Mogu, Inc. Q2 FY2020 earnings call

• Expanded LVB hosts: Recruited nearly 2,000 new hosts in the quarter, now with over 64,000 KOLs and 24,000 LVB hosts, creating over 3,400 hours of live streaming content daily. Launched designated content channels for new KOLs.
• Invested in KOL short videos: Expanding KOL-generated short video content to improve user conversion to LVB users. LVB MAU up 76% YOY, LVB active buyers in 12 months up 64% YOY.
• Strengthened supplier infrastructure: Rapidly expanded premium suppliers, developing live streaming tech and mini programs to enhance user experience. Integrated LVB and marketplace back-end systems to enhance synergies.

For the overall platform, GMV grew nearly 10% YOY. Live Video Broadcast (LVB) associated GMV in Q2 FY2020 was RMB1.6 billion, up 115.2% YOY. LVB-associated GMV contributed roughly 40% of total GMV. Total revenue was RMB197.9 million, down 15.3% YOY. Commission revenue increased 3.3% to RMB101.3 million due to LVB GMV. Marketing service revenues decreased 30.8% due to focus on LVB. Other revenue decreased 24.3%. Cost of revenue decreased 3.8%, sales and marketing expenses decreased 7.1%, R&D expenses decreased 17.5%, G&A increased 6.5%, amortization of intangibles increased 40%.

• Continue to focus on LVB business. Commission revenue expected to drive total revenue in the foreseeable future. LVB growth to account for a more significant portion of the business. Shift from user traffic operating model to high value customer operating model to improve ROI.

• Competition: More players entering the live streaming e-commerce space, which may increase user acquisition costs and market uncertainty. - Uncertain market conditions: Forward-looking statements based on current conditions, which may differ materially from actual results due to unknown risks and uncertainties.

Q: Quick question about future marketing strategy and new user acquisition, any changes in budgeting for marketing?

A: Shifting from user traffic operating model to high value customer operating model. Priority is to grow high ARPU LVB users. Launched live short video content channel to convert users. Will invest more in user loyalty program to improve ROI and user acquisition costs.

Q: How to handle management of large number of KOL hosts and differentiation from other players?

A: MOGU has established infrastructure and technology for LVB over 3 years, allowing stable cost structure. Differentiation comes from established capacity to empower KOLs (including people operation) and established supply chain capacity to provide full e-commerce services for live streaming, which few others have in-house.