Good day, ladies and gentlemen. Thank you for standing by, and welcome to Boqii's Fiscal Year 2024 First Half 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. If you have any objections, you may disconnect at this time. Now, I will turn the call over to L, Boqii's Head of Investor Relations. L?

Okay. Thank you, operator, and thank you all for waiting for us to start the conference call, and good morning, everyone. Welcome to Boqii's fiscal year 2024 first half earnings conference call. Joining us today are Ms. Lisa Tang, Co-CEO and CFO as well as Mr. [indiscernible], our Financial VP. We released results earlier today. The earnings result is available on the SEC website. A replay of the call will be available on the site later today. 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 expectations ex priced today. Further information regarding these and other risks and uncertainties is included in the Company's public filings with the SEC. The Company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please note that certain financial measures that we use on this call, such as non-GAAP net loss, non-GAAP net loss margin, EBITDA and EBITDA margin are expressed on a non-GAAP basis. Our GAAP results and consolidations of GAAP to non-GAAP measures can be found in our earnings press release. Also, please be reminded that unless otherwise stated, all figures mentioned during the conference call are in Chinese RMB. With that, let me now turn the call over to our co-CEO and CFO, Ms. Lisa Tang. Over to you, Lisa.

Thank you, L, and many thanks to everyone for joining our call today. At the beginning of fiscal year 2024 despite the challenges of market uncertainty, we made great strides in revenue mix enhancement and cost control with high-margin primary labels showcasing resilient and indirect costs, also seeing a normal drop in amount and percentage to revenue, laying the foundation for a solid first half. As part of the management team, we totally believe that we are moving in the right direction and we maintain confidence in the development of China's pet industry. We will continue to work diligently and passionately, and we'll keep a keen eye on market dynamics and opportunities so that we can generate sustainable returns to our shareholders. Let me pass the time to L to further update you on our operations and business developments in first half 2024.

Thank you, Lisa. In fact, despite the uncertainties in the macro economy, China's pet economy continued to demonstrate its potential. According to the latest report, the penetration rate of households on impacts in China is expected to continue its riding trend, reaching 22% in 2023. That number is still way behind that in the United States and Europe, suggesting substantial room for expansion. By 2025, it is predicted that China's pet markets will hit RMB811.4 billion, representing a CAGR of 19.8% from 2021 to 2025. All this, we reassure us that China's pet market is going to eventually rebound. Hence during the first half, Boqii focuses on strengthening its market position, enhancing its brand profile, improving its user stickiness, refine its product offerings, and streamlining its business operation in preparation for the better ways in the future. In particular, customer loyalty will be the major growth driver for the growth as the listed company. In the meanwhile, we've delivered satisfactory results for our private label, leveraging our extensive user data and excellent big data capability, we were able to optimize our private labels, product offerings to better cater pet parents' needs while reducing our carrying costs for non-performing FPUs. Although the broad suffered a drop in overall GMV, GMV of private labels actually enjoyed an increase of 2.1% to RMB212.9 million. Its revenue contribution to overall revenue also rose from 17.8% to 26.4%, leading to a stable performance in gross margins and post fulfillment margins, with gross margin standing firm at 20% and post fulfillment margins enjoying an uptick of 170 basis points to 11.2%. As we grow as a brand, along with the comprehensive content and customized product selection on offer, there was also rising user stickiness, which was reflected in the historic low CC, down by 46% year-over-year to nearly RMB2.8. Customer purchase frequency also increased from 1.32 last year to 1.34 this year, with growth seen across both new and existing customers. Overall, we remain confident in our unique positioning in China's expanding pet market. We have observed encouraging trends, including a significant rise in the number of pets and the increasing authority of pet e-commerce, which bodes well for the future of us at the pet industry aggregator. We will continue our journey to establish a well-rounded ecosystem adaptive delivers values to both pet parents and brand partners. We are [indiscernible] building upon our leading position, hopefully creating a more resilience and impact for industry presence in the future. I will now turn the call over to our Financial VP, [indiscernible], who will share more details on our financials, [indiscernible].

Thank you, L. In the following, I'd like to share more on our financial performance for the fiscal half of -- first half of fiscal year 2024. We continue to execute our strategic adjustment and business optimization. Our revenue for the first half of fiscal year 2024 was RMB389.4 million, down by 34% year-on-year, as a result of the voting consumer sentiment and consumption downgrades in China, overall gross profit margin only decreased by 100 basis points to 20% with gross profit reaching RMB77.9 million. We also made notable efforts on cost of control as we improve the operational efficiency of our logistics services, fulfillment expenses as a percentage of revenue for the first half year decreased to 8.9% compared to 11.6% over last year. Fulfillment expenses decreased 49.4% to RMB34.5 million that lay the foundational and improving cost fulfillment margin, increasing from 9.5% last year to 11.2%. Sales and marketing expenses decreased 28.6% to RMB45.4 million, mainly due to the growing efficiency of customer acquisition from more cost-efficient channels. General and administrative expenses were RMB32.2 million compared to RMB22.1 million for the first half year of fiscal 2023. The increase was mainly due to the increase in share-based compensation expenses. That came to a net loss of RMB37.7 million in the first half of fiscal year 2024 and non-GAAP net loss is RMB34.2 million. We did [indiscernible] transaction in the first half year of 2024 and the related expenses of RMB7 million is recorded in net loss. Also in the first half year for the first time, we applied rule of ASC 326 and expected credit loss model to assess capability of account receivable and other receivables and the expected credit loss of RMB3 million is recorded in net loss is excluding above two one-off effects. Our net loss…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Zoe Zhao of CICC.

[Foreign Language]

As described in our ER, the decrease is primarily due to the optimization of product mix related to our business strategy and the worsening consumer sentiment and consumption downgrade in China. In the future, we expect our revenue to stabilize as we finish the optimization of our product mix and as the economy recovers in the short-term future. We expect we will make the breakeven in the short term future. Thank you.

Our next question today will come from Lisa Lau of Jefferies. Please go ahead.

This is Lisa Lau from Jefferies. So currently, I have two questions for you, the first one. I want to learn about, has the Company's delisting risk being resolved. This is the first one. And secondly, could we give more like some color from you about the expenses such as S&D, G&A and R&D? And any reduction further to expert in the future. Thank you so much for your questions.

Okay. Thank you for your questions. And I will answer the first question. The Company has already resolved the delisting risk in October this year, and we successfully listing transferred from NYSE to NYSE America where the Company meets its compliance requirements and currently has no delisting risk.

Our total operating expenses of first half year were RMB110 million representing a decrease of 27.1% from RMB154 million for the same period of last year, especially for our fulfillment expenses as we improve the operational efficiency of our logistics services, our fulfillment expenses as a percentage of total revenue for first half year has decreased to 8.9% compared to 11.6% of last year. And the fulfillment expenses amount decreased 49.4% to RMB34.5 million. And our sales and marketing expenses were RMB45.4 million, representing a decrease of 28.6% from RMB63.5 million for the first half year of last year. Lastly, our G&A expenses were RMB32.2 million compared from RMB22.1 million over same period of last year, which is primarily due to the share-based compensation expenses increase. In the future, as we continue to improve our logistics service efficiency and the customer acquisition efficiency, we expect that our operating expenses -- we'll be able to maintain a downward trend and the percentage of the -- our revenue will also decrease in the short-term future. Thank you.

Thank you. Seeing no more questions in the queue, let me turn the call back to Ms. L for closing remarks.

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

Thank you all again. This concludes the call. You may now disconnect.