Good day, ladies and gentlemen, thank you for standing by and welcome to Boqii's Second Half and Fiscal Year 2023 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. Now, I will turn the floor over to L, Boqii's Head of Investor Relations.

L?.

Thank you, operator, and good morning, everyone. Welcome to Boqii's second half and fiscal year 2023 earnings conference call. Joining us today are Ms. Lisa Tang, Co-CEO and CFO; as well as Mr. [indiscernible] our Financial VP. [Foreign Language] We released results earlier today.

The press release is available on the company's IR website at ir.boqii.com as well as from Newswire services. A replay of the call will be available on the site later today. 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 risks and uncertainties as such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these 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 statements except as required under applicable law. Please note that certain financial measures that we use on this call such as non-GAAP net loss, non-GAAP net loss margin, EBITDA and EBITDA margin are expressed on non-GAAP basis.

Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. Also please be reminded that unless otherwise stated all figures mentioned during the conference call are in Chinese RMB. With that, let me now turn the call over to our Co-CEO and CFO Ms. Lisa Tang.

Over to you Lisa?.

Thank you, L, and many thanks to everyone for joining the call today. In fact, fiscal year 2023 was a challenging year for e-commerce in China. Increasing geopolitical risks and lingering COVID-19 impact had to a wide range of changes in the global supply chain. That was subsequently translated to growing raw material and logistic costs.

The rising inflation and uncertainties has also led to a general conversation among consumers. In the case of China, the COVID prevention priorities have also created short term problems on production and delivery. Inside of this, we remain confident in our unique positioning in China's expanding tech market.

We saw favorable increase in the number of pads and the growing penetration of party e-commerce. That will support further past the number online. We also saw the trend of consumption upgrade supported by the strong growth in unique markets such as pet food and healthcare products.

Over the year we strived to strengthen our group along the supply chain integration in order to improve the operational efficiency and enhance margins. For example, in the post COVID era based on the system supporting, we switched from traditional warehousing to cloud warehousing management, allowing us to hear better efficiencies.

We also relabeled our upstream production and manufacturing network so that we can count our cost optimization, accelerating production and varieties for our growth business. We are particularly encouraged by the fact that we see a strong monthly performance at the end of the fourth quarter.

We also have to report that non-GAAP net loss has significantly narrowed by 41.6% in fiscal year 2023 laying a solid foundation for China around in fiscal year 2024. Looking ahead, we expect China's consumer sentiment to rebound as a result of post COVID era, as well as the reversing macro uncertainties and the inflation impact.

We will continue to drive business development and the financial growth through organic development and M&As as we are confident that Boqii will continue to grow in creating long term values from our shareholders, branded partners and pet parents. As part of management team, we believe we are heading towards the right direction.

Our team will continue to work with passion while keeping a keen eye on our operation and potential market opportunities. In order to repay our trust and confidence, let me pass the time to L to further update you on our operations and the private levels in fiscal year 2023..

Thank you, Lisa.

Despite the obstacles we faced during the year, which we continue to focus on building a community and enhancing its supply chain proposition through our growing brand profile, comprehensive content and an extensive selection of products, our Boqii mall was able to maintain resilient performance, even though consumer sentiment was relatively weak during the second half.

In numbers, our number of users demonstrated a satisfying increase of 16.2% year-on-year to over 5.8 million. The stickiness was also reflected in the historic low safety down by 57.2% year-on-year to RMB5.3 for the year. That showcases our ability to expand user approval at a low cost and actually a solid foundation for our future growth.

During the year, which we also saw excellent performance from its private label. It's GMV for the year was up by 6.2% year-on-year. Its revenue also recorded a remarkable increase of 19.2% year-on-year despite a weak second half.

We saw strong growth across all product categories, including pet food, snacks, pet supplies as well as medical and health products.

Leveraging by our improving big data capability, we also took the opportunity to optimize our private label mix so as to avoid carrying nonperforming products which track a third asset efficiency, and as well as to improve product quality to satisfy pet parents need.

The reshuffle along with the growing revenue contributions from private label from 15.4% to 19.9%, was able to drive level gross profit margin to 21.4%. That represents a modest enhancement of 90 basis points year-on-year. Coming from a period built with service, supply chain and consumer market disruption.

We believe the private label business will be one of our key growth drivers in the future. Looking ahead, we will continue to refine our product mix, enhance product quality and expand our distribution network so as to support our private label development.

All in all, we believe it is important for us to enhance our value proposition, allowing ourselves to have more buffer regardless of the macro environment.

To do so as the leading position of the pet industry, we will continue to find more opportunities to reinforce our closed-loop community by enhancing our coverage from upstream production, midstream warehousing and distribution to downstream presence and offline touch point average.

And as the pet market is relatively fragmented, we look forward to creating an all-rounded ecosystem, which brings value to pet parents and brand partners. Now I will turn the call over to our Financial VP [indiscernible], who will share more details on our financials.

[indiscernible]?.

Thanks, L. In the following, I'd like to share more on our financial performance for the year, is part of the marked difficulty brought by COVID-19. We still delivered year-over-year improvement for the year, supported by expanding margins and improving cost control.

[Foreign Language] On our full year revenue was RMB1.09 billion, down by 8% year-over-year as a result of lingering COVID-19 disruptions and working market conditions supported by the growing contributions from Boqii Mall and the private label along with our efforts in private label product mix optimization.

Gross profit margin recorded an 19 basis points increased to 21.4% with gross profit reaching RMB233.5 million for the year. Fulfillment expenses decreased to RMB126.3 million as compared to RMB134 million last year as a result of the decrease in GMV and revenue.

However, benefited from the gross profit margin enhancement post the fulfillment margin increased from 9.2% last year to 9.8% this year in spite of the surging logistics cost and the COVID-19 pandemic. Total sales and marketing expenses for the year were RMB124 million significantly down by 27.5% from RMB171 million last year.

Sales and marketing expenses as a percentage of total revenue was 11.4% down from 14.4%, mainly due to the decrease in advertising expenses amount to RMB36.7 million, resulting from the increase portion of revenue generated from more cost-efficient channels.

General and administrative expenses were RMB46.6 million, down by 38.9% from RMB76.2 million in fiscal year 2022. General and administrative expenses as a percentage of total revenue was 4.3%, down from 6.4% in fiscal year 2022. The decrease was primarily attributable to the decrease in share-based compensation expenses.

That came to a net loss of RMB106 million for the year versus a net loss of RMB132.8 million last year, representing a 20.2% reduction year-over-year.

Impairment of goodwill of RMB40.7 million was recorded in net loss in fiscal year '23 compared to near in fiscal year 2022, excluding good impairment or goodwill net loss of this year is RMB65.3 million compared to RMB132.8 million over last year, representing a 51% improvement year-over-year.

Non-GAAP net loss for the year also came to RMB70.7 million, representing a 41.7% reduction year-over-year. On our financial position as of March 31, 2023, excluding the RMB102.8 million of the long-term debt, our effective debt to asset ratio stood at 39%.

As we are in the progress of completing share for the [indiscernible] company is expected to receive the equivalent amount in U.S. dollars from overseas, which will be recorded in equity after repaying the RMB102 million -- after repaying the RMB102.8 million of the long-term debt.

Moreover as of March 31, 2023, our cash and cash equivalent and short-term investment is RMB160 million.

Our net operating cash outflow in fiscal year '23 was RMB52.3 million, representing a significant decrease of RMB95 million compared to RMB147 million in 2022 with no major CapEx posting and a strong credit line back up, we believe we are cash sufficient to support our operations and pursue new improvement, especially with our CSC achieving near low and as we get closer to our breakeven point.

Let's now move on to the Q&A session.

Operator?.

[Operator Instructions] The first question comes from Matt Maa with China Securities. Please go ahead..

[Foreign Language]?.

Okay. Let me translate first. So Matt want to know, he saw that the revenue is down and understanding that it may be related to the COVID-19 last year. So he would like to know our forecast for the fiscal 2024 revenue. [indiscernible], please..

[Foreign Language] Yes, our revenue has a slight decrease compared to fiscal year 2022 due to the COVID-19. After the recovery of COVID-19, we expect our revenue growth will be higher than last year. Thank you..

[Foreign Language]?.

Let me translate first. Matt want to know that the net loss for the whole year narrowed down by around 20% and which is lower than that of the first half of the year. So he would like to know about the reason..

[Foreign Language] Our net loss of fiscal year '23 was RMB106 million representing a decrease of 22% from net loss of RMB132.8 million in fiscal year '22.

Impairment of goodwill of RMB40.7 million was recorded in net loss in fiscal year '23 compared to near in fiscal year '22, if excluding impairment of goodwill, net loss was RMB55.3 million in fiscal year '23 represents a decrease of 51% from net loss of RMB132.4 million of fiscal year '22. Thank you..

Are you ready for the next question?.

Yes. Of course, please..

Thank you. The next question comes from [indiscernible]with CICC. Please go ahead..

[Foreign Language]?.

Okay. Let me translate first. [Yushi] asked two questions. First is she said that we operated the private labels already long time. And she saw that the private label performance is good in fiscal year 2023.

And she would like to know our plan for the private labels and want to know the future forecast for the private label, the revenue and the gross profit margin..

[Foreign Language].

Okay. Let me translate first. Lisa answer that yes, we have made a plan on the strategy of the private label and relying on the original data and user advantage. It is expected that the proportion of the private label revenue will exceed around 30% in the future. And the gross profit margin rate will exceed 35%.

And the second question, Yushi said that she saw that she would like to know the current cash flow of the company and she would like to know how long could the current cash flow maintain the business operation..

[Foreign Language].

[Foreign Language].

[Foreign Language].

Okay. Let me translate first. Firstly, I will translate the answer for the last question. Okay. For the second question, that Lisa answer that, our - the cash flow of the fiscal 2023 has been greatly improved compared with before. And also thanks to the efforts of the team.

And as of - as of March 31, 2023, the company has RMB160 million in cash and cash equivalents and short-term investments and the operating cash outflow of RMB147 million in fiscal year 2022, narrowed significantly to RMB51 million in fiscal year 2023.

And we believe that - we expect that the narrowing range will be further improved and with stable way of the market and consumption and with the growth of income and the improvement of operating data which can support the company's operations for a really long time.

And Yushi ask the third question is that, will the forecast for the private label will be achieved and what measures will the company will be take to achieve this guidance?.

[Foreign Language].

Okay. Let me translate first. The proportion around 30% is medium-term goal, then there will be for the future. And at present, the industry, we could see that the industry is relatively scattered and we have developed a series of strategies to compliment the current market situation and to use the big data to do the label brand metrics and brand lane.

And for the gross profit margin, we think that the different categories and different brand combinations could help us to improve the gross margin. And some categories of rebrand in incubation stage will make process to cultivate customer combination. And we believe that the comprehensive performance will be - exceed the 35%. Okay. Thank you..

Thank you. I'm seeing no more questions in the queue. Let me turn the call back to Ms. L for closing remarks..

Okay. Thank you. Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again on our progress in the next half year. Thank you..

Thank you all again. This concludes the call. You may now disconnect..