Boqii Limited [BQ] Conference call transcript for 2021 q3
2021-11-30 10:52:02
Fiscal: 2022 q2
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.:
Operator: 00:01 Good day, ladies and gentlemen. Thank you for standing by and welcome to Boqii’s Fiscal twenty twenty two Second Quarter Earnings Conference Call. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today’s call. If you have any objections, you may disconnect at this time. 00:23 Now, I will turn the call over to Mandy Luo, Boqii’s IR Manager. Mandy?
Mandy Luo: 00:29 Thank you, operator, and good morning everyone. Welcome to Boqii’s fiscal twenty twenty two September quarter earnings conference call. Joining us today are Mr. Louis Liang, CEO and Chairman of Boqii; Ms. Lisa Tang, Co-CEO and CFO of Boqii; Mr. Kai Fang, Chief Strategy Officer; and Mr. [indiscernible] Financial Director of the company. We released results earlier today. The press release is available on our company’s IR website at ir.boqii.com, as well as from Newswire services. A replay of the call will be available on our the site later today. 01:08 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 nineteen ninety five. Forward-looking statements will involve inherent risks and uncertainties. 01:25 As such, the company’s actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties are included in the company’s public filings with the SEC. The company does not assume any obligation to update any forward-looking statement except as required under applicable law. 01:50 Please also note that certain financial measures that we use on the call such as adjusted net loss, adjusted net loss margin, EBITDA, and EBITDA margin are expressed on a non-GAAP basis. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. Please also be reminded that unless otherwise stated, all figures mentioned during the call are in Chinese RMB. 02:21 With that, let me now turn the call over to our Co-CEO and CFO, Ms. Lisa Tang. Over to you, Lisa.
Lisa Tang: 02:31 [Foreign Language] 03:02 Thank you, Mandy, and once again we welcome for everyone attending the call today. We celebrated our new milestone at the end of Q2 of the last fiscal year. As we have successfully admitted on an NYSE. It opened a new chapter for us. [Indiscernible] expectations for investors on the industry at large, we continue to strengthen Boqii’s position and impact vertical by enhancing our [indiscernible] value chain and improving our product and service offering with the goal of creating more values for end users and the shareholders. 03:45 [Foreign Language] 04:12 In this quarter, we delivered solid financial results with top line reporting of worldwide growth of twenty three point one percent and our gross profit margin have improved from eighteen point six percent to nineteen point seven percent this year. 04:31 Our fulfillment margin also increased significantly from five point nine percent to nine point two percent. Behind all these daring numbers, they also point [indiscernible] advantage for this growing recognition from both end of the supply chain effectively connecting [indiscernible] with vendors. 04:52 [Foreign Language] 05:24 For [indiscernible] perspective, we are well [indiscernible] products and service. Our [premier quality] [ph] of the income comparative in prices through our established ecosystem, we are also able to strengthen our brand name, as well as inference to patch our non-pet owners, ever since [indiscernible] we have achieved a growth of more than twenty percent in the number of active buyers for five consecutive quarters. This was no exception in Q2 as we saw our growth of Chinese three point five percent. 06:04 [Foreign Language] 07:06 Meanwhile, we continue to expand our brand and the product selection. At the end of September, we were providing twenty four thousand SKUs from six hundred and nineteen brands compared with more than seventeen thousand SKUs from five hundred and sixteen brands at the end of June last year. Revenue from our marketing and Information services has more than doubled over the past [few quarters] [ph]. 07:38 In Q2, we also saw a eleven times worldwide increase in this segment of revenue showcasing the recognition of purchase capability in brand incubation, as well as in effective marketing, new media channels such as TikTok. 07:58 Currently, revenue from our marketing and information services has already reached five point seven percent of total revenue, and we believe this will continue to contribute to our gross margin and constitute one of the key differences in terms of our ecosystem when compared to the generic platforms. 08:21 [Foreign Language] 09:19 As China's pet industry is still in its early stage, especially when compared to the other mature categories like women apparel. Is a reason numerous small and mid-sized brands that are leading on terms of million RMB in GMV. Combining the fact the pet owners are just above twenty five percent of the total population. It is difficult for most of the pet brands to secure sizable year impact in traffic. 09:50 Let it be integrated e-commerce platforms, offline stores or hospital for online channels, the much diluted pet traffic on generic platforms and the high set-up cost of flagship stores [excluding] [ph] the profit margin of rent. 10:09 Even if they have made huge investment in the store, once they reached certain GMV scale, the growth rate is very likely to stay flat. Talking about offline. Also the in-store traffic is exactly where the brand's launch. Stores are scattered around the country and lack of trained management requiring brands to invest heavily in sales team to build up to our brand channel no matter through direct sales or distribution. The sales point are hard enough to engage, let alone branded awareness or education. 10:50 [Foreign Language] 12:08 Hence we believe [one-stop] supply chain and the marketing solutions is the way to go for such a small to [indiscernible] expense. Other shop [indiscernible] of adjustment Boqii is now fourteen to fifteen [indiscernible] between sales operating and self-value channels. We believe such mix will enable our brand owners to attract new pet parents through the use of integrity platforms. 12:34 While branding customer royalties through [indiscernible] and education note content to avoid the self-operating channel. Riding our extensive brand mix and SKU selection, we have demonstrated our ability to effectively lower user acquisition cost. As of 30 September, our user acquisition cost has come further down to a historical low of RMB nine point nine per user, which shall also have broken the record as the lowest customer acquisition cost among all vertical platforms in China. 13:13 And in such flexible arrangement, brand owners can devote more resources to branded DNA, as well as formulation and the product development. And both will handle customer origin supported by its [one hundred plus 2C] [ph] channels and expensive distribution network. As a pet vertical player, we see more of our values in healthy industry to grow and providing a localized professional solution that is to ensure us and cost effective. 13:46 [Foreign Language] 13:56 Louis will [indiscernible] more about our business and the financial highlights.
Louis Liang: 14:02 Thank you, Lisa. And thanks everyone for joining our call. We would also like to share with you in the three major business developments in our pet ecosystem, as well as our financial data during this quarter. 14:16 [Foreign Language] 14:34 First, we have reached a strategic partnership with Evetsoft, an established leader in the Pet Hospital SAAS Market. Together, we will launch an online procurement platform called Doctors Choice, [indiscernible] catering the procurement fees of over three thousand five hundred independent pet hospitals and small hospital chains across the country. 14:59 Over the last eleven years, Evetsoft has been committed to create specialized data management solutions to drive the operating efficiency of independent impaired hospitals. Average result now it has a market share with twenty seven percent covering over three hundred point five hundred pet hospital and clinics, providing them with tailored SaaS solutions. 15:25 In this partnership, Boqii brought our supply chain expertise to the table. We're supplying those independent pet hospitals with over six hundred SKUs from sixty five different brands. The new procurement platform covers not only medical and healthcare products, but also snacks and food as pet hospital aim to diversify its revenue resources. 15:52 Together, we provide those hospitals with a convenience in online procurement system, which offers better choice, broader selections, and [indiscernible] fulfillment. We believe the collaboration would establish a disruptive approach to address the procurement problem of over ten thousand independent pet hospitals nationwide. 16:17 [Foreign Language] 17:53 We also launched our brand new membership program in July. In a new membership program, we provide comprehensive benefits for the pet owners, such as points redemption, free of charge products trial, twenty four hour partner service, night medical emergency, first and offline social events. 18:13 By reading data, we're proud to say that this is a membership loved by our customers. For example, the points redemption ratio was as high as thirty percent. Members loyalty directly leads to consumption. Seventeen percent of the active rated members has been shopped with us in the past quarter. 18:33 In terms of purchase frequency and ARPU, members on the new programs of three point one times and two point five times more than non-member users. We are thrilled by initial success with further promote new membership programs among our spending customers. 18:51 [Foreign Language] 19:54 Last, but not least, this October we established a strategic partnership with China's largest hotel chain, Huazhu Group. Together, we aim to provide pet friendly experiences in over one hundred [boat] [ph] and house brand hotels in the coming three years. In this partnership, we will provide pet-care related training to hotel stuff, upgrade the hotel room facilities, accommodate the pets, operate an in-hotel day care center for the pets, and offer a specialized design activity for pets and pet parents. 20:30 Going forward, Boqii will co-develop more pet tourism products with Huazhu to benefit our customers. 20:37 [Foreign Language] 21:29 Previously, Lisa already briefly shared our view on our revenue and gross profit performance in the following, we will discuss further regarding expenses and net loss for this quarter. 21:41 Quarterly gross profit was RMB fifty five point seven million, up by thirty point seven percent year over year, which lead to a gross margin of nineteen point seven percent. Fulfillment expenses slightly increased to twenty nine point six million as compared to twenty nine million in the same period of last year. 22:05 Fulfillment cost as percentage of revenue was ten point five percent versus twelve point seven percent in the same period last year. Post fulfillment gross margin increased to nine point two percent compared with five point nine percent in the same period last year. Our early investment in nationwide fulfillment infrastructure continued to contribute to the reduction in fulfillment expenses as a percentage of revenue and improve our operational efficiency. 22:37 [Foreign Language] 23:06 Our total sales and marketing expenses were RMB forty four million, up forty point three percent from the thirty one point three million in the same period of last year. Sales and marketing expenses as percentage of total revenue were fifteen point six percent up from thirteen point seven percent in the same period of last year. The increase were primarily due to the increase of personnel expenses related to discontinued COVID-nineteen government subsidies for medical insurance, [house lending] [ph] and social insurance for the employees, as well as increased expenses business expansion and the investment in the emerging channels. 23:50 [Foreign Language] 24:10 G and A expenses were RMB twenty three point two million, up by thirty nine percent from RMB sixteen point seven million in the same period of last year. G and A expenses as a percentage of total revenue were eight point two percent compared with seven point three percent in the same period of last year. The increase were primarily due to the increase of share with compensation expenses, as well as increase in professional fees after we became a public traded company. 24:38 [Foreign Language] 24:54 We ended this quarter with cash, cash equivalents and short-term investment of RMB three hundred and thirty nine point seven million compared with RMB four hundred and fifty million as of June thirty, twenty twenty one. We experienced a relative low point of cash in Q2 of each fiscal year as with certain accounts payables resulted from the six eighteen promotions and stock up the preparation for the double eleven promotions, which will result in the further increasing the prepayment. 25:26 [Foreign Language] 25:39 To conclude, Boqii delivered another solid quarter with a minimal progress in execution of a quality growth strategy. We remain committed to invest and build-up our pet ecosystem because [indiscernible] would offer unparalleled value for the pet parents and our branded partners. 26:00 [Foreign Language] 26:27 Now, let's start with the Q and A session. Operator?
Operator: 26:34 [Operator Instructions] And the first question comes from Darren Aftahi with Roth Capital Partners. Please go ahead.
Operator: 38:56 Our next questions come from Ming Chen with Goldman Sachs. Please go ahead.
Operator: 42:07 [Operator Instructions] The next question comes from [indiscernible]. Please go ahead. Hello [indiscernible] Mohammed, your line is live. You might be muted on your end.
Operator: 45:40 This concludes our question and answer session. I'll turn it back over to management for any closing remarks.
Lisa Tang: 45:52 Okay. Thank you, operator, and thank you for participating in today's call [indiscernible]. We appreciate your interest and look forward to reporting to you again on our progress in the next quarter. Thank you.
Operator: 46:11 The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
