Ladies and gentlemen, thank you for standing by, and welcome to MOGU Fourth Quarter Fiscal Year 2020 Financial Results. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Christian Arnell. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us today. MOGU's earnings release was distributed earlier today and is available at the IR website, ir.mogu-inc.com as well as through 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 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 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 required under applicable law. On the call today from MOGU are Mr. Shark Qi Chen, chairman and CEO; Mr. Raymond Huang, chief strategy officer; and Ms. Hwei Ching Eli Wang financial controller. Mr. Chen will review the business operations and company highlights, followed by Mr. Huang, who will discuss financials. All of them will be available to take your questions during the Q&A session that follows. It is now my pleasure to introduce chairman and CEO, Mr. Chen. Please go ahead.

[Foreign language]

Hello, everyone. Thank you for joining our fourth quarter earning call today. Today, I will introduce the company in Chinese first, and Raymond will help to translate.

[Foreign language]

The past quarter was a highly unusual one. Our live video broadcasting business remained the focal point of our strategy throughout the pandemic and it continued to maintain strong growth momentum. LVB-associated GMV during the quarter increased by 54.1% year over year to RMB 1.6 billion and 91.6% during the fiscal year 2020 to RMB 7.9 billion. Our LVB business is now the key driving force behind our growth, accounting for 65.4% of our GMV during the quarter and 46.2% during the entire fiscal year 2020, while working to help KOLs improve their sales skill with new tools and power them with additional supply chain infrastructure as we build this business out to scale.

[Foreign language]

Over the past 12 months, active buyers of live video broadcasting business continued to maintain steady growth, increasing 44.9% year over year to 3.6 million. The LVB business continues to generate strong growth momentum and increasing users' stickiness. Active buyers for our LVB business for live video broadcast 21 days a month on average. And their 15 days, are repurchase rates, reached 86% during the quarter.

[Foreign language]

We are committed to continuously strengthening the connection between users and the LVB hosts. Our community of content creators is helping to highlight each hosts' unique personality, improve their interaction with users, and provide snapshots of moments in the showroom. We are pleased to see many users refer their favorite LVB hosts to other brands, which has helped expand and diversify our new user base. We will continue to build out these functions to attract high-quality and targeted users.

[Foreign language]

As a pioneer in the live video broadcasting sector, we have built a dedicated system, which we call K-10 system internally, over the last four years. This is a complete ecosystem for live video broadcasting hosts to drive in. We quantify the monetization capabilities based on the number of fans, number of short video they release and the historical sales data from their live video broadcasting rooms. Therefore, we provide them with different tools and incentives so that they can grow in a more systematic manner. LVB hosts are somewhat like commercial properties. Once established, they can bring in a steady stream of revenue for themselves and for the platform.

[Foreign language]

The outbreak of COVID-19 this year has been a test for the entire human society and has not spared the entire Chinese fashion industry. Tens of millions of clothing practitioners have been devastated. Many government factories have been shut down due to the pandemic. Due to the worldwide spread of COVID-19, tighter export restrictions and sharp declines in domestic sales have made it difficult for garment factories to operate profitably. Business activity in the wholesale market in Guangzhou and other places has dropped by 40%, and the traditional offline apparel merchants are looking for ways to survive this crisis. Despite the disruption, however, we know crisis also creates opportunities. The live video broadcasting help merchants to reach their customers, collect massive small orders and bypass middlemen with transparent pricing. Offline apparel suppliers are all embracing this opportunity. Despite prior criticism from wholesale market practitioners. We observed that they became the biggest advocates for LVB during this quarter.

[Foreign language]

As the industry evolves, MOGU is best positioned to capture this opportunity. Our business model is based on KOL operation and the tight control of the supply chain. We have strong preference toward supply chain partners that have great access to products, and we bridge them with hosts and the most relevant set of fans. Through active expansion of brand-less product categories and price ranges, we have made sufficient -- or we have made significant progress with our product offerings in the past -- in the last few months. Our ARPU has been increasing. Our LVB hosts are developing stronger bonds with our users through quality products and they are and powered by the platform. In addition, we have developed of [indiscernible] system in which our hosts can select and curate their products from the supply chain directly. This system clearly empowers them and accelerate their growth.

[Foreign language]

The COVID-19 outbreak has made it difficult for many strong offline apparel brands. They reach out to us when they had buildups in the inventory and the shops that were shut down with no business visibility. We've deployed our LVB brand strategy in a timely way to enrich our supply chain with apparel -- with brand apparel products. We empower brand partners with dedicated LBV hosts with the exemption of commission fees. For example, we have achieved more than RMB 40 million GMV from our Nike and Adidas dedicated sales on March 27, and that was only sales for one night.

[Foreign language]

We believe the worst is now behind us, and we are seeing the light at the end of the tunnel. Going forward, we remain committed to deploying the best-in-class LVB e-commerce strategy, expanding the lineup of our LVB hosts, and improving their quality, continuing to build supply chain infrastructure and expanding our brand partner strategy. We will achieve better synergy between our KOLs and the supply chain partners. We are very confident that we are ideally positioned and are on the right track to capture the massive growth potential that LVB e-commerce in China presents.

[Foreign language]

Thank you, Shark. Thanks again, everyone, who joined our conference call today. So, now, I will walk you through our fourth quarter and the fiscal year 2020 financials. We believe year-over-year comparison is the best way to review our performance. Unless otherwise stated, all percentage changes I'm going to give you will be on that basis. Let's review the financials first. We'll go through the figures for the fourth quarter of fiscal year 2020 first and followed by that of the fiscal year 2020. Our GMV for the 12-months period ended March 31, 2020, was RMB 17.1 billion, which remained stable year over year. Our focus on growing the GMV from live video broadcasting, which has increased by 91.6% during the same period to 7.9 billion. LVB business continues to grow as a proportion of the total GMV, and it is now accounting for 65.4% for the fourth quarter and 46.2% for the entire fiscal year 2020. Active buyers of LVB business in last 12 months grew 44.9% to 3.6 million. So, let's now turn to revenues. In last quarter, total revenue came in at RMB 119 million, a decrease of 45.3%. But this was primarily due to a 43% decrease in the commission revenue and 74.4% decrease in the marketing revenue. The commission revenue decreased to RMB 66 million, primarily due to the impact of COVID-19 pandemic, including the cancellation of orders as a result of logistics disruption in factory, weakness in the fashion and apparel category and also our exemption of commission fees for the brand merchants as our support. Commission revenue from the LVB business, however, grew significantly and it was in line with the continued strong growth in the LVB-associated GMV. The LVB business also continues to generate a stable commission rate, which was, however, partially…

[Operator instructions]. Your first question comes from Charlie Chen from China Renaissance. Your line is open.

[Foreign language]. Thanks for taking my questions. So, my first question is regarding the strategy of your LVB business in the near future. So, as far as I can see, there are three ways to continue to expand your GMV from the LVB business, which is, number 1, increasing the -- I mean continually recruit new hosts or broadcasts hosts so that you can have more people joining this business. And number 2 is increasing the length of broadcasting by each hosts. And also number 3, increasing the efficiency of the broadcasting sales, which means increasing the GMV per hour generated from this business. So, within this three, which one do you think is your -- possibly your focus in the near future, and how do you gauge that or how do you evaluate the ROE or return on investment in this business?

[Foreign language]

Okay. Sure. I would just briefly translate Shark's answer. So, basically, we have been doing the LV business for an extended period of time in the last four years. And apparently, as Charlie mentioned, it's very, very important that we need to increase the number of hosts, the duration of the show and the efficiency of the LVB. But sometimes, we actually -- we think all these LVB hosts actually very, very diligent, and we worry about their health and the sustainability. So, we believe that to improve the LVB efficiency is the critical path that we'll take. So, how do we improve the efficiency? We have two ways. Number 1 is the supply chain empowerment. So, because of all the individual hosts, they just don't have sufficient capability or know-how or resources or connection to build a solid and sufficient supply chain. So, we can help them to introduce brand products, to introduce original factories, to introduce all the native Internet KOL brands, so that they can have a very powerful support from the supply chain infrastructure that we provide. The best example we just quote is the Nike-Adidas Night we had in March this year. We had recorded a sales of 40 million in one night, and that was because of Nike and Adidas. From all The KOLS, our platform, they're probably not capable of sourcing these two brands. But we -- MOGU as a platform, we could do that. So, that's a huge value-add we can provide to the KOLs to improve their efficiency. And number 2 is about the proprietary traffic they have. So, for all the KOLS, we are developing, and we encourage them to develop their own proprietary traffic within MOGU, within the MOGU app so through the -- because the fans will follow them, follow their time line, enter into the chat room with them, have a stronger emotional bonding with the hosts, with the KOLs. Because of this very strong bonding and emotional connection, KOLs can easily or can better monetize their fans in a more efficient and effective way. So, supply chain empowerment and the proprietary traffic expansion are two keys, we think, can improve the efficiency of the LVB. Okay. Maybe, operator, we can turn to the next question?

[Operator instructions]. Your next question comes from Locky Lau from AJ Asset Management. Your line is open.

[Foreign language]

Okay. Locky [Foreign language]

[Foreign language]

Maybe let me translate the question first. So, basically, Locky was asking about the -- because the previous CFO left the company and the -- if the company has any plans. The company's answer is that it's probably not the best place to comment on this situation. Operator, maybe we can move on to the next question?

Can you listen? Can you hear me?

Yes. I can hear you, yes.

Yes. I will ask the question on the liquidity. I think our liquidity is not enough. So, is it enough for us to do the share repurchase plan?

Sure. Okay. Maybe I can take this question. Okay. On liquidity, we believe that we are of view that the company the LVB business, especially, is growing very fast. So, the market -- as the market over time will realize the value of the company and more and more on investors will be following us, so liquidity is not really our concern. And we launched the share repurchase plan because we feel are of view that our share price currently is undervalued, and we want to use -- we want to deploy company's capital to buy back shares. And to -- and number 1, to show -- to send a very strong message that we do believe the company is undervalued. And number 2, we believe that this is also a very sensible thing to do from a company capital treasury management perspective.

[Foreign language]

So maybe let me translate the question. So, I think the question was, we provide base pay to the KOLs, this program, and if that create any financial distress to the company. Is that right?

Yes.

Okay.

[Foreign language]

Sure. Maybe I will translate the first part of the answer first. So, basically, we are the pioneer of the LV business, and we spent the last four years dedicated to develop and to establish a complete ecosystem for that video broadcasting. And as the pioneer of this industry, we know we have accumulate a lot of know-how throughout the entire supply chain. We have built up a platform. We have the e-commerce closed-loop system. We have the IT infrastructure. We also have the financial service that can support them. So, we have a very full spectrum system that can support them. But going forward, we do believe that we want to dedicate our resources to two parts. Number 1 is the supply chain. Supply chain partners, well, I think which we have leveraged a lot on that. And number 2 is about the incubation of KOLs. So, KOLs are effectively salespeople of our platform. So, they're extremely important and instrumental to the success of our business.

[Foreign language]

So on the supply chain, apparently, up to the pandemic, we have been working very closely with a lot of supply chain partners. We want to work with the original factories, especially those factories that provide KOL or, I guess, K-driven native Internet brands, because these brands are most well received by our customers. And apparently, because of that, we -- our customers like these clothes, and we want to provide a very strong value proposition by cutting off all the middlemen in the supply chain. So, we can work with the factories directly and they can ship the clothes from factories to our end customers.

[Foreign language]

Yes. On the second part, about the incubation of KOL. So, we believe that they are not just the sales of the company. We want to make them -- or we want to incubate more quality or, I guess, more professional KOLs. So, they have a lot of professional skills. They have potential to become the superstar on MOGU. They can become the brand curator or the brand owner of many fashion brands on MOGU. And they cannot just sell the products, but they have the capability to develop and to incubate new products on their own. So, this base pay is really paying for their high potential. We would like to work with them for the next three to five years. We have a very long-term dedication to these KOLs. And of course, the base pay is to attract talent, but majority of their income going forward will be still from the commission, because commissions, they are still that video broadcasting hosts. We will help them to grow. And once they become established, most of the revenue, most of the income they have are still from the sales. But back to your question, we are very dedicated to develop a long-term relationship with our KOLs. And this base pay does not create any financial distress to us. And we are -- we believe this is our -- this is a very important and critical long-term investment we can make.

Your next question comes from Charlie Chen from China Renaissance. Your line is open.

[Foreign language]

Charlie, you're breaking up. I can't hear you.

Okay. Can you hear me now?

Yes, yes. It's better. It's better now. Yes.

Yes, all right. Yes. [Foreign language] I noticed that there is a substantial cuts in the sales and marketing expenses in the past three months, both in absolute amounts as well as a percentage of revenue. So, can you give me a little more elaboration on how to achieve this kind of cost saving and how is the sales and marketing going forward?

[Foreign language]

Okay. Charlie, so I will just quickly translate the answer for the audience. So, basically, number 1 is that we have to switch the model from traditional e-commerce to more focus on that video broadcasting e-commerce. And apparently, the traditional model has decreased as a proportion of the total GMV pie. And live video broadcasting customers are very, very sticky. They are extremely sticky, so that it's been 21 days out of a month to watch LVB. And their 15 days repurchase rate is 86%. Their ARPU has been increasing. And then, the ARPU is much higher than we have ever seen in the traditional e-commerce model. So, with that, we can see that the live video broadcasting channel is actually more -- it's more about unit economics. It's less about filtering massive traffic to a little -- to a few percent of buyers. So, the model has switched. And number 2, as we mentioned, all the LVB hosts, they are just like commercial properties. They're just like commercial properties, they are like stores. They are like flagship stores for MOGU. So, our focus going forward is actually to deepen our operation and deepen our cooperation with them. Help them to have more targeted user and the traffic acquisition strategy so that -- because we have very targeted marketing for this -- for their fans and for their respective new users. So, our user experience actually came down. In the future, do we think it's possible that we'll go up again? Yes, it's possible. We don't rule out that possibility. However, in the future, we need to carefully consider the accuracy of acquiring these users, because the traditional model or the traditional marketing expense -- the traditional way of user acquisition doesn't really apply to the new model of LVB. So, we need to be very, very selective and do a very targeted marketing.

I have no further questions in queue. I turn the call back over to Mr. Arnell for closing remarks.

No. Actually, it looks like we have Veronica from China Renaissance on the line. Could you put her question through, please?

Okay. Certainly. Veronica Chen, your line is open.

[Foreign language] Well, my first question is regarding to the LVB business. And could you please give us a breakdown of the host numbers, and what is the percentage of top-tier hosts? And could you please quantify the contribution from the top-tier hosts throughout the top line? And how should we look at the trend going forward? While my second question is regarding to the guidance for 2Q. Could you please give us some color about the top line growth in 2Q, and could you share more about your plan for promoting [indiscernible]?

Maybe Veronica, I will just -- I'm going to take your question first. So, for the breakdown of hosts, right, we actually don't disclose very specific number, that the breakdown of the different level of hosts. But one thing I can tell you is that the -- because we are in the fashion e-commerce business, right? So the monthly effect or I guess, the concentration risk for us is much lower. Our customers do value different type of influencers, as different type of influencers will actually open them up to various fashion choices. So, that's number 1. Our influencer is actually quite diversified and our user taste also very diversified. And we are seeing that the top level of our live video broadcasting hosts are showing very strong efficiency so that they will grow very, very fast. But because of supply chain empowerment and a lot of logistics and infrastructure help support we provide to our KOLs, the middle part -- or the long tail hosts are also growing accordingly. And we have this content community so that each and every one of them have their voice to be heard. So, this is a very important differentiating factors that differentiate us from other live video broadcasting platform. And so, that's to your first question. And to your second question, we actually don't provide a revenue guidance at this point. But as I mentioned earlier, I think we are very confident that we reach an inflection point. I think China e-commerce -- China fashion e-commerce has generally reach an inflection point. China has reached an inflection point. Live video broadcasting has accelerated the entire society's adoption of new form of sales. So, this digital adoption and the digital transformation will change deeply the supply chain of Chinese fashion industry. And we are seeing that more and more people are embracing this from. We will have more hosts joining us. We'll have more supply chain partners joining us. So, I think we're confident -- very confident about our future. So, we will just try our very best to see how we can embrace this future.

[Foreign language]

[Foreign language] Yeah, please.

Okay. Thank you. [Foreign language] Well, my question is regarding to the apparel category. Could you give us more color on the recovery process of apparel category? Female apparel since the demand is quite soft in 1Q, have you ever seen a strong rebound after people returned to work in March? Or people prefer to buy new and second clothes instead of discounted and off-season products? And could you please share some thoughts about that?

[Foreign language]

Yes. So, maybe I would just address this question, and I'll probably add some commentary about the macro trend of China. So, I think for the apparel industry, right, we are seeing that in the short term, of course, it's going to be affected by the pandemic. But in the medium term, I think it's more related with the Chinese GDP. And longer term, it has nothing to do with the Chinese culture and the Chinese ecosystem. So, in the last quarter, we are seeing that -- maybe from different -- from various sources, apparel industry has decreased by 40% and the cosmetic beauty products has decreased by 30%. So, that's basically the information we are getting from all different types of the sources we're seeing.

[Foreign language]

Okay. Maybe for the next two quarters, it's actually quite difficult for us to predict the exact number. On one side of that, we believe we're very supportive of the Chinese government's policy on social distancing because it's extremely important to have everyone stay healthy and everyone stay healthy and to make sure that our economy can recover sometime soon and our society won't be affected as much. So, that's very important. We support all the government's policies. In addition to support the government, we also closely work with all the supply chain partners, brand partners, work with them. In our value, we believe that we want to help them to -- we want to help all our partners to achieve -- to survive this crisis at the same time. So, it's very difficult for me to predict what's going to happen in the next two quarters, but we'll try our very best to work with them.

[Foreign language]

Yes. So, in the medium term, we believe that the GDP has a bigger role to play in the fashion industry, because the Chinese consumers will not be able to pay for much brand premiums going forward. They will probably care more about quality, functionality or, I guess, the value for money part of the products more. So, at MOGU platform, we also work with factories with the original producer of all these clothes instead of people who are actually adding more brand premium to the products. We work with these original producers to ensure that their products, as they deliver to the customers, they are value for money, and the pricing is very transparent, and we cut off all the middlemen. But this is also a very good news for all the KOL-driven ecosystem -- or KOL-driven e-commerce.

[Foreign language]

So in the long-term, we believe that the Chinese culture will be a very powerful impact in the fashion -- in the mass market, Chinese fashion market. And as -- we believe that, a lot of fashion designer brands will be popping up all over China. And -- we, MOGU platform, we have the privilege to work with them. And we believe that a lot of the influencers will be incubated on our Internet platforms. And we want to bridge them with supply chain partners or we bridge them with factories. So, in the short term, LVB business is very important for us. But in long term, it's very important that we bear in mind the KOLS representing the next-generation of new brands in China. So, just to sum up, our view of the Chinese fashion market going forward, in the short term, of course, it will be affected by pandemic. But in the medium to long term, Chinese GDP and Chinese culture will be the main factors driving forward.

[Foreign language]

[Foreign language] Operator, do you have more questions on the floor?

I have no further questions on the Q&A portion. I turn the call back over to Christian Arnell for closing remarks.

Thank you, everyone, for joining us tonight. If you have any questions or comments, please don't hesitate to reach out to the MOGU IR team. That concludes the call. Have a good night.

Thank you, all.

Thank you, everyone. This will conclude today’s conference call. You may now disconnect.