Mogu Inc (MOGU) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the MOGU Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Mr. Roger Hu. Thank you. Please go ahead, sir.

Thank you. Hello, everyone, and thank you for joining us today. MOGU's earnings release was distributed earlier today and is available on the IR website at ir.mogu-inc.com as well as on the Business Wire services.

Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and the current market and operating conditions and relate to events that involve known or unknown risks, uncertainties or other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements 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. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as otherwise -- except as required under applicable law. On the call today from MOGU are Mr. Shark Chen, the Chairman and CEO; Mr. Raymond Huang, Chief Strategy Officer; and Ms. Feng Qi, Financial Controller. Mr. Chen will review the business operations and company highlights followed by Mr. Huang, who will discuss financials. They will be available to take your questions during the Q&A session.

Now it is my pleasure to introduce our Chairman and CEO, Mr. Chen. Please go ahead.

(foreign language)

[Interpreted] Hello, everyone. Thank you for joining us today on our fourth quarter and fiscal year 2021 earnings conference call today.

(foreign language)

[Interpreted] During the past quarter, we continue to see a consistent and steady growth in the live e-commerce business. The GMV from live e-commerce increased by 42% year-over-year to RMB 2.245 billion in the fourth quarter, contributing to 87.2% of the total GMV during this period. This demonstrates that MOGU has successfully executed on the transformation of its business and has essentially become a pure-play live e-commerce powerhouse. As an early mover in live e-commerce, we have witnessed the advancements in the live e-commerce business in China during the last 5 years and have established a very differentiated shopping experience for our users. This allow us to continue capturing new growth opportunities in the e-commerce space in China.

(foreign language).

[Interpreted] So continuous innovation is an essential quality in MOGU's culture. After establishing our live e-commerce business in 2016, we have also developed a product feature called Short Live, which has really begun to make a breakthrough over the past few months. Short Live is basically a short video clip produced by KOLs in MOGU live room and can be disputed as structure and tag information to wider audience in public. This information can be searched, structured, categorized and recommend in the feed. Different from the one-off performance in the live show, Short Live can have very long short life for consumers to browse and purchase.

(foreign language)

[Interpreted] As for our users, Short Live has significantly enriched their live mobile shopping experience. It has also lowered the entry barriers for new users in our live e-commerce business. Although the user stickiness of live e-commerce is very strong, it's also very time-consuming and presents a higher entry barrier for new users. That's what makes it difficult to further improve the penetration rate of live e-commerce in e-commerce space. Short video is not just a simple recording of product presentation. It also captures the best moment of the host -- of the live host and also the personal touch on the product feature.

(foreign language)

[Interpreted] As for our partners, our Short Live product is also a disruptive innovation. Short Live can be easily recorded during the MOGU Live shorts and their production costs are very low. Apart from real-time sales in the live showroom, Short Live allows for KOLs to further expand their sales channels in the long term. Furthermore, Short Live also provides an excellent growth path for small and medium KOLs. By leveraging the lower entry barrier for gaining new fans, they can generate stable and considerable revenues from the Short Live business. Just a few months after launching this product, we have already seen hundreds of KOLs growing their presence. As for brand partners, Short Live now enables them to generate continuous sales growth volume over extended period of time in addition to generating explosive sales alive.

(foreign language)

[Interpreted] We have achieved our early success with our Short Live product and believe that it will be a breakthrough in live e-commerce industry. Going forward, we'll continue to expand the ecosystem of Short Live and to help accelerate our live e-commerce growth. We believe that there will be unlimited possibilities for live e-commerce in the future. And MOGU will be a continuous innovator and a beneficiary of the industry. Thank you.

Thank you, Shark. Thanks, again, for everyone to joining our conference call today. I will now walk you through our fourth quarter and fiscal year 2021 financials. We believe year-over-year comparisons are the best ways to review our performance. Therefore, unless otherwise stated, all percentage changes I'm going to mention will be on that basis. So let's review the financials first. Our GMV for the fourth quarter of fiscal year 2021 was RMB 2.576 billion, an increase of 6.5% year-over-year. GMV for the 12-month period ended March 31, 2021, was RMB 13.855 billion, a decrease of 18.8% year-over-year. Our focus has been growing the GMV from live video broadcasting business, which has increased by 42% year-over-year to RMB 2.245 billion. Live video broadcasting associated GMV for the fourth quarter of the fiscal year 2021 accounted for 87.2% of the total GMV.

Let's now turn to revenues. During the quarter, total revenues decreased by 23.6% to RMB 90.9 million from RMB 119 million during the same quarter of fiscal year 2020. Commission revenue decreased by 1.7% to RMB 65.2 million from RMB 66.3 million in the same period of fiscal year 2020, primarily due to the restructuring of the company's business towards an LVB-focused model. Marketing services revenue, which is mainly generated through our marketplace business unit, decreased by 34.5% to RMB 11.9 million from RMB 18.2 million in the same period of fiscal year 2020. The decrease was primarily due to restructuring of company's business towards LVB-focused business.

I will now walk you through our major cost and expense. Cost of revenue decreased by 35.4% to RMB 37.9 million from RMB 18 -- RMB 58.6 million in the same period of fiscal year 2020, which was primarily due to a decrease in the costs associated with the lower online direct sales. Sales and marketing expense decreased by 44.5% to RMB 43.4 million from RMB 78.2 million in the same period of fiscal year 2020, primarily due to optimized spending on branding and user acquisition activities.

Research and development expense decreased by 40.3% to RMB 19.6 million from RMB 32.8 million in the same period of fiscal year 2020, primarily due to the optimization of headcount. G&A expense increased by 124.4% to RMB 25.7 million from RMB 11.5 million in the same period of fiscal year 2020, primarily due to the reversal of share-based compensation expense in the fourth quarter of fiscal year 2020. Amortization of intangible assets decreased by 5.7% to RMB 82.1 million from RMB 87.1 million in the same period of fiscal year 2020.

Loss from operations was RMB 110.3 million compared to loss from RMB -- from -- a loss from operations of RMB 149.1 million in the same period of fiscal year 2020. Net loss attributable to MOGU's ordinary shareholders was RMB 108.6 million compared with the net loss attributable to MOGU's ordinary shareholders of RMB 141.9 million in the same period of fiscal year 2020. Adjusted EBITDA was RMB 20.1 million compared with a negative RMB 83.6 million in the same period of fiscal year 2020. Cash and cash equivalent, restricted cash and short-term investments were RMB 803.1 million as of March 31, 2021, compared with RMB 1,095.4 million as of March 31, 2020.

So let's now move the financials to the entire fiscal year of 2021. Total revenue came in at RMB 482.4 million, a decrease of 42.3%. So the commission revenue came in at RMB 318.6 million, a decrease of 27.3%. Marketing services revenue came in at RMB 71.3 million, a decrease of 70.6%. The overall decrease was primarily due to company's restructuring or transformation of its business towards the LVB-focused model. Cost of revenue decreased by 37.7% to RMB 183.1 million. Sales and marketing expense decreased by 62.5% to RMB 229.8 million, primarily due to optimized spending on branding and user acquisition.

R&D expense decreased by 39.5% to RMB 103.5 (sic) [RMB 103.5 million] and G&A expense decreased by 19.6% to RMB 103.0 million. Loss from operations was RMB 428.9 million compared with the loss of operations of RMB 2,072.9 million in the fiscal year 2020. Net loss attributable to MOGU's ordinary shareholders was RMB 328.0 million compared with RMB 2,223.6 million in the fiscal year 2020.

So adjusted EBITDA was negative RMB 51.5 million compared with a negative RMB 320.1 million in the fiscal year 2020. Our net loss and adjusted EBITDA improved remarkably by 85.3% and 83.9%, respectively, which showcased the positive effects from our effort to optimize customer acquisition and operating efficiencies. By the end of fiscal year 2021, we have reached a major milestone in the execution of our strategic transition to a live video broadcasting e-commerce company. Our breakthrough in short video further expands our live video broadcasting ecosystem and is a new revenue growth generator.

Going forward, we'll continue to execute on our disciplined approach in terms of customer acquisition and will partner with more capable and innovative KOLs, so that they can deliver the best products and the best shopping experience to our consumers.

So with that, I would like to open the call to Q&A. Operator?

(Operator Instructions) Your first question comes from the line of Sabrina Hu from Jefferies.

I have 2 questions. The first one is, how should we see the competitive landscape going forward? In short video perhaps step up efforts in live streaming e-commerce? The second one is how should we see the live streaming e-commerce growth rate this year for both industry and MOGU, where the newfound Short Live goes to the revenue growth? I will translate myself. (foreign language)

Sure. So I'll answer the question directly in English then. So yes, number one, speaking of competition, of course, we are seeing that the e-commerce space in China is extremely competitive. But we do believe that, okay, the Chinese consumers are very, very demanding. They are always asking for more innovative and more interesting, more immersive, more interactive way to shop. China is becoming a very strong country with very open society. So that our shoppers have many different options. They are not just going for the cheapest products or they are going for the massive product. They're actually asking for different shopping experience.

So that's why MOGU will stay very, very focused on product innovation and to give our consumers the best experience. And we believe that our KOL partners -- they know our consumer is the best. They can find the best product that is suitable for our consumers, and they can actually deliver the best experience. So speaking of maybe other competitors, we are seeing that the other maybe short video platforms, they are very, very strong in terms of traffic or in terms of entertainment and content. But we are a live e-commerce platform. So that's the fundamental difference between us. And we do believe that we can provide a more holistic shopping experience in terms of reform, return and also quality control, brand -- authentic brand.

And all these are very important elements with our consumers to make a purchase decision. So that's where we are different from short video platforms. And also compared with other big shopping platforms, I think we're very much focused on the human element. We want our KOLs to become the front face of our shopping experience, so they can interact with our consumers. So instead of people go to certain platform and search for products, they will be actually connected with our KOLs to buy whatever product that actually our KOLs thinks is especially suitable for our guests. So I think this basically is very -- differentiate us from the other shopping platforms. And we believe that our users as you can see from the retention data, is very -- is showing that -- it's showing their vote to support our platform.

And the second question is about the Short Live and the revenue growth. So we are of a view that Short Live is a very, very important product feature that can help all their KOLs to grow faster on the platform. All the suppliers can benefit from the growth of KOLs. And our consumers will be attracted to us because of this diversified and massive supply of KOLs and substantially the products behind it. So we believe that this is a very important growth engine for us in terms of users and in terms of KOLs. So over time, our supply will be increasingly diversified and our experience will be increasingly diversified. And therefore, revenue or any financial numbers as a result will come out of that.

(foreign language)

[Interpreted] So when we examine the competition landscape, we also need to look at our internal reasons. So I think our dedication to live e-commerce and our very extremely efficient operation is a very important differentiating factor. So we know that e-commerce is a very complicated system. That everyone needs to do a lot of work around the system to make sure that system doesn't fall apart. And the live e-commerce is actually more challenging. And as we can see that live e-commerce is accounted for 87% of our total GMV. We're now effectively a pure-play of live e-commerce.

We have been dedicated to live e-commerce segment for very, very long time, and our investments and our dedication in this segment will definitely pay out. And our focus on the live e-commerce segment is a big differentiating factor that differentiate us from competitors. And the Short Live as a result was also the fruit of our dedicated effort in this segment. So without this much -- this level of dedication, we wouldn't be able to innovate a product like this. And we believe that this is actually a very big breakthrough of the live e-commerce industry in China.

Your next question comes from the line of [Charlie Chan].

(foreign language)

(foreign language) Okay. So basically, the question is -- the question is very simple. It's basically about the ROI of Short Live versus Live in terms of the -- incorporating all different factors, including user interaction in the showroom and also how many times we can actually repeatedly use the live -- Short Live video.

So the company's answer is, yes, that's a very good question. So Short Live is meeting the user interaction. So that's actually not the best part of the Short Live. So our users tend to find better user interaction in the live showroom. So that's where most of the interaction happens. That's where the immersive and interactive experience takes place. However, the pros or the advantage of Short Live is that it can be used forever. We are seeing that our host can be -- they have recorded a Short Live from last year, maybe from 12 months ago, can be still seen by our audience and people are still making purchase of that item that she introduced or she presents 12 months ago.

So it has a very, very long short life. So people can always go back to the product and buy that. So that -- so apparently, the return on investment on that or, I guess, the sales mix generated per SKU or sales generated per Short Live is very, very high. And speaking of interaction or, I guess, the specific things about Short Live is, in Short Live, you can see all the previous product reviews posted by previous buyers. So in Live, you actually cannot see all the user reviews at the same time because the product is actually new and it's actually new to the audience. But in the Short live, because it has very long short life, so you can actually see all the reviews from previous buyers and make a more informed decision accordingly. So therefore, the conversion rate, even of the assistance from previous buyers, make the conversion rate even higher. So that's kind of what we have observed over the course of last year -- over the last few months.

(Operator Instructions) Your next question comes from the line of Locky Lau.

(foreign language)

Okay. So Locky's question is about organic growth for the last quarter and for the quarter going forward. So I think as Sabrina mentioned earlier, China is actually extremely competitive situation. The live streaming companies is growing really fast in terms of the entire sector growth. So it's also extremely competitive. So at this juncture, we wouldn't be able to give forward-looking guidance on the GMV growth. But we do believe that the live streaming e-commerce segment has very, very high potential, and we are only at the beginning. So we are optimistic and positive on this side. So we'll continue to invest in the live e-commerce business to make sure that we can capture all the growth opportunities going forward. Okay. So operator, do we have next question?

There are no further question at this time. You may continue.

Okay, great. So if we don't have further questions on the floor and we can end the call today. So thank you, again, everyone, for joining the conference call today. We look forward to seeing you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect. Presenters, please stay on the line.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]