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Operator: Good morning, ladies and gentlemen. Thank you for standing by for Baozhun’s Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. As a reminder, today’s conference call is being recorded. I will now turn the meeting over to your host for today’s call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations at Baozhun. Please proceed, Wendy.

Wendy Sun: Thank you, Operator. Hello, everyone, and thank you for joining us today. Our third quarter 2024 earnings release was distributed earlier and is available on our Investor Relations website at ir.baozhun.com and on PRN’s web services. We have also posted a PowerPoint presentation to accompany our comments, which is available for download on the same website. On the call today from Baozhun, we have Ms. Winsen Xu, Chairman and Chief Executive Officer; Ms. Catherine Zhu, Chief Financial Officer; Mr. Arthur Yu, President of Baozhun eCommerce; and Mr. Ken Wang, Chief Financial Officer of Baozhun Brand Management. Ms. Xu will first share our business strategy and company highlights, followed by Ms. Zhu, who will discuss our financials and outlook.

Then, Mr. Yu and Mr. Wang will share more about our eCommerce and brand management businesses. They will all be available to answer your questions during the Q&A session. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of U.S. securities laws. These statements are based on management’s current expectations and market conditions, involve risks and uncertainties, and could cause actual results to differ materially. Further information on risks and uncertainties is included in the company’s filings with the U.S. Securities and Exchange Commission and the Stock Exchange of Hong Kong. All figures mentioned during this call are in RMB unless otherwise stated. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Winsen Xu. Please go ahead.

Winsen Xu: Thank you, Wendy. Hello, everyone, and thank you for joining us. I am pleased to report that Baozhun is well on track with advancing our strategic transformation. Our total revenues grew by 13% year-over-year, reflecting the strength of our revitalized approach and consistent operational alignment. Both BEC and BBM have enhanced key growth drivers. BEC achieved a 14% revenue increase, driven by improvements in services and product sales. Notably, our Douyin business grew by triple digits year-over-year, directly resulting from our strategic integration efforts and commitment to launching innovations that capitalize on emerging trends. These initiatives have strengthened our presence on Douyin, further reinforcing Baozhun’s leadership in digital commerce.

BBM also resumed growth, with a 10% year-over-year increase, marking the first revenue expansion for the Gap brand in China following years of contraction. Our efforts to build partnerships have been instrumental in integrating global resources with local insights and networks. This approach has positioned us for sustained growth momentum heading into 2025. Additionally, Hunter has made solid progress with category refinement and channel optimization. This was highlighted by the recent launch of a pop-up store in Shanghai’s high-fashion district, which generated remarkable attention during Golden Week. In summary, Q3 has been a pivotal quarter of growth and progress across our business segments. I am confident in our ability to sustain this momentum.

Let me pass it to Catherine for the financial update.

Catherine Zhu: Thanks, Winsen, and hello, everyone. Now, let me share our third-quarter 2024 financial results in more detail. Baozhun Group’s total net revenues increased by 13% year-over-year to RMB 2.1 billion. eCommerce revenue grew 14% to RMB 1.8 billion, while brand management revenue grew 10% to RMB 331 million. Breaking down eCommerce revenue by business model, services revenue increased by 15% to RMB 1.3 billion for the quarter, driven by a 40% year-over-year increase in revenue from digital marketing and IT solutions. Product sales revenue also resumed growth, rising 10% year-over-year to RMB 454 million. This growth was supported by stronger performance in the beauty and cosmetics categories, as well as contributions from our self-incubated brands.

From a profitability perspective, our blended gross margin for product sales was 28.1%, and gross profit increased by 2% to RMB 220 million. Adjusted loss from operations improved to RMB 85 million, compared to a loss of RMB 90 million a year ago. As of September 30, 2024, our cash and cash equivalents, restricted cash, and short-term investments totaled RMB 2.7 billion. Additionally, we have repurchased approximately 8.6 million ADS for USD 9.9 million, reflecting confidence in the company’s future. Let me now pass the call to Arthur for updates on BEC.

Arthur Yu: Thank you, Catherine, and hello, everyone. We are delighted to report that BEC continued its growth trajectory in Q3, achieving a 14% year-over-year revenue increase. Services revenue grew by 15%, and product sales also made a notable recovery with 10% year-over-year growth. Our Douyin business achieved triple-digit growth, focusing on brand-centric live streaming and high-impact projects. Beyond Douyin, we also recorded strong growth on emerging platforms such as Tencent’s Mini Program and Little Red Book. Our exclusive distribution business saw strong performance, particularly with the British high-end kitchenware brand Joseph Joseph. Finally, let me provide a quick update on the recent Double 11 shopping festival. Our total order value reached a record high with double-digit year-over-year growth. However, the record-high return rate slightly impacted overall operating efficiency. Let me now pass the call to Ken for updates on BBM.

Ken Wang: Thank you, Arthur. BBM achieved a 10% year-over-year revenue growth, marking the first top-line turnaround for the Gap brand in recent years. Strategic initiatives such as localized engagement, channel-specific products, and new store openings contributed to this success.During Q3, we opened 24 new stores, focusing on quality locations in emerging cities. Offline expansion remains a priority, with plans to meet our target of 15 new stores by year-end. Our approach balances global brand integrity with local market responsiveness. That concludes our prepared remarks. Operator, we are now ready to begin the Q&A session.

Operator: Thank you, Ken. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press the star key followed by the number one. We will now pause momentarily to assemble our roster.

Alicia Yap (Citigroup): Hi, this is Alicia Yap from Citigroup. Thank you, management, for taking my questions. Congratulations on the solid results. I have two questions. First, could management elaborate on the overall performance during this year’s Double 11, specifically which categories performed better than expected and which underperformed? Also, how were Gap China’s sales during Double 11, and were there any noticeable changes in shopping behavior compared to previous years? Secondly, regarding AI advertising tools, how does Baozhun plan to embrace AI to capture bigger opportunities? Do you see domestic brands relying more on your services for targeted digital ad campaigns?

Arthur Yu: Thank you, Alicia. I will take the first question regarding Double 11. Overall, the campaign performance was solid. Categories like apparel, sports, and luxury exceeded expectations, while small appliances and travel-related categories, such as hotels and theme parks, performed slightly below expectations. A key characteristic of this year’s Double 11 was its omnichannel nature, as all major channels showed double-digit growth. Another noticeable trend was the extended campaign period and higher return and cancellation rates, which added complexity. However, our robust service infrastructure and IT capabilities helped us provide stability to our brand partners during this period. On AI, we have been leveraging AI technology in operations for a few years now.

AI enhances our efficiency and decision-making capabilities. For example, our intelligent customer service assistant, Sway, has improved service quality while reducing handling times. Additionally, our Baozhun Business Intelligence tool helps brands with data-driven merchandising and planning strategies. These tools allow us to deliver personalized and effective services to our clients, including domestic brands seeking to enhance their digital marketing strategies.

Ken Wang: Regarding Gap China during Double 11, its performance exceeded expectations. The brand moved up three positions in Tmall’s apparel rankings compared to last year, achieving double-digit growth in GMV and net sales. Gap also performed exceptionally well on JD and other platforms. This reinforces the effectiveness of our omnichannel strategy.

Operator: Thank you. The next question comes from Frank Tal with CMBI. Please go ahead.

Frank Tal (CMBI): Thank you, management. My question is about the slowdown in live-streaming eCommerce growth this year. How does management see this trend, and will there be any adjustments to your operating strategy in the coming quarters?

Arthur Yu: Thank you, Frank. While we have observed some deceleration in live-streaming eCommerce, it does not fundamentally change our strategy. We operate across multiple channels, offering omnichannel services to our brand partners. Our tools and data analytics help brands allocate resources effectively across platforms.

Winsen Xu: Let me add that our business intelligence capabilities allow us to analyze platform dynamics and guide resource allocation to maximize outcomes. We will continue supporting our partners across all platforms, regardless of channel-specific trends.

Operator: Thank you. The next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong (Jefferies): Thanks, management. I have two questions. First, how has sales momentum evolved post-Double 11? Secondly, could you share your outlook for key categories like luxury, apparel, FMCG, and consumer electronics for the coming year?

Arthur Yu: Thank you for the questions. Post-Double 11, we observed a slight slowdown in sales, particularly in apparel, due to heavy discounts during the campaign. However, we expect recovery heading into December, particularly in categories like apparel. Regarding category outlook, we remain cautious for 2025 due to macroeconomic pressures. Categories like luxury and FMCG have shown flat growth, while consumer electronics have seen some softness. However, Baozhun’s ability to provide high-quality services and innovate will help us navigate these challenges and seize opportunities.

Operator: The next question comes from Jai Wei Yin with CITIC. Please go ahead.

Jai Wei Yin (CITIC): Good evening, management. Congratulations on the strong quarter. I have two questions. First, how is Baozhun performing on JD.com, especially in apparel? Secondly, media reports mention high return rates for Ralph Lauren during Double 11. Could you comment on this and share any broader insights on return rates in the apparel category?

Arthur Yu: Thank you, Jai Wei. Baozhun has a strong partnership with JD.com, and we are a top-performing partner in their apparel and luxury segments. Gap is one of JD’s top-performing brands, and we also operate five out of ten luxury brands for JD, highlighting our strategic importance. Regarding return rates for Ralph Lauren, we cannot comment specifically on their strategy, but our technology ensures rapid restocking of canceled products, minimizing business impact. Overall, return and cancellation rates in apparel remain an industry-wide challenge, with a single-digit increase year-over-year. However, our operational efficiency helps mitigate the impact for our partners.

Operator: Thank you. The next question comes from Jack Ho with Voitai Securities. Please go ahead.

Jack Ho (Voitai Securities): Thank you, management, for taking my questions. Could you share your consumption trend outlook and top-line and margin expectations for next year?

Arthur Yu: Thank you, Jack. We expect consumption to stabilize further in 2025. Brands are focusing on building internal capabilities, and Baozhun is well-positioned to support them with our omnichannel expertise and innovation. We aim to drive growth by expanding into new categories while strengthening our core segments.

Winsen Xu: From a top-line perspective, we remain cautiously optimistic given supportive government policies and our internal operational improvements. Our focus on efficiency and resource optimization will help us achieve sustained margin improvement in the coming year.

Operator: Thank you. This concludes the Q&A session. I would now like to turn the call back over to the company for closing remarks.

Winsen Xu: Thank you, Operator. On behalf of Baozhun’s management team, we thank you all for participating in today’s call. If you have further questions, please feel free to reach out. This concludes the call. You may now disconnect.