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Edited Transcript of RUHN.OQ earnings conference call or presentation 29-Aug-19 12:00pm GMT

Q1 2020 Ruhnn Holding Ltd Earnings Call

Aug 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Ruhnn Holding Ltd earnings conference call or presentation Thursday, August 29, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Sterling Song

Ruhnn Holding Limited - Senior IR Director

* Min Feng

Ruhnn Holding Limited - Founder and Chairman of the Board of Directors

* Zhenbo Chi

Ruhnn Holding Limited - CFO

* Mac Zhou

Ruhnn Holding Limited - Vice President

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Conference Call Participants

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* Alicia Yap

Citigroup - Analyst

* Xi Jing Lee

UBS - Analyst

* Ya Zhing

DH Capital - Analyst

* Bo Pei

Oppenheimer - Analyst

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Presentation

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Operator [1]

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Hello, ladies and gentlemen, thank you for standing by for Ruhnn Holding Limited's Earnings conference call for the First Quarter Fiscal Year 2020. At this time, all participants are in listen-only mode. Today's conference call is being recorded.

I will now turn the call over to your host, Mr. Sterling Song, Senior IR Director of Ruhnn. Please go ahead.

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Sterling Song, Ruhnn Holding Limited - Senior IR Director [2]

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Thank you, Annie. Good evening. Hello, everyone, and welcome to Ruhnn Holding Limited's earnings conference call for the first quarter of fiscal year 2020. As a reminder, this conference is being recorded. The Company's financial and operating results were issued in a press release earlier today and are available online. You can download the earnings press release and sign up for the Company's e-mail distribution list by visiting the IR section of the Company's website at ir.ruhnn.com.

Mr. Min Feng, our Founder and Chairman of the Board of Directors; and Mr. Zhenbo Chi, our Chief Financial Officer, will begin with some prepared remarks. Following the prepared remarks, Mr. Lei Sun, our Founder, Director and CEO; and Mr. Mac Zhou, our VP, will also join us for the Q&A session.

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 views expressed today.

Further information regarding these and other risks and uncertainties is included in certain filings of the Company with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The Company doesn't assume any obligation to update any forward-looking statements, except required by law.

I will now turn the call over to Ruhnn's founder and chairman of the board, Mr. Min Feng. Mr. Feng will deliver his remarks in Chinese, followed immediately by English translation. Mr. Feng, please go ahead.

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Min Feng, Ruhnn Holding Limited - Founder and Chairman of the Board of Directors [3]

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(Interpreted) Good evening, everyone. Thank you for joining our earnings conference call for the first quarter of fiscal year 2020. On April 3, 2019, we successfully completed our IPO on the NASDAQ Global Select Market, marking a significant milestone in the Company's history.

We firmly believe our successful listing on a U.S. stock exchange, which requires the highest corporate governance standards globally, is creating a solid foundation for long-term sustainable business development in the years to come. We have already begun to see an impact from the IPO on Ruhnn's brand awareness and industry influence in the internet KOL e-commerce sector in China.

We are very pleased to see strong growth momentum in the first fiscal quarter with GMV increasing by 50.4 percent to RMB755 million (sic - see press release "RMB758 million") and net revenues increasing by 34.3 percent to RMB312.8 million, both on a year-over-year basis. Notably, revenues from the platform model tripled in the first fiscal quarter, compared with the same year-ago period. We have also realized significant margin expansion, resulting in gross margin of 35.7 percent, compared with 24.8 percent in the year-ago period.

Benefitting from robust top line growth and improving operating efficiency, we managed to significantly narrow our adjusted net loss by approximately 51.6 percent on a year-over-year basis. This outstanding performance clearly demonstrates the strength and viability of our business model as well as our strong management and execution capabilities.

By leveraging our effective KOL cultivating capabilities, creative product marketing, cutting-edge technology, big data analysis and synergistic supply chains, we were able to rapidly capitalize on the fluid monetization opportunities in the KOL economy market, further strengthening Ruhnn's leadership and competitiveness in China's KOL e-commerce market.

Platform GMV as a percentage of total GMV continued to increase in the first fiscal quarter, recording 45.7 percent, compared with 19.4 percent in the year-ago period. Full-service model GMV, as a percentage of total GMV, decreased to 54.3 percent from 80.6 percent for the same fiscal quarter of last year. Looking ahead, we aim to operate in a more asset-light manner through the accelerated expansion of our business under the platform model, while also maintaining healthy growth for the full-service business.

As of June 30, 2019, the total number of KOLs signed by Ruhnn reached 133. In addition to providing professional training to new KOLs, we provide highly personalized marketing and product selection solutions to each KOL to help them create distinct personal style and enhance their recognition. This in turn fuels our sales growth by meeting the diverse social content and product needs of customers.

Our KOLs obtain increasing numbers of fans through our systematic training and marketing. In addition, the deep interactions on numerous social media and e-commerce platforms, between KOLs, fans and customers, provides us with enormous amounts of data. Our strong data platform analyzes and integrates this data and allows us to get market feedback and consumption preferences, helping us to adjust marketing methods and product selections. We will continue to improve our comprehensive internet KOLs identification, cultivation and supporting system to grow our top-tier and established KOL pool. Further, we plan to collaborate with a great number and a variety of KOLs, while simultaneously further optimizing our cost structure to realize our financial targets.

During the past few years, with an eye towards the continuous development and seamless operation of our first-in-class platform, we have been building up precise SKU-selecting capabilities, mature supply chain management capabilities and advanced big data IT technological capabilities. At the same time, we continued to upgrade our uniquely flexible supply chain, C2M, by enhancing its managerial efficiencies and overall operational performance. These efforts consistently enhanced our unique leading position in the KOL e-commerce market.

We have become a reliable partner for the increasing number of retail brands, providing them comprehensive services ranging from product design, marketing and supply chain management. As we move forward, we remain committed to becoming a cooperation platform for emerging fashion brands in China, if powered by advanced technologies and big data.

As of June 30, 2019, we partnered with 701 brands, compared with 297 brands as of June 30, 2018. We are also working to create a smarter and a more automated supply chain to better serve third party merchants and KOLs. By empowering KOLs with, for example, lower KOL transaction costs to fully exert and enhance precise matching capabilities between KOLs and SKUs, we are aiming to become the largest KOL transaction platform in China.

Turning to our strategic partners, we continue our stable and close working relationship with Alibaba, our significant strategic stakeholder and a long-term key business partner. Alibaba provides solid e-commerce infrastructure and the complete technology tools to support the internet KOL ecosystem initiated by Ruhnn. We are continuously exploring new business cooperation opportunities with Alibaba, especially in the light asset and the light supply chain platform model business, as well as the product marketing business of KOL live streaming on Taobao.

We also work and partner with other important shareholders, for example, Weibo and Bilibili. With both of these partners, we are looking to further our business expansion in KOL live streaming while exploring ways to further our collaborations with such social media platforms as Tik-Tok, Kuaishou and Little Red Book. This will allow us to drive innovation in emerging e-commerce businesses to enhance our core competitiveness.

Further, as a pioneer and leader in KOL cultivation and KOL e-commerce, we remain dedicated to further penetrating internet KOL industry and further exploring strategic investment opportunities. In June 2019, we reached a strategic partnership with China's leading online marketing platform, Duomai. With Duomai's precise online traffic acquisition and marketing services, we will enhance our online marketing, precise e-commerce operation and the KOL marketing capabilities. This partnership is also in-line with our strategic investment plan to diversify our monetization channels to bring about greater long-term value. Looking ahead, we will continue to explore high-quality investment opportunities and improve our operational efficiency through resource integration.

Moving onto our strong cash position, as of June 30, 2019, cash, cash equivalents and short-term investments recorded approximately RMB733.6 million. In addition, our operating cash inflows have consistently improved in the last few years. Adequate cash reserves and a healthy cash flow will guarantee our ongoing development.

Looking ahead to the rest of this fiscal year, we will remain focused on achieving stable and healthy top line growth by enhancing our KOL operation capabilities, improving product design, as well as strengthening our technology and supply chain support. Looking at China's huge and addressable KOL economy market in front of us, we are well prepared and feel confident in our ability to maintain our first-mover advantage and the leading position in the KOL e-commerce industry.

Now with that, I will now turn the call over to Mr. Mac Zhou, Vice President of the Company, who will read the prepared remarks on behalf of Chief Financial Officer Mr. Zhenbo Chi, which will provide an update on our financial performance for the first quarter of fiscal year 2020. Mac, please.

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Mac Zhou, Ruhnn Holding Limited - Vice President [4]

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Thank you, Mr. Feng and Sterling, and hello, everyone. I will begin with some key financial highlights for the first fiscal quarter.

We are very pleased to see Ruhnn preserve its tremendous growth momentum in the first quarter of fiscal year 2020. In the first fiscal quarter, GMV increased by 50.4 percent to RMB758.0 million, primarily attributable to the increased GMV in the platform model and net revenue increased by 34.3 percent to RMB312.8 million. Full-service revenues increased by 17.1 percent year-over-year to RMB247.3 million and platform revenues tripled to RMB65.5 million.

We are also very pleased to report our continued margin expansion and bottom line improvement. The gross profit almost doubled year-over-year in this quarter. Gross margin increased by approximately 11 percent year-over-year to 35.7 percent. We also greatly narrowed adjusted net loss by approximately 51.6 percent year-over-year. Our financial performance in the first fiscal quarter was driven primarily by the continuous progress from KOL cultivation, the enhancement of monetization capabilities in advertising services, brand cooperation and e-commerce and finally, improved overall operating efficiency.

As a clear leader in China's internet KOL e-commerce industry, we have high confidence in our growth strategy and the promising opportunities that lay ahead of us. We are focused on growing market share as well as staying ahead of industry growth pace. We can do this by leveraging our capabilities to expand KOL pools and optimizing KOL structures in order to maximize value-added service for both brands and online stores.

Now let's move onto detailed quarterly financial performance. Net revenues increased by 34.3 percent year-over-year to RMB312.8 million, primarily attributable to the increase of revenues from product sales of stores opened in the name of top-tier KOLs and an increase of revenues from services through the platform model.

Revenues from product sales through the full-service model increased by 17.1 percent year-over-year to RMB247.3 million. The increase was primarily attributable to the sales growth of the stores opened in the name of the Company's top-tier KOLs and was partially offset by the transformation of the business models of some online stores opened in the name of the Company's emerging and established KOLs from the full-service model to platform model.

As a result of such a transformation, the number of the Company's online stores decreased to 40 as of June 30, 2019 from 75 as of June 30, 2018 and the number of the Company's KOLs serving the full-service model decreased to 11 as of June 30, 2019. On the other hand, GMV from the Company's online stores opened under top-tier KOLs that were in operation in the entire period increased by 49.6 percent in the first quarter of fiscal year 2020, compared with the same quarter of fiscal year 2019.

Thanks to the rapid growth of GMV, the percentage of GMV facilitated by our top-tier KOLs decreased to 48.7 percent in the first quarter of fiscal year 2020 from 49.0 percent in the same quarter of fiscal year 2019. In particular, the percentage of GMV facilitated by one of our top-tier KOLs, Zhang Dayi, decreased to 37.0 percent in the first quarter of fiscal 2020 from 40.0 percent in the same quarter of fiscal year 2019.

Revenues from services through the platform model increased by 201.3 percent year-over-year to RMB65.5 million. The increase was primarily attributable to the increase in the number of KOLs under our platform model and an increase in the number of brands with which we cooperated in our advertising and marketing business.

Cost of revenues increased by 14.9 percent year-over-year to RMB201.3 million. The increase was in line with the business expansion. Gross profit increased by 93.0 percent year-over-year to RMB111.5 million as we continued to grow the business.

Gross margin increased to 35.7 percent, compared with 24.8 percent for the same quarter in the last fiscal year. The increase was primarily due to, firstly, the increased gross margin in product sales attributable to more crossover cooperation with third party brands and enhanced efficiency in supply chain management; and secondly, the increased proportion of the Company's net revenues attributable to services under the platform model which exhibit higher gross margins than product sales.

Total operating expenses increased by 32.4 percent year-over-year to RMB138.8 million. Fulfillment expenses increased by 12.2 percent year-over-year to RMB35.0 million. Sales and marketing expenses increased by 71.7 percent year-over-year to RMB74.1 million. The increase was primarily due to firstly, the increased promotion expenses in order to improve gross margin of product sales; secondly, the increased expenses of KOL incubation, cultivation, content production and the training to support increased activities for the Company's KOL sales and advertising business; and thirdly, non-cash amortization expenses of intangible assets exclusive cooperation rights.

General and administrative expenses remained flat year-over-year to RMB30.5 million. Loss from operations decreased by 42.0 percent year-over-year to RMB27.3 million. Net loss attributable to Ruhnn decreased by 40.1 percent year-over-year to RMB26.7 million. Adjusted net loss attributable to Ruhnn decreased by 51.6 percent year-over-year to RMB21.6 million.

Basic and diluted net loss per ADS was RMB0.32, compared with basic and diluted net loss per ADS of RMB0.70 for the same quarter of last fiscal year. Adjusted basic and diluted net loss per ADS was RMB0.26, compared with basic and diluted adjusted net loss per ADS of RMB0.70 for the same quarter of last fiscal year.

In terms of our balance sheet, as of June 30, 2019, we had cash, cash equivalents and a short investment of RMB733.6 million, compared with RMB90 million as of March 31, 2019.

Turning to our outlook, for the full fiscal year 2020, we currently expect revenues from product sales through the full-service model to be between RMB980 million and RMB1,130 million and revenues from services through the platform model to be between RMB280 million and RMB380 million. This would represent a year-over-year growth between 4 percent and 20 percent and between 86 percent and 152 percent, respectively.

This forecast reflects the Company's current and the preliminary view on the current business situation and market conditions, which is subject to change.

This concludes our prepared remarks. We will now open the call for Q&A. Operator, please go ahead.

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Questions and Answers

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Operator [1]

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Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)

Our first question comes from the line of Alicia Yap of Citigroup. Please go ahead.

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Alicia Yap, Citigroup - Analyst [2]

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Hi. Good evening, management. (Interpreted) My first question is related to these transitions from the 1P to the full-service model to the platform model. Remember there were some KOLs that were transitioning from the 1P to 3P, right? Last year. So can you remind us which quarter it actually started and which quarter that we should see this year should start to see normalize?

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Mac Zhou, Ruhnn Holding Limited - Vice President [3]

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I will take this question. For the transformation of our emerging and established KOLs from the full-service model to the platform model, this transformation took place in the quarter one last fiscal year. Currently, we are still proceeding such transformation and we will decide the balance between the full-service model and the platform model depending on the operating results of our full-service stores and also the progress of the implementation of the China e-commerce law.

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Alicia Yap, Citigroup - Analyst [4]

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Okay. So it will still be ongoing. And then so that leads me to my second questions on the full-year guidance. So if we add up the product and the service revenues, it's implied on the full-year basis it's 15 percent to 38 percent year-over-year growth. Your first quarter, you already delivered 34 percent year-over-year growth, so can you help us understand why are you still giving this low end of the guidance range, if that imply there could be some transitioning impact that would still be happening? And if you could give us some color in terms of how we should think about in the September quarter, which is the next quarter. Will that be a seasonally slow quarter that we should see a sequential decline?

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Zhenbo Chi, Ruhnn Holding Limited - CFO [5]

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(Interpreted) Yes, I will quickly translate for Mr. Chi. Our revenue guidance is made based on the current operational results and the industry situation. This guidance will be driven by four following factors. First, the growth of our KOL pool and the speed of our KOL kind of we enter into contract and as well as the speed for us to grow our fan base.

Second, the progress of the implementation of the China e-commerce law. Ruhnn has been kind of compliant as a listing company starting from the year 2016 while along with the implementation of the China e-commerce law, those stores on the Taobao platform will be forced to increase the selling price of the products. Therefore, the full implementation of the Chine e-commerce law will help Ruhnn to increase the competitiveness of its full-service model and enhance the revenue of the product sales.

Third, the performance of the double Singles' Day and also the double 12 Day sales. In the women's apparel industry, there is a seasonality driven by these two factors, the revenues from the double Singles' Day took a significant proportion of the whole year revenue. So the performance of the double Singles' Day will impact on the percentage of achievement of the whole year target.

And the fourth and the last, the progress of the transformation for the emerging and established KOLs from full-service model to platform model because in full-service model, we are recognizing revenue based on the product sales, while in the platform model, we only recognize revenue based on a take rate of the product sales, so the progress of such a transformation will impact on the growth rate of our revenue. So these are the major factors when we make our revenue guidance.

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Alicia Yap, Citigroup - Analyst [6]

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Sure. Thank you. Any color on the September quarter that you can share?

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Mac Zhou, Ruhnn Holding Limited - Vice President [7]

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Currently, our September quarter performance is in line with our expectation and we have taken full consideration of the July and August actual performance when we make the full-year revenue guidance.

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Alicia Yap, Citigroup - Analyst [8]

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Okay. Thank you.

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Operator [9]

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Thank you. Our next question comes from the line of [Xi Jing Lee] of UBS. Please go ahead.

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Xi Jing Lee, UBS - Analyst [10]

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Thank you, management, for taking my question. I have two questions. (Interpreted) Now let me translate. My first question is as we see full results, service revenue was up by almost twofold. I'm wondering which part of the segment performed better. Is it third party e-commerce stores or advertising revenue? In the coming quarters, will this segment face more headwinds of advertising weakness?

My second question is do we have more plans to penetrate the Kuaishou video platform as it seems to be a good traffic pool for e-commerce? Thank you very much.

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Mac Zhou, Ruhnn Holding Limited - Vice President [11]

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Thanks, Xi Jing. In our platform business, we have seen significant growth rate in both e-commerce and advertising sectors and we have noted a even faster growth rate in the advertising services. We have not seen any sign in our -- of kind of the flowing factor which will slow our advertising services.

We have noted that in the market for a lot of internet company, there is a trend that the advertising services slowed down, but if we look at the different segments within the advertising services, we have seen there is a clear trend that the advertising kind of budget goes from the transitional media to the social media. So in our case, because in our advertising services we have fully leveraged our KOL position and the loyalty between the KOL and our fan base is to influence our fans and customers. And it would be very easy that in our case that we ensure that our fans are focused on our content from our KOL in a decentralized community. So it would be important to note that we can help the brand to deliver its value and we can help them to receive the real-time feedback from our fans.

So as of the end of this quarter, the brands that we have cooperated have increased to more than 700 and we believe in the future, we will continue this trend and to serve an even larger number of the brands and maintain a fast growth trend.

For the second question, I will ask Mr. Feng Min to respond and I will translate.

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Min Feng, Ruhnn Holding Limited - Founder and Chairman of the Board of Directors [12]

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(Interpreted) Yes. Ruhnn has cooperation with Kuaishou. Actually, Ruhnn is a major strategic operation partner with Kuaishou, especially in the internet KOL e-commerce sector. Actually, as we mentioned earlier, in 2018, Kuaishou together invested with Ruhnn in one of our subsidiaries, Zhiyi Technology Company, which is a AI SKU selection company for women's apparel sector.

And besides Kuaishou, Ruhnn at the same time also services other social media platforms such as Bilibili, Tik-Tok, Little Red Book, et cetera. For example, Ruhnn provides precise SKU selection services between KOLs and SKUs for the internet KOLS in Tik-Tok and we help those KOLs to realize their monetization channels and we help them to increase their efficiencies as well.

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Xi Jing Lee, UBS - Analyst [13]

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Okay. Thank you.

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Sterling Song, Ruhnn Holding Limited - Senior IR Director [14]

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(Interpreted) Okay. Thank you.

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Operator [15]

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Thank you. Our next question is from the line of [Ya Zhing] of DH Capital. Please go ahead.

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Ya Zhing, DH Capital - Analyst [16]

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Hi. Thank you for taking my question and congrats on the solid results. I have two questions. My first question is on your KOLs. I know those KOLs who serve the full-service model also operate their own online stores. Would those stores will shutting away your traffic besides your same-store sales based on year-over-year basis were not stable in the first quarter 2020. Can you give us some color on this?

My second question is on the platform service model. In terms of third-party merchants and the pipeline of KOLs, can you just give us some color on this and what are the numbers that we can model in the next quarters? Basically, what are the influencing factors of those take rates and what is the trend in the near future? Thanks.

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Mac Zhou, Ruhnn Holding Limited - Vice President [17]

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Thanks. I will respond to the first question and Sterling will answer the second question. For the first question regarding the full-service model, the number of KOL working on the full-service model is 11 in this quarter and if we compare the same period last year, last year was 33. We had 33 KOLs last year working on the full-service model.

We could see that for those top-tier KOLs who is opening the store in the full-service model in both periods this quarter and also last quarter, we have seen a significant growth in GMV, more than 49 percent, and we anticipate that despite the impact of the transformation from the full-service model to the platform model for the emerging and established KOLs, our revenue will still continue to grow at a fast rate driven by the robust growth of our top-tier KOLs.

We have realized that the China e-commerce law has came into effect since January 2019 and currently it is still in the progress for implementation and we will decide on the balance between the full-service model and the platform model from a strategic point of view based on the progress of the implementation of this law.

Regarding the conflict of a single KOL both in the full-service model and in the platform model, we do not see such kind of conflict. For those KOL working on both two business models, normally that she will promote the private brand women's apparel in the full-service model while to promote the third-party brand cosmetics, consumables, health care and food in the platform model.

So this combination will fully utilize the loyal relationship between the KOL and her fan base and will concrete her image as a person who is willing to share her beauty recommendation. So as a result, we do not see a kind of conflict for any single KOL who is both working on two business model.

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Sterling Song, Ruhnn Holding Limited - Senior IR Director [18]

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Could you please repeat your second question? Hello? Could you please repeat your second question? Operator, could you ask her to repeat her second question?

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Operator [19]

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Yes. For Ms. Ya Zhing --

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Ya Zhing, DH Capital - Analyst [20]

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Yes. My second question is on the platform service model, in terms of third-party merchants and pipeline of KOLs, can you just give us some color on this, and then what are the numbers that we can model in the next quarters? Basically, what are the influencing factors of your take rate and what is the trend in the near future?

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Min Feng, Ruhnn Holding Limited - Founder and Chairman of the Board of Directors [21]

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(Interpreted) Okay. I will do the translation. This quarter, the Company has signed total of 133 KOLs. So as we mentioned earlier, everyone at the Company will interview candidates of several hundred normally between 800 to 1,000 candidates for KOLs, but finally, in the end, we'll officially sign contracts with between 5 to 10 KOLs on average on a monthly basis. It is estimated that by the end of fiscal year 2020, the Company will sign about nearly 200 KOLs.

For this quarter, as of June 30th, 2019, we have served almost 701 brands. We estimated this number of brands that we have provided service to will exceed 1,000 by the end of this fiscal year.

And talking about the take rate factors, there are three. Factor one is the demand from the branded merchants. Second is the supply of the internet KOLs in the e-commerce sector. Lastly, the percentage of advertisement business as a percentage in the platform model because the advertisement business doesn't contribute directly to our GMV. So as Mr. Feng mentioned, in the current business structure, we have estimated that the take rate will keep stable in the platform business.

And at the same time, as we mentioned earlier, we have been exploring new businesses in the monetization channels with our strategic shareholder - Alibaba. So if we achieve any new breakthroughs in our new business, we expect that the take rate will have some change in our income structure. Thank you. We hope that answer your question.

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Operator [22]

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Thank you. Our next question comes from the line of Bo Pei of Oppenheimer. Please go ahead.

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Bo Pei, Oppenheimer - Analyst [23]

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Hi, management. Thanks for taking my question. I have two or three if I may. (Interpreted) And I will translate for myself. So my first question is regarding our guidance. We provided a revenue guidance for fiscal year this year and then how does that imply to GMV growth?

And then my second question is on the short video industry in China. So we know the short video, especially on the e-commerce, is growing really fast in China. So how do we see that trend going in five years in China? And then my third question is the e-commerce law which we mentioned implemented in January this year. So what is the progress so far and then how does that impact the industry and especially on Ruhnn? Thank you very much.

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Unidentified Company Representative [24]

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(Interpreted) Yes. I will first translate the response to question number one and number two. Regarding the trend of the GMV growth, we expect that we will also achieve rapid growth in our GMV, but of course that we will focus more on the quality of our growth. So we will lay more emphasis on the growth of our revenue and in the meantime, because we are currently exploring different monetization channels based on our cooperation with our shareholder Alibaba, so we will see that the diversified ways to achieve the growth of our revenue and we will all the shareholders updated about the progress.

Regarding the question number two on the short video, of course, that we have note that for those brands that short video has been a very important part to deliver the value from the brand to the customers and the quality of content will play an important role for the promotion of the brands.

For the question number three regarding the progress of the implementation of the China e-commerce law and we have got to see that the implementation of the China e-commerce law will ensure that the compliance for most stores, including those stores on the Taobao platform. So that we anticipate that this implementation will drill down to those stores as a major player in the ecosystem of the Taobao platform, and we anticipate that this full implementation will come into being in one or two years.

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Sterling Song, Ruhnn Holding Limited - Senior IR Director [25]

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Yes. We hope that answer your questions. Thank you. Thank you, Bo. Operator?

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Operator [26]

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Thank you. As there are no further questions, now I'd like to turn the call back over to the Company for closing remarks.

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Sterling Song, Ruhnn Holding Limited - Senior IR Director [27]

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Thank you, Annie. Thank you again for joining us today. Thank you, everyone. If you have further questions, please feel free to contact Ruhnn's Investor Relations department through the contact information on the website or the Company's IR forum TPG Investor Relations. Thank you, everyone. Thank you again. Bye-bye.

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Operator [28]

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Thank you. This concludes this conference call. You may now disconnect your line. Thank you.