Q1 2020 Earnings Call
Ladies and gentlemen, today's conference call is scheduled to begin shortly.
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Today's conference is scheduled to begin shortly.
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He was standing buys lose fluids Holdings limited earnings conference call for the first quarter fiscal year 2020.
At this time it looks like he's a sense on listen only mode. Today's conference call is being recorded.
The technical over to your host Mr. setting so see I don't have that kind of a booming. Please go ahead.
Thank you I mean.
Good evening, Hello, everyone and welcome to do how Holdings Limited earnings conference call for the fourth quarter of physical year time to time.
As a reminder, this conference is being recorded the company financial and operational results, where you feel you know a press release earlier today and the available online you can download the earnings press release, and a sign up for the Companys email distribution list by visiting them be a section of the company's website at <unk> Dot one dot com.
Mean phone, our founder and chairman of the board of Directors and me.
To bolster our chief financial Officer, we will begin with some prepared remarks.
Following the prepared remarks, Ms., Lisa our founder directly to the CEO and Mr., Mike Jones, our VP, but also do a lot for the Q and a session.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risk and uncertainties I thought.
The companys actual results may be materially different from the views expressed today.
Further information regarding these and other risks and uncertainties is included in certain filings of the company with the U.S. Security and Exchange Commission, including its annual report on form 20-F, the company doesn't assume any obligation to update any forward looking statements, except as required by law I will now turn the call over to 200 founder and chairman of the Board May mean phone myth Fogo de lever in his remarks in Chinese.
Followed immediately by English translation MS phone. Please go ahead.
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Good evening, everyone. Thank you for joining our earnings conference call for the fourth quarter of physical year 2020 .
On April 3rd Punky 19, we successfully completed our IPO on the NASDAQ Global select market, our <unk> brand awareness and the industry influence in the Internet tail out ecommerce sector in China.
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Well I'm kinda your shoulder while wholesale one Andy so touching the very pleased to see strong growth momentum in the fourth fiscal quarter with JV, increasing by 50.4% to 755 million RMB.
And that revenue increasing by 34.3% to 312.8 million on both on a year over year basis.
Notably revenues from the platform model tripled in the fourth fiscal quarter compared with the same year ago period. We've also realized significant margin expansion, resulting in gross margin of 35.7% compared with 24.8% in the year ago period.
Benefiting from robust topline growth and improving operating efficiency.
We managed to significantly narrow our adjusted net loss by approximately 51.6% on a year over year basis.
This outstanding performance clearly demonstrates the strength and the viability of our business model as well as our strong management and execution capabilities.
By leveraging our effective al captivating capabilities create 80 per Doc marketing cutting edge technology Big data analysis, and the synergistic supply chain.
We were able to rapidly capitalized on the fluids monetization opportunities. So our economy market further strengthening who had leadership and the competitiveness in China, our ecommerce market.
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Platform DMV.
As a percentage of total JV continued to increase in the fourth fiscal quarter recording 45.7% compared with 19.4% in the year ago period.
Service margin as a percentage of total JV decreased to 54.3% from 80.6% for the same physical quarter of last year.
Looking ahead, we aim to operate more asset light manner through the accelerated expansion of our business and as a platform model, while also maintaining healthy growth for the full service business.
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As of June Thirtyth 2019, the total number of two hours time by Roussin reached 133.
In addition to providing professional training to new.
We provide highly personalized marketing on the product selection solution to each care out to help them create distinct personal style and enhance their recognition.
This in turn fuel our sales growth by meeting the diverse social content and product needs our customers.
Our two out of 10, increasing numbers of 10 throughout systematic training and marketing in addition to deep into actions on numerous social media and ecommerce platform between our sense and the customers provides us with enormous amounts of data.
Our strong data platform analyzes and integrate the beta and allows us to get market feedback and the consumption preferences.
Helping us to adjust monthly matters and the product selections, we will continue to improve our comprehensive internet out an identification calculation on the supporting 16 to grow our top tier and establish our pool further we plan to collaborate with a great number and a variety of out.
Well the Multani monthly further optimizing our cost structure to realize our financial targets.
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During the past few years with an eye toward the continuous development unseemly operation of our fucking class platform, we've been building up precise I skills to lock them capabilities.
I'm not sure supply chain measurements of probabilities and other <unk> big data I technological capabilities.
At the same time, we continue to upgrade our uniquely flexible supply train seats web by you and I don't think it's managerial. He features these an overall operational performance.
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We have become a reliable partner.
For the increasing number of retail grant providing them comprehensive survey this region from product design marketing on supply chain management.
As we move forward.
We remain committed to becoming a a corporation platform for emerging fashion brands in China.
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As of June 30th 1919.
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We are continuously exploring new business Corporation opportunities to me I'll be by by your specialty you know life assets and then lied supply chain, so that platform model business as well as the product marketing business, Okay, I'll live streaming on top.
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We remain dedicated to for their parents couldn't internet <unk> industry and therefore, they're exploring.
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In June 2019.
He reached a strategic partnership with China, leading online marketing platform door mine.
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<unk> partnership if also in line with our strategic investment plan to that worth it by our manifestation channels to bring about greater Lonesome value.
Looking ahead.
We will continue to explore high quality investment opportunities and improve our operational efficiency through resource integration.
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Moving on to have a strong cash position as of June 30th.
2019 hash hash equivalents on a short term investments recording approximately 733.6 million arm beep.
In addition, operating cash flow have consistently improved in the last few years.
Adequate cash reserves and a happy cash flow, we will guarantee our.
Ongoing development.
Looking ahead for the rest of the physical year will remain focused on achieving stable unhealthy plant growth buying hunting <unk> operations capabilities.
Improving product design as we are strengthening our technology and 19 support.
Looking at China huge <unk> economy market in front of us.
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Now with that I will turn the call over to meet my Joel Vice President of the company will be able to read the prepared remarks on behalf of Chief Financial Officer Me, Jim Bolger, which will provide updates our financial performance for the fourth quarter of fiscal year 2020 Ma C.
Thank you, Mr food and studying and I know everyone.
I will be getting some key financial highlights.
For the first fiscal quarter.
We are very pleased to see you harm for sure.
It's a tremendous growth momentum in the first quarter of fiscal year 2020.
In the first fiscal quarter G.M. the increased.
<unk>, 50.4% to 758.0, R. and B.
Primarily attributable to increase the G.M.B. practical model.
And and that's revenue increased by 34.3% to 312.8.
B, who serbia's revenues increased.
By 17.1% year over year two 247.3.
<unk> R. and B.
And the platform revenue Trifled to 65.5, U.N.R. and B.
We are also very pleased to report our continued margin expansion in both mind improvement.
The gross profit almost doubled you over here in this corner.
Gross margin increased by approximately 11% year over year, 275.7%.
We are also going to be narrowed adjusted natural laws.
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By approximately today, 51.6% year over year.
Our financial performance in the first fiscal quarter was driven primarily by the continuous progress from two well <unk> <unk> <unk>.
<unk> <unk> <unk> <unk> advertising services brand Corporation, and E. Commerce, and finally improved Google or operating efficiency.
There's a clear neither you know timers Internet's kill you comments industry, we have high confidence you know goal strategy added a promising opportunities not to move ahead of us.
We are focused on growing markers sure as well as being a head off industry growth pace.
We can do this by leveraging Oh, we'll keep it reduced to expand to kill our <unk> and occupy the P.O.L. structures.
In order to maximize value added service for both brands and online stores.
No.
Let's move on to detailed quarterly financial performance.
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Increased by 34.3% year over year, two 312.8 million R.M.B.
Primarily attributable to increase revenue from products out of stores opened in the name of the talk to you know kill will increase revenue from services through the pipe a model.
Revenues from product sells food food's model increased by 17.1% G.D. over years to 247.3 in order to be.
The increase with <unk> attributable to the sales growth of the stores open even name of companies poverty, Okay what else.
<unk>, partially offset by the transformation of the business models of some online stores open in the name of companies emerging and established Carrawell form, whose whose motto to platform model.
As a result of <unk>.
The number of the companies online stores decreased 40 as off of June <unk>, pointing 19 from 75 has off June Saudi point 18.
And the number of the companies <unk>, serving food service model decreased to 11 I'd off Judy 2019.
On the other hand G.M.V. from the companies online stores opened into topped you'll kill health <unk> in the entire Pureed increased by 49.6% in the first quarter of fiscal year 2020, compared with the same quarter of fiscal year 2019.
Segues to the rapid growth of a G.M.V. the percentage off the G.M.V. for through the ages by our top t. or P.O.L. decreased to 48.7% in the first quarter or fiscal year 2020 from 49.0%.
In the same quarter or fiscal year 2019.
Input to Cooner the percentage of G.M.V., let's see the hatred by one of our top fuel kill well <unk>.
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237.0% during the first quarter or fiscal year 2020.
From 40.0 per cent in the same quarter of fiscal year 2019.
Revenues from services through the platform model increased by 201.
0.3% you over you 265.5 year in R. and B.
The increase would primarily attributable to the increase in the number off care well into our pets for a model and an increase in the number of friends with which we comprehend.
Advertising and marketing business.
Cost off the revenues increased by 14, 49% <unk>, two 201.3 million R. and B.
The increase with <unk> <unk> <unk> <unk>.
Gross profit increased by 93.0% you'll be you.
Two 111.5 billion R. and B.
As we continue to grow the business.
Glossed margin increased.
235.7% compared with 24.8% for the second quarter, you know not fiscal year.
The increase with <unk> due to first rate increased gross margin import it sells after believable too <unk> over corporation, we sort of party brands and being housed efficiency in supply chain management.
And the secondary to increase the proportion of the companies not to revenue.
Attributable to services.
Under the platform model, which acts a bit higher margin.
Then product sounds.
Total operating expenses increased.
Bye sorry, 2.4% you over here to 108.8 mutant R. and B.
For human expenses increased by 12.2% year over year. He was 75.0 mutant R.M.B.
<unk> pens is increased by 71.7% you over here to seven T. 4.1, B.B.N.R. and B.
<unk> increase with primarily due to firstly the increased promotion expenses in order to improve cost margin of protest zones.
Secondly, the increased expenses of kill hour incubation cultivation content reduction and the training to support increased activity.
For the company's killed how cells and advertising business.
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<unk> expenses of intangible assets exclusive operations rights.
Gentle and distributed expenses remained flat you hold a year two 3.5 <unk>.
<unk> decreased by 42.2% you over here to 27.3 meet an r. and B.
<unk> loss attributable to harm decreased by 40.1% you over here to 26.7 get in order to be.
Just <unk> decreased.
<unk>, 51.6% of your your 221.6 mutant R. and B.
<unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> 70, R.M.B. for the same quarter last fiscal year.
Drifted basic and diluted that's lost <unk> was zero point 26, R.M.V. compared with basic <unk> Hideous Autobytel point 70, R.M.B. for the same quarter of locked fiscal year.
In terms of our balance sheet as of June 29th two we had a cash cash equipment and a short investment of 733.6 minute R. and B.
Compared with 19 million on beat as of March 31st 2090.
Turning to our outlooks.
For the full fiscal year 2020, we currently expect revenues from products else Who's Who's Who's model to be between 980, you didn't on <unk>.
And 1100, and sodium get an r. and b.
<unk> revenues from the services through the platform model.
To be between 280 million R.M.B. and 380, you didn't r. and B.
This would represent a year over year gross between 4%.
And 20% and the between.
86%.
And what 152% respectively.
These phone part reflects the company's current and the preliminary review on the current beating the situation and the <unk> conditions.
Which is subject to change.
This concludes our prepared remarks were now open the core for culinary appraiser. Please go ahead.
Thank you.
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The first question, Okay I know.
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My first question relating to these a transition at one key too.
So these models.
Formato remember it that way.
Transitioning from you know.
The one p. too.
Three p. right last year, and so can you <unk>.
<unk> actually start that and and beach quite a that we should see these sharing I should start I can see normalized.
Sure I what took this question.
For the transformation of our emerging and established kill L. from the food too small, though to the pet for a model. It's transformation took place in the quota won or lost complete school yet.
Currently we are you proceeding such for transformation.
And we will just find the balance between.
Model and the platform model, depending on the operating results of our food service.
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And also the the the progress on the implementation of the China you call. This law.
Okay. So it will still be ongoing and then so that leads me to my second question is on the full year guidance.
So if we add up the product and the service revenue it imply on the full year basis, it's 15% to 38% year over year growth. Your first quarter, you already delivered 34% year over year growth. So can you help us understand why are you still getting these low and Austin the guidance range does that imply that could be some transitioning impacts that will still be happening and if you can give us some color in terms of how we should think about in the September quarter. We just the next quarter would that be a seasonally slow quarter that we should see a sequential decline.
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Yes, I will quickly translate for you structure.
Our revenue guidance is.
It's made based on the current operational results and to the industry situation.
This guidance will.
It will be driven by four following factors.
First the growth of our acute our pool and this and the speed of our or kill our.
Cannot farm that we enter into contract and as well as the speed for us to grow our fan base.
Second the progress of the implementation of the China E Commerce floor.
So luann has been.
Kind of compliant as a leasing company starting from the year 2016.
While.
Along with the implementation of the China ecommerce lower those stores on the top or platform will be forced to increase setting.
The price of the products three or four.
The full implementation of the China E Commerce law will help lead time to increase the competitiveness of its full service model and enhances revenue of your product sales.
The third.
The performance of the double singles day, and also the double 12 days sales.
There is a women's apparel industry.
There is a seasonality driven by these two festivals and the revenues from the double single state.
Took a.
A significant proportion of the whole year revenue.
So the performance of the double single state will impact on the.
All of the.
The percentage of achievement of that of the whole year targets.
And the fourth and the lost.
The progress of the transformation for the emergent and establish a kilo alphaform foodservice model to to outflow important model to platform model because in food service model. We are recognizing revenue based on the product sales while in that platform model. We only recognize revenue based on a take rate of that product sells solves a pro rata of digital transformation will impact on the on the growth rate of our revenue. So these are the major factor when we make our revenue guidance.
Sure. Thank you any color on the September quarter that you can share.
Yes.
Oh currently all were our September quarter performance is in line with our expectation and we have taken full consideration of the of the July and August actual performance into our consideration when we make for the full year revenue guidance.
Okay. Thank you.
Thank you. Our next question comes from the line.
GGB, Yes. Please go ahead.
Thank you management for taking my question I have two questions.
Guys, you're going to we're not going to be eager to a one kindle who so this has been done quite normal which on Dol took a fuso contingent on the bubble from gives you an update on how each year.
See decent volumes are going to be a zone. We all know how soon can go you know hotel will activity due to the bank wise, So sunil acquaintance with our liquor gone got off on you in Asia.
The other thing was recently acquired quite Dinyar the parcel entitlement.
Allow me.
Now let me translate my first question is as we see four result service revenue was up by almost the two folds I'm wondering which part of the segment performed better is it. Thank you very much.
Our second strategic.
In our platform business, we have seen both.
Significant growth rate in both our e-commerce and advertising sector.
And we have note a even faster growth rate in the advertising services, we have not seen any signs in our of kind of.
And does the flowing our factor, which will slow our add about advertising services.
We have note that in the market for a lot of Internet company. There is a trend that the advertising services slow down, but if we look at the different segments. Each within the advertising services. We have seen there is a clear trend that softer advertising.
Kind of budget goes from the traditional media to the social media.
So so.
Being in in our case.
Because in our advertising services, we have we have fully leveraged.
The the hour Calwell, our position and the loyalty between Tokyo Al and her fan bases to influence our fans and customers.
And so we would it would be very easy that in our case that we.
Ensure that our fans are focused on our accountant from from alcohol in a decentralized the community. So it would be important to note to that so we can help the brand to deliver its value and we can help them to receive real time feedback from our fence.
So.
As of the end of this quarter the brand that we have cooperated has increased to more than 700.
And we believe in the future we will continue this trend and.
And to serve an even larger number of the Brad and maintain a fast growth trend.
For the second question I will ask curve is performing to respond and I will translate.
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Uhhuh AD hoc reactor you see lacking company for women's apparel at Vactor and be beside our choir. So look at the same time also pervasive other social.
Media platforms, such had barely Billy Arctic talk.
Our little Red book its stature. Our for example, our lohan provide a precise.
Actually with the lacking a pervasive up between how out and at Q4 for the Internet kill our yield tick tock, unaware help though out to realize their monetization panel and we help them to increase their decisions there as well.
Okay. Okay.
Thank you.
Thank you.
Our next question is from benign they'll be as being of the hedge capital. Please call me here.
Hi, Thanks for taking my question and congrats on the solid laid out.
I have two questions my first husband, it sounds, though kilo Oh, I know that don't play out something in southern Florida, or so off of it Oh all light source is postponed that those doors. It was shocking SCHUNK you know, but choppy. Besides your same store sales stay strong year over year basis. They both the first quarter in terms of <unk> can you give us some color.
My cuts and my second question is on the platform. So all these models in terms of third party merchants and have now Kate can weigh outs on taking a walking on the books motto is 11 in this quarter and if we compare to the same period last year. Our chill was Saudi Street, we have 33 go Alan nacelle working on if we see some model.
Oh, we could see some for those top tier keil, who is.
Oh, the opening the stores in the full service model in both periods. This quarter and also last quarter, we have seen a significant.
Kind of gross in GMB more than 49%.
And we anticipate that despite the impact of the transformation from the full six motto to the platform model for the emerging and established kill al.
Our revenue will still continue to grow at a faster rate driven by the robust growth of our top tier care well.
Oh, we have realized that the China E Commerce lore has.
Has.
Came into effect since January 2019, and currently it is still in progress for implementation and the we will decide.
The balance between the forces motto and a platform model kind of from a strategic point of view based on the progress of the implementation of this law.
Regarding thoughts the confidence.
Off a single kill out both in the full service model and is a platform model, we do not see are kind of fun.
A such a kind of <unk> kind of confidence.
And for those kill L. walking to both two business models normally that she will promote the private brand womens apparel in the full service model while to promote the sorta Pardee brand cosmetics consumer boasts a health care and the food in platform model. So.
So this combination will fully utilize the loyal relationship between the kill al and her fan base and the will concrete her image as a person who is willing to share core beauty recommendation.
So as a result, we do not see a a kind of comfort for anything go and kill out both working on to business model.
Could you please repeat your second question.
Hello could you. Please repeat your second question.
Operator could you ask her to repeat your second question.
Yes, well these yesterday.
On my second question is on the platform. So this model in terms of third parties Murchinson pipeline I'll kill <unk> can you just give us some clean sound I mean.
What causes numbers that we can model X quarters, basically what kind of the good things that choice of fuel take rates and what is the change in the near future.
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Well known spongy two courses on Google EBI salad sandwich variable home console will not make a year have which gives you miss the G. By me inside yards away woman change on the whole China, Let me reiterate on your machine, we have with settlement charge on call today since the change year Dawson.
Jeff the Aarding and maintaining a more woman jangle achieving them in the channel.
Please turn to users each on your new essentially almost full good looking pipeline that our shuttling Asia will make AG early early Intandemone, wilmar, food and Pms food and how will it change our.
Paying high most of the Siguiri to use on Yuzu bubble charts again, the team hi, Sanjay the shareholder yup tile for longhorn the country that these are.
Congo, you delay put Hanson for the year, Jim either sold assumption are you sold the PV.
So while we'll MITG time seeing you on the yields you go shop, Shanghai most of the regulator jump up 17.
Post the remand the company wheel interview, our candidate of several hundred normally between 800 to 1000 candidates per hour, but finally, Indiana will officially signed contract with.
Our our between our five to 10 people.
Our average on a monthly basis. It is estimated that by the end of physical year 2020 . The company real time about to nearly 200.
Internet App and for this quarter as our.
Thirtyth June .
2019.
We served.
Up that will be sub brand almost 701 hour we estimated.
The number of brands with we provide service we will exceed 1000 are by the end of the physical.
And the.
Talking about the take rate factors. There are three factors one is the demand from the branded much. It second is the supply off the internet per hour.
In the ecommerce our sector lastly, as the percentage of our diverse advertisement a business as a percentage in the platform model because the other advertisement business our doesn't contribute directly to our GM lease. So I mean from just mentioned in the current business structure are we actually make up the take rate, we'll keep stable in the platform business.
And at the same time as we mentioned earlier, our we have been exploring new businesses in the <unk>.
Monetization channel with our strategic shareholder Alibaba. So if any we will we achieve adding new brick through our new businesses are we we expect that take rates are we all are we will have some change yeah our income structure.
Thank you, we hope that onto a pattern.
[laughter].
Thank you. Our next question comes from the line of gold pay of Oppenheimer. Please go ahead.
Hi management. Thanks for taking my question I have two or three if you if I may.
Do you get when he said a woman commingled <unk> you didn't pay Las Vegas highly in the revenue guidance without wins out you go to the cadence in pilots, who took a gym, we though part Doug I see you got something Ellington Downs, Hong Kong now Jago wouldn't he is Oh, two wars enzyme time, Suitings again sounds a quite far down in the fate I'm quite a ways out home. So you go Hamir Patel dual I swore Wellington can consume when you hold times. It brings some young Ching Tai tied to good E. Commerce, sometimes you don't on a buyer you got some younger which is Oh, Gee, who you're going to use it without getting some fine tuning going had ti dollars sitting and you haven't HYSYS and shell, though we don't wins at Dunkin' assisting these year seeming time, you'd see a switching the whole data you go home here, a year, which is big <unk> Joey good some younger you Michelle.
And I will translate for myself.
Dig of antisense flown in GMI. The Cindat woman has if we parse the eco quest for the Cindat should do better than what we can do to income Lincoln since Accelops Si pothole Monkey King pin type of course, I want me to answer those at times working toward the PGM finances.
We will move which you can through June sold the Trulia.
Just to assume going Jamie the date.
Not quite to the client.
I think pricing will move quickly than where it has the way like the S&P assumption tiotwo quantum topline JD Mifi Samsung are they running on fund of funds.
So we think good things and then they don't plus the woman can you go through that that she uses for you. When we are doing with Tysabri wheelabrator being paid to climb trillions on file with the phase until the other two.
Yes.
Yeah, I will switch to translate or no response to the question number one number two.
Regarding the trend of the GMB grows we expect lots we will.
Also achieve rapid growth seeing our GMB, but of course, not we will focus more on the quality of.
Of our of our gross so.
So we will we will play more emphasis on on the other growth of our revenue and in the meantime, because we are currently exploring different monetization.
Channels.
With.
Based on our cooperation with our shareholder hype about so.
We will.
We will we will see an out some.
The diversified ways to to achieve the growth of our revenue and we will keep all the shareholders updated about the progress.
Regarding the question number two on the short video.
Of course, not we have note not some four for those brands at short video has been a very important part to deliver the value.
From the brand to that to that too.
To their customers and the policy offer content to wear a place where play an important role.
For.
For the promotion of the brands.
That is and this is where it is and that the Eagle legend time to negotiate crashing into the season sizzle than we like we like that what the demand pull searching pay Santyl cases, she tool Jones act vessels with it for me.
To me the.
Just the soil Sina on what kind of light candles and toward the importance ISO chancellor with of course Enzo.
Woman synergy that passes for the.
Sure.
Leave they realize your life sciences as a teaching lead due to the home floor will ensure that the compliance for for most stores.
Including those stores and how long platform.
And so that we anticipate that this implementation will drill down Q.
Q2 through those stores as a major player in the ecosystem of the tobacco platform and the we anticipate that these full implementation will come into being one or two years.
Yeah, we hope that answer your question. Thank you.
Thank you award.
Operator.
Thank you I said another way to questions now I'd like to tend to call back over to the company for closing remarks.
Thank you and thank you again for joining us today. Thank you everyone. If you have any follow up questions. Please feel free to contact rule, how you might the relations.
Department through the contact information on the website or the company's IR from TPG Investor Relations. Thank you Hello, everybody. Thank you again bye bye.
Thank you Lisa. Please this conference call you May now disconnect. Your line. Thank you.
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