MOGU Inc. (NYSE: MOGU) reported Q3 EPS of ($2.15). Revenue for the quarter came in at $38.7 million versus the consensus estimate of $55.41 million.

Mr. Qi Chen, Chairman and Chief Executive Officer of MOGU, commented “We continued to execute on our innovative LVB e-commerce strategy during China’s peak shopping season. Our LVB business continued to gain strong growth momentum, increasing 99.5% year-over-year during the quarter as it increasingly accounts for a more meaningful proportion of GMV which increased to 53.2%, up 14.3% sequentially. LVB hours per day also continued to rise, eclipsing 3,800 hours per day in December 2019, up from 3,400 hours per day in September 2019. I believe these strong results reflect the success we expect to see going forward as our strategy begins to bear more fruit.”

“This quarter, we made significant progress in cultivating and empowering our KOLs and LVB hosts, a key component of the engaging and comprehensive fashion and lifestyle destination we are building for our users. First, we expanded our LVB host talent pool by recruiting nearly 5,000 new hosts during the quarter to increase the diversity of fashion and lifestyle-related content and amplify engagement with a wider demographic. Second, we are seeing the performance and growth of our new and mid-tier LVB hosts improve rapidly on our platform driven by the effective systematic execution of the new-KOL incubation and empowering \"Duo Hundred\" and \"Migrating Bird\" plans we rolled out in July 2019. Third, we strengthened the infrastructure we have built to empower KOLs by adding 2,000 new supply chain vendors that cater to several product categories and are strategically located across different parts of China. We believe that combination of strategically expanding and supporting our LVB host talent pool and the increase in our supply chain capacity will create enormous synergies that deepen our competitive advantage and generate sustainable growth going forward.”

“At the same time, we continued to enrich our LVB e-commerce business by expanding the breadth and depth of our product categories, price ranges of the products offered, the array of brand partners we work with and the variety of innovative cutting-edge tools to support KOLs. We continue to grow the catalog of fashion and lifestyle-related short-video content that is both created and shared by our LVB hosts in order to increase overall engagement with their followers during off-peak hours when they aren’t broadcasting. This remains critical for improving user conversion rates and driving consumption on our platform.”

“As the pioneer in the development of LVB e-commerce, we began building an interactive platform that seamlessly connects consumers, KOLs, and suppliers, before LVB technology was adopted by the wider e-commerce sector. This can be seen in the unique \"P2K2C\" model we are deploying. Under this model, “K” stands for KOLs, who play a central role in bridging the social-commerce gap through their unparalleled ability to understand, influence and aggregate diverse consumer demand. \"P\" stands for our platform as a provider of consolidated resources including our supply chain capacity, LVB e-commerce infrastructure and KOL-empowerment system. Last but not least, \"C\" stands for our customers. An adaptable and responsive approach to consumer demand is critical for success in our industry and we are committed to empowering KOLs by leveraging the capabilities of our supply chain partners in order to serve the diverse demands of our users.”

“Progress in 2020 will not come without its challenges. The outbreak of the Covid-19 has threatened the health of many people across the globe and disrupted a wide variety of consumer-related industries in China. Tens of thousands of front-line medical professionals are fighting the virus at the risk of their own lives. A large number of civil servants and volunteers are also working tirelessly to stem the outbreak. Many Chinese citizens have voluntarily quarantined themselves at home for extended periods of time as part of nationwide prevention efforts. In the fight against Covid-19, the people of China and across the globe have demonstrated strong resolve and made significant sacrifices. I am extremely proud of their heroic actions.”

“As a company that serves a majority female-oriented consumer base with a deep-rooted supply chain spread across China, we have not been immune to the impact from the Covid-19 outbreak. We expect that our near-term performance will be impacted by the outbreak and subsequent temporary suspension of operations by factories, large wholesale markets, and express delivery services. In response to the change in business environment, we have taken several measures in collaboration with our KOLs and business partners to mitigate the impact of the epidemic as well as seize the opportunities created by it. We capitalized on the growing realization of the importance that online operations play in today’s economy and expanded the pool of brand partners we work with by adding over 500 new ones to our supply chain. We made a strategic decision to prioritize cooperation with brand partners whose sales were most impacted by the outbreak by demonstrating the unique value proposition and differentiated solutions our platform can offer through LVB discount sales. We are also taking advantage of the opportunity to further optimize the systems and processes we use to empower KOLs and suppliers and are benefiting from enhanced streamlining of our cost structure.”

“We believe the outbreak will gradually be contained and business will resume quickly. The word crisis, or weiji in Chinese, contains the characters for both \"danger\" and \"opportunity\". Trials and tribulations create opportunities and we firmly believe that the outbreak will create an opportunity for us to strengthen the impact our KOL-centered LVB business has on the growth of the e-commerce sector as we focus on creating long-term and sustainable growth for our shareholders.”

Ms. Helen Wu, Chief Financial Officer of MOGU, commented, “Total revenues were RMB269.5 million during the quarter, mainly as a result of 19.6% year-over-year decrease in commission revenues to RMB141.2 million and 44.9% year-over-year decrease in marketing revenues to RMB72.5 million. Our LVB business continued to grow strongly as did associated commission revenues which increased significantly and accounted for a larger proportion of our overall commission revenue. Going forward, we expect our LVB business to continue generating strong growth momentum driven primarily by our strategy and the continued upgrading of the merchant structure on our platform. This challenging market environment created by Covid-19 may impact our performance in the near-term, but we remain confident in the long-term growth prospects for our business.”

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