Q4 2021 Baozun Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by for the fourth quarter and full year 2021 earnings conference call. At this time all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded.
I'll now turn the meeting over to your host for today's call Ms. Wendy Sun Investor Relations Director of thousand. Please proceed Wendy.
Thank you operator, Hello, everyone and thank you for joining us today, our fourth quarter and full year 'twenty 'twenty. One earnings release was distributed earlier today and is available on our IR website at IR Dot thousand dot com as well as a global newswire services.
We have also posted a powerpoint presentation that accompanies our comments to the same website, where they are available for download.
On the call today from Bose and they have Mr. Vincent you Chairman and Chief Executive Officer, Mr. Al <unk>, Chief Financial Officer, and me, we see lead our vice President of strategic business development Mr.
MS. Jill will review the business operations and company highlights followed by Mr. Yu, who will discuss financial details. They will all be available to answer your questions. During the Q&A session that follows.
Before we begin I would like to remind you that this conference call contains forward looking statements within the meaning of the Securities Exchange Act of $19 34, and the U S. Private Securities Litigation Reform Act of 1995.
These forward looking statements are based upon management's current expectation and empowered market and operating conditions and relate to events that involve known unknown risks uncertainties and other factors all stage are difficult to predict and then if they are beyond the company's can show which may.
Cause the company's actual results to differ materially from those in the forward looking statements.
Further information regarding these and other risks uncertainties or factors is included in the company's filings with the U S. S E C E O.
I meant on the website of Hong Kong stock exchange.
The company does not undertake any obligation to update any forward looking statements, except as required and applicable law.
Finally, please note that unless otherwise stated all figures mentioned during this call are in RMB. It is now my pleasure to introduce our chairman and Chief Executive Officer, Mr. Vincent <unk> Me Sir Please go ahead.
Good morning.
Sure. Thank you all for joining us.
This fourth quarter, despite persistent e-commerce headwinds I'm pleased that the folgers business remained resilient and our.
Team continue to make steady progress on our strategic objectives.
During the quarter, China's total retail sales growth decelerated to 3% year over year.
Kind of erotic COVID-19 pandemic that have caused the weak consumption sentiment and constructive government policies persist for China's e-commerce .
Year to resilient Lee as demonstrated on slide number three.
This fourth quarter, we grew GMB, 14% year over year.
Driven by strong volume in electronics, FMC G and luxury categories.
As well as breakthrough in beauty and cosmetics.
We also grew our omni channel business with JV more than doubling in the mini program.
Pending 70% year over year.
We see accelerated our momentum in <unk>.
We help our brand partners generated 187 million <unk> in the fourth quarter, which is more than the cumulative of month generated in the first three quarters of the year.
We've all known PMO channels expanded 400 basis points year over year to 26% of total GMB.
Anticipating a new e-commerce , where the market focuses on consumers lifetime value generation.
Leading the way to help run the partners accelerate their digital transformation.
As displayed on slide number four.
Take our luxury business group as an example, with deep understanding of Brian the value proposition and the unique insights.
Prior year, new even though visions to fine tune consumer experience and the promote user engagement.
During the quarter, we launched personalized and interactive VIP customer service for few brands, which can engage consumers with one on one interactive video communications to enhance conversion and Arpus.
We also incorporated.
<unk>, enabling functions the merchandising live streaming and the interactive marketing.
And the incorporated.
Neither worse in companies to participate in the first wave of no fungible token champions.
Tmall luxury pavilion during this years double 11 campaign.
In total we opened 20, new luxury stores in 2020 , one and expect to open another dozen in the first half of 2022.
However, innovative technology, coupled with differentiated brand value proposition drives our success.
This quarter, we quickly adapted to the personal identity information regulations.
Enabled another smooth double 11.
For the first time, we were able to supply over 330 brands on wider Omnichannel approach during the annual Mega campaign.
While offering sweeping real time intelligence services to help our brand partners make better business decisions.
We also launched a digital transformation program for one prominent electronics brand partners in developing its nationwide distribution network management.
While our technology and innovation empowers business operations.
Our progress in product position and the monetization has driven a doubling of IP revenue for 39 million during the quarter.
In addition.
This year, we have strategically combined.
Mini program engaging emerging in innovation center with our digital marketing Department.
Two newly formed the digital marketing group with EMG.
This digital marketing group greatly enhances our capability to offer the most comprehensive solutions for private domains to lay all the customer assets and to integrate your factual marketing.
Omnichannel approach.
<unk> currently accounts for approximately 10% of total GMB.
We believe the integration meaningfully enhances our value proposition and we would drive a stronger revenue penetration going forward.
Meanwhile, we continue to make upgrades to our digital digitized central and the integrated operating platforms and middle office for better process reengineering and automation.
Therefore, he has operating efficiency and flexibility.
Please turn to slide number five.
Lesser and lesser year, we have successfully scaled up our original services centers in nantong and the hefei to more than 1400 employees and then we plan to build additional original centers in Chengdu and the Xi'an in 'twenty to 'twenty two to further optimize.
Mice employee allocation.
Our service anywhere KOL, Fannie continuing to ramp up.
As we have seen great uptake with over 400 brands stores deploy them by the end of 'twenty the only one.
Withstand these powerful business in talent capability, we also upgraded traditional customer service Kpis systems for a master Kps system.
To incorporate more comprehensive operating metrics, such as customer satisfaction and the reaction duration to help brand partners achieve higher brand recognition.
We are glad that even under this comprehensive Mazda Kpis system, we are able to achieve further upgraded its rating system by one key international sportswear brand.
Our medium term strategic plan centers around the customer service.
Please turn to slide number six early this year.
Engaged with Nielsen to conduct a comprehensive net promoter score or NPS survey.
Together feedback from our brand partners.
To our knowledge. This pioneering survey is actually the first ever in China's e-commerce industry.
And we are delighted of achieving a very positive NPS result of greater than eight five out of 10.
This further validates that our value added services, such as technology, and the premium warehouse and logistics services.
Become well recognized by the industry and our brand partners as our core differentiated competitive advantage.
Adding to the excellent NPS survey result.
We also received numerous other recognitions from our broader stakeholders as displayed on slide number seven.
You can go way 'twenty or 'twenty, one is a year full of recognition for Biogen and <unk>.
We are honored to earn as such high praise from Brian The partners employees industry leaders as well as ESG communities.
Aspire to keep building up.
Top off this achievement on top of this achievement and there are keen to foster a culture that drives innovation in the business efficiency to empower our brand partners.
Now on slide number eight.
Advancing forward with these ambitions, we have completely streamlined the company into four major groups.
Namely.
E Commerce group ECG.
Our logistics and supply chain group MSG, the technology and the innovation Center TICC and the digital marketing group DMG.
With the company being a leaner flatter and more focused we are crafting mechanisms that inspire the use of incentives to encourage innovation and the broader employee ownership access.
We are also developing talent program, including management trainee and universities collaborations for further enhance sustainability.
In conclusion, despite the macro uncertainties, we continue to see acceleration in Omnichannel development.
And then we are quickly helping run the partners elevate their comprehensive on the interactive user engagement to promote brand value.
Both are excellent enabling capability and a strong business development.
To see our new business pipeline expanded threefold.
From a year ago.
Moreover, with our proven industry leadership, and a sound cash position, we emphasize high quality growth and the superior unit economies.
Economists, while continuing to optimize resource allocation.
We are poised to bring best in class services and innovative solutions to our brand partners and our March further on our medium term strategic plans to drive is growth and sustainable value creation.
I will now pass the call over to Arthur to go over our financials. Thank you.
Okay, Central England, and Hello, everyone.
2021 with no doubt a challenging year for the Internet and e-commerce sector in China. Despite.
<unk> not we ended the year wave validates topline growth and a strong business pipeline.
And more importantly, all the business, a small retail and unbalanced button and taking them from diversification in category mix.
Breakthrough in Omnichannel strategy complementary business acquisition and inquiry.
<unk> in our people and technology.
Now let me first do a quick review of financials of Q4, and the full year in 2008 until what.
Please turn to slide number 10.
During the quarter, our total <unk> increased by 14% to 26 billion.
Cte and electronics licensed apparel, both showing double digit year over year inquiry.
The sentiment for applying improved.
A slight year over year increase on GMB compare with a decline in the previous quarters.
On the flip side of <unk>.
Errol and accessories declined by mid teen percentage during the quarter as brands partners adopting a defensive strategy to protect that margin from the impact of title call initiatives obese yacht and weak consumption sentiment.
Overall, the <unk> split between category for full year 2021 I follow.
Apparel and accessories.
Only 14% followed by electronics at approximately 13%.
The <unk> at 15% and upon.
Meet single digit.
Now distribution T&D increased 16% to $24 6 billion contribution from strong service fee model and the performance from <unk> and electronic Texas.
As we focus on high quality coal.
We have proactively dropped some low margin business, which caused our distribution <unk> to decline by 16% to $1 4 billion.
Now please turn to slide number 11.
Total net revenues declined by 5% to $3 2 billion of which all of our acquisitions contributed a total of $283 million.
Product sales revenue declined by 17% largely in line with the decline in <unk> from distribution model I just talked about.
Services revenue increased by 4% to $1 5 billion benefiting from several acquisitions made this year.
During the quarter, although cost of goods sold decreased by 19% to $1 billion and gross margin for product sales improved by 250 basis points to 15, 2%, reflecting our strategy in pursuing high quality product sales.
Now, let's turn to operating cost and expenses on slide number 12.
Fulfillment expenses were 959 million Inc.
The increase of 12, 7% year over year.
This quarter, there was an incremental fulfillment cost of $222 million.
Related to our two newly acquired businesses.
In home and feedback.
Excluding the impact from acquisitions adjusted fulfillment expenses from organic business was signed 136 million a decline of 13, 5% over a year.
Sales and marketing expenses were $895 million.
An increase of 28% year over year.
The increase was mainly due to increased staff as our business scales and expansion in the head count of digital marketing services, which was partially offset by the efficiency improvements.
Our technology and content expenses were $126 million.
An increase of 14, 4% year over year.
The increase was mainly driven by more.
In card activation and commercialization that doubled revenue in the quarter.
G&A expenses increased to 157 million. This increase was mainly due to accelerated amortization of leasehold as we moved to new headquarters in October 2021.
Which was mainly a one off accounting treatment.
And as you might in talent and other strategic objectives.
Scale up along with our acquired businesses.
Anticipate although I annualized G&A expenses to stabilize to a range of 388% to $400 million in 2022.
I'll, let you efficiency metrics of Opex.
As a percentage of G M D.
Fourth quarter total opex as a percentage of AMD eight points, 2% compared with seven 7% in the same quarter of last year.
We were to exclude fulfillment costs from the two warehouse and logistics services, we newly acquired.
And the one off G&A expenses related to our move to the new headquarters.
Although adjusted Opex as a percentage of <unk> would have been seven 2%, reflecting all types of efficiency in all of our organic business.
Now I'll turn to slide number 13.
Based on the above mentioned items, our non-GAAP income from operations was $71 million during the quarter and non-GAAP op margin was two 2%.
As there are so many moving parts that impacted our financial performance.
We have prepared waterfall diagram depicting our analysis of how our topline and bottomline evolved year over year. Once again this analysis.
I'll just hit and showed solid 80 used.
Indicative numbers two eight hour discussion.
First on slide number 14.
This waterfall shows our net revenues walk from Q4, 2022, Q4 'twenty to 'twenty one.
In Red you can see that PCI on the weaker consumption sentiment continues to have a major negative impact.
Dropped down the business in general.
Especially the performance of sportswear.
Apparel, along with our logistics and supply chain business.
Furthermore, we optimized our patent portfolio in the distribution model.
<unk> sales declined.
By 220.
$244 million.
On the other hand, although I mandate I've heard greatly enhance the top line resilience and as we achieved a breakthrough in the luxury category wave high double digit growth rate.
I think it's worth noting that although value added service such as technology and digital marketing both had a nice year over year growth.
As e-commerce keep rapidly evolving.
Anticipate this value added service will become growth engine for our business in future.
Now turn to slide number 15.
We also provide here indicative walk whole non-GAAP operating profit on cost of spring.
I've shown in Blue.
We have positive momentum in luxury and technology as we all are addressed.
Although revenue from our distribution model decreased significantly.
Operating profit from distribution were largely unchanged year over year.
This clearly demonstrates that our optimization improved resource efficiency and overall gross profit margin.
We believe they focus on high quality distribution business.
Slowdown total product sales in the near term.
Along with him it will improve our profit and cash flow prospects.
You're right the overall macro weakness dragged down the performance of sportswear fashion apparel, along with our logistics and supply chain businesses.
I for all of our M&A progress.
In addition to our solid revenue contribution.
You have also be able to quickly turn positive for operating profit this quarter.
As we further integrate <unk>.
Additional efficiencies and synergies to drive higher operating profit.
Yes.
Additionally, we have continued to invest in people and infrastructure.
Including new headquarters.
<unk> recruitment and signing up our DAU in Department and regional Charter Service Center.
For PMT.
And anticipating.
Anticipating the booming demand in 2022, we also increased martech funding during the quarter.
Now turn to slide number 16 about our cash flow.
As of December 31.
The 2021, our cash and cash equivalents reached $4 7 billion.
An increase of 2 billion from previous quarter.
The increase was mainly attributable to our financing cash inflow of $1 6 billion.
And a positive operating cash flow of $520 million.
The financing cash inflow was mainly from tiny of investment in our logistics business group.
Which I will elaborate a little bit more data and.
And this partially offset by our share repurchase programs.
Our solid cash position and positive operating cash flow enabled us to pursue two initiatives to further enhance our shareholder value.
Firstly during the quarter, we repurchased $8 5 million of ordinary shares for approximately $14 million.
Postpaid our total share repurchase to 165 million annualized dollar for the full year 2018 until what.
We believe the share repurchase not only deliver benefit to the existing shareholders.
Also demonstrate our confidence in <unk> future business performance.
Secondly, we will use the cash flow targets complementary acquisitions will drive additional growth for the business.
Please turn to slide number 17.
Marcia and acquisitions.
Our strategy on M&A, mainly concentrated on four areas.
Capability enhancement.
Vertical consolidation.
Geographic expansion and brand building.
To date, all the acquisitions largely targeted capability enhancement and the vertical consolidation.
And the initial.
And the initial integration.
Taking a while.
For example, fashion as our boutiques E Commerce service provider for fashion and life style brand.
Fun as our interactive user engagement program to Nevada.
And bought in home, our premium warehouse management capability enabler.
Have all achieved higher growth and synergy than we original plant.
In the quarter. We also started to make progress in brand building by investing in several fast growing local emerging brands.
Just I saw showcase on slide number 18.
We are glad to share that one of the local emerging brands or invested in October 'twenty or 'twenty one skinful.
Skinful its brand called no bad state already has it become a while no brand after sponsoring.
After sponsoring Mike Parrett to win the gold medal in the reasons Winter Olympic games.
As we move forward and the land, we expect to see more synergies and higher value proposition in marching this business into Bolton.
During the quarter, we successfully closed the investments from Chinese network into our logistics on the warehouse division bottom.
I'm glad to say the early integration has shown some quick synergies and promising future opportunities.
Please turn to slide number 19.
Combining both homes outstanding customer centric services waste tiny all networks larger economy of scale and infrastructure all of our integrated service offering for apparel and luxury category will be able to advance to the next level.
In terms of being more premium customized diversified and omnichannel.
We are confident this will help our brand partner achieve higher cost leverage on the higher efficiency wave one inventory for all channels.
I start to partner integrates Deepak.
We anticipate additional synergies, including value added insight and business development capability.
Innovative material recycling.
The high profile <unk> engagement that will greatly improve brand value and stickiness.
We also anticipate additional revenue streams from China on Nighthawk router brands platform.
In sportswear luxury category and cross border businesses.
And lastly, a quick one on slide number 21.
We ended 2008, one to one on a solid eight not waste total GMB of $7 1 billion, an increase of 28% year over year well.
<unk> generated from non Tmall channel <unk>.
Funded 500 bps to 31% of total GMB.
Our operating.
Cash flow adjusted for exceptional items remain constantly positive for the third consecutive year on our balance sheet also remains solid waste full point $7 billion in total cash position and the more than $2 billion in unused line of credit.
In summary, we are quite confident in our business model and investment strategy and we are still excited about our mission to become the leading global brand E Commerce business partner.
That wraps up my financial review section and concludes our prepared remarks. Thank you.
Operator, we're now ready to begin the Q&A session.
Thank you very much their participants we will now begin the question and answer session.
Wish to ask a question. Please press star and one on your telephone keypad and wait for name to be announced.
If you wish to cancel your request. Please press the husky once again, if you wish to ask a question. Please press star one.
The first question comes from the line of Thomas Chong from Jefferies. Please ask your question.
Thanks management for taking my question I have two questions first can management comment about the impact of the Michael.
Uh huh.
It's a category.
I'm sorry.
And my second question is on the hour.
Our cooperation with high now and how are you.
The expansion into the southeast Asia market. Thank you.
Okay. Thank you.
So I will comment on the overall wake my coal headwind and then Tracey you can comment on the luxury and I will answer the tiny all.
Our cooperation question if that's okay.
Okay in terms of the overall economy impact well I think we definitely have seen some impact.
In the last two quarters and at this moment he still.
Hum.
Still a lot of uncertainties.
In this kind of situation the brand.
Nominally adopt very conservative strategy as I mentioned earlier trying to protect that profitability inside of driving the growth.
At the same time in.
To maintain.
The stable business. They are looking to things like the omni channel and also Ah different ways too.
To engage more customer so for example at our <unk>.
Multi months in terms of data services and also the intelligence and also the customer relationship management without trying to do more of that and in addition, we have seen some.
Panel.
The customers are more focused on China for China strategy, where they think the people in China are now close to the battlefield and be able to make.
More some detail on the ground. So that's the overall, what we have seen in terms of.
The make whole.
The micro headwinds at this moment, but Tracey do you want for comments on the luxury.
Sure. Thank you I think an overall fashion in the reasons I think the composition data our observation is right.
Stops decreasing on the we see the slightly increased cross category and especially in some of the political power like luxury, although especially luxury still keep a very high growth compared with last year and even for Baldwin I think of as much as Vince already mentioned we have.
Our new store will open.
In the.
First of all in the first quarter of this year and also we have a strong pipeline a first half of this year.
And also I think luxury been those that show their omnichannel capture from day, one so I think within our new Windows you can see minimal dominates our Jean <unk> and also Wechat channel. So our brands also shows grading faced this year the OEM and also a poison that emerging channel too.
This purpose I think Roger technology on the logistic solution has showed great.
Great power to support.
The business, especially in the <unk> and the inventory part that's why we can end up with a strong wells are Montana Cross channel and also a strong pipeline.
This year.
Thank you.
Okay.
Now about the cooperation with China, So basically as I mentioned earlier.
Full volatile all restaurant and so you saw a need to hire and IMC and brand and also will focus on non standard highest category like the luxury apparel.
Also the fourth flat at the same time tiny small focus on small to medium sized brand and stay out there.
I'll focus on the standardized category and to standardize the service so that gave US a lot of room full synergy across the different category full cooperation and learn from each other so that's the first one.
One is we're working with China to define our strategy will focus on one KOL category.
Which has the apparel, Topeka apparel category, where China has a lot of potential clients. They also have some business leading the apparel category going forward all those business will be done by volatile OLT and through bolt on.
At the same time that is only a starting point what we want to do is after we consolidate one category wave the value added service wants to expand together with China into other category like for this year. We are looking into cosmetics and also we are looking into some other categories in the <unk>.
So we can see that category by category, we will be able to utilize the bari good BD capability health Tainio to grow the business together with them. So that's the second one.
The third one we're looking for is a concept of what inventory.
So historically speaking bolt homes more focus on the E Commerce channel like the old facial website. The e-commerce platform like Tmall and JD and also the social media like we had on the other hand, China has a lot of.
Business operation in the offline distribution network and the old flying.
<unk>.
At the shops that they operate now we are able to combine those channels all together to provide a one stop solution for a particular brand where they can youll spoke to them to the one inventory.
That's greatly enhanced and improved the infantry efficiency of our brand partner and help us too.
To win more business, we hope in the future. So those are the kind of the three opportunities that we can see and we have already started to see some new opportunity come to you much and Furthermore.
Recently, we've been working with China on the cross border opportunity, where both outbound and inbound we potentially will be able to utilize Chinese network globally to enhance our proposition football at home. So that's on the on the tiny apart.
Okay.
Okay. Thank you.
Thank you. The next question comes from line of Alicia Yap from Citigroup. Please ask your question.
Good evening management. Thanks for taking my question. This is Vicky Wei on behalf of Lusatia Yep.
Can management comment the latest consumption sentiment, especially on the chance you all seen in January and February will that potential impact on new brands on boarding process given the latest political situations.
And the impact on raw material prices and supplies of merchandising.
That's S K you in the coming quarter.
My second question is can you elaborate a non tmall channel the performance and contribution from J D versus Wechat mini programs and short video platforms and the update on progress with I click partnership.
Gil.
Okay. Thank you.
Chris you want to handle the first one yes, we will do the second one yeah.
Thank you so in terms of the I think the consumer sentiment, especially in the first quarter, we see from the daily sales and also the two big promotion in last three months.
I think he is a quite a consideration right now as I mentioned in the Big fashion group. The whole March I think is quite flat do we see them structure opportunity in vertical category like.
As I mentioned, although the skiing and also luxury part what a bolt on.
Other parts like like beauty and also the kind of consumer electronics I think is quite flat to if there was a slight increase on beauty parts, but a typical baldwin's hopefully quite balanced because each of the category actually we are quite even so in total I think we still can manage out quite a balanced portfolio.
Here and also I think some of your questions rational about the.
Emerging channels, yes, exactly I think for that.
And I should put that in don't parts. During the last the two I think a big promotional like double 11 last years double 11, and also this year's Chinese new year promotion.
I think.
No matter if the name of the brands will be producing the promotion or the transition. That's L. A we are largely I think at least a double the Denver way compared with last year. So it's quite.
Good trends and also I think rhino.
Our solutions, including the way inventory podcasts as I mentioned and also the solutions in India.
In the logistic part has support us to to reach the readout one week like the I mean, the non GMO the omni channels.
Well thank.
Thank you.
Okay.
The question about the raw material price.
Currently we haven't we haven't seen much.
Zero real impact yet in May.
Maybe not coming through yet we will keep it.
But when we see something happen.
In terms of the partnership with I click so early in the year we.
Our strategic investments into I click so the business operations level.
Our integration has been really successful in or through the help and the partnership with I click we won't be able to introduce a new a new client and we were able to get more business waste that partnership as we mentioned earlier the mini program.
Has increased very significantly and for this year, we have doubled the size of the mini program isn't a.
Both our <unk> and also on the revenue perspective.
We actually noticed that at the moment the <unk>.
The share price has been under a little pressure of iconic we believe this is the overall market impact and also the market sentiment.
On the wechat on the transcend and kind of the ecosystem and we think we will focus on the operational side working together with I click.
To improve the business cooperation going forward and hopefully the market will recover and will be able to reflect the true value of both company.
Okay.
Thank you.
Thank you. Thank you. Thank you participants as a reminder, if you wish to ask a question. Please press star and one on the telephone keypad than that.
Next question comes from the line of Charlie Chen from China Renaissance. Please ask your question.
Thank you management. This is Charlie Chan from China Renaissance I have two questions here. The first one is about the Onboarding of brand partners. So.
Remember that the company has focused more on domestic brands. So can you give us some update on what is the progress of Onboarding are important the domestic brands. So that's my first question and the second question is a follow up on the logistic acquisition, so often autos logistics acquisitions.
Do you feel that.
This acquisition or new capability, you have improved your relationship kinds of relationship or enable you to have a better bargain power to charge higher take rate or charge more so that you can come at central. So these are my two questions. Thank you.
Okay. Thank you.
On the on the domestic brands.
We definitely have seen improved in terms of the.
The demand from the domestic brand and we have many different ways to provide sorry for the domestic brands from the operation perspective, a weekend to the entre and sorry to the domestic brands, but more importantly, our capability on the digital marketing and also be able to to make right.
<unk> to the domestic brands in terms of how to define that E. Commerce from a strategy execution. That's hugely has helped a lot.
Has helped our TMT business unit to win very significant demand.
The brand business, we may not do with the operations for them, but we just didn't say has seen more business from the digital marketing group and that will help to knock the door into those brands and we'll be able to get more business from them from them. So that's one and also as you can see I mentioned we stopped.
From a use our investment vehicle to make some investment into the smaller kind of the brand, which will be able to can I caught.
From the equity perspective waste some in <unk>.
<unk> brand and find out so for example Ah.
The brand's nobody day as I mentioned, we are going to become the.
We're going to become the preferred e-commerce supplier from this point onwards, and we are starting to help them to drive the Omani China growth on the E. Commerce, so by doing that way well how can the the local domestic brands to grow together and partner facing both of us.
So that's all in that's one.
In terms of the acquisition then.
The strategy for the logistics business unit I think you are right, we try to integrate and try to build the strategic alliance with the different partners.
That will help us to provide a value added service.
As you might see from the NPI survey all the logistics and also the warehouse services ranked at the top from Alba.
From our clients' perspective, they greatly value.
That kind of the service without being able to provide it to them as I mentioned earlier, a lot of the brands, especially the island see brands. We operate they now starting to do China for China and in China, a potent unique capability to offer a premium logistics on the warehouse.
Sorry, it's really make half two standout so in that way, we think that will help us to further strength that business itself and also to contribute for baudrons overall ability to acquire new brands and to acquire new business.
Alright. Thank you. Thank you very much.
Hey, Frank.
Thank you.
Thank you.
As a reminder, if you wish to ask a question. Please press star and one on your telephone keypad.
Next question comes from the line of choice you from Banc of America Securities. Please ask your question.
Thanks for taking my question.
My first question is about the investment strategy is there any update on your investment strategy, especially tougher macro environment and my second question is about.
You mentioned resource allocation.
Optimizing product sales could you elaborate a little more on the.
Okay, and how would that impact you.
On the financial.
Okay. Thank you for the question.
Firstly on the investment strategy.
So we stopped to.
Do some of.
It's a decent size in terms of.
And I know you from last year and this year, we have seen.
The financial contribution starts to come in through full 2022, our strategy as we still using M&A as one of the driver to growth our business.
Given the current environment, we are doing this in a much more scrutinized the way trying to improve the quality of the acquisition.
Our.
Our strategy is still focused on the full IRA.
The kind of.
Capability enhancement, so what's your KOL consolidation or other similar service provider.
And also the brand building and as I mentioned, one of the new a new a new area. We're looking at for this year.
Looking at overseas.
China growth is at this moment, it's under a lot of pressure.
At this time.
Asia Pacific and the rest of the World May present more opportunities for Bolton. So we basically are looking at that for this year as well.
So that's on that you might spend strategy.
In terms of the resource optimization.
At this moment given the wider macro environment, we are being very careful in terms of the quality of our business.
Our clients prefer profitability than the apparel at the same time. Both are nice also focus on the quality growth because we want our growth to be sustainable and also at this moment given the environment.
Our risk appetite has changed a little bit there.
Therefore for this year, we priced safely had a thorough review of our business.
The product sales perspective.
The Oh, well actually look at our business and.
To identify those are the product sales business, which has a low margin and at this moment in time. We are we made a decision for this year to not to do those low margin business as you have seen in Q4 and actually starting from Q.
Three we're already adopting they are kind of the strategy, even though our revenue dropped 244 million, but our margin hasn't been impacted or those business and a full.
At least the first half of this year, we will operate the similar a consultative approach in terms of the product sales business.
And we also look at the efficiency and the people efficiency for our.
Our non distribution business as well, we identified a number of clients, which half low contribution from a profit perspective. These are all our surveys.
Sorry, C motor business and we're looking at those businesses the way, saying, Hey, we cannot provide the value added services like the largest takes like the TMT liked the technology only doing the operations and wait till they were low margin. We made a decision to not to further contino those business and in <unk>.
<unk>, we will reallocate those resources into the high margin and high value added service wage with more value to the customer at the same time, we can try to generate more profit margin from them. So that's our thoughts in terms of the retail optimization at this moment.
Thank you.
Thank you. The next question comes from the line of Robin noon from Daiwa. Please ask your question.
Hi, Thanks management for taking my question.
Could management share on the 'twenty to 'twenty two revenue outlook and also the margin.
And in the next few quarters I wish to targeting 5% non-GAAP operating profit margin for 2022 given that this.
This year, we have a lot of one off expenses. So excluding debt in 2022, we should see a.
Meaningful improvement thank you.
Oh, okay.
Thank you I think theres a lot of uncertainty at this moment. So every day the world is a different world. So basically assume everything unchanged as of today than.
When we do our annual operating plan, we see our top line, having a double digit like something between 10% to 20% of growth.
But our bottom line they've been for 2021 we'll have a number of the one off.
No impact.
The impact we will be able to see a healthy growth in terms of the bottom line.
Which will greater than 20%.
As I mentioned, there's a lot of uncertainties the micro environment the U S China relationship.
The kind of the KOL weight is now starting to come by having a significant impact at this moment. So this is at the moment, what we have seen but what we will do a ways. We will focus on the fundamentals focus on to improve the quality and processes and tools.
Be able to offer more value added service to our customers. We believe in the longer term one that business getting back to normal we will be much stronger business into the future.
Excuse me if I didn't have this okay two questions.
Yeah. Thank you very helpful. Thanks.
Thank you. The next question comes from the line of Charlie Chen from China Renaissance. Please ask your question.
Thank you management for taking my questions again, so I have a question regarding the regulatory side of your business. So as soon as the second half last year, we have seen a lot of tax audits on live streaming retail and business. So how do you feel the impact on your business and also aside from that.
Do you feel do you see any other regulatory risks on your business in terms of like business acquisitions, and whatever you can think about thank you.
Okay.
I will try to answer and then maybe two more after my answer well first of all I think.
You must be say.
The point, you were making a small with a K O L and also the tax implication and the regulatory arms of Kayo out right. So we actually think that's a positive kind of move from the regulatory perspective trying to get the pipe foam and.
And also with the business back to normal and back to a sustainable growth into the future. So that impact will will lead the <unk>.
<unk> focus on more the day to day kind of life show, which will require.
The K O L.
The normal kind of.
Hum.
But no more like <unk>.
While each who do the day to day kind of the light show so that will help too.
To stabilize the traffic acquisition and provides the opportunity for more middle retail aisle to play more parts in terms of the livestream, we still believe the lifestream.
A growing part of the business and for this year, we start to sign up more business for the life a screaming, we'll have our studio and Ola and also we're starting to do more cooperation with the universities trying to build our employee base will come too.
The normal day to day life stream show on top of that we are engaging ways.
The pipe foam, both the though in and also the T mall.
Let's see how we can do more coordination in terms of our master control for the light show and also how to deploy the battery itself the Brian Atwood.
Rising and and also the traffic acquisition.
What kind of things will help us to get back to normal and to improve the stickiness of beltran and all our and our client partner, So Tracy anything to add.
Yes, yes.
Yes, I think to further select wrong topco in pockets of short comments from many inquiries from platform from brands and also from our self so I think after the regulation we passed the two months of operation. We do we definitely saw positive impact.
They don't they are not material and also the cellphone livestream all pre the buy button.
I mean, the topic part you'll see the topic, but I think.
Two actually two.
Two how do you say to.
To me the topic into the trial.
I also remind.
Also need the other results allocation like the proper merchant and the proper increase in the discount. So I think it will take them off small brands and the us together to come out the solid plan how to I mean I have.
I'll just say to.
Proof of our cellphone livestream percentage dropped our total year spend this let's do it I think is a good sign.
Okay, and finally on the regulatory impact.
We believe the many regulatory.
No rules or.
Oh, the new introduced the royalties actually help us to build a longer term.
The longer term prospect for the e-commerce industry in China, and so in poultry and we're out doing a few things number one is we have made a lot of.
Emphasize on the ice tea so far this year, we have improved our ranking of yesterday from a triple b.
A rating, which is one of the highest in the e-commerce business in China, So that demonstrate.
Ah Ah that sustainability and also.
The regulatory awareness of Bolton and also from a technology perspective in Q4, we very quickly adapted our system and platform too.
Two feet wait for new requirements on P. II, so that will help us to be more.
To be more kind of.
To improve.
The.
Our ability.
To provide the salaries to the I'm seeing customer when normally has a higher requirement in terms of the data security. So.
No.
So going forward, we believe we are well positioned to cope with the new regulatory environment currently for the E Commerce in China.
Yeah.
Great. Thank you very much.
Thank you there are no further questions I would like to turn the meeting over to management team for closing remarks.
Thank you operator, yeah, Yeah, I think on behalf of the management team.
Thank you for your participation in today's call. If you require any further information feel free to reach out to us. Thank you for joining us today and this concludes the call. Thank you.
Yeah.
That does conclude our conference for today. Thank you for participating you may all disconnect have a nice day.
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