts during the outbreak.
Confronted with a previous let alone disease everybody was geared.
Well, we're no different.
Yes, I talked about how we're thinking about that.
Our management teams stayed focused on their responsibilities, while our stuff basing Shaw high return to voluntarily during the holiday to join aim to fight.
We implemented a measures to ensure the house in the 50 of our employees. So that all of us quite a focused on helping others Taco problems brought on by reduced the manpower logistics disruptions supply shortages at a heightened the demo.
Our team poured a time and energy into supporting the relief efforts in Kobe Province.
And the other regions severely affected the bite outbreak.
We saw ciena donated much needed a medical supplies and equipment.
We're also aided agriculture producers in regions affected the by the outbreak which.
We're set up a new programs throughout the impact to.
Producers and this to the agricultural goods more usually our possible and if we recommended that their goods to interested to consumers by doing so well how ensured that the most off our users.
For a quarantining that home.
You didn't to worry about getting quality fresh produce delivered to their homes.
The battle against a cold with 19 try NYSE wagering.
Supported by the selfless contributions up in numerous ordinary people and the SMB.
These people piles silently without any halos at all to up the limelight.
They even put the old lives at the risk.
In similar vein, we're glad to see met all of our younger team members stepping up during this extraordinary time to lead.
The demonstrated their core values upset.
And a commitment to our platform.
Driven by their desire to uphold the interests of consumers and the merchants. These young man in the women shoes to return and Astana by their stations work in part of this live Leslie when they could have chosen otherwise.
They sold out I'll talk a good set of hundreds of millions of users we're waiting for at home.
Procured a protective gears for frontline medical team.
According to the logistics supported for merchants so the orders could it be successfully fulfilled.
And the responded patiently they are today to the higher than normal level upper using careers.
The unforeseen challenges from this outbreak.
Celebrated their growth under development.
These young man or woman, what become important future leaders of our organization.
And I expect there will continue to couple of tough warmed to great Heights in 2020 it'd be out.
I'm proud to be able to work kind of five to alongside our teams <unk>.
It is this kind of professional dedication that are what are you sure. Our eventually return taught piece for life.
Well, we hope to see is that a due to all rapids behind the scene consumers all the platform can enjoy greater stability in their daily lives and it could give us more savings animal fall.
This is how PVD aspires to be as a company.
Seeking to spotlight will never be our goal.
During this difficult time, many companies, including P. indoor outdoor I.
A likely to suffer economic losses data, yet it's difficult to quantify.
He said also dwelling on a path we must look for work as a company our most valuable assets for people.
We should all the more command and to reward our team members will help tirelessly labored creates value.
Such where I've decided to raise the pay for the vast majority of our stuff rather than asking them to bear to short term fund actually impact stemming from an outbreak well also plan to grow the short term cash bonuses at a loved her shopping incentive to those who went to the extra mile to serve others during the outbreak.
In recognition of their commitment to <unk> dollars.
Same time, where comprehensive he knows the merchants, who sacrifice to that the family time at a profit to provide a stable supply of goods to tens of millions of families that we're looking to further expanded the scheme.
The ongoing Corona virus outbreak has also prompted us to deepen our support for research and in medical Sciences.
In January with established the RMB 100 million phone in collaboration with the church young universities to support research into the prevention and control.
Oh from viral infections and the respiratory disease.
The founder will also support a medical resource allocation to hospitals heavily affected areas as well as a reward how kind of walk us well have contributed significantly to the fight against the Corona virus outbreak.
Now a few words.
[noise] Twentytwenty outlook.
Today marks the one loan.
Things the resumption of work for most of China.
Our merchant operations and the logistics have a resumed and are gradually returning to normal.
Well, we'll continue our subsidies program to support their recovery.
The disruption caused by the outbreak well have negatively impact our results for the first quarter of trying to trendy, but our expectations for the Laura remain unchanged.
Even more positive.
Well deserved a broader adoption of digital services by consumers during the outbreak, which bodes well for the future up ecommerce in China.
I've seen rising consumer engagements pumping total.
And I'm confident that our platform stand the better prepared for the future.
We plan to continue evaluating user engagement throughout Twentytwenty and it will remain optimistic that this year would it be another year offer revpas growth and innovation for our platform.
Now, let me tell over to David push your more specifics our strategy and to discuss our financial results.
[noise] David.
Thank you, calling and Hello, everyone.
Let me first recap our key initiatives in 2019 and discuss the relief efforts and measures that we got them came into since the outbreak to support both consumers and facilitate recovery from the activities on their platform.
Same day, one tended to have thought to create an open platform aligns the interest of our merchant partners the shape of users better.
Okay. All thing done them experience of more savings are more phone.
Oh priority remains the same too deep imitrex engaging with our substantiate user base.
So by 50 investing in sourcing and offering a broader range of products that compelling value where users can purchase without hesitation.
Second we continue to push that greater efficiency upstream in that it takes your and your manufacturing industries, Yes, you do any initiatives to deliver tailored high quality choices for consumers.
Yes, we soda invested in technology and operations to strengthen our IP rights protection program.
We continue to see shaping our user base.
So to increase our reach I don't understand our users better we are seeing how that interest and needs evolve across categories and price points.
You're picking our capabilities to shift attractively priced high quality products have you seen system effectively is a key elevating the shopping experience on our platform.
So you know either 10 billion subsidy.
When we launch.
Thank you last year has become synonymous with all clock.
And proven effective encouraging users to venture out and try and new product categories.
This program, Okay encourages our users this year greenfields more frequently within their network.
In addition, we're rentable cross border business to offer users popular imported products ranging thing you like harming the cosmetics and casual luxury directly by reliable and competitive sources.
We also partner with Amazon to open a pop up store during the Black Friday cells.
For 1000 products directly from his global stores.
We continue to explore punish opportunities and collaborative models to offer our users are more differentiated experience.
But divestments in developing our supply chain neighborhoods to respond quickly to the extraordinary circumstances around public 19.
It's worth of from frontline medical staff will leverage our network is short equipment and supplies and donated over 1 million medical Matt.
70000 for type issue.
200000 pairs, the medical glove and 30% of Jimmy important disinfectant.
Back to cities in every way problems.
We provide to RMB six engineering subsidies to more than 80 million orders as of February 1st to stabilize prices of these critical supplies. They use our users and decided.
During this difficult period, you wouldn't even more important not we stick with our motion to help them over call it logistical and operational challenges they face.
Hey, good we usually get RMB 1 billion to fund a subsidy.
Maybe two to four.
At EUR <unk> billion liters during the outage.
At the same time, we're not just contend with sourcing what is currently available in the markets for our users.
Well CPM initiatives was seeking to better line supply chain capabilities with user demand in the market.
We launched our new branding initiative in mid December 2018, with a modest go up helping us understand he's built up their brands domestically.
Over the course of 2019, we brought over 900 companies into the pilot phase of this initiative to develop manufacture and price tailor made good specifically to our users requirement.
2200 custom S.K. you for created spending 20 category, such as how say electrical appliances digital embedded in there for over 150 million orders placed cumulatively.
Approach has evolved over time.
Supporting a single manufacture to engaging that entire manufacturing belts across China.
We have also moved from focusing only on manufactured goods <unk>.
<unk>, incorporating agriculture products, a category, which has always been close to our hearts.
In 2019, JV for agriculture products on our platform reached 136 billion RMB.
Oh, 109% from a year par or.
We can make a 586000 merchant selling agriculture products on our platform with 240 million active users will purchase such good with over 70% repurchase rates.
Last year about fixing penta S.K. you.
See over 100000 waters as a result about he purchase model.
Oh I first on improving the lives of over 12 million farmers directly.
At the beginning of this year, our new branding initiative.
Extended to cover 130, T. producers and see what Jim Province.
When quality affordable T to the masses.
She is you know its consume widely in China right.
Right. It is open difficult for consumers to ascertain the quality of what they're paying for.
We use a possible my well position to help set parameters and provide more transparency to the product, which you turn helps expand the market for the producers.
More broadly in like a culture of goods production, we have been developing technology related to product logistics and you like the man and we're gaining insights phone and machine learning based central processing system.
They insights generated so far much better plan that funding and delivery schedule and sure are usually see fresh produce at that price.
That's at the end of 2019, our central processing system covered all China's counties, we leverage that during the call. The nice thing operate to shorten the efficiently deliver more than 100 tons of fresh produce the hospitals in Hebei province.
Once a month of supply for 5000 medical staff that four hospitals.
The disruption caused by the Florida virus not only affected farmers foreign income by also disrupted their funding plans for the entire year.
Meanwhile, restriction on travel in activity made it difficult for many urban residents to purchase vegetables, and fruits in a timely manner.
So alleviate the situation we launched our farmers program on February 10, which enables consumers to buy fresh produce directly from promising approximately 400 agriculture areas.
Leaving 230 national poverty stricken compete covering 2200 80000, though can you.
This online channel how far most affected by the closure of the usual offline sales channel coverage, you a new consumer base.
Oh, so much Meanwhile, get to access a much broader selection and what their local olive can stop.
To continue building our trust with our user base, we invested throughout 2019 anti counterfeiting technology and grew apart from teach you want it to step out kind of effect and IP infringing products.
And to help our user spread identified trustworthy merchant.
Our improved capabilities not only contributor to better user satisfactions overall, but they also enabled us to exert greater impacting the outbreak and protect our users during this critical.
We initiated an emergency measures on January 22.
In fact disease prevention necessity, so I'm plop them around the clock.
Between January 23rd and February 4th we have prevented the nothing and taken down over 500000 products in question.
And you post restricted penalties that gets over 6000 merchants in question.
Now let me take you through our financial results for the quarter and fiscal year ended December 31st 2019.
Oh, no active buyers for the last 12 months ending December 31st 2019 grew by nearly 50 million compared to I know active buyers at the end of the last quarter.
To exceed 585 million.
Compared to the same quarter in 2018, our active annual buyer base grew by 40%.
Alright, I know you grew by 52 million from a pile quarter to reach 482 million.
This is an increase of 77% from the same quotas in 2018.
The growing engagement our user base is the result of acquired investment.
We believe these activities will contribute to long term GMB growth at these users mature online platform.
Oh, that's all mentioned before 2019 surpassed the one trillion RMB, mark representing 113% year on year growth.
Our continued you can be increase was driven by the sustained growth of our annual spending a fact that buyer, which raised 53% year on year to reach 1700 Twentys b.
But increasing that average numbers should be considered in the context of the rapid increase of our active buyer base over the past few quarters.
Yeah, Hi, like that's our value proposition is resonating strongly with users who are staying on increasing ascending I'd say find more that appeals to their needs our platform.
Our total revenues during the quarter ended December 31st 2019.
Were 10.8 billion RMB.
91% from 5.7 billion R&D in the same quarter last year.
The main driver of this growth was.
Our online marketing services.
Oh and marketing services revenue was 9.7 billion RMB this quarter, so you're getting 90% of our total revenue.
This is about 91% compare to the same period 2018 and is driven by the rising demand for our advertising products.
That's the user traffic and Jamie I'll talk them continue to expand rapidly.
The remainder revenue comprised of transaction services revenue, which in this quarter amounted to 1.1 billion RMB.
This is up 87% compared to the same period a year power.
We continue to offer presidential race to high quality merchant.
This effect on monetization in the short term, we believe this will accrue to the long term value of our platform.
Moving on to call.
Our total cost of revenue increased 43% from RMB 1.4 billion that same period last year Q2 billion this quarter.
This translates to gross margin of 81%, that's compared to 75% a year ago.
Total cost of revenues increased mainly due to higher cost of cloud services.
Call Center, a mission support services.
Total operating expenses this quarter were 10.9 billion RMB.
That's compared to 6.9 billion I'd be remiss in quarter 2018.
Our sales and marketing expenses this quarter increased 54% to 9.3 billion RMB from 6 billion aren't being the same quarter 2018.
This is mainly due to an increasing online to offline advertisement in promotion as we continue to invest in growing our user engagement and user base.
He also leverage I make IPO and RMB 10 billion subsidy programs to feature specific items.
When we did this white black Friday pop up store collaboration with Amazon, We observed not only high conversion for the future products, but also a meaningful traffic increases to Amazon storefront.
I Love GAAP basis, I felt that marketing as a percentage of revenue this quarter was 84%.
That's compared to 89% in the prior quarter and 103% on the same quarter last year.
The variation in our sales and marketing expenses as a percentage of revenue Maumee demonstrates the potential operating leverage in our business model, but more importantly on the sports that discretion, we have in driving our business.
When do you find you will continue to be important investments for us.
The next few quarters, we expect our south and marketing expenses remain fairly dynamic and we'll continue to spend when we see opportunities that meet ROI requirements.
General and administrative expenses were RMB 346 million, an increase of 7% RMB 322 million in the same quarter 2018, primarily due to an increase in headcount.
Research and development expenses were 1.3 billion RMB and increased 142%.
<unk> 500, and type of 575 million in the same quarter of 2018.
The increase was primarily due to an increase in headcount and the recruitment and more experience R&D personnel and increasing argue aid that cloud service expenses.
On a non-GAAP basis, R&D expenses as percentage of our revenue was 9%.
To sum up operating loss for the quarter was 2.1 billion RMB a GAAP basis.
Compared with operating loss of 2.6 billion.
The same quarter of 2018.
Non-GAAP operating loss was 1.3 billion RMB compared with operating loss of 2.1, getting RMB and the same quarter of 2018.
Net loss attributable to ordinary shareholders was 1.8 billion RMB as compared to net also 2.4 billion RMB in the same quarter last year.
Basic and diluted net loss for it yet were 1.5 to RMB compared with RMB 2.16 in the same quarter 2018.
Non-GAAP net loss attributable to ordinary shareholders, what's I'd be it hasn't 15 million compared with RMB 1.9 billion in the same quarter last year.
Non-GAAP basic and diluted net loss for eight years, where I'd be 0.72, compared with RMB 1.72 in the same quarter 2018.
That completes the top end last payment for the fourth quarter.
Net cash from operating activities was RMB 9.6 billion.
Compared with RMB 5.7 billion in the same quarter of 2018.
Merely due to an increasing online marketing services revenue.
As of December 31st 2019, the company has RMB 33.3 billion in cash cash equivalents and restricted cash.
Excluding this restricted cash we had RMB 5.8 billion in cash and cash equivalents. In addition, we've had RMB 35.3 billion in shorten investments.
As Karla mentioned, we expect <unk> first quarter 2020 result to be negatively impacted by the coil now by this outbreak given suspension or commercial activities doing much of February and the gradually assumptions enormously thereafter.
Oh priority as an ecommerce platform that serves nearly 600 million user is to help facilitate the recovery People's lives and resumption of smoke <unk>, a smooth business operation.
So that N., we will continue to provide the necessary support to our merchants and users and we look for opportunities to invest our users <unk> Ah, yes, south of marketing to resume our growth trajectory.
This concludes our prepared remarks, operator, we're ready for questions. Thank you.
Ladies and gentlemen, we will now begin to question answer session.
If you wish to Oscar questions. Please press star one on your telephone I read for your name to be announced if you wish to answer.
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Your first question comes from the line.
Thomas Chong of Jefferies. Please ask your question.
Hi, Good evening fashion management for taking my questions and wish everybody is eating withheld and stay safe.
My question you asked about the V. publicly traded a cost if but <unk> typically in the first two makes it much can management share it's about how it trend of Bush is.
The same pivot las yet.
And my second question you asked about the GP margin.
Just at the GP margin is over 80% in Chile fall. So how should we should think about the GP margin trend going forward and our investment areas.
In trying to try to eat and finally I have a quick question about the the sales and marketing expenses occupant affects that is going to be up by that make.
The next a couple quarters.
Should we still have shown that as a percentage <unk> revenue that would be lastly, a marketing spending thank you.
[noise], Hey, demos thinks I'm sort of question.
With regard to your question on recovery I would say that it is too early yet to assess the full impact of the corner virus outbreak.
During this period, our priorities are still with our users merchants and ecosystem partners. So as discussed we plan to continue subsidizing. The SMB merchants are platform and to focus on improving the user experience.
As we noted we believe the investments today and by standing behind our users will create value for the shareholders in a long run.
That said I will note that you know as we launched at the end of February <unk>, a three day campaign on a 10 billion subsidy shopping festival on the theme of people returning to work. We have says you know a recovery you consumer demand so during the first.
Hours of that campaign, we sold over 50000, I think our platform and 20000 Mac that sticks.
That give us confidence that the longer term demand or and for the industry remains unchanged.
Your second question was with regard to gross margin trends and I would say that you know as we continue to.
To move forward with our investment you will fluctuate from quarter to quarter between 70% to 80%, we will invest that's needed and to build infrastructures and I would not I read too much into the patterns.
And finally, I think palace you had a question around I thought the marketing.
As we have discussed with investors previously we do not have a quarterly target far south and marketing spend instead, we make our decisions on sales and marketing spend based on internal ROI hurdles. So if we see an attractive opportunity to spend we will go ahead and do so I'm going forward and.
For the 20 to 20 as I mentioned this will continue to be an urea investment for us.
Of course, that's the scale grow up a problem growth assert that leverages likely but I wouldn't not you know I.
I would not I would say it I know there is no fundamental change and took a how we're managing this out the marketing spend.
Got it thank you.
And operated before the next question just remind us all the analysts to keep your question.
<unk>.
Thanks, good questions we.
Your next question comes from the line as a Jerry Liu CBS. Please ask your question.
Hey, Thank you guys.
Management I just want to ask about long term consumer behavioral changes first of all to bring this outbreak period have you seen any changes in change the mix of potentially more consumers having enough trust in the platform to buy a fruits and vegetables.
Any kind of a new categories and secondarily on the supply side as we've seen some pressure.
For the merchants do you see any potential structural changes as we recover from the outbreak for example, maybe more manufacturers could turn their attention towards the domestic market versus a exporting.
So just wondering what are some of the long term implications. Thank you.
[noise] sure.
As you know the fight against the corner of ours continues in China, I would say that we.
I have seen certain changes in behavior because of the tendency appeared that people are staying.
In doing in inside the homes and we have seen more users tending to being too though during the crisis for their daily me. So are you in numbers in the fourth quarter have held up very well.
Have held up well versus the end of last year.
And we are doing our best to meet our users request a neat.
Intensive and I would say that he knows the outbreak has also encourage more.
More users to and by more than of activities on the digitally on line and including the purchases of agriculture produce and Sasha as we noted that agriculture products a tender for night.
136 billion RMB I'm not talking.
And we are already seen guy trying to grow in the first quarter.
All right.
<unk>.
Your next question comes from the line Gregory Zhao of Barclays. Please ask your question.
Hi, Matt.
My question.
Oh.
Yes.
Yeah.
Okay.
Hi, this quarter the catalog to know whats Youre right.
<unk> engagements I try not new functions like screaming <unk> gaming mice I'm comfortable function to further.
I'd be engagement article on the take rates can be applied to crucial gallery people. Your expansion the cast wonder I understand more about <unk>.
But it kind of new advertising products you.
Hello.
Good morning fabrication Hunter.
Sure as we have discussed the party for our platform is to focus on growing user engagement. So we of course are paying attention to a different new media's her ways of engaging and we decided to introduce lightstream function.
For our merchant a few months ago unpopular request and we will observe how things proceed before pushing them on the addition of live streaming I would also say that timing was probably play app as homebound consumers. During the special time, we're also more receptive to watching live streaming.
Well my screening, we have sold rider goods and agriculture.
Last year I mean, what has been a surprising the popular I recently read the Lightstream that we did featured mayors from different agriculture area spotlighting, a local produce and we have seen strong support from users with 15 kinds of passion food and over 10 times. So they will and just being sold out in one day.
Your second question I think was regarding take rates.
We do not diminish our business towards the specific pay rate targets.
In fact over the past few quarters, our priority has been bringing onboard hypos. He merchants, who can offer users a broader range of selection and giving them better value and better experience such we are continuing to offer merchants preferential rates and as our activities of use are still a possible I believe mom.
Hi vision will naturally follow.
Hi, good.
And please everybody to one question.
Your next question comes from the alignment of Alicia Yap at Citigroup. Please ask your question.
Hi, I'm good evening management, Thanks, Mike Thanks for taking my questions.
Can management elaborate a little bit linguists say you know first quarter will be nothing can be impacted could you help us frame I think a relatively impact on the GMB terms the active buyers some and also on the revenue.
Would that be a scenario that we even see matthijs GMB growth or then apathy revenue for off thank you.
You know, we do not give guidance on T.N. V or find any financial metrics. So I will keep the plumbing Savage generic as we have seen I brought a so.
The epidemic I would say has a broad impact on across the businesses in China. The industry and we are no exception Chinese new year is a seasonally low quarter for E Commerce and there's a this year the impact has been put long because the lack of labor force and logistic disruption.
Another products, we're sold out on our platform and I could not be replenishing I'm and other products were experiencing shipment delays and simply undeliverable. That's it I would note that our platform has been a very fast growth platform. So any set back at does not change our perspective intensive opportunity for them.
Hi, a year.
Okay, well, let's say that you know the bought adoption that you've heard us doing the outbreak its actually a favorable thing for the overall industry and so can go.
Thank you.
Your next question comes from the line as Natalie will see ITC. Please ask your question.
Hi.
Well in taking my question.
Just wondering for that line.
Got it spending in the fourth quarter, how much it relates to go with subsidizing new uses.
Gotcha lately with the subsidizing the existing ones.
Great.
Can help us understand if I loosen up the range. So in the past several quarters. Thank you.
[laughter].
I think salary for the question.
As you know we didn't factor such breakdown and I would just say that you know we continue to manage our spending on you use that as well as and coupons and subsidies very dynamically based on where it would seem to see the market opportunities.
Next question.
Your next question comes from the line of Han Yun Kim of Macquarie. Please ask your question.
Great. Thank you I just want to understand what your Jim the mix by category. It might look like at the end of last year and then how you might want to see that change. This year I think you talked about agriculture quite a bit it sounds like it's almost 20% of your mix, but just overall apart from that.
Whereas some of the categories you want to incubate further this year. Thank you.
Sure. So as I mentioned agriculture, GMB was 136 billion out of one trillion. So it's really more like 13%.
That's that overall mix of Jimmy on the platform has not changed.
Apparels and efficiencies you can you do accounted for roughly 50% of our GMB.
We look forward the idea, it's actually not to target specific changes in category mix, but to increase that that's the offerings that we happen, we actually see opportunity for growth across all the sectors.
Next question.
Your next question comes from the line the as Eddie Wang of Morgan Stanley. Please ask your question.
Hi, managements and COO for taking my question just how it could hold off on the apparel category. So some of the platform had mentioned that there have been increasing so a human trial.
Awesome.
Brands. So have you witness ending you'll know potential for you know more brands addition.
In terms of got Pago.
On to do such de stocking in.
In March and second quarter. This year. Thank you.
What I would say you in terms of spending behavior over the course of the first quarter up because of the outbreak.
Unless the initial preoccupation were around how we laid a product and devices and that certainly has an impact on their 70 spending behavior is around the discretionary products, However, as China resumed to normal.
The pace of recovery starts to pick up we have seen continued the men.
Across discretion that goes in across different categories as I mentioned earlier and into February when they did a three day campaign, we sold 20000 Machlis sticks in the first 12 hours. So I think overall I, we expected trends for the whole yard continue to be.
After that the other thing that I wouldn't know there's a platform that will have around 600 million users now with monthly active users posted 500 million rents are approaching us more and more so too.
Participate and take advantage of our ecosystem.
Thank you.
Your next question.
Your next question comes from the line of abuse Mobileye of Goldman Sachs. Please ask your question.
<unk>.
Mr. By your line is now open.
[laughter] Hello.
You saw some magic one trillion G.M.B. figure in record time in 29 team.
What categories ramped up in the watch would be the areas of focus for Twentytwenty category wise and how is the lowest here, but it's hard to mix changed for the last year and how should we think could be so all of these parameters through twentytwenty.
Thank you.
Sure.
Excuse as we do not give specific breakdown between different sectors I will comment generally intensive trends.
I'm, sorry user base continue to grow our user distribution phone that population perspective has not changed unnecessarily. However, what we have seen is because update trust that we are dealing with our user base. We are gaining more confidence and consumers are shopping with greater USANA platform and we continue to observe that they.
I'm more and more need that we can address at the platform. So moving for I would say that you know if it's about again, increasing the diversity of the product that we have a the breadth of product we have across all the categories.
And it is about increasing their frequency a purchase on our platform, which proved too and increasing our average order value.
Specifically I would say that you know because of the behavior that we were seeing where you do see a growth in electronics and beauty categories. Given the interest that we see in tier one tier two cities.
Thank you I could I ask another question I know you said one only.
Okay, but I look at when I look at the pace of reacted by addition.
If you continue the pace of the last two years on average in 10 months, you would have caught up with a market leader and you'd have over three quarters of a billion active buyers at that point of time, how does the business changed for you.
China is a very large market and as you know ecommerce penetration is only around 25%. So frankly I think we are not so preoccupied with what our competitors are doing or you know where we operate in says a how can we be doing things better our own platform.
As we stand today I think you know it's again about.
Continuing to build trust with our users continued increased engagements and.
We continue to create a unique fun and interactive experiences.
Any color.
Yeah, well I think it's a interesting question and it's a very good observation.
It's true that you will give will continue this pace than to use a base will be very similar even surpassing.
The major competitor.
So I'd rather have that I think.
It is a good question that Oh, we should I asked the other part [laughter] I mean.
Even today <unk>.
There are still a lot of a press release I know that talk handball, Lord <unk> city users, but when we're looking at 1 billion user base.
What's the difference between large here in the upper tier I'm. So.
So it's kind of.
Interesting to me that people still dividing to users but to me like yes. It is then share cities.
And as you rightly pointed out.
Very soon.
The question itself, a floor, Ken and and first tier cities will be many of us.
So at the upon time its not you all questions that I talked about is also question valid to all the players in the markets and so and.
And together with this.
Jerry.
Oh use your time during the krona virus a lot of the user behavior has been changing so I wouldn't say, it's going to be very interesting time in the next two years.
Thank you.
Next question.
Your your next question comes from the line of Joy each year of Bank of America. Please ask your question.
Hi.
Thanks for taking my question.
Actually I like to.
The impact from <unk>.
Right.
Hi, I know you have mentioned that.
The demand side, Okay degree suffered.
Hi, Matt shock.
I want to know from suppliers side.
Hi.
Like trends, what kind of challenging phasing and you mentioned.
Yes.
That's true how seasonal trends.
And what they like new initiatives hat on and just for financially show nice those kind of investment.
<unk>.
I take rate or.
Actually a impact.
For the next quarter, Thanks, a lot.
Thank you for that.
So in terms of impact to the merchants on our platform. We would note that because of the prolonged a suspension of travel in China or the ability to return to work the ability to start fulfill orders start to manufacture asked me impacted for most of the players and.
And this is particularly would be felt for the small media enterprises and go though it does the platform has is unique ability to help and support to the sense I'm used to return to their normal operations and as I mentioned earlier, we have reserve we deserve an army 1 billion a one to two find that.
The the of two to four RMB per order for merchants fulfilling orders through this time period and you shoot from another perspective, we expect this to be it to the take rate.
Thanks.
Your last question comes from the line as Binnie Wong of HSBC. Please ask your question.
Hi, Good evening management. Thank you for taking my question. So I think belong on just physically.
See that all custom it they couldn't 12 months I think music insulated catching up with all of US close composite and in terms of <unk> right and spend per customer of course, there still is that how about how many do I say one.
Well I'll, maybe once and then all bets and how you see that I'll be chemicals.
Due to the customer one that is that.
Because I think its himself cats, because it's an shoot you properly also quite which I think it's so maybe you think their citizens.
The category or does that give them in terms of upselling and how I actually think that's a sensor so much.
Thank you for that question first of all I would note that we said almost two times the users as articles competitors.
In the fourth quarter and that has an impact to our ARPU, which will take time to catch up so as to use this mature and platform. We do expect to see that their annual spending to increase overtime.
HM.
And you tend to strategy, but then there 10, it's gonna be continuing to engage the users to increase 30 actions and to help build their truck increased continued to build their trust for about five.
Colin I think you wanted to see something.
Yeah, My answer would be really short I think it's just a matter of time.
And with that said.
Please don't over to ask committed to our speed to increase stuff, but I also think that you shouldn't underestimate how about potential too.
Increase stopping the Laura so yeah. So the deposits to answer will be it's just that uptime, just wait and see.
Yeah. Thank you.
So we have reached the end of her presentation that would know liked to have the conference back that today's presenters for closing remarks.
Hey.
David and thanks, everyone for joining the conference calls.
Yeah I need for their follow on question, please feel free to reach out to the.
Thank you and <unk>.
Ladies and gentlemen that does conclude our conference for today, Thank you for participating in and out.
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