Q1 2021 Vipshop Holdings Ltd Earnings Call
Yeah.
Ladies and gentlemen.
For standing on good day, everyone and welcome to the VIP Shop Holdings Limited first quarter 2021 earnings Conference call.
At this point I would like to turn the call to Ms. Jessie fan VIP.
On the IP shops director of Investor Relations. Please proceed maam.
Thank you operator, Hello, everyone and thank you for joining VIP shop first quarter 2021 earnings conference call before we begin I will read the safe Harbor statement. During this conference call. We will make forward looking statements within the meaning of the private Securities Litigation Reform Act of 19.
95.
Just on our current expectations assumptions estimates and projections about VIP shop Holdings limited and its industry.
All statements other than statements of historical fact, we may make during this call are forward looking statements.
In some cases.
These forward looking statements can be identified by words or phrases such as anticipate believe continue estimate it.
Expect intend is or are likely to may plan should aim potential or other similar expressions.
These forward looking statements speak only as of the date hereof and are subject to change at any time.
We have no obligation to update these forward looking statements.
Joining us on todays call are Eric Shen our co founder.
The chairman and CEO and David <unk>, our CFO at this time I would like to turn the call over to Mr. Erickson Zone.
Good morning, and good evening, everyone welcome and thank you for joining our first quarter 10 day in day, 1 earnings conference call.
We delivered another quarter of strong financial and operational results in the first hotel 10 different day 1.
Driven by the continued robust growth momentum in our <unk> ex suite customers.
During the quarter, our total number of customers grew by 54 per cent year over year to 45 8 million flow from benign on 6 million in the same period last year.
As a result, our D N V for the quarter increased by 59% year over year to 46 on the 1 billion from on the heat on 90 day in the same period last year.
G N V for apparel related category.
Which are our bread and butter grew even faster by 70% year over year.
These.
Other result, our books on the execution of our merchandising strategy.
We have long term collaborative relationships with our suppliers.
I think solar in our core categories.
Those relationships, we aim to deepening our partnerships with them to increased contribution from our meda for VIP products.
As we continue to offer volume.
Our customer flow differentiated offering flow market market. Therefore.
We believe we will acquire more new customers, while increase the thickness of our existing customers.
Going forward, we remain committed to continuing to strengthen our leadership in China is kind of the retail market aiming to generate sustainable value for our customers and suppliers.
At this point, let me hand over the call to our CFO Debbie suite. So that he may discuss our strategy in more detail and go over our operational and the financial results.
Thanks, Eric.
Hello, everyone.
We are pleased to have delivered another quarter of solid top line growth coupled with strong profitability.
During the quarter.
Our total net revenue continued to see strong growth increasing by 51% year over year to $28 4 billion.
On a 10.8 billion in the prior year period.
In addition.
Our profitability improved.
Year over year basis.
Our non-GAAP net income attributable to VIP stuffs shareholders for the quarter increased by.
74% year over year to 1 7 billion from 986 million.
In the prior year period.
And our non-GAAP net margin attributable to <unk> shop shareholders for the quarter increased to 2 6.
6 zero percent from 5 2% in the same period.
Last year.
Looking ahead, we aim to grow our top line as fast as possible, while keeping our margins stable.
Through our free diversified.
Viable product carefully prepared by our strong merchandisers on a daily basis.
We'll attract new customers on to retain existing customers while early in our pool over time.
We are committed to delivering long term sustainable value to all of our shareholders.
Now moving onto our quarterly financial highlights.
Before I get started on it.
Wed like to.
To clarify that all other financial numbers presented today are in renminbi amounts.
And all the percentage changes refer to year over year changes.
Otherwise noted.
Total net revenue for the first quarter of 2021 increased by 50.
51, 1 per cent year over year to $28 4 billion from $18 8 billion in the prior year period.
I'm really driven by the growth in the number of <unk>.
Total active customers.
Gross profit for the first quarter of 'twenty on here 1 Inc.
Chris the 5.
54, 7% year over year to $5 6 billion from $3 6 billion in the prior year period.
Gross margin for the first quarter of 2021 <unk>.
Increased to 19, 7% from.
19, 2% in the prior year period.
Total operating expenses for the first quarter of 2021.
Were $4 4 billion as.
As compared with 3.0 brilliant in the prior year period.
As a percentage of total net revenue total operating expenses.
For the first quarter of 2021 decreased to 15, 4% from 15, 9% in the prior year period.
Fulfillment expenses for the first quarter of 2021 were at $1 8 billion.
As compared with $1 4 billion in the prior year period.
As a percentage of total net revenue.
Fulfillment expenses for the first quarter of 2021 decreased to $6 3 per cent from 7 4% in the prior year period.
Marketing expenses for the first quarter of 2021.
Or $1 3 billion.
As compared with 412 3 million in the prior year period.
As a percentage of the total net revenue marketing expenses for.
For the first quarter of 2021 was 4 6% as compared with 2 2% in the prior year period.
Primarily attributable to increased investment in advertising activities relating to customer acquisition and retention.
Technology and content expenses for the first quarter of <unk> 21 decreased to $337 5 million from 330.
$4 million in their price.
As a percentage of our total net revenue types.
Technology and content expenses for the first quarter.
Thank you Tony on 1 decreased 212 per cent from 1 8% in the prior year period.
General.
The administrative expenses for the first quarter of 2021 or $956 7 million.
As compared with $839 2 million in the pre.
Sure.
As a percentage of total net revenue.
General and administrative expenses for the first quarter of 2021 decreased 234% from.
That's 1 5% in the prior year period.
Our income.
Operations for the first quarter of 2021 increased by.
93, 2% year over year to $1 5 billion from $782 2 million in the prior year period.
Operating margin for the first quarter of 2021 increased 2.
5 3% from 4 2% in the prior year period.
Non-GAAP income from operations.
Which excluded share based compensation expenses and amortization of intangible assets, resulting from business acquisitions.
Increased by 66.0% year over year to $1 7 billion from 1.0 pellet in the prior year period non.
Non-GAAP operating income margin.
The first quarter of 2021 increased to $6 1 per cent from 5 6% in the prior year period.
Our net income attributable to VIP shop shareholders on it.
First quarter of 2021 increased by 125, 7% year over year to $1 5 billion from $684 8 million in the prior year period.
Net margin.
Attributable to VIP shops shareholders for the first quarter of 2021.
Increased to 5 4%.
From 3 6 per cent in the prior year period.
Net income attributable to VIP shops to shareholders per diluted.
For the first quarter of 2021.
Increased 2 2.18 RMB from 1.00 RMB.
In the prior year period.
Non-GAAP net income attributable to <unk> shops shareholders well.
For the first quarter of 2021.
Which excluded share based compensation expenses.
From a loss of the investment.
Amortization of intangible assets, resulting from business acquisitions.
Tax effect of amortization.
Intangible.
As a.
Resulting from.
Business acquisition.
And last month day as the valuation of the investment.
Food in dividends.
The effect of investment gain on revaluation of investment extraordinary dividend.
Share of loss or a gain in the last months of limited partnerships.
That are accounted for as equity method investees.
Increased by 73, 7% year over year to $1 7 billion.
$986 1 million.
In the prior year period non.
Non-GAAP net margin attributable to yeah to your shops shareholders.
The first quarter of 2021 increased 260%.
From 5 2% in the prior year period.
Non-GAAP net income attributable to VIP yourself shareholders per diluted EPS for the first quarter of 2021.
The increase of 2.41 RMB from 1.4 for on the arm.
In the prior year period.
As of March 31, 2021 on.
The company had cash cash equivalents and restricted cash of $15 1 billion and short term investments of $3 7 billion.
For the first quarter of 2021 net cash used in operating activities were 439.0 millet.
Looking at our business outlook for the second quarter of 2021.
We expect our total net revenue to be between $28 9 billion RMB.
And 31 billion RMB.
Representing a year over year growth rate of.
Approximately 20% to 25%.
These forecasts reflect our current and preliminary view on.
The market on operational condition, which is subject to change.
With that I will.
Now I would like to open the call to Q&A.
Thank you Sir.
Ladies and gentlemen, we will now begin the question and answer session if ya.
You wish to ask a question. Please press star 1 on your telephone and wait for your name to be announced if you wish to cancel your other question. Please press the pound or the hash key.
Please note due to the time constraint, we will take 1 question at a time from each participant if you have a second question. Please disconnect and rejoin the queue by pressing star 1 on your telephone keypad and waiting for your name to be announced.
Okay.
Okay.
Alright, we have see.
Next question from the line.
Annie Huang Please go ahead.
Thank you management for taking my question. So my question is about the outlook for the second quarter.
So I'll ask for the second half of this year. So Oh, we noticed that we had hold on quite successful all promote promotion event in India.
April so just wanted to check whether or not.
Trying to just kind of 5% to revenue growth and our guidance for the second quarter already factored in just a very strong year on OTT.
Events promotional events in April and Uh Huh.
Give more color on the house.
I'll look for the revenue growth outlook for the second half will be very helpful. Thank you.
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Income.
The second quarter tightened, we see it as rather conservative.
There are a couple of factors in consideration 1 is that last year, we didn't along the April 19th promotional event that we did put on it.
So on that basis, it's quite positive I think after last year, we saw extremely strong growth in may, particularly during the may holidays, because that way we win.
On it to come on.
Current team on really starting to travel and buy new code.
On the Lockdown in China. This year were facing much tougher comp.
On the beginning of May we.
I'm going to have to see how they can promotional event period on the summer time Gary.
To get a full picture of the second quarter.
However, we are growing quite steadily and we are achieving sustainable growth driven by strong user growth.
We are confident about our growth in the second half on in the long term.
More specifically, we saw quite strong user growth.
Especially on the number of male customers that shopped with us.
We believe that this is driven by alright.
And more category focused on sportswear for example, as low as better personalization.
Additionally, we also saw some growth in the number of paid Super VIP, which are on those loyal customers that contribute to that.
Quite a sizable chunk of the overall revenue. So we are quite confident about the long term growth on some business in the long term healthy development.
Okay.
Once again, ladies and gentlemen, if you wish to ask a question.
Press Star 1 on your telephone keypad and wait for your name to be announced.
If you wish to cancel your request please press the pound on the hash key.
Due to time constraint, we will take 1 question at a time from each participant if you're on.
Second question, please rejoin the queue.
The next question from the line outside Joyce Ju from Bank of America. Please go ahead.
Good evening management, Thanks for taking my question and congrats on the solid but us.
On my question was related to the gross margin profit this quarter. It seems like this non were actually down.
Shelley and Alastair on.
Quite meaningfully so just wanted to get color in terms of share like gross margin trend is that of course like you know we have new discounting strategy or it's because of my probably weighted we changed out our take rate getting with the brands like just wanted to get more color on.
Thanks.
Thanks Joyce.
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And on a high jewelry your question on the.
Gross profit on the gross margin outlook, you talked about my optimistic about the long term growth margin gross margin trend.
We focus more internally on managing to the bottom line.
As we've communicated in the past, we aim to grow top line faster as possible.
At our bottom line, they need a relatively stable and healthy.
In the first quarter, we spent more money on reactivating old customers getting their shopping frequency up as well as pain on more benefits to our F. B IP, that's where our Super VIP members.
Offering selectively to some numbers on an extra 5% on which during the test period is mostly on the other.
Cost of growth be buried by our own company, but in the future more bands will participate to share the costs.
And on we're happy to see the net margin trend in the first quarter continues to be very solid increasing on.
And then net margin basis on a year over year basis, though over you know over the long run we're still quite confident and quite optimistic about the long term outlook of higher growth profit as well as our net margin.
Okay.
We have a <unk>.
Next question from the line of.
Thomas Chong from Jefferies. Please ask your question.
Hi management, Thanks for taking my question.
A question about medical inflation, so do we have any.
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This income.
And we actually have a various very diversified customer acquisition channel with them and including them.
You know on targeted advertising, including endorsement on TV shows and reality shows as well as a cellphone training installation and at the same time. We're also exploring more into short video live streaming and so on.
What's different this year is that we are going to start.
Start to be more.
To try to be even more personalized E on customer acquisition.
You uniformed.
Improved on more.
Our optimized on operations in terms of how we invest on them.
Marketing dollars on.
So we do believe that is going to be more targeted and give us better results than what we have done in the past.
On the 1 thing that is worth mentioning is that we are looking to invest a little more into life changing.
From a customer acquisition, we don't think that will be a much more meaningful portion of the overall marketing budget, but we do think that it's going to be in.
Creasing compared to before.
We have the next question from the line up.
Not only from a high tone International please ask your question.
Hi, Good evening. Thanks, Paul taking my question just wondering your take on a longer term debt.
After completion of COVID-19, what kind of bought alcohol sales could be the most comfortable on board.
A stable state.
Also relate to the margin profile at that time.
Just wanted to get some.
Yes.
On thoughts on bad debt.
So are you guarding the competition just wondering what's next on.
Based on that mix change considering entering memorial day moves Jasmine signaling Angie is moving from PPO platform. Thank you.
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And not only in the long term.
We are aiming to achieve on more steady and sustainable long term growth and we're quite confident about the long term growth that we show on that basis.
Regardless of when the data on shipping.
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Natalie.
On a customer acquisition channel, we are actively exploring many programs as well on a straight short.
Videos and testing with other partners in terms of customer acquisition, but there isn't a single channel that is.
At a 15 to 20 per cent of the overall customer acquisition contribution.
In the future, we will continue to explore and to enhance the performance on her.
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Okay.
We have the next question from Ronald.
Ronald Keung from Goldman Sachs.
Ask your question.
Thank you management for taking my questions.
On behalf of Ronald.
In terms of development on the VIP shop product as management should we does in last quarter VIP has collapsed collaborated with a few hundred Brent.
Just wondering how many brands have weeks.
Spend it collaboration we've in the past quarter and if theres any related operating metrics can be shared will be great. For example, skill of the sales and how many users have purchased VIP shop product on our App.
Lv ex etcetera. Thanks.
Thank you for the question is on.
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On the made for VIP shop collaboration we are currently already working with around 500 bands on the main floor VIP shop product. However, every bank level of sophistication in how how much product that they're working with us on the contribution for that band sales on our platform is a bit different.
The good news is that we've seen improved conversion rates and higher sell through rate.
For these products than the other products on our platform.
<unk> debt metrics are quite solid and proof that this strategy is on track however, as it hasnt been long enough, we need more time to figure out.
France. This works best with and how to deepen our collaboration with fans on the need for the equity shop products.
Do believe that these products will be very important for our long term growth and to create more differentiation from other platforms over time.
Yeah.
We have the next question from the line.
All right on Th capital. Please ask your question.
Hi, Thanks management.
What the <unk> Center.
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You bet.
For our 3 P business. So what are what is our strategy for Steve on the first part of that business.
The end of the year. So what is management expectation for CP business it'd be percentage of total business. Thank you.
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Thank you. Please vote your shares on mobile phones on us on golf.
And so on.
On the marketplace.
Development this quarter the contribution is less than 5% around 4748 per cent of the total GMB comes from sales through marketplace.
We do plan to growth marketplace business by owning provided if the user experience and the complaint rate.
Under our control so we want to offer the same level of ex U.
Parents in a marketplace business and our first party business.
In terms of how much we want to grow that business in the first quarter. The contribution as we said is less than 5 per cent and in the fourth quarter of this year, we hope to get it to.
Slightly over 6%, but it wouldn't be a very meaningful increase in the total contribution is we still want to focus on the 1 people.
We have the next question comes on line.
<unk> <unk> from credit Suisse. Please ask your question.
Thank you management for taking my question.
And just want to ask you about how do we see the destocking from brands.
Ooh passed a few months and how do we see.
In second half this year and whether the previous Blackhawk against some international brands.
It impacts the overall needs.
Oh, great Ya and poke you. Thank you.
Thanks Ashley.
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Gartner of choice and access them on.
Inventory clearance.
We not only clear excess inventory that are already in stock for them, but we also grow with them via make for VIP shop product, which we've discussed in the past on earlier in the call and we also do a lot of in season slow moving.
Inventory for our brand partners and we also contribute in many other formats for example bank to choose to allocate different FTE to different e-commerce channel to be sell it. So we are actually a top partner for our apparel brand partner.
Actually in their e-commerce on online sales, which is a meaningful channel for a lot of our bank partner and we grow with our customers in terms of we grow with our bank partners in terms of both gaining new shoppers for that brand as well as growing net sales.
On your second question on messenger on cotton.
That day.
The event.
Packed on international brand.
On there, but quite minimal.
At the same time, we're seeing domestic bond picking up momentum that we're seeing in search results for domestic bonds on the demand for domestic on growing quite back overtime. We believe domestic brands will likely take share some international brands.
We have a next question from the lineup.
Stay tuned on Zhang from <unk>. Please ask your question.
Patients on <unk>. This is feet on behalf of young from sassy. Thanks for taking my question and congrats on the solid result, I have 1 question is about category expansion will be a Saturday, but the category expansion for example in <unk> category to acquire more users, especially you mentioned that.
We have we now having more male customers what if so what would be the impact on the margin are we going to subsidized or just destocking for Florida. Those are male brands like 3 day those categories. Thank you.
Thanks, Tom.
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Mike do you see that the Holocaust.
In total it increased 100 coal goes on there's only 19 routinely.
What day ship.
19 will put them on.
A smile.
So the contribution from new customers was up by around 5% in terms of the number of customers.
Year over year.
And that's why we saw on mens wear and sportswear sales growth removed.
Thirdly, our male customers.
The total pool of customers in the overall contribution might continue to growth, but we will still be primarily focusing on efforts on.
On a female customers.
But our bread and butter and for women women's apparel, mainly on male customers might be shopping with us a lot more frequently than we might be able to acquire more customers, but we on a claim on the apparel related category.
They are not going to come on be buying on return on cell phones are driving down the margin. So from our perspective, it's all about the apparel in wearable category.
And we're confident that we can serve male customers quite well in this category.
1 really positive.
Sure.
The 1 really positive thing that we see how customers shop is that they have much higher conversion rate and make decisions much more quickly. So we will be on improving our personalized shopping experiences for male and female customers when they come to our platform.
Okay.
We have the next question from the lineup.
Charlie Shen from China Renaissance. Please ask your question.
Thanks management for taking my question actually I have a question on regarding the.
Average revenue per user as well as the trend going forward. So I did a quick calculation. It seems that the average revenue per user for this quarter.
If we use U S dollar basis actually is year on year started to growth that's actually the first time for the past few quarters.
And even if you use the RMB.
Hi, actually it's very very narrow already so high.
Do you see the momentum or trend up the average revenue trend going forward and also can you give us more color on what is driving that is that across the board everyone is buying more or in particular, new users are contributing more on the average revenue or the old core customers.
So on a country that anymore.
Yeah.
Due to limitations on women and yourself.
Charlie kind of element.
It sounds like.
My sense is you're getting.
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Charlie on the.
88, RMB free shipping.
What impacted the <unk> in the year of 2020, and therefore throughout the year, we saw year over year declining are low.
With me because customers do not need to get to a certain basket size in order to get free shipping anymore and now in 2021, you'll see that tend to normalizing. So this is.
As we've communicated.
This is what we expect.
Our customers are still very sticky to the platform.
Just a change in their.
Shopping habits due to some of the change in policy last year.
We will continue to grow our pool going forward on 1 thing that we like to mention is on focus on the Super VIP paid members and they are spending on average a super VIP customer.
And 8 to 9 times more than in average customer myself on that perspective, and if we can get more customers to join the Super VIP program. We are confident that theory there.
I put on the platform will also increase over time. Additionally, we continue to focus on personalization and improving the experience on each customer when they come to our platform.
We do believe that over time will also increase the ARPA and stickiness of the customer.
We continue to grow the number of customers that shop with us and the outcome of that.
Customers, we do believe that our long term growth prospects are quite good.
Oh.
Operator.
Ladies and gentlemen, as we've come to the end today's conference I would like to hand, the call back to our speakers for any closing remarks.
Hello.
Thank you everyone for taking the time to join US and we look forward to speaking with you on that next quarter.
Thank you thank.
Thank you. Thank you.
Thank you, Sir ladies and gentlemen.
This concludes our conference call for today. Thank you for participating you may all disconnect.
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