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MOGU Announces Third Quarter Fiscal Year 2019 Unaudited Financial Results

HANGZHOU, China--(BUSINESS WIRE)--

MOGU Inc. (MOGU) (“MOGU” or the "Company"), a leading online fashion and lifestyle destination in China, today announced its unaudited financial results for the third quarter of fiscal year 2019 ended December 31, 2018.

Third Quarter Fiscal Year 2019 Highlights

  • Gross Merchandise Value (GMV1) for the twelve-month period ended December 31, 2018 was RMB16,978 million (US$2,469 million2), an increase of 21.5% year-over-year.
  • Total revenues were RMB367.2 million (US$53.4 million), an increase of 20.3% year-over-year.
  • Active buyers3 in the twelve-month period ended December 31, 2018 increased to 34.5 million from 33.9 million during the same period last year
  • Live Video Broadcast business continued to grow strongly with associated GMV increasing 177.8% year-over-year and average Mobile MAUs who clicked on a live video broadcast in the twelve-month period ended December 31, 2018 increasing 43.6%.

“We recorded healthy growth during the quarter with total GMV increasing 21.5% in the twelve-month period ended December 31, 2018, driven primarily by strong growth in our live video broadcast business.” commented by Mr. Qi Chen, Chairman and Chief Executive Officer of MOGU. “Live video broadcast not only provides users with a more fun, engaging, and interactive fashion discovery experience, but also allows us to gather data on current fashion trends and what users want which allows us to create a more efficient fashion industry value chain. As we continue enriching the fashion content on our platform and serving more users, merchants and influencers, our focus will expand to include optimizing and elevating the supply chain for fashion products. While this will be a difficult challenge, we strongly believe that these efforts will greatly benefit all participants across our ecosystem.”

Ms. Helen Wu, Chief Financial Officer, commented, “We generated total revenues of RMB367.2 million during the quarter, an increase of 20.3% year-over-year and 57.2% sequentially. Our loss from operations improved to RMB97.7 million (US$14.2 million) during the quarter from RMB202.5 million during the same period last year. Our net loss also improved to RMB42.2 million (US$6.1 million) during the quarter from RMB156.1 million during the same period last year. We will continue to execute our strategy which focuses on growing our live video broadcast and prime services offering businesses for merchants which carry higher commission rates and will further drive revenue growth.”

Third Quarter Fiscal Year 2019 Financial Results

Total revenues increased 20.3% to RMB367.2 million (US$53.4 million) from RMB305.2 million during the same quarter of fiscal year 2018. The increase was primarily attributable to increases in commission revenues and other revenues, which were partially offset by a decrease in revenues from marketing services.

  • Revenues from marketing services decreased by 9.6% to RMB131.4 million (US$19.1 million) from RMB145.4 million in the same period of fiscal year 2018, primarily due to the Company’s decision to strategically increase its focus on the live video broadcast businesses as an effective and efficient content format to improve user engagement and experience, which affected the amount of marketing service properties available on MOGU’s platform and the number of its marketing services customers.
  • Commission revenues increased by 34.7% to RMB175.6 million (US$25.5 million) from RMB130.3 million in the same period of fiscal year 2018, primarily attributable to the growth in GMV and a slightly higher average commission rate.
  • Other revenues increased by 104.6% to RMB60.2 million (US$8.8 million) from RMB29.4 million in the same period of fiscal year 2018, primarily attributable to the growth in online direct sales.

Total costs and expenses decreased by 8.4% to RMB464.9 million (US$67.6 million) from RMB507.6 million in the same period of fiscal year 2018, primarily due to decreases in amortization of intangible assets, research and development expenses and sales and marketing expenses, which were partially offset by increased cost of revenues and general and administrative expenses.

Cost of revenues increased by 21.1% to RMB100.4 million (US$14.6 million) from RMB82.9 million in the same period of fiscal year 2018, primarily due to costs associated with increased online direct sales as part of the Company’s trial launch of its beauty product online direct sales business.

Sales and marketing expenses decreased by 8.6% to RMB204.7 million (US$29.8 million) from RMB223.9 million in the same period of fiscal year 2018, primarily due to lower spending on customer incentive programs as the Company further refines its sales and marketing strategies.

Research and development expenses decreased by 22.2% to RMB55.3 million (US$8.0 million) from RMB71.0 million in the same period of fiscal year 2018, primarily due to a decrease in payroll costs associated with lower employee headcount as the Company continues to optimize its organizational structure.

General and administrative expenses increased by 110.2% to RMB47.9 million (US$7.0 million) from RMB22.8 million in the same period of fiscal year 2018, primarily due to an increase in share-based compensation expenses.

Amortization of intangible assets decreased by 39.3% to RMB66.6 million (US$9.7 million) from RMB109.8 million in the same period of fiscal year 2018, primarily due to a decrease in amortization of the intangible assets of an acquired company which was fully amortized in February 2018 and was partially offset by an increase in the amortization of the intangible assets recorded as a result of the new business cooperation agreement MOGU entered into with Tencent in July 2018.

Other net income increased by 265.4% to RMB10.0 million (US$1.5 million) from RMB2.7 million in the same period of fiscal year 2018, primarily due to a government grant the Company received during the quarter.

Loss from operations was RMB97.7 million (US$14.2 million), compared to loss from operations of RMB202.5 million in the same period of fiscal year 2018.

Interest income was RMB7.7 million (US$1.1 million), compared to interest income of RMB8.1 million in the same period of fiscal year 2018.

Share of results of equity investee was RMB14.8 million (US$2.2 million) for the period.

Net loss was RMB42.2 million (US$6.1 million), compared to RMB156.1 million in the same period of fiscal year 2018.

Adjusted EBITDA4 was negative RMB5.3 million (US$0.8 million), compared to negative RMB73.1 million in the same period of fiscal year 2018.

Adjusted net profit5 was RMB13.7 million (US$2.0 million), compared to net loss of RMB81.7 million in the same period of fiscal year 2018.

Basic and diluted loss per ADS were RMB4.03 (US$0.59) and RMB4.03 (US$0.59), respectively, compared with RMB15.02 and RMB15.02, respectively, in the same period of fiscal year 2018. One ADS represents 25 Class A ordinary shares.

Cash and cash equivalents, Restricted cash and Short-term investments were RMB1,614.2 million (US$234.8 million) as of December 31, 2018, compared with RMB1,355.4 million as of March 31, 2018.

Conference Call

The Company will host a conference call to discuss the earnings at 7:30 a.m. Eastern Time on Monday, February 25, 2019 (8:30 p.m. Beijing/Hong Kong Time on the same day).

Dial-in numbers for the live conference call are as follows:

International:     +1 647 689 5649
Mainland China, North: +86 108 007 141 191
Mainland China, South: +86 108 001 401 195
United States: +1 877 824 0239
Hong Kong: +852 800 901 563
Passcode: Mogu

A telephone replay of the call will be available after the conclusion of the conference call until 11:59 PM ET on March 4, 2019.

Dial-in numbers for the replay are as follows:

International:     +1 416 621 4642
United States: +1 800 585 8367
Passcode: 9478068

A live and archived webcast of the conference call will be available on the Investor Relations section of MOGU’s website at http://ir.mogu-inc.com.

Use of Non-GAAP Financial Measures

In evaluating the business, the Company considers and uses non­GAAP measures, such as Adjusted EBITDA and Adjusted net profit/(loss), as supplemental measures to review and assess operating performance. The presentation of these non­GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company defines Adjusted EBITDA as net loss before interest income, gain on deconsolidation of a subsidiary, income tax benefits, gain from investment disposals,share of results of equity investee, share-based compensation expenses, amortization of intangible assets, and depreciation of property and equipment. The Company defines Adjusted net profit/(loss) as net loss excluding gain of deconsolidation of a subsidiary, gain from investment disposals, share-based compensation expenses, amortization of intangible assets, and adjustments for tax effects. See “Unaudited Reconciliations of GAAP and Non­GAAP Results” at the end of this press release.

The Company presents these non­GAAP financial measures because they are used by management to evaluate operating performance and formulate business plans. The Company believes that the non­GAAP financial measures help identify underlying trends in its business by excluding certain expenses, gain/loss and other items that are not expected to result in future cash payments or that are non­recurring in nature or may not be indicative of the company’s core operating results and business outlook. The Company also believes that the non­GAAP financial measures could provide further information about the Company’s results of operations, enhance the overall understanding of the Company’s past performance and future prospects.

The non­GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non­GAAP financial measures have limitations as analytical tools. The Company’s non­GAAP financial measures do not reflect all items of income and expense that affect the Company’s operations and do not represent the residual cash flow available for discretionary expenditures. Further, these non­GAAP measures may differ from the non­GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non­GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating performance. The Company encourages you to review the Company’s financial information in its entirety and not rely on a single financial measure.

For more information on the non­GAAP financial measures, please see the table captioned “Unaudited Reconciliations of GAAP and Non­GAAP Results” set forth at the end of this press release.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident,” “potential,” “continue” or other similar expressions. Among other things, the business outlook and quotations from management in this announcement, as well as MOGU’s strategic and operational plans, contain forward-looking statements. MOGU may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about MOGU’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: MOGU’s growth strategies; its future business development, results of operations and financial condition; its ability to understand buyer needs and provide products and services to attract and retain buyers; its ability to maintain and enhance the recognition and reputation of its brand; its ability to rely on merchants and third-party logistics service providers to provide delivery services to buyers; its ability to maintain and improve quality control policies and measures; its ability to establish and maintain relationships with merchants; trends and competition in China’s e­commerce market; changes in its revenues and certain cost or expense items; the expected growth of China’s e­commerce market; PRC governmental policies and regulations relating to MOGU’s industry, and general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in MOGU’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and MOGU undertakes no obligation to update any forward-looking statement, except as required under applicable law.

About MOGU Inc.

MOGU Inc. (MOGU) is a leading online fashion and lifestyle destination in China. MOGU provides young people with a more accessible and enjoyable shopping experience for everyday fashion, particularly as they increasingly live their lives online. Through innovative use of content, MOGU’s platform provides a vibrant and dynamic community for people to discover and share the latest fashion trends with others, and offers users a truly comprehensive shopping experience.

For more information on MOGU, please visit: http://ir.mogu-inc.com.

1 GMV refers to the total value of orders placed on the MOGU platform regardless of whether the products are sold, delivered or returned, calculated based on the listed prices of the ordered products without taking into consideration any discounts on the listed prices. Buyers on the MOGU platform are not charged for separate shipping fees over the listed price of a product. If merchants include certain shipping fees in the listed price of a product, such shipping fees will be included in GMV. As a prudent matter aimed at eliminating any influence on MOGU’s GMV of irregular transactions, the Company excludes from its calculation of GMV transactions over a certain amount (RMB100,000) and transactions by users over a certain amount (RMB1,000,000) per day.

2 The U.S. dollar (US$) amounts disclosed in this press release, except for those transaction amounts that were actually settled in U.S. dollars, are presented solely for the convenience of the readers. The conversion of Renminbi (RMB) into US$ in this press release is based on the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of December 31, 2018, which was RMB6.8755 to US$1.00. The percentages stated in this press release are calculated based on the RMB amounts.

3 “Active buyers” refers to registered user accounts that placed one or more orders on MOGU’s platform in a given period, regardless of whether the products are sold, delivered or returned. If a buyer registered two or more user accounts on MOGU’s platform and placed orders on its platform through each of those registered user accounts, the number of active buyers would, under this methodology, be counted as the number of registered user accounts that such buyer used to place the orders.

4 Adjusted EBITDA represents net loss before (i) interest income, gain on deconsolidation of a subsidiary, income tax benefits, gain from investment disposals and share of results of equity investee, and (ii) certain non-cash expenses, consisting of share-based compensation expenses, amortization of intangible assets and depreciation of property and equipment. See “Unaudited Reconciliations of GAAP and Non­GAAP Results” at the end of this press release.

5 Adjusted net profit/(loss) represents net loss excluding (i) gain of deconsolidation of a subsidiary, (ii) gain from investment disposals, (iii) share-based compensation expenses, (iv) amortization of intangible assets, (v) adjustments for tax effects. See “Unaudited Reconciliations of GAAP and Non­GAAP Results” at the end of this press release.

 
MOGU INC.
Unaudited Interim Condensed Consolidated Balance Sheets
(All amounts in thousands, except for share and per share data)
     
As of March 31, As of December 31,
2018 2018
RMB RMB US$
ASSETS
Current assets:
Cash and cash equivalents 1,224,393 1,266,172 184,157
Restricted cash 1,004 1,005 146
Short-term investments 130,000 347,000 50,469
Inventories, net 110 4,663 678
Loan receivables, net 104,247 131,346 19,103
Prepayments and other current assets 188,862 163,341 23,757
Amounts due from related parties 7,179 862 125
Total current assets 1,655,795 1,914,389 278,435
Non-current assets:
Property, equipment and software, net 16,511 11,176 1,625
Intangible assets, net 116,770 1,038,642 151,064
Goodwill 1,568,653 1,568,653 228,151
Investments 201,037 220,204 32,027
Other non-current assets 18,755 9,265 1,348
Total non-current assets 1,921,726 2,847,940 414,215
Total assets 3,577,521 4,762,329 692,650
 
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ (DEFICIT)/EQUITY
Current liabilities:
Accounts payable 12,270 16,509 2,401
Salaries and welfare payable 20,654 50,760 7,383
Advances from customers 37 1,385 201
Taxes payable 8,523 6,527 949
Amounts due to related parties 20,103 6,213 904
Accruals and other current liabilities 608,486 509,291 74,073
Total current liabilities 670,073 590,685 85,911
Non-current liabilities:
Deferred tax liabilities 25,233 8,302 1,207
Total non-current liabilities 25,233 8,302 1,207
Total liabilities 695,306 598,987 87,118
 
Total mezzanine equity 7,384,872 - -
 
Shareholders’ (deficit)/equity
Ordinary shares 31 177 25
Statutory reserves 1,979 2,475 360
Additional paid-in capital - 9,360,233 1,361,389
Accumulated other comprehensive (loss)/income (3,650) 85,186 12,390
Accumulated deficit (4,501,017) (5,284,729) (768,632)
Total MOGU Inc. shareholders’ (deficit)/equity (4,502,657) 4,163,342 605,532
Total shareholders’ (deficit)/equity (4,502,657) 4,163,342 605,532
Total liabilities, mezzanine equity and shareholders’ (deficit)/equity 3,577,521 4,762,329 692,650
 
 
MOGU INC.
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
(All amounts in thousands, except for share and per share data)
   
For the three months ended For the nine months ended
December 31, December 31,
2017   2018 2017   2018
RMB RMB   US$ RMB RMB   US$
Net revenues
Marketing services revenues 145,380 131,396 19,111 400,253 324,449 47,189
Commission revenues 130,336 175,577 25,537 331,485 391,230 56,902
Other revenues 29,441 60,231   8,760 53,802   141,006   20,508
Total revenues 305,157 367,204 53,408 785,540 856,685 124,599
 
Cost of revenues (exclusive of amortization of intangible assets shown separately below) (82,919) (100,419) (14,605) (241,739) (252,734) (36,759)
Sales and marketing expenses (223,886) (204,721) (29,775) (628,727) (565,529) (82,253)
Research and development expenses (71,017) (55,252) (8,036) (219,778) (179,236) (26,069)
General and administrative expenses (22,779) (47,886) (6,965) (77,795) (121,574) (17,682)
Amortization of intangible assets (109,755) (66,633) (9,691) (329,241) (149,862) (21,797)
Other income, net 2,735 9,993   1,453 10,367   6,141   893
Loss from operations (202,464) (97,714) (14,211) (701,373) (406,109) (59,068)
Interest income 8,130 7,724 1,123 27,132 24,422 3,552
Gain of deconsolidation of a subsidiary 13,592 - - 13,592 - -
Gain from investment disposals - 31,236   4,543 -   31,236   4,543
Loss before income tax and share of results of equity investees (180,742) (58,754) (8,545) (660,649) (350,451) (50,973)
Income tax benefits 24,651 1,778 259 76,670 12,355 1,797
Share of results of equity investee - 14,816   2,155 -   (7,394)   (1,075)
Net loss (156,091) (42,160) (6,131) (583,979) (345,490) (50,251)
 
 
MOGU INC.
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
(All amounts in thousands, except for share and per share data)
   
For the three months ended For the nine months ended
December 31, December 31,
2017   2018 2017   2018
RMB RMB   US$ RMB RMB   US$
Net loss attributable to non-controlling

interests

111 -   - 116   -   -
Net loss attributable to MOGU Inc. (156,202) (42,160) (6,131) (584,095) (345,490) (50,251)
Accretion on convertible redeemable preferred shares to redemption value (174,756) (139,262) (20,255) (507,646) (509,903) (74,162)
Deemed dividend to holders of mezzanine equity - -   - -   (89,076)   (12,956)
Net loss attributable to MOGU Inc's ordinary shareholders (330,958) (181,422)   (26,386) (1,091,741)   (944,469)   (137,369)
Net loss (156,091) (42,160) (6,131) (583,979) (345,490) (50,251)
Other comprehensive income/(loss):
Foreign currency translation adjustments, net of nil tax (13,727) 3,340 486 (48,634) 82,497 11,999
Share of other comprehensive income/(loss) of equity method investee - 34 5 - (110) (16)
Unrealized securities holding gains, net of tax 472 3,197   465 3,953   6,449   938
Total comprehensive loss (169,346) (35,589) (5,175) (628,660) (256,654) (37,330)
Total comprehensive loss attributable to non-controlling

interests

111 -   - 116   -   -
Total comprehensive loss attributable to MOGU Inc. (169,457) (35,589)   (5,175) (628,776)   (256,654)   (37,330)
Net loss attributable to MOGU Inc's ordinary shareholders (330,958) (181,422)   (26,386) (1,091,741)   (944,469)   (137,369)
 
 
MOGU INC.
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
(All amounts in thousands, except for share and per share data)
   
For the three months ended For the nine months ended
December 31, December 31,
2017   2018 2017   2018
RMB RMB   US$ RMB RMB   US$
Net loss per share attributable to ordinary shareholders
Basic (0.60) (0.16) (0.02) (1.98) (1.21) (0.18)
Diluted (0.60) (0.16) (0.02) (1.98) (1.21) (0.18)
 
Net loss per ADS
Basic (15.02) (4.03) (0.59) (49.55) (30.25) (4.40)
Diluted (15.02) (4.03) (0.59) (49.55) (30.25) (4.40)
 
Weighted average number of shares used in computing net loss per share
Basic 550,825,006 1,126,645,958 1,126,645,958 550,797,978 780,640,722 780,640,722
Diluted 550,825,006 1,126,645,958 1,126,645,958 550,797,978 780,640,722 780,640,722
 
Share-based compensation expenses included in:
Cost of revenues 1,179 3,568 519 3,483 10,465 1,522
General and administrative expenses 1,085 12,894 1,875 2,951 39,405 5,731
Sales and marketing expenses 533 2,074 302 1,937 6,209 903
Research and development expenses 1,653 4,647 676 4,617 13,107 1,907
4,450 23,183 3,372 12,988 69,186 10,063
 
 
MOGU INC.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
(All amounts in thousands, except for share and per share data)
   
Three months ended December 31, Nine months ended December 31,
2017   2018 2017   2018
RMB RMB   US$ RMB RMB   US$
 
Net cash (used in) / provided by operating activities (125,028) 29,128 4,236 (177,833) (235,270) (34,219)
Net cash provided by/(used in) investing activities 226,401 (78,646) (11,439) 258,514 (223,379) (32,489)
Net cash provided by financing activities

 

2,344

 

425,791

 

61,930

 

6,169

437,955 63,698
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash

 

 

 

(13,392)

(1,566) (228) (48,299) 62,474 9,086
Net increase in cash and cash equivalents 90,325

 

374,707

 

54,499

 

38,551

 

41,780

 

6,076

 

Cash and cash equivalents and restricted cash at beginning of period 1,219,721 892,470 129,804 1,271,495 1,225,397 178,227
 
Cash and cash equivalents and restricted cash at end of period 1,310,046 1,267,177 184,303 1,310,046 1,267,177 184,303
 
 
MOGU INC.
Reconciliations of GAAP and Non-GAAP Results
(All amounts in thousands, except for share and per share data)
     
For the three months ended December 31, For the nine months ended December 31,
2017   2018 2017   2018
RMB RMB   US$ RMB RMB   US$
 
Net loss (156,091) (42,160) (6,131) (583,979) (345,490) (50,251)
 
Less: Share of result of equity investees - (14,816) (2,155) - 7,394 1,075
Less: Income tax benefits (24,651) (1,778) (259) (76,670) (12,355) (1,797)
Less: Gain from investment disposals - (31,236) (4,543) - (31,236) (4,543)
Less: Gain of deconsolidation of a subsidiary (13,592) - - (13,592) - -
Less: Interest income (8,130) (7,724)   (1,123) (27,132) (24,422)   (3,552)
 
Loss from operations (202,464) (97,714) (14,211) (701,373) (406,109) (59,068)
 
Add: Share-based compensation expenses 4,450 23,183 3,372 12,988 69,186 10,063
Add: Amortization of intangible assets 109,755 66,633 9,691 329,241 149,862 21,797
Add: Depreciation of property and equipment 15,152 2,625   382 49,259 9,780   1,422
Adjusted EBITDA (73,107) (5,273)   (766) (309,885) (177,281)   (25,786)
 
Net Loss (156,091) (42,160) (6,131) (583,979) (345,490) (50,251)
 
Less: Gain from investment disposals - (31,236) (4,543) - (31,236) (4,543)
Less: Gain of deconsolidation of a subsidiary (13,592) - - (13,592) - -
Add: Share based compensation 4,450 23,183 3,372 12,988 69,186 10,063
Add: Amortization of intangible assets 109,755 66,633 9,691 329,241 149,862 21,797
Less: Adjusted for tax effects (26,232) (2,688)   (391) (78,696) (14,322)   (2,083)
 
Adjusted net (loss)/profit (81,710) 13,732   1,998 (334,038) (172,000)   (25,017)
 

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