Q3 2020 Vipshop Holdings Ltd Earnings Call

[music].

Ladies and gentlemen.

Good day, everyone and welcome to share.

Shelves Holdings limited fourth quarter Twentytwenty ardent.

This conference call.

At this point I would like to turn the call them and 50 fun.

Vipshop director of Investor Relations. Please proceed.

<unk> operating Hello, everyone and thank you for joining VIP shop, there, what a 2020 and conference call.

Before we begin I want to meet and beat Harbor.

During this conference call, we will make forward looking statements.

And the meaning of the private Securities Litigation Reform Act of 1995 and are based on our current expectations and assumptions estimates and projections about VIP shop Holdings limited and its and.

All statements other than statements of historical fact room and made during this call are forward looking statements.

In some cases. These forward looking statements can be identified by words and phrases such as anticipates or B and C estimate ex.

Back and 10 is for our and likely to May plan should well and potential for other from like discussions.

These forward looking statements speak only as of the date hereof and are subject and teams and any time and we have no obligations upbeat and forward looking statements.

Joining us on todays call and Eric Schoen, co founder Chairman and CEO and don't how young our CFO.

At this time I would like to turn the call over to Mr. Erickson and from.

Good morning, and good evening, everyone welcome and thank you for joining our third quarter from the time the earnings conference call.

Before I go into business update I would like to welcome our new CFO, Debbie free who we got here for the call.

Moving to go from us lots and mom and he will officially succeeds Oh, there's always hear from big off.

Oh, the day coal from haul road from this transition into two new low and.

Our non executive director and the continued to contribute to our future glue and the due from the capacity.

Now I will turn to our results for the third quarter, Oh pundits and.

Moving to quote from we believe and stronger.

Financial and operating results driven by the low, but 36% year over year low even though the active accounts and further.

Further extended reaping flown the gross read in the second quarter.

This was made possible because we consistently offer degrees for dogs and the deep discount to our valued customers.

We are especially glad to see that both new and repeat customers demonstrate low pass lose momentum.

Which was the result from our focus on merchandising and to some degree investment into branding so that our.

Especially as he did come from Rico can be known them to a broad customer base.

As a result, we recently added a lot of new customers and the old customers.

And that's how not shopped with us for a long time line.

And with customers.

Typically spend a lot less than our existing low your customers. We garnered from our ARPU in the short term.

We are always tracking the stroke, because their shopping behaviors and the different cohort two accounts.

We are glad to see the ARPU for our coal customers continue to increase flow.

While new customers.

And the leap X food and food customers have fuel and the better repeat Patrice and ARPU trends as compared to the same global older customer [noise].

From the prior year period.

This means our merchandising strategy is working well and our customer who can line the value of our you basically operating if especially in our coke category.

Going forward, we will continue to focus on.

From a few high quality and the deeper in sheet production and.

Deep discount and the deepening our expertise in made for VIP products.

Leveraging our strong merchandising and capability and the solid the price and networks.

We remain focused on providing our customer with product Oh deep value on a daily basis.

While improving our operations to provide more personalized ex failing to meet different customer needs.

We recently hired a new co CEO coming through and do who has over a decade, our solid experience in big data and.

And the personalization in Chinas Internet space.

He will focus on improving the customer experience.

Lou optimizing the match between our and really acute to dock to deepen customer because personalized Haiti.

This will help our suppliers monetize their inventory more efficiently and the gross yourself more quickly.

We are confident we can continue to expand our customer base and the positive trend in cost and acquisition and the retention well also continue from.

Further driving our growth and profitability and the enabling us to deliver solid the shareholder returns over time.

At this point, then need and over the course of our CFO Doha Young so that you discussed our strategy in more detail and go over our operational and the financial results.

Thanks, Eric and Hello, everyone.

First of all I'd like to express my deep gratitude to Eric and all of my colleagues for their help and support during line nine year tenure at the table of VIP shop, and will continue to serve the company as a director and with VIP shop, and David the New CFO, all the best luck and the future.

And the first quarter of 2020, we deliver strong revenue and profit growth. Our total net revenue increased by 18% year over year to 23.2 billion from 19.6 billion RMB and the same care period last year.

As a result of better operating leverage our non-GAAP net income attributable to VIP shop shareholders increased by 15% year over year to 1.4 billion from 1.2 billion R&D and that the prior year period. In addition, we generated robust free cash.

Cash flow with.

With free cash inflow from Phil trailing 12 months ended September Thirtyth 2020, increasing to 5.4 billion from 4.8 billion RMB and the prior year period.

We are pleased to see that more customers over the news are coming to us more frequently for our differentiated product offerings.

Our merchandisers carefully procure products and launch new deal on a daily basis, providing superior value to our customer base, while helping our suppliers Claire their excess inventory more efficiently.

And the first quarter of 2020, our total GMV grew by 21% year over year and GM before our core apparel related categories grew even faster at 29% year over year. These successes are made possible by our strategy to focus.

It's all it's got retail, especially and non standardized categories.

Looking ahead, we remain keenly focused on balancing our top line growth and profitability. We believe the healthy growth momentum and our number of active customers will continue to drive our future growth importantly, we strictly follow the lifetime value.

A model to evaluate the quality of the customers, we acquire insurer and the long term sustainability of our growth and profitability, we aim to generate sustainable value creation for our customers suppliers and shareholders now moving on to our quarterly from.

Financial highlights before I get started I would like to clarify that all the financial numbers presented today are in and then be month and all the percentage changes refer to year over year changes unless otherwise noted.

Total net revenue for the third quarter of 2020 increased by 18.2% year over year to 23.2 billion from 19.6 billion in the prior year period.

Primarily driven by the growth in the number of total active customers gross profit for the third quarter of 2020 and.

Increased by 15.3% year over year to 4.9 billion from 4.2 billion in the prior year period gross margin was 21.1% as compared with 21.6% and the prior year period.

Total operating expenses for the third quarter of 2020 were 3.9 billion as compared with 3.4 billion and the prior year period as a percentage of total net revenue total operating expenses decreased to 16.9% from 17.3%.

And the prior year period.

Our film and expenses for the third quarter of 2020 were 1.6 billion as compared with 1.6 billion in the prior year period and the percentage of total net revenue fulfillment expenses decreased to 7% from 8.1% and the prior year period, primarily.

Critical to the chain and fulfillment logistics arrangement.

Marketing expenses for the third quarter of 2020 were 1.1 billion as compared with 721.3 million and the prior year period as a percentage of total net revenue marketing expenses were 4.9% as compared with 3.7% and prior year period.

Primarily and should have attributable to increased investment into customer acquisition second.

Technology and content expenses for the third quarter of 2020 decreased to 305.1 million from 400.7 million in the prior year period as a percentage of total net revenue technology and content expenses decreased to 1.3 percentage from.

2% and the prior period.

General and administrative expenses for the third quarter of 2020, or 848.6 million as compared with 681.6 million in the prior year period and the percentage of total net revenue general and administrative expenses were asleep.

0.7% as compared with 3.5% and the prior year period.

Our income from operations for the third quarter of 2020 increased by 6.7% year over year to 1.2 billion from 1.2 billion in the prior year period operating margin was 5.4% as compared with 6% and the prior year.

Period, non-GAAP income from operations, which excluded share based compensation expenses and amortization of intangible assets, resulting from the business acquisition increased by 8% year over year and 1.5 billion from 1.4 billion in the price.

Your period non-GAAP operating income margin was 6.4% as compared with 7% and the prior year period.

Our net income attributable to VIP shop shareholders for the third quarter of 2020 increased by 42.1% year over year to 1.2 billion from 875.5 million in the prior year period.

Net margin attributable to VIP shop shareholders increased to 5.4% from 4.5% and the prior year period net income attributable to VIP shop shareholders per diluted EPS increased to 1.8 RMB from 1.3.

RMB and the prior year period.

Non-GAAP net income attributable pivotable to we actually have shareholders, which excluded share based compensation expenses amortization of intangible assets, resulting from business acquisitions tax effect of amortization of intangible assets, resulting.

From business acquisitions investment gain and the revaluation of U.S. investment excluding dividend and.

Tax effect of investment gain and revaluation and investments, excluding dividends and share of lot and investment of limited partnerships that are accounted for as equity method, let Steve.

Increased by 15.2% to 1.4 billion from 1.2 billion and the prior year period, non-GAAP net margin attributable to VIP shop shareholders was 6% as compared with 6.1 person and the prior year period non-GAAP net income attributable.

The book to VIP shop shareholders per diluted EPS, yet increased to 2.01 R&D from 1.78 RMB in the prior year period.

As of September.

Thirtyth 2020, and company had cash and cash equivalents and restricted cash of 9.6 billion and short term investments of 4.9 billion for.

For the third quarter of 2020 net cash from from operating activities was 1.2 billing.

Looking at our business outlook for the fourth quarter of 2020, we expect our total net revenue to be between 33.7 billion RMB and 35.2 billion billion RMB, representing a year over year growth rate of approximately 15%.

And to 20% these.

These forecasts reflect our current and preliminary view on the market and operational conditions, which are subject to change.

With that I would now like to open the call to Q and eight.

Thank you, Sir ladies and gentlemen, and he will now begin the question and answer session. If you wish to ask a question. Please press star followed by the number one on your telephone keypad and wait for your name to be announced.

You're not going to try and constrain kindly ask one question purpose and one.

One thing and it is star followed by the number one glossy question the council requested and press the pound or how strength.

And we have the first question coming from the line of Alicia Yap from Citi. Please go ahead.

Hi, Good evening management and thanks for taking my questions. Congratulations on the strong results.

And one that you wish I don't how are the best and also welcome Debbie.

So my question is related to the active customer call, Steve Quanta, and so any way you quit shabby, but how many of those each brand new user registered for the first time wash installs and Tom and user and that you've successfully leasing.

Absolutely and then and I look at the balance between gross margins and show some marketing spend.

Could you also shabby, but how do you optimize and decide which ways and more effective and attracting user and also tried and compassion is there a difference.

Between you and so you know that the effective way of drawing news flow versus.

We give them back the O'neill Sir thank you.

Thank you Alicia.

And then deal and he still claim with engines and the eco ships and engaging with them to do that.

Mm Hmm and high Tech and she can sometimes and.

She's she's had and his leadership.

Not so much from each day.

Oh, Yeah price issue, she Watson traditionally machine sales somehow and eating out.

Sure.

And now with <unk>.

Ladies and financial.

African and expansion of coal outages, which yeah and she's just something comes on line.

And now Keith.

I like and golf and each day.

And maybe even when you use a woman and win new Q TBD Syncrude Houma and system, he sold and people eat food the COO.

And usages from Cooper for me and Aliano Force Syncrude and MACI to the to the simple. This includes two leases from senior license, which we called the <unk>.

Yeah from in a woman and meal juices, you'll allow cook will be relied upon my view and I might call and since our switching how to me like no one should see and sometimes from lump and similar to what you see is she says and stand alone cool and you've got usually starts with all these people the moving one of them will usually it's as you say two months.

And the solution to Sue and system.

The money beyond the winter pieces, just wouldn't make the sales.

Sales for sure.

Absolutely.

Okay, and it's a they tend to submit and I wouldn't use the woman genes and push it could and share and seems to something and I don't know has really can be done and the trend ongoing studies and nothing essentially one the truth and upon the easily and woman she still and it's probably wouldn't you from them.

And leveraged on is about mtwos or tissue samples and bill you want to do the same field.

And so let me share regarding the first question and a tough from there.

Thanks.

I actually don't disclose new custom and under its definitely price.

Moving from our customer bases, and mostly and segment and include net completing and customers who purchase from the first time, Alec its growth rate and whatever the highest leased and.

And that can be owned hotels, so customers, who are repeat customers and Florida.

And for that for a long time, we also saw a very high growth rate in the nation.

Accordingly.

And 20 point and.

And then look like and we have our loyal customers, who shop with us I mean.

Generally not any.

Any extra into gross margin and Mckinney, and and secondly, I wake up and the ROI and huh.

And why there was any gross margin line and marketing in that quarter, because it's a and.

Coated with very few promotional and then actually mostly from each from a customer acquisition and Andy appetite and founder and.

Sponsored subsidy institution.

And maybe and some color to that question Alicia first of all thank you very much.

Free or a good wishes and hopefully you know we will come across each other and you know down the road and then David and join Us and and.