BlueCity Holdings Limited
Q4 2020 Earnings Call Transcript

Published: 23 Mar 2021

[Operator:]

Good day, ladies and gentlemen, thank you for standing by. And welcome to BlueCity’s Fourth Quarter and Full Year of 2020 Earnings Conference Call. Currently, all participants are in a 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. Now, I'll turn the call over to Lingling Kong, Head of Investor Relations for the Company. Ms. Kong, please proceed.

[Lingling Kong:]

Thank you, Operator, and hello, everyone. Welcome to BlueCity’s fourth quarter and full year 2020 earnings conference call. Joining us today are Mr. Baoli Ma, Chief Executive Officer; and Mr. Ben Li, Chief Financial Officer. We released the results earlier today. The press release is available on the Company's IR website at ir.blue-city.com, as well as from Newswire services. A replay of this call will also be available in a few hours on our IR website.

[Baoli Ma:]

Thank you, Lingling, and hello, everyone. Thank you for joining our earnings conference call today. We had an exceptional year in 2020, despite the challenging COVID-19 environment, we remained focused on our growth strategy, and achieved encouraging results. First, our NASDAQ IPO was a remarkable milestone in our long journey. Since founding our predecessor Danlan website over 20-years ago, we have prepared for the recognition and social acceptance of the LGBTQ community. Being a public company, we will further broaden our user base and help us to connect with the LGBTQ community globally. We believe we can make a wider and a meaningful impact in the world, with our unwavering goal to create value for society, promote diversity and foster a sense of belonging for our members. Second, we demonstrated the strength of our portfolio strategy. We can pull different levers quickly, which makes us agile and able to grow faster. For instance, we acquired and quickly integrated LESDO and Finka into our operations, leveraging our experience in technology, those acquisitions strengthened our leadership positions in the LGBTQ community. After acquiring LESDO in August, we quickly introduced a new version in Q4. As a result, by February of this year, LTSDO’s MAU increased 3.1 times since the acquisition. Meanwhile, Finka’s MAU reached a historic high of 730,000 in December, representing 15% growth in one month, since the acquisition.

[Ben Li:]

Thank you, Mr. Ma. And thank you, everyone for joining our call today. For the fourth quarter, total revenues were RMB278.9 million, up 24.2% year-over-year. We remain committed to enhance our monetization capability and the diversifying monetization methods, in order to generate a sustainable growth. We are pleased that our revenues for membership services and He Health continue to achieve robust growth in this quarter. Monthly average users on this Blued app grew by 12.5% year-over-year, reaching RMB6.6 million, out of which 47% MAUs were from overseas. Monthly active users on our non-Blued app reached 980,000. DAU over MAU for this quarter, on the Blued app remained stable as 44%. Total paying users on the Blued app were 518,000, up 37.9% year-over-year. In addition to our solid financial growth, we also made meaningful progress in product innovation. We launched a voice chat room function on the Blued app in Mainland China. Users can join chat rooms to have real time, community focused audio conversations with other members, based on their preferred language, friends and interests. We believe, this function will resonate with users and expect the full rollout sometime in April. Meanwhile, a separate voice-based app called for our community users is expected to launch by mid-April. Together with the community feature and catch function we introduced in the last quarter, we have been relentlessly devoting resources to product innovation that improve the user experience and deepens the bonds of our community. We continue to drive LGBTQ awareness. A recent example was the Let Love Go Home campaign launched to coincide with the typical family reunion activities of the Chinese New Year holiday. This campaign helped our community members to find a greater sense of belonging at home and cultivating more acceptance from family, thus bridging the gap between generations, and generate . We live streamed an online real roundtable session between an openly gay influencer and his mother, who together candidly discussed his experience in announcing his a self-identity. In March, we also partnered with UNAIDS on the Zero Discrimination campaign, that's aimed to end discrimination and inequality in the Asia-Pacific region. BlueCity brands, such as Blued, LESDO, Finka and He Health and Danlan Public Interest together voice to the opposition to prejudice of all kinds, especially that based on sexual orientation and gender identity. The campaign was executed using a combination of themed posters, interview with experts, live broadcast and short videos.

[Operator:]

Your first question comes from the line of Laura Champine of Loop Capital Management. Please ask your questions.

[Laura Champine:]

Good morning. My first question is about the changes to live streaming. Could you be more specific on what the expenses were related to those changes? And in what way you expect that to increase lifetime value of your live streaming customers?

[Baoli Ma:]

So, I'll translate to Mr. Ma first, okay. Okay. Hi, Laura. And there are three points regarding to your questions. The first one is that actually comparing to the percentage of revenue sharing with talent agent ordinary person, like the ordinary streamers share a lower percentage. And we intend to increase that actually to increase the engagement from the ordinary streamers. And, in turn, that will attract more users to join our platform. And hopefully, we can improve the number of paying users in the channel. The second is that actually we are inviting more agent talent to join our platform. Currently, we have quite limited number of talent agencies on our platform. And we are going to invite more agent talent agencies to provide more kind of professional and high quality content on our live streaming platform. The third is that, from the revenue side, actually the revenue are recorded from the paying users virtual gifting. And we intend to launch new features to the streamer site, generating the revenue from streamer site, which they can, you know, through our platform, they can purchase like promotion choose to increase their traffic to their own channel. That's a straight point.

[Laura Champine:]

Thank you. And last question on the launch of your business in Latin America, how will that compare in terms of a push, initial push compared to your launches outside of China into other Asian countries?

[Ben Li:]

Laura, I'm sorry, we are not quite following you clearly. Can you repeat the question?

[Laura Champine:]

Sure. Your initial advertising spend or your initial launch spend to launch Latin America, how will that compare with your initial spend when you launched BlueCity’s apps outside of China into other Asian countries?

[Baoli Ma:]

Thanks, Laura. I will translate your question. Okay, I will translate. Mr. Ma’s answers. The first Laura, actually, for every new app entering into new market, the initial launch always is the most difficult part, okay. And we intend to spend more on the initial launch, and after that, once we gain the reputation we can easily spread our brand and to attract users through word of mouth. As we are in the leading position in Southeast Asia, and we can quickly leverage all the marketing channels into Latin American markets. Actually the marketing channels are quite similar to the Southeast Asian market. We usually tend to use Facebook, Google channels, as well as running offline events with local agencies. In terms of the average spending, we see that it's kind of middle years, in the middle between our high net wealth countries such as Japan, Korea, it's like the middle range. Thank you.

[Laura Champine:]

Thank you.

[Operator:]

Your next question comes from the line of Bo Pei of Oppenheimer.

[Bo Pei:]

Thank you. I will translate for myself. Good evening, management. Thanks for taking my questions. So, I noticed our revenue growth slowed down slightly in 4Q. But our 2021 guidance imply a growth acceleration this year. So just wondering can you talk about the growth strategy this year, especially for He Health you mentioned is going to be our second growth engine. So can you talk about the required investment in this business? And also talk about to achieve the revenue growth guidance, what else investments do we need to do for this year? And then my second question is about our M&A strategy. Can you also talk about M&A strategy this year compared with last year? And then where will our target be, for example, in China or overseas market to expand our international footprint? Thank you.

[Baoli Ma:]

So, for the first question regarding the growth strategy in 2021, I will answer this question in four parts. First is the monetization opportunity overseas, and we see a great potential in overseas markets, especially in live streaming and the membership services. Before that, we are in the very early stage of monetization overseas. And we will enhance the operations in life training and provide more membership service products and offerings, security rates, the paying habits of overseas users. Therefore, we see a huge potential of revenue growth overseas. Second is the revenue contribution from Finka. And after like three months of integration with Finka, we found that there is still plenty of room to grow for Finka business, especially in live training and membership services. We found that based on Finka's user profile, they have higher willingness to pay for high quality services. Partly, Finka's revenue structures tend to be more healthy; it's like more than 30% from live training around 30% from advertising and another 40% from membership services. Therefore, that leveraging on our financial support and the technology support, we will offer more features in live training and in membership services to drive our paying ratio of Finka users. Third is that we continue to see there is a huge growth opportunities in Blued membership services. As you all know the membership services is a recurring revenue and have higher gross margin. For Blued membership services, we will offer more interactive features, we will adding more features to behind the pay wall trying to cultivating our users paying habits and intend increase the paying ratio of our users. Fourth and the last is as you mentioned, is our He Health strategy. He Health, internally what we position He Health as . It's like that He Health will be our meaningful driver for our recent years. First, the opportunity for He Health is huge. We started from providing HIV-related services and then we became quickly expand that service goes into more housing, privacy related services and into the well-being of men's health. And we see that through the partnership with pharmacists and many pharmacy manufacturing pharmacists, we can easily take leverage on the pricing negotiation. And right now we currently are going to obtaining the Internet hospital license in the near future, and we are pretty confident that we can build a comprehensive men’s health platform and wrap up that business very quickly. Now for your second question, -- sorry let me translate that answers first. Thank you. And first, that based on our mission is that we are tend to be a comprehensive lifetime provider for the LGBTQ community. So, we choose our acquisition target more carefully. We tend to choose the target shares a similar vision with us. And so that we keep active dialogue with our potential acquisition targets in America, Japan and Europe, keep a good dialogue with them and seek for opportunities, so that we can work closely together through partnership or other forms of M&A. Thank you.

[Bo Pei:]

Okay. Thank you.

[Operator:]

Your next question comes from the line of Brian Li of AMTD Global Markets. Please ask your questions.

[Brian Li:]

Thank you for taking my question. Congrats on your solid fourth quarter results. My question is about the two successful M&A deals last year. As you have included that MAUs in the latest reports, so could you please add more color on the integration plans, and one where you expect the company can benefit from the synergy you achieved via M&A deal? Thanks.

[Baoli Ma:]

Thank you for your question Brian. And let me just a simple translation here. Actually, we're quite pleased with the integration of Finka and LESDO. You can see that the MAU growth of Finka and LESDO are very encouraging. You can see that in our scripts. And we haven't disclosed the latest MAUs of Finka, it's like its reached even higher compared to the end of last year. So it's like that our portfolio strategy has proven to be right. And through our portfolio strategy, we can sell more users in -- kind of more users, so we can extend our user base. And each of our quarter portfolios will position them quite differently, so twice of more different group of users. For example, we will quickly launch another voice-based app called , and to try to cover more users who like to use the voice-based app. So, it's that we aim to be the match group in the LGBTQ community. And we are trying to launch more new apps or new features try to cover and serve more different groups within the LGBTQ community. Thank you.

[Brian Li:]

Thank you.

[Operator:]

Your last question comes from the line of Austin Moldow of Canaccord Genuity. Please ask your questions.

[Austin Moldow:]

Thanks for taking my questions. Within live streaming, can you talk about which products have the most meaningful revenue contribution currently? And what new products have the most potential for growth going forward?

[Ben Li:]

I'll just translate that. I think you are asking that, nice to hear you again. This is Ben, and I will do the translation to Mr. Ma first. Hi, Austin. This is Ben. I will just do the translation myself. Mr. Ma just explained that for existing revenue pie that apart from the live streaming he deemed or the management deems now the membership services revenue, it is going to -- is actually taking a very majority important role for now. And for the future, the most potential impactful revenue service pie contributor is coming from the health-related services, Austin. Regarding the so called health-related services, actually it's mainly related to private treatment for men here in China. So, currently we do see the HIV-related treatment for the exposure prophylaxis and post-treatment et cetera. Actually the HIV community here in China, we had our internal analysis is around 1 million population. So, we do see -- it is going to be a huge -- because people have to taking lifetime drugs to get a qualified treatment. So, we do see it is going to be a recurring revenue and a best entry port for us to get into there. Not to mention that HIV treatment is only a start for the private treatment for men here in China, and also other demands from for men like the hair issue, like the sexual malfunction issue, et cetera, Austin.

[Austin Moldow:]

Thank you for that. Just following up a little bit. What live streaming products drive the most live streaming revenue? And what are some new live streaming products you're excited about?

[Ben Li:]

Interesting question. I want to translate. Austin, we have to say this so virtual gifting model for live stream means is kind of existing for years. So, we keep innovating by developing new features trying every effort to figure out what to do to better leverage our position for live streaming revenue service contribution to our revenue pie. And what Mr. Ma explained for only one example is that, but that's too minor. I'll explain, because his earlier speech was also mentioned that, currently our revenue many from the people who purchase the virtual gift on platform right. So actually, sooner or later we are going to develop a new feature that's actually, the live streamers might purchase some services features from the platform. So basically, we are telling you that we are going to just not doing the monetization from the viewer’s audience side, but also from the live streamer side. So that's number one. Number two, Mr. Ma Gao just added that, for example, we're going to create some interesting functions like taking the number -- the zoom number, how important for a zoom number for a lucky trial here in China. Number six, number eight meaning locking et cetera. So, we are going to develop something like that say, taking example. So, we keep innovating from time-to-time, Austin.

[Austin Moldow:]

Thank you. That's very helpful. My last question is regarding competition. When you launch into new overseas markets, for example in Latin America, where you're focusing in 2021. Do you typically find one or two well entrenched competitors that are already there? Or is it typically a very fragmented market that doesn't have any scales, competitors of note?

[Ben Li:]

That's easy answer. But, anyway. Yes, sure. Austin, actually, in Latin America, there are only one named actually that's famous U.S.-based competitor of us already there. And due to the population, Latin America having a large population over there, and also the user behavior is not a product was kind of very popular already on site. So basically, as a latecomer, we enter into those new markets. We have to deal with it very carefully, starting from a market analysis. We interview, we engage with third-party consultants on the standard, the user behavior engagement based on those local players and the local users on a general matter. And also, we identify those gaps, the demands of the users locally have not been satisfied by the existing player. So, back to your question directly that there are only one meaningful peer in Latin America market. Yes, still there are some demand that we do see a huge opportunity. We could do something meaningful over there in general, Austin.

[Austin Moldow:]

Okay. Thank you very much for taking my questions.

[Ben Li:]

Sure. Okay. I think that’s all, operator.

[Operator:]

Well we are at the end of this call. If you have more questions, please contact us by email directly. Thank you. Let me turn the call back to Mr. Li, for closing remarks.

[Ben Li:]

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

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you. You may disconnect your line now.