Q1 2020 Earnings Call
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Ladies and gentlemen, thank you must timing by good day, everyone and welcome to Bishop Holdings Limited first quarter Twentytwenty earnings Conference call at this point I would like to turn the call well with the Miss Jesse Sutton Bishop <unk> director of Investor Relations. Please go ahead.
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Good morning, and good evening, everyone Worldcom and it's been Q4, joining all worked for supported to start and can be earnings conference call.
We are pleased to have a deliberate if you really.
No. It was good cultural to sort of.
Despite the next to incur from the cool nights King endemic <unk>.
The retail industry, where the meaningfully impart by the end Duncan.
Paradoxically wouldn't be Fisher is perfect due to people, leaving the Oh, let's open.
Through the coupon, we work closely with our suppliers and the as ever.
Chris to continue to provide real production and the reliable city 12 recover.
Also as a lot who is also that's it.
Medical and the Senate highly productive.
Such as Facebook and co workers that consumer need.
During this time.
Well I'm glad that everybody's are in China has returned to normal and our business has been houses to recover as well.
Our JV has grown nicely, mainly driven by the consumption.
Covering our co category.
In addition, we will be launching our June promotion events soon.
We've seen this year's June promotion events as a great opportunity to help our suppliers Petrov wholesale.
While providing our customers with you in from a weather at the turn shows either.
Looking into the rest so year to be out beyond we see positive about south loop of our company.
We believe always ugly tongue.
Ecommerce companies to gain share from offline retailer and the we are especially well positioned to extend our market share in trying to use come to retail market.
Looking ahead, we will continue to improve.
Our merchandising capabilities.
As our brand partners are freezing challenge with experts inventory.
We are committed to working with them mall effectively while opening the best view to our consumers.
Taking a win win situation for all Parkway.
At this point, let me hand over the call. It 12 careful so how young.
She may discuss our strategies in more detail and the go over our operational and financial results.
Thanks, Eric Hello, everyone.
We'll go out.
The first quarter of 2020 with on growth that exceeded our expectations.
And solid profitability, even that missed it cobot 19 in Ghana.
Although our burst margin would impact to turn this quarter results come more standardized products with lower take rates joined the pandemic, we delivered solid bottom line through the execution of effective cost control.
Cool in the first quarter of 2020, non-GAAP net income attributable to VIP is not shareholders increased by 20.8% year over year to 986 million pump 800.
16 million in the prior year period.
Our non-GAAP net margin attributable to VIP shop shareholders increased to 5.2%.
3.8% in the prior period.
During the first quarter, our number of active customers remained stable year over year, and our total orders increased by 4% year over year to 121.7 million from 116.5 million in the prior year period.
We see these metrics this fall results during such a turbulent time.
Especially since we invested third vessel into customer acquisition this quarter.
In the current environment, we believe the powder cyclical nature of our business positions us well for opportunities to gain market share core category.
Brian that don't currently work with us will be more open to partnering with us the clear their inventory through our platform.
The same time and online retail and easy in apparel are facing challenges.
Listing supplier or work with us even more closely and give us more desirable pilot.
Deeper discounts.
Going forward, we will continue to balance our topline growth and bottom line supporting our brands partners, where we can drive more sales for both parties.
Now moving on to our quarterly financial highlight.
The point that started I would like to clarify that all the financial numbers presented today are usually be amounts and all percentage changes we've heard so year over year changes unless otherwise noted.
Hello.
The first quarter.
<unk> increased by 8% year over year to 18.8 billion from 21.3 billion in the prior year period, primarily attributable to soft consumer demand for discretionary category.
Ladies logistic services and spill response from the supply chain during the cold with 90 and Dennis.
Gross profit for the first quarter of 2020 was 3.6 billion as compared with 4.4 billion in the prior year period.
Gross margin was 19.2% as compared with 20.4% in the prior year period, primarily attributable to higher revenue contribution from standardized products with lower gross margin during the coldest 19th and again.
Total operating expenses for the first quarter of 2020 decreased to 2 billion from 3.6 billion in the prior year period as a percentage of total net revenue total operating expenses decreased to 15.9% from 16.9%.
In the prior period, primarily attributable strict cost control.
Fulfillment expenses for the first quarter of 2020 decreased to 1.4 billion from 1.8 billion in the prior year period.
As a percentage of total net revenue fulfillment expenses decreased to 7.4%.
8.3% in the prior year period, primarily attributable to the chase people selling logistics arrangement.
Marketing expenses.
Quarter of 2020 decreased to 412 million from 781 million in the prior year period.
As a percentage of total net revenue marketing expenses decreased to 2.2% from 3.7% in the prior year period, primarily attributable to reduced spending during the coolest 19 and Dennis.
Technology and content expenses for the first quarter of 2020 decreased to 338 million from 383 million in the prior year period.
As a percentage of total net revenue technology and comp expenses remain stable at 1.8% year over year.
General and administrative expenses for the first quarter of 2020.
Were 839 million as compared with 669 million in the prior year period as a percentage of total net revenue general and administrative expenses were 4.5% as compared with 3.1% in the pattern period.
Primarily attributable to operating expenses related to our offline stores and shirt options granted.
To our Coke honors.
Our income from operations for the first quarter of 2020 with 782 million as compared with 810 63 million in the prior year period operating margin increased to 4.2%, 4% in the prior year period.
Non-GAAP income from operations, which exclude excluded share based compensation expenses and amortization of intangible assets, resulting from business acquisitions was 1 billion as compared with one building in the prior year period.
Non-GAAP operating income margins increased to 5.6% from 4.9% in the prior year period.
Our net income attributable to VIP shop shareholders for the first quarter of 2020 was 685 million as compared with 872 million in the prior year period net margin attribute attributable to VIP schuff shareholders.
0.6% as compared with 4.1% in the prior year period net income attributable to VIP shop shareholders per diluted EPS was one RMB as compared with 1.27 RMB in the prior year period.
Non-GAAP net income attributable to VIP shops, shareholders, which excluded shared based compensation expenses impairment loss of investments.
Jason of intangible assets, resulting from business acquisitions.
The effect of amortization of intangible assets, resulting from business acquisitions in investment gain and revaluation of investments excluding dividends.
The effect of of the investment gain and revaluation of investments, excluding dividends and share gain or loss in investment of limited partnership that is accounted for as an equity method MSP increased by 20.8% to 986 million.
And from 860 million in the prior year period.
Non-GAAP net margin attributable that you saw shareholders.
5.2%.
3.8%.
Previous.
GAAP net income attributable to VIP shop shareholders for diluted avionics.
2.4 or harm.
Points.
The prior year period.
As of March 31st 2020, the company had cash cash equivalents unrestricted cash up 5.8 billion and short term investments.
3.4 billion.
The first quarter about 2020 net cash used in operating activities was 1.7 billion.
Looking at our business outlook for the second quarter of 2020, we expect our total net revenue to be between 22.7 billion RMB.
3.8 billion RMB, we're presenting and year over year growth rate of approximately zero percent to 5% primarily factoring in the continued impact some to cope with 19.
These forecasts reflect our current and preliminary view on the market and operational conditions, which is subject to change.
With that I would now like to open the call it the QNX.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask the question. Please press star one on your telephone and wait for him to be announced if you wish to cash held your request. Please press the pound or hash key.
In order to be fair to all corners to wish to ask questions. We will take one question at a time from each caller.
If you have more than one question. Please request he joined the question Q again. After your first question has been a tranche.
Okay.
Your first question comes from the line up.
Tangent Kim from Macquarie. Please ask your question.
Great. Thank you very much for the transcends question.
Your opening remarks, you guys talked about.
So there's more business partnership so you're doing right at the.
Doing a lot more promotion to the true corridor.
Yes, you know when I look at your guidance for the second quarter, it's kind of a you know that normals here to 5% that we'd be giving for the past several quarters. So.
Can you just let us know how you're thinking about the process here, whether it's just you know the got into smart.
Target that you want to.
And you know what kind of.
Additional kind of opportunities you actually do you see it to the June quarter that fundamentally changes your I'm here relationship with Brad said your opportunity to provide better benefits to consumers like it.
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Your next question comes from the line of Thomas Chong from Jefferies. Please ask your question [laughter].
Hi, how would you give me friends many humans all taking my questions and congratulations on the solace that smoke results. My question is about a the second half Oh look I'll keep it affects that its become but 40 in the month last June well, how should we think about the second half business trends in homes up they use a.
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Your next question comes from the line of Andy Yep from Citigroup. Please ask your question.
Hi, Thank you good evening syndrome, dumb kind Jesse thanks for taking my questions are also congrats on the solid results.
My question is related to use the behavior.
So being.
I'm, sorry, being a leading discount apparel platform I'm supposed to call. The 19 have you seen any meaningful shift oh, the change of the user behavior or actually true.
What's the apparel put chase that might be a either positive or not but these are two VIP shop, and how would you elaborate on the positive trend and tackle the nappies shift and how will your strategy change if any effect.
On your girlfriend margin profile going forward. Thank you.
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Comment.
So to speak you will stick to our means strategy, which is.
Focusing on our merchandising and apparel, which is a core category there will be.
Small adjustments here and there.
But our many strategies will not change we will stick to it.
Your next question comes from the line up Andrey Chang from JP Morgan. Please ask your question.
And on the OHA Jesse.
Is there going to use ago did even alcohol so.
My question is about the margin in first quarter ended all look we know piece that the despite the coping that can impact as opposed to are you tracking down to a high marginal apparel sales and the de leveraging your back over the call yourself scale, we still see the no operating margin that margin prove a young here in the first quarter.
Okay.
And also he's already above the level in the second quarter last year. So my question is a pilot the marketing spending has been cut aggressively in the first that's first quarter.
We are going to was the first of all the marketing spending picking up a meaningful inc. second quarter or is the structure changed out or current strategy to focus on merchandise will not require us to spend as much on marketing and secondly, east I will we see the margin to improve no sequentially.
No based on no more apparel sales and a better category mix. Thanks.
After that.
Well, thanks for the sort of question well the reason why our marketing costs went down so much in Q1 lives. Because then after they are cobot 19 broke out you know we decided I was probably not a good time spent or marketing dollars to acquire more traveling users given you know.
Thanks, Dan most Oh I'm guessing per country was locked down anniversary if were to stay at home just no matter how hard you try to it does make them by any of you know apparel, they they will not anyway.
So that's why we cut back on our marketing spend a dramatically back in Q1 and we started.
You know to spend on marketing you know in early April and I think leveraged return back to our normal level or marketing spend.
You know as of now and we do expect.
To spend.
Can you just spend a marketing you know to the recipe or any of that receive a future.
And as a as to your second question you know we do not.
Provided guidance for margins for the next quarter, but you know we remain very confident about long term a prospect of our profitability and margin level.
Ladies and gentlemen in order to be fair to all callers, who wish to ask questions people take one question at a time from each caller. If you have more than one question Tees requests to join the question Q again after your first question.
He has been addressed.
Your next question comes from the line up after the Wu from Sea ice he sees ask your question.
Hi, Good evening. Thanks for taking my question I assume you go when you mentioned that you are planning to invest had been h. She sees the offline to online opportunity can you elaborate in more details on that.
Good or low more discount to the consumer by offering low applies Oh are you planning ahead, yeah, that's a marketing expenses.
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Your next question comes from the line up Kronos killed from Goldman Sachs. Please ask your question.
Thank you. Thank you send doing endo and Jesse.
Question is on a competitive landscape with a larger than usual backlog of inventory where brands would like to clear do you see a time said they would like to expand the online channels. This year and so looking into for example that they'll go channels or other channels, how do we see that meaning.
You know position, leading because this position and discounted apparel retail thank you.
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Your next question comes from the line of Teen along from Credit Suisse. Please ask your question.
Hi, Thank you many for taking my question I, just so quick follow up on the margin question first because of the a in industrial a wide very high inventory levels have week here in snow Lake, but deeper discounts the normal years from the suppliers.
And if so how that would benefit our margins and if we plan to like reinvest some part of it.
And another question is actually on off my operations I can I follow up because of the coal that I mean, we're all aware off line operation like go see really impacted in the first quarter.
Much revenue is actually generated from those offline and also a whether things actually happening already returned to normal. Thank you.
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Oh, hi business accounted for about 4% covered TMB.
In Q1, this year and less than 2% of a net revenue. So it's a very small part of a overall business.
And.
And it.
Model I'm business that we have basically two models, we wanted a sense on and I look the other one.
Are you know is just regular off my story, you know sometime as some.
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But haven't done now nearly as well they haven't return.
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Small size.
Your next question comes from the line of choice choose from Bank of America. Please ask your question.
His name Kendall young adult Ingevity, Congrats I recall, it without this quarter and.
My question is actually a more strict take one caused a gentle physically get nice you're like actually Yankee, how well liked it is like antibody, hi, which oh, the fire actually high immensely public offer I'll Oh Oh.
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Your next question comes from the line of Eddie One from Morgan Stanley. Please ask your question.
Hi sends only on don't just senior <unk> Ah. Thank you for taking my question.
My question is also related to the user and a marketing expense. So if you look how to use or in the first called actually a flattish year over year and ER I think a understand it's a minimum because of the cobot my team, but so given the sales marketing is also kind of in the first quarter do you think is ending.
Yeah impact from the a you know reduce the sales <unk> marketing spending and the on top of bad. So as you mentioned that you have increased the you know marketing spending during the second quarter to drive the user growth can you give us some color in terms of how you know the user growth has been you noting that.
So far into second quarter, Oh, well use the gross actually come back to the a you know that the growth of second Cordova boss your close through our own 20% and ER last one just given the Oh intends to you know competition.
Ecommerce.
I will see any you know increase the cost of customer acquisition in the second quarter. Thank you.
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We are seeing back home at night.
During the first quarter.
Excellent.
Yes.
Hi.
[laughter] actually remain quite.
And that number year over year.
Even though.
That's a much.
Oh the customer.
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The second whatever nations.
Got it back into marketing again.
Hi.
In terms of customers.
So.
Right now.
Huh.
Yeah.
I see that we are.
Right.
I think Arnie Teradata.
No.
We haven't seen much change.
After that so.
So.
Switching cost factors.
[laughter].
Your next question comes from the line of Gene you from U Street Research. Please ask your question.
Hey, good evening guys. Thanks for taking my question I think on your prepared remarks dung how are you mentioned that.
Gross margins trend a little bit lower given the given the contribution to make some to standardize products.
I apologize if I. If this question was asked before I dropped off for a few minutes, but I related to the standardized products with Cobas 19, largely you know the spread largely behind us and with a more availability across the board of pp product in the marketplace should we expect that standardized product mix.
To reverse they're supposed to be approach the second half of the Americans no gross margins reflect back to plus 20% on market. We saw this time last year. So how should we looked at the contribution mix I'm standardized product as we kind of move away from the spread of covered thank you. Thanks.
Oh, yeah, well actually you're absolutely right. So in Q1, we sold a lot more standardized products than we used to that including phase them out to another standardizing or a your product.
And going forward as our apparel business continues to come back to return to its a normal mixed level. We do expect took our gross margin.
Two.
Recover added to improve and go back to normal level.
Got it thanks.
Yep. Thank you.
Your next question comes from the Lamb shallow shift from Nomura. Please ask your question.
Hi, Thanks for taking my question good evening.
Tim Jesse congratulations on a very sort of what's her.
My question is about you'll feel makes sense a personal my calculation. You also makes sense for older less likely to have a 11 I mean people order in Q1, Q and a one she was the first full quarter. It seems to your also in kind of deliveries to simplify it spreads just wonder if we should extrapolate these older.
Makes sense, one Q2 future Cortez Hills, just wonder if there is more room.
Metric to trend even more in.
You took orders.
Just another question.
Well in our facility expenses actually there are two main components. One is the that's not really quite.
Are you know since last summer.
Is that December we started working with a with sousaphone and we pay them or you know a predetermined a fixed amount the order for their last mile delivery service. So that part is a as mostly fixed.
But in Q1, you know we also had another component which was the warehousing.
Component.
She is are you know business were negatively impacted by because 19.
Pandemic, a you know a lot of the warehousing costs were fits class.
So Dr. Christian Group Board as we continue to grow our business as you know in general the economy recovers from that endemic impact you know we do expect the there is really bars to.
Reduce our warehousing related costs.
Yes, there is room, whereas to continue to reduce that occur.
Order fulfillment costs in terms of absolute RMB.
Your next question comes from the line of salary Chen from steel has deep. These ask your question.
Hi.
Good evening then.
My question actually have a follow up question on this.
So for one for the first for you guys why don't we celebrate slightly like 1% was quite young yet. So I'm wondering if you can help us think about you know how we should think about us off making fun you because from my cousin late night <unk> first quarter, we could have some benefit maybe ones. It's super complaints on that just looking at ways Nelson yes.
And then alone will have some one off cyber Smith, you mentioned on the lower parallel Constitution. I'm wondering you know tell itself me Oh, how has the parallels <unk>.
On a year on year basis.
And then went there are some one oh you know.
No.
Other factors like subsidies level things is a in the first quarter.
I would probably just mentioned we are investing more oh, well know what price for that.
Hi, Thank you very much.
Uh huh.
Okay.
Okay. Thank you heard for through question well again, you know, we do not provide guidance on gross margin or.
You know margins in general So this is the second quarter, but for the next quarter.
But you know in Q1 in understandably no gross margin.
Would negatively impacted by the Cobot 19 endemic you know we had just so I'm not a lot no, but a substantially more you know standardized products. Then you know are used to.
You know with lower margins. So that was one of the biggest reserves while gross margin in Q1 was lower you know from a year over year comparison perspective going forward you know as.
You know people start to a social started go back to work, but give us last or it's too.
Go back to normal you know people will buy more close.
As we explained earlier, you know and Oh, you know, we're gonna be one of the name.
You know beneficiaries of that trend.
So we do expect it our future business you know apparel will.
You know.
We'll go up substantially compared to standardize products.
So will our gross margin you know right you know we're also improved.
Your next question comes from the line of has Chin from Keybanc. Please ask your question.
Hi, Good evening. Thank you for taking my question no I've a question about the average order value I in Q1 is.
Down 16% I mean.
I mean these emerging from Q1 by I think that's partly because they'll be meet shipped and then as we have a recovery until a payroll into Q2 and suppose the rest of year, how should we think about between 40 odd average order value because.
I mean, as we see more and more apparent makes sense to be a positive positive impact in but in the meantime, we.
Also we mailed dusting will not be kind of front.
The powerful emerging and that will be.
Negative impact for the average order value and also we are going from them that lower shipping.
If I told me into last year. So so just wanted to be between.
For the average order value. Thank you.
Uh huh.
Hi.
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Yeah.
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Josh.
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Sure. So my feel told that it must be doing I don't want you see we like this.
To the couldn't out you can then.
That we'd as a Q how does the you yeah, that's a duplicate it won't be the up thanks.
Huh Okay.
Yes.
First quarter decreased.
Various reasons.
For example.
Hi.
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So [laughter].
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But.
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Yes.
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Concerned about.
Uh huh.
Well Mike.
I'll cover.
Thank you, ladies and gentlemen, appoint you'll see we have run out of time for any further questions I'd like to kinda compressed sajid today's presenters. Please continue.
Thank you all for taking my parents Doron. After we look forward speaking with you next quarter.
Ladies and gentlemen, this concludes todays conference call. Thank you for a party CBD you meet all disconnect.
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