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?

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.

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…

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…

26:34 [Operator Instructions] And the first question comes from Darren Aftahi with Roth Capital Partners. Please go ahead.

27:07 Good evening and thanks for taking my questions. Just a couple if I may. Could you speak to on your membership business of the one point six million active buyers? How many of those are currently members? And then how you plan to kind of improve that figure going forward?

27:27 Hi, Darren. Nice meeting you again and great question. So far, we are at new or early stage of when we launched membership program, and we have thirty thousand-ish active members. The next stage for membership programs, we're focused on, a, further promoting our member activation of a membership among our spending customers; b, we would further enrich the benefit system leveraging our platform advantage. 28:04 Regarding the membership program, I want to say that because this membership will be exactly like the membership program of airline company and hotel chains. So, it’s free to activate. Therefore, definitely, we are confident that with good enough medical assistance we should be able to get a very optimized numbers, members to be, the spending customers to be our member.

28:34 [Foreign Language] Darren you can continue your question.

29:21 Great. Thanks. Two more if I may? Could you just speak to the strength in the online marketing segment, kind of what's driving that and then how sustainable that is? And just the impact it’s having on gross margins?

29:39 [Foreign Language] 31:11 So, Darren on to first question regarding the high growth rate of the service revenue. The first, the logic why brands are working with us or they are willing to pay money to us is because the market of pet is growing really at a fascinating speed. But in the meantime, we are seeing that middle to small scale brand, they lack effective traffic to market on, and they can't really find such traffic through different channels with online or offline. But for us, we have omnichannel and we on top of sales for that products, we also offer different values including marketing helping them making advertisement on emerging channels and doing many other brand awareness programs. 31:58 So they are willing to spend it with us. And turning to the numbers, we are very glad to see that in this quarter this service revenue has picking up by eleven times, and this is a remarkable achievement sustaining the growth in the last few quarters. And Lisa further added that because of some of the rules of the U.S. GAAP, some of our revenue were calculated into the gross profit were canceled down as the cost of our good sold. 32:33 That's why, if combining the overall part, the total service revenue actually contributes to around seven percent of total revenue, instead of the five point seven percent numbers shown on our financial statements. And I will ask Lisa the second question about GPM. 32:54 [Foreign Language]

33:06 [Foreign Language] 33:39 Darren, regarding the gross profit margin, yes, it does have some positive effect on the GPM, but we see more values on the other parts of our ecosystem, because as friends are working with us more closely, by trusting us to help them market their products and invest in their users, they also gave us other privileges such as giving us the first chance to release their new product like to give us differentiated products and also give us other support on the supply chain. And we think this will continue. And of course, we also have GPM up drivers from other parts of the business as well.

34:25 Great. Thank you. And then just last one from me and I'll pass it on. We've heard from other Chinese e-commerce providers and service providers that obviously COVID still an impact, but there's been a slowdown in consumer demand, I’m just curious kind of your thoughts on both and whether there's any impact on your business going forward? Thanks. 34:47 [Foreign Language]

36:09 Darren answering your questions, the management does observe the slowing down of the [indiscernible] in some other e-commerce players, but we are not really affected by this trend. If we look at revenue this quarter is still growing at a very strong rate. Although we were partly affected by the COVID because some of the cross border e-commerce products, they can't really enter China because of some limitations over the transportations. 36:41 So, we were smally affected, but looking at a macro trend, the industry is still growing at a fast CAGR. And from the past experience, we are not affected by the economic cycle. So, we will continue to grow driven by the different demands of the industry, including from domestic brands or international brands and we don't see that trend slowing down. 37:05 [Foreign Language] 37:51 And also one thing to add is that we still see the emergence of COVID situation in some part of China from time to time. That's why the offline business, especially the offline pet store and hospitals were affected by the COVID, but in the meantime we think it is also a good time to consolidate resources. That's why we announced a news today that we are working with Evetsoft, the offline hospital SaaS solution provider to try to empower offline independent hospitals because there are a lot of them while they lack professional supply chain, and we want to offer that to them to use this kind of period to really empower them and help providing better medical service to the end users i.e. our customers.

38:49 Great. Thank you.

38:51 Thank you, Darren.

38:56 Our next questions come from Ming Chen with Goldman Sachs. Please go ahead.

39:03 Thank you. I was just wondering could you elaborate more what's driving your online marketplace revenue?

39:12 Sure. [Foreign Language]

39:19 The first question is very macro. The COVID situation doesn’t really affect the pet industry, actually it helps us with some tailwinds that’s why we are seeing more consumptions in the field. 40:00 [Foreign Language] 40:27 The second question is because we are in the industry for over thirteen years and we have a lot of – already have a lot of users. Still we see the active buyer number growing at a CAGR of about twenty percent every quarter. That's why they are driving our revenue growth on the marketplace part. 40:47 [Foreign Language] 41:15 And then the second, the third question is because in addition to customer engagement, we also have been working on a supply chain for many years. As you can see from the latest numbers we are working with over six hundred brands, because of our years of experience in this industry, we understand what the users need to understand about the brands and their products. So, the brands can trust us to promote that product to the users. That's why you can see the continued growth momentum in our revenue segment, online marketing and other revenue part, and you will see this trend continue.

41:56 Ming, do you have further questions?

42:01 No further questions from me. Thanks.

42:04 Thank you, Ming.

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.

42:31 Sorry. Yes. Hello there. First all congratulations on your results. Some excellent work there. I have two quick questions. The first is you plan to reach profitability by the end of the year, are we to assume that you will be reaching profitability next quarter? And finally, the cash position you have around fifty million dollars in cash, is that enough for future investments or do you plan to raise capital? Thank you very much.

42:58 [Foreign Language]

43:14 [Foreign Language] 42:58 Answering your question Mohammed, you can see our GPM, gross profit margin is improving. So, we released – and also the expenses are shrinking, so we do see a [breakeven point] [ph] by the end of the first half of next fiscal year. That's before September next year. 43:58 And your second question about the cash.

44:00 And I will address your cash position question. As mentioned at, we are in strong cash position with over three hundred thirty nine million RMB, our cash, cash equivalent and balance sheet. Definitely it is more than enough to burn to your next year and even the year next. So, we are very strong in terms of cash position. 44:25 [Foreign Language] 45:10 In addition we have sufficient bank facility of three million RMB from our banks and we have no [indiscernible] side of CapEx.

45:27 Thank you.

45:40 This concludes our question and answer session. I'll turn it back over to management for any closing remarks.

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.

46:11 The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.