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Ruhnn Holding Ltd (NASDAQ:RUHN)

Q4 2020 Earnings Call

Jun 3, 2020, 8: 00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, ladies and gentlemen. Thank you for standing by for Ruhnn Holding Limited’s Earnings Conference Call for the Fourth Quarter and Full Fiscal Year 2020.

[Operator Instructions]. Today’s conference call is being recorded. I will now turn the call over to your host, Mr. Sterling Song, Senior IR Director of Ruhnn. Please go ahead.

Sterling SongSenior Director of Investor Relations

Thank you. Thank you. Good morning. Hello everyone and welcome to Ruhnn Holding Limited earnings conference call for the fourth quarter and the full fiscal year 2020. As a reminder, this conference is being recorded. The Company’s financial and operating results were issued in a press release earlier today and are available online. You can download the earnings press release and sign up for the Company’s email distribution list by visiting the IR section of the Company’s website at ir.ruhnn.com.

Mr. Lei Sun, our Founder, Director and CEO; and Mr. Jinbo Wang, our CFO will be begin with some prepared remarks. Following the prepared remarks, Mr. Min Feng, our Founder and Chairman of the Board of Directors will also join us for the Q&A session.

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 views expressed today.

Further information regarding these and other risks and uncertainties is included in certain filings of the Company with the U.S. Securities and Exchange Commission, including its Annual Report on Form 20-F. The Company doesn’t assume any obligation to update any forward-looking statements, except as required by law.

Please also note that the Company’s earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. The Company’s press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

Now I will turn the call over to Ruhnn’s Founder, Director and CEO, Mr. Lei Sun. Mr. Sun, please go ahead.

Lei SunFounder, Director and Chief Executive Officer

Thank you, Sterling. Hello, everyone. Thank you for joining our earnings conference call for the fourth quarter and the full fiscal year 2020. We finished a spectacular fiscal year 2020 with strong overall operational and financial performance despite the impact of COVID-19 pandemic in China during the fourth quarter. Historically a slower seasonal quarter for our business.

At the same time, we continued improving operational efficiency and profitability, providing a solid foundation for our long-term sustainable growth. For the full fiscal year 2020, our total net revenue recorded RMB1.3 billion, of which service revenue under the platform model reached RMB303 million with a year-over-year increase of over 100%. We achieved our revenue target for the fiscal year 2020 and delivered satisfactory full-year results for the first complete fiscal year following our IPO in April 2019.

In January 2020, facing the external challenges caused by the COVID-19 outbreak and certain of our third-party merchants and brands, product manufacturing, logistics, and fulfillment were adversely affected due to various travel restrictions and quarantine measures imposed in China. And we implemented various response plans in a timely manner to mitigate the impact on our overall business.

On the premise of ensuring the safety and health of all employees, we have gradually resumed our operations since mid-February, according to the requirements of local government. The overall impact and interruption on our operation has been managed to a minimum level. And in fact, our supply chain and the logistics have been gradually recovering to normal levels since March. Through our efforts, we are pleased to cap off the full fiscal year 2020 with outstanding results.

Looking back over the past year, we maintained a rapid growth momentum across our core businesses. For the full fiscal year 2020, total GMV increased 41% and the total net revenue increased 19% both on a year-over-year basis of which the service revenue under the platform model increased over 100% year-over-year. While adjusted net loss attributable to Ruhnn narrowed by 81%, we also achieved positive net cash provided by operating activities.

Our robust performance is a testament to the strength and viability of our business model and our strong execution capabilities, benefited by our first mover advantage. We continued furthering our and solidifying our leading position in China’s internet KOL e-commerce sector. The continued expansion of our platform business and further exploration of diverse monetization channel under platform model continue to be critical growth drivers in the past few quarters, as well an important part of our long-term core strategy

The online sharing store business that we initiated in the third quarter of our fiscal year 2019 continued expanding in fiscal year 2020 with revenue generated from the online sharing increasing nearly 700% year-over-year. Revenue generated from the online sharing stores as a percentage of total service revenue under the platform model grew to nearly 20% in the full fiscal year 2020 from single-digit figure in the fiscal year 2019.

At the same time, we continued setting up diverse types of online sharing stores for more and more internally incubated KOLs with excellent marketing skills, through our KOLs distinct personal style and large followers base as well as our precise matching capabilities, our KOLs activity recommend various types of third-party merchant products with high quality to drive fans and customers, attracting and converting traffic from major social media platforms and effectively achieving traffic and content monetization.

As a result, the enhanced retention and conversion efficiency of their wide range of fans significantly improved the stock repurchase rates. At the end of the fiscal year 2020, sharing store business has successfully operated for more than 12 months and has continuously achieved excellent operating performance which will also be one of our main growth drivers in the next fiscal year.

In addition, our e-commerce live streaming business grew rapidly in the second half of fiscal year 2020. E-commerce live streaming is not new to Ruhnn as our KOLs have been utilizing the live streaming to introduce our own women’s apparel products under our full-service model. At present e-commerce live streaming have been extended to direct live streaming fields of our own women apparel brands and for third-party merchants and brands. The KOLs we signed are those who resonate with followers at a deep level and their endorsement of products can influence followers buying decisions, thus accumulating a large fan base on social media platforms.

After co-operating with third party merchants and brands, our influential KOLs can rapidly amplify their business value by leveraging this deeper and intimate connection with their fan base. Through the continuous efforts and exploration in e-commerce live streaming business in the past two quarters, e-commerce live streaming has emerged as an important monetization channel under the platform model, greatly enriching the KOL monetization channels and better leveraging our precise matching capabilities.

Our e-commerce live streaming business has delivered good results since the third quarter of fiscal year 2020 generating approximately 20% of the total service revenue under the platform model while receiving positive feedback from merchants and consumers.

Leveraging on the main competitive advantage of KOL incubation, our KOL has a large number of high-quality fans with strong stickiness on different social media platforms who have converted to consumers of our e-commerce live streaming business with very good conversion results.

This allowed us to minimize any extra resource allocation required from the Company in a way. In the future, we will cooperate with more social media platforms with e-commerce live streaming functions in addition to our top live streaming platform to further enhance KOLs monetization capabilities through the e-commerce live streaming which has emerged as an important monetization channel for our KOLs.

Our leading KOL incubation and transaction platform has also become the cooperation platform for emerging fashion brands in China. Brands now not only aimed to increase the sales, but also need us to empower their overall marketing program to revamp brands and to improve efficiency.

As of March, 31st, 2020, we had partnered with a total of 1,035 brands in our advertising service representing a 64% growth from 632 brands as of March 31st, 2019. Our efforts have begun to bear fruit, reflected in positive feedback we have received from third-party merchants and brands as well as more potential cooperation opportunities that have surfaced from advertising agencies and brands, including domestic brands and international well-known brands.

All of these achievements have enabled us to form a complete brand metric that covers multiple areas. We will continue growing the advertising business and look forward to collaborating and serving more brands both domestically and globally.

Our enriched and diverse KOL pool is fueled by our strong capabilities in KOL cultivation and development and flexible cooperation models with KOLs. As of March, 31st, 2020, the total number of KOLs signed by us through long-term agreements reached 168 with an aggregate number of fans of over 206 million, a year-over-year growth of 31% and 33% respectively, which are our major social media assets.

Some of our newly signed KOLs are mainly focused on leveraging their strong marketing capabilities on iconic social media platforms such as Tik-Tok, Kuaishou, Little Red Book, and Bilibili, as they already have a stable and large fan base that drives extensive online traffic. Further, our KOLs influence on these platforms will be further elevated after our comprehensive training, thus their marketing capabilities will be further enhanced.

In addition, many social media platforms have launched tools to help users gain followers, which are beneficial for KOL platforms like Ruhnn, enabling us to incubate KOLs and help them grow their fan base in a more systematic and efficient way.

Furthermore, I would also like to discuss some additional information regarding our platform KOL classification. As an additional measure to assess our platform KOL performance, we classify our platform KOL based on the total service revenue generated by the KOL under the platform model during the previous 12 months.

Our platform top tier KOL increased from one as on March 31st, 2019, to eight as of March 31st, 2020. The number of our platform top tier, established and emerging KOL increased 68% to 37 as of March 31st, 2020 from 22 as of March 31st, 2019. This demonstrated our capabilities in KOL incubation and cultivation.

In terms of business cooperation, while we continue to actively pursue acquisition opportunities that fit within our business strategy, we are also looking forward to partnering with other market players, including establishing a KOL industry fund to promote the healthy and rapid development of internet KOL e-commerce industry in China.

With our conviction in our business fundamentals, long-term prospects, and the growth strategy, we recently announced a share repurchase program of up to $15 million and it also reflects our commitment to increasing shareholder value.

As we enter our fiscal year 2021, China’s economy has gradually started recovering back by improving COVID-19 health statistics in China. From a long-term perspective, the COVID-19 pandemic is poised to help consumers transit into a new age of online shopping norms, accelerated social media consumption habits, and promote the further development of the e-commerce industry.

Being the bridge between mainstream e-commerce and social media platforms, Ruhnn is well-positioned by this change. Unlike other third-party independent social media platforms, we don’t compete for online traffic with existing social media platforms and e-commerce platforms but empower them.

For example, with Alibaba, our significant strategic stakeholder and a long-term key business partner, we will continue maintaining a close cooperation with them. In addition, we will continue developing our platform business with Weibo and Bilibili, which are also our important shareholders and other social media platforms such as Tik-Tok, Kuaishou, and Little Red Book, to further explore new monetization channels and business.

With that I will now turn the call over to Mr. Jacky Wang, CFO of the Company, who will provide an update on our financial performance for the fourth quarter and full fiscal year 2020.

Jinbo WangChief Financial Officer

Thank you, Lei Sun, and hello, everyone. We kicked off a successful fiscal year 2020, in which we managed to achieve our fiscal year revenue target, narrow non-GAAP adjusted net loss attributable to Ruhnn significantly by 81% year-over-year, and generate a positive net cash provided by operating activities.

For the fourth quarter of fiscal year 2020, we also delivered satisfactory financial results and the non-GAAP adjusted net loss attributable to Ruhnn narrowed significantly by 45% year-over-year, despite the impacts of the pandemic on our business and the financial results since January 2020.

Building on the successful fiscal year 2020, we are well-positioned to achieve profitability for the full fiscal year of 2021 on a non-GAAP basis. Today, I will be presenting some abbreviated financial highlights for our fourth quarter and full fiscal year of 2020. We encourage you to read through our press release issued earlier today for further details.

Now I would like to discuss certain highlights of our financial performance for the fourth quarter ended March 31st, 2020. Total net revenue was RMB228.2 million, a decrease of 4% from RMB237.3 million for the same quarter of last fiscal year, mainly due to the impact of the COVID-19 pandemic in China as well as the transition of some of the Company’s online stores from the full-service model to the platform model.

Services revenue through the platform model increased 24% year-over-year to RMB62.2 million. Gross profit increased significantly by 51% year-over-year to RMB84.3 million. Gross margin increased to 37% from 23% for the same quarter of last fiscal year.

Net loss attributable to Ruhnn narrowed 6% year-over-year to RMB26.4 million and adjusted net loss attributable to Ruhnn narrowed 45% to RMB15.4 million.

Now let’s move on to detailed financial performance for the full fiscal year of 2020. Net revenue increased 19% or RMB202.5 million to RMB1.3 billion despite the impacts of the COVID-19 pandemic in China during the fourth quarter of fiscal year 2020. The increase in services revenue from the platform model accounted for 75% of the total net revenue increase.

Revenue from services through the platform model increased significantly by 101% to RMB303.2 million. This increase was mainly attributable to the following factors. First, the increase in the number of KOLs serving the Company’s platform model, which increased 12% to 137 as of March, 31st, 2020 from 122 as of March, 31st, 2019.

Second, the improved performance of such KOLs as evidenced by the increase in the aggregate number of the platform top tier, established and emerging KOLs to 37 as of March 31st, 2020, from 22 as of March 31st, 2019. In addition, the average services revenue generated per KOL serving the platform model increased approximately by 39% as compared to the last fiscal year. And third, an increase in the number of brands that the Company cooperated in its advertising business to 735 for the fiscal year 2020 from 507 for the last fiscal year.

Revenue from product sales through the full-service model increased 5% to RMB992.6 million. The increase was primarily attributable to the sales growth of the online stores opened in the name of the Company’s top tier KOLs partially offset by the transition of the basic model of some online stores opened in the name of the Company’s emerging and established KOLs from the full-service model to the platform model.

As a result of the transition, the number of the Company’s online stores decreased to 19 as of March 31, 2020, from 56 as of March 31, 2019. And the number of the Company’s KOLs serving the full-service model decreased to three as of March 31, 2020, from 14 as of March 31, 2019. However, product sales revenue from the Company’s online stores that were opened in the name of the Company’s top tier KOLs and were in operation in both fiscal years increased 40% compared to the last fiscal year.

Cost of revenue increased 7% to RMB806.1 million, which was mainly attributable to the increase in the total net revenue. Cost of revenue primarily include product costs, inventory writedowns and KOL service fees.

Gross profit increased 43% or RMB147.7 million to RMB489.7 million with gross profit from the platform model accounted for 61% of the total increase. Gross margin increased to 38% from 31% for the last fiscal year with gross margin of services increasing to 57% compared to 55% for the last fiscal year.

Total operating expenses increased 43% to RMB607.2 million. Included in the total operating expenses was an aggregate of RMB78.9 million of noncash amortization expense of intangible assets in relation to exclusive cooperation rights, noncash share-based compensation expense, and litigation costs for the fiscal year 2020 compared to nil for the last fiscal year.

Total net revenue during the fourth quarter of fiscal year 2020 was impacted by COVID-19 pandemic while certain operating expenses were fixed. Exclusive of an aggregate of RMB78.9 million noncash charges and litigation costs for the fiscal year 2020, as mentioned above, total operating expenses accounted for 41% and 39% of the total net revenue for the fiscal year of 2020 and 2019 respectively.

Fulfillment expenses increased 6% to RMB134.9 million. The increase was in line with the increase in product sales. Exclusive of RMB1.6 million noncash share-based compensation expense in the fiscal year 2020, fulfillment expenses accounted for 13% of product sales revenue during the fiscal years of 2020 and 2019.

Sales and marketing expenses increased by 48% to RMB305.2 million following the expansion of KOL pool from 128 signed KOLs as of March 31, 2019 to 168 as of March 31, 2020. Related expenses for KOL incubation, cultivation, and content production and the personnel costs of related support teams to support increased activities for the Company’s KOL sales and advertising business increased accordingly.

We are investing for the future. In addition, the year-over-year increase in sales and marketing expenses were also attributable to the non-cash amortization expense of the intangible assets of RMB20.6 million and the noncash amortization of share-based compensation expense of RMB10.2 million. Exclusive of the aggregate of RMB30.8 million, noncash amortization expense of the intangible assets and share-based compensation expense in the fiscal year 2020. Sales and marketing expenses accounted for 21% and 19% of total net revenue during the fiscal year of 2020 and 2019, respectively.

General and administrative expenses increased by 82% to RMB167.8 million. The increase was primarily driven by the increased share-based compensation expense of RMB43.5 million, professional fees like audit fee, legal fee, general insurance expense, and litigation costs of RMB21 million and bad debt provision of RMB5.8 million. Exclusive of the aggregate of RMB46.5 million of share-based compensation expense and the litigation costs in the fiscal year 2020, general and administrative expenses accounted for 9% and 8% of the total net revenue during the fiscal years of 2020 and 2019 respectively.

Net loss attributable to Ruhnn was RMB92.5 million inclusive of an aggregate of RMB78.9 million of noncash amortization expense of the intangible assets in relation to exclusive cooperation rights, noncash share-based compensation expense, and the litigation costs compared to RMB73.2 million for the last fiscal year.

Adjusted net loss attributable to Ruhnn narrowed significantly by 81% to RMB13.6 million from RMB73.2 million for the last fiscal year. As a result of the following, in terms of our balance sheet and cash flow, as of March 31, 2020, we had cash and cash equivalents, restricted cash and short-term investment of RMB800.6 million compared to RMB103.8 million as of March 31, 2019. Net cash provided by operating activities was RMB50.6 million for the fiscal year 2020 compared to net cash used in operating activities of RMB9.4 million for the last fiscal year.

Here one point to add regarding the share repurchase program up to $50 million discussed by Mr. Sun previously, the Company expects to fund the repurchases made under the program from its existing cash balance.

Before turning to our outlook, I would like to spend a few minutes providing an update on the COVID-19 situation. Just now, Lei Sun shared some information regarding the impacts of COVID-19 pandemic during the fourth quarter and fiscal year 2020.

While the Company has seen gradual recovery of its overall business resulting from the improving health statistics in China since March 2020, the Company still anticipates the negative impact of the pandemic to continue into the fiscal year 2021, but to a lesser extent as compared to the fourth quarter of fiscal year 2020.

However, the duration and magnitude of the impact from the pandemic on the Company’s business will depend on numerous evolving factors that cannot be accurately predicted or assessed, including the duration and scope of the pandemic, the negative impact it has on the Chinese and global economy, its impact on unemployment and consumer confidence, the Company’s ability to successfully navigate the impacts of the pandemic, as well as actions government, businesses and individuals would take in response to the pandemic.

With respect to our outlook, the Company currently expects, for the full fiscal year 2021 ending March 31, 2020 — 2021, net revenue from services through the platform model to be between RMB520 million and RMB610 million, representing a year-over-year growth between 72% and 101%, respectively, and total net revenue to be between RMB1,320 million and RMB1,500 million, representing a year-over-year growth between 2% and 16%, respectively.

This forecast reflects the Company’s current and preliminary view on the current business situation and the market conditions, including the Company’s current estimate of any impact from the COVID-19 pandemic, which are all subject to change.

This concludes our prepared remarks, we will now open the call for Q&A. Operator, please go ahead.

Questions and Answers:

Operator

Thank you so much. [Operator Instructions] Alright, and our first question comes from the line of Ellen Li [Phonetic] from SWS. Li, your line is now open.

Ellen LiSWS Research Co. — Analyst

[Foreign Speech] And I’ll repeat my question in English. At present, your faster growing KOL marketing model is a market — is in the market is live streaming, however live streaming is currently facing some problem, such as few top KOLs occupying most resources or a non-profit from brand owners and a high return rate and it’d be a good solution to these problems. What do you think of the future picture of the live streaming industry and what is our strategy in this regard? Thank you.

Lei SunFounder, Director and Chief Executive Officer

This is Lei Sun. Thank you and it’s a very good question, quite profound and in-depth. Let me share some thoughts with you about Ruhnn and e-commerce live streaming. It’s true that e-commerce live streaming has boosted the domestic economy in China to a new high — to a new high level, quite vigorously. But if we carefully analyze the KOL e-commerce live streaming and the companies behind such KOLs, we will notice that it is due to, you mentioned it just now, like heavy concentration on single or few top tier KOLs. Third-party brands and the merchants are unprofitable or even damage to brand value if they utilize the e-commerce live streaming, etc.

As I mentioned in the prepared remarks e-commerce live streaming business have been expanding rapidly since the second half of fiscal year 2020. E-commerce live streaming is not new to Ruhnn as our KOLs have been utilizing the live streaming on Taobao platform, to introduce our own women’s apparel products under our full-service model. At present, e-commerce live streaming have been extended to direct live streaming sales of our own women’s apparel brands and for third-party merchants and the brands.

Live streaming for third-party brands has become an important monetization channel on the platform model for Ruhnn. There are different types of e-commerce live stream KOLs. For example, the regional KOLs who grow up from live streaming platform. The KOLs we signed are those who resonate with the followers at a deep level and their endorsement of our products can influence followers’ buying decisions thus accumulating a large fan base on our social media platform.

After cooperating with third-party merchants and brands, our influential KOL can rapidly amplify their business value by leveraging this deeper and intimate connection with their fan base. Through continuous efforts and exploration in e-commerce live streaming business in the past — the past two quarters e-commerce live streaming has emerged as an important monetization channel under the platform model, greatly enriching reaching the KOL monetization channels and better leveraging our precise matching capabilities. We are receiving positive feedback from merchants and consumers.

In other words, leveraging on our high-quality KOL metrics, we have third-party brands to acquire brand premium — to avoid any low price promotion and unprofitability during e-commerce live streaming. As for the top tier KOL concentration, Ruhnn has been building up KOL metrics for e-commerce live streaming. We are not solely relying on the specific KOLs.

Our KOLs resonate with followers at a deep level and their endorsement of products influence followers’ buying decisions. Depending on different vitality [Indecipherable] as well as fan base on different social media platforms, KOL live streaming is not necessarily limited to Taobao platform, it could be on Kuaishou as well.

The [Indecipherable] streaming KOL metric continues to expand with good performance besides the top tier KOLs we mentioned about. There come some new KOLs with good operational results including [Indecipherable] etc. Ruhnn has set up strategic cooperation with multiple platforms to explore e-commerce live streaming monetization channels. Our KOLs also get involved with other monetization channels besides live streaming, including self-operated stores on the full-service model, online sharing stores, brand advertisement, etc. All such demonstrates Ruhnn’s strong capabilities to serve KOLs and brands.

In summary, we keep high confidence in the KOL economy in the long run. Due to the epidemic more sales shift from offline to online, which greatly benefited the e-commerce sector including the KOL economies. For us, under the full-service model, we will continue to utilize Taobao live streaming to introduce our own women apparel products that — where customers can directly place orders and complete the purchase.

On the platform model, we will continue to build up our unique KOL metrics, both the number of KOLs and [Indecipherable] in live streaming will continue to expand rapidly. And for business development, we will continue to set up a unified BD team to better serve KOLs and third-party merchants. We expect the service revenue from e-commerce live streaming to account for a more significant percentage in the total service revenue. Thank you.

Operator

Thank you so much. And your next question comes from the line of Bo Pei from Oppenheimer. Your line is now open.

Bo PeiOppenheimer — Analyst

[Foreign Speech] And I’ll translate myself. Thanks for taking my question. So first, congrats on the good results despite a difficult operating environment due to COVID-19. So I have a question about our full-service model and then the platform model. First, our Company has mentioned the transition from the full-service to the platform model.

And then can you talk about the reason behind the transition. And then from two perspectives, one from the operating, the other from the financial, can you talk about these two models performance in the fiscal year 2020 and then the outlook for 2021 and then which area we’re going to focus? Thank you.

Min FengFounder and Chairman

[Foreign Speech] Thank you. This is Min Feng. Let me answer your questions, first from a business perspective and then Jacky will add something from a financial results perspective. It is true that if you check the previously issued quarterly results during the past few fiscal years, we have mentioned the transition several times. And now the business performance and financial results have clearly demonstrated that business transition is successful.

[Foreign Speech] The full-service model that is the 1P business in the region of Ruhnn. However starting from fiscal year 2019, we implemented certain measures to seize the sales of certain brands of apparel products in the full-service model and transformed that business into the platform model, and that is, we wouldn’t regard opening online stores for oursevels, incubated KOLs to sell our own women apparel products as the only KOL monetization channel. Our KOLs can provide sales and advertising services for third-party brands and the merchants and the services revenue under the platform model is generated and recognized based on the sales and advertising services provided. So, Ruhnn has become platform focused and diversified.

[Foreign Speech] During the past fiscal year 2020, following the booming of our KOL economy in China, there are lots of factors that boost our platform business model, like the asset-light model want more third-party brands and merchants attracted by KOL marketing and advertising, more and more monetization channels develop to match with various brands and merchants. So for the full fiscal year 2020, platform services revenue increased over 100% as compared to the last fiscal year.

[Foreign Speech] Well under the full-service model, we noted that our incubation speed is much faster than the replication of supply chain and the growth has been limited. In addition, the product category is mainly limited in women’s apparel, and it needs high investments if we want to enter into other product categories.

In addition, the competition. Of course, I have to point out that the supply chain capabilities and the resources we accumulated in the full-service model could provide us with more development possibilities in the future.

[Foreign Speech] As of March 31, 2020, we have successfully completed the business transition of certain online stores opened in the name of certain established and emerging KOLs from the full-service model to the platform model and the platform model is becoming the focus of the Company’s business in the future.

[Foreign Speech] For our platform model, we will continue to expand and enlarge our KOL pools, incubate or cooperate with more KOLs in a more flexible and diversified way. For the existing signed KOLs, we will continue to cultivate them to improve their monetization capabilities to serve more third-party merchants and brands.

Meanwhile, we will actively explore and develop more monetization channels like e-commerce live streaming, which have emerged as an important channel under the platform model. We expect the platform model will further increase the revenue contribution percentage as compared to the total net revenue and it has been and will continue to be the major growth driver in revenue increase and achievement of profitability during the fiscal year 2021. Thank you.

Jinbo WangChief Financial Officer

Okay, thank you, Mei Feng. This is Jacky here. I want to share some information regarding — from the financial results perspective and maybe you can — from that information you might see you know, OK the rationale and the financial model of the difference of those two models you might say why we need to do the transition.

First, I want to talk about from the revenue perspective. As compared to the total net revenue, you can calculate from the financial statement that services revenue and the platform model accounted a full 14% in fiscal year 2019 and increased to 23% in fiscal year 2020 and we expect the percentage will increase further to around 40% in the fiscal year 2021.

Right, it’s true that the product sales revenue under the full-service model still accounts for the majority of the total net revenue. But if we look further from the growth profit perspective as compared to the total gross profit generated, gross profit from the platform model accounted for 24% in the fiscal year 2019 and increased to 35% in basically our 2020 and we expect the percentage will continue to go up, maybe around 50% in the full fiscal year 2021 and platform model is an asset-light model, we will now account for the inventory cost in its cost of revenue account. That explains the difference why if you look at our gross profit perspective, the percentage are even higher for platform model.

And third, as we look at the gross margin. For the full fiscal year 2020, gross margin of services revenue was about 57% compared to 32% for product sales under the full-service model. And if we further look at the operating profit, I’m talking about the operating profit, not taking into consideration of certain headquarter, general and administrative expenses that could not be allocated to these two models.

For the full fiscal year 2020, the adjusted operating profit of platform model accounted for in fact the majority, nearly 70% as compared to the total adjusted operating profit and we expect the percentage will further go up in the future.

Therefore, from the financial results that I shared just now for dividing into a full-service model and the platform model, we can see clearly that the net — that it’s really necessary to do the transition and we expect the platform model will play an even more important role in the future development. Thank you.

Bo PeiOppenheimer — Analyst

Thank you.

Operator

Thank you so much. And your next question comes from the line of Vicky Wei from Citi. Vicky, your line is now open.

Vicky WeiCitigroup — Analyst

[Foreign Speech] Good evening Management. Thanks for taking my question. I have a question about the fiscal ’21 guidance. So, can management provide some color about assumption for both the product sales and service revenue guidance? Thank you.

Jinbo WangChief Financial Officer

Thank you. Let me take the question for the full fiscal year 2021 revenue guidance, and I want to separate them into two parts. First, net revenue from our services through the platform model to be between RMB520 million and RMB610 million representing a year-over-year growth of between 72% and 101% respectively. It’s accounted for around, I think 40% of the total expected total net revenue. When we prepare the forecast or the outlook, right, the guidance, we consider the following drivers behind the growth for the platform model.

First, we consider the number of KOLs serving the comprehensive platform model and we expect it to increase from around 130 as of March 31, 2020, to over 210, which represents a growth by over 50%. To compare, in fiscal year 2020 and an increase, I’m talking about the number of KOLs increase of 12% to 137 as of March 31, 2020, from 122 as of March 31, 2019. It means in the next year, based on our — the plan for the Company to sign more KOLs, we expect we will try to sign more and more KOLs.

And second, we can see that the improved performance of such KOLs as evidenced by the increase in the aggregate number of the platform top tier, established, and the emerging KOLs. If you look at the history, right, it increased to 37 as of March 31, 2020 from 22 as of March 31, 2019 and we expect the number to increase a further by around 50%.

And third, we also consider the increase in the number of the brand with which the Company cooperated in its advertising business or other monetization channels. And if you talk about the advertising business, it increased to 735 for the fiscal year 2020 from 507 for the fiscal year 2019. We expect the number of brands to increase over 50% in fiscal year 2021. In addition, the merchants that the Company served through online sharing store is also expected to be doubled.

By analyzing the number of brands and the merchants we expect to serve, we also look at the growth by different monetization channels like the online sharing store and the e-commerce live streaming, which are all expected to increase significantly during the full fiscal year 2021.

Second, just now, I mentioned the platform model. But talking about the full-service model, the product sales through the full-service model, if you look at the number for fiscal year 2021, it indicates a decline in full fiscal year 2021 as compared to 2020 mainly due to the following assumptions. One, we consider the transition. And just now we — for another question we answered that, we talk about the transition and we have completed the transition as of March 31, 2020, and we — Ruhnn has transformed into a platform Company.

And the number of the Company’s serving 1P decreased from 14 to three as of March 31, 2020, and the online stores decreased to 56 from 19 — decreases to 19 from I think over 50 as of March 31, 2019. So that’s one really affected the increase — the percentage if you calculate the fiscal year 2021 as compared to 2022.

And second reason, there is the impacts of COVID-19, alright. We also mentioned we expect it to be an ongoing factor into fiscal year 2021, but to a lesser extent as compared to the fourth quarter of fiscal year 2020. I also want to add additional information here. We — following the successful business transition, building on the successful fiscal year 2020 we are well-positioned to achieve profitability for the full fiscal year 2021 on a non-GAAP basis. Thank you.

Vicky WeiCitigroup — Analyst

Thank you.

Operator

Thank you so much. And your next question comes from the line of Qi-Ying Hu [Phonetic] from UBS. Qi-Ying, your line is now open.

Qi-Ying HuUBS — Analyst

Okay. Thank you management for taking my question. Actually, I only have one follow-up question about the live streaming e-commerce model. I was wondering what is the revenue split between Ruhnn and KOLs and how much revenue came from live streaming model in the fourth quarter and how should we think about the future trends in the next few quarters? [Foreign Speech]

Lei SunFounder, Director and Chief Executive Officer

[Foreign Speech] Thank you. Thank you for your question. For a different platform, different e-commerce platform might have different policies regarding the e-commerce live streaming. So let us take Taobao live streaming platform as an example. Taobao live streaming platform is the largest e-commerce live streaming platform in China. So the total amount paid by brand or merchants, Taobao platform will take approximately 20% to 30% as their fee. And for us, for Ruhnn, we will get about 20% to 35% as our fees. So our KOLs will take the remaining.

[Foreign Speech] So the revenue generated from live streaming accounted for nearly 20% of total services revenue under our platform model for Q4 fiscal year 2020. And in fiscal year 2021, the revenue from e-commerce live streaming is expected to increase significantly and we anticipate the percentage as compared to the total platform revenue will also increase further. Thank you.

Qi-Ying HuUBS — Analyst

Thank you.

Operator

Thank you so much. And your next question comes — oh, it seems that Gregory is asking for an operator help.

Lei SunFounder, Director and Chief Executive Officer

Hello? Operator, if there are any further questions?

Operator

Yes, we’ve got one from Gregory. Gregory, [Operator Instructions] Oh, it seems like that he already dropped his line. Speakers, you may continue. I’ll hand it back to you. Thank you. Oh, we’ve got Gregory on the line. Gregory Zhao, your line is now open.

Gregory ZhaoBarclays — Analyst

I’m sorry, I think there were some technical issues.

[Foreign Speech] So, yeah I would translate. So we noted that in the past two quarters the leading e-commerce platforms like Alibaba, JD, PDD, all emphasized the importance of live streaming services on their earnings calls and also expressed their strong intention to expand their services and improve their monetization.

So just wanted to understand your current cooperative relationship with the three e-commerce companies. And if there are any difference in the cooperation formats with those three companies and what kind of efforts have you seen as the platforms are already made to increase the monetization with Ruhnn? Thank you.

Min FengFounder and Chairman

[Foreign Speech] Thank you. I’m Feng Min. Let me try to answer your questions. First, I want to point out and emphasize that we are not serving the e-commerce platforms, but what we are serving are brands or merchants. Our cumulative number of brands that we have cooperated with increased to 1,035 as of March 31, 2020 from 632 as of March 31, 2019, has increased more than 60% year-over-year. So we will continue to increase the number of brands that we will be cooperating with.

[Foreign Speech] Ruhnn is benefited by our first-mover advantage. We are the leading e-commerce KOL incubation and cultivation on a transaction platform in China. So leveraging on our strong KOL incubation, cultivation, and service capabilities, we had a bridge between our major e-commerce platforms including Alibaba, JD, and the PDD that you just mentioned about and the other social media platforms. And as — and you know a strategic partner to an e-commerce platforms in China we can empower all such e-commerce platforms.

[Foreign Speech] Alibaba is the largest e-commerce platform in China accounted for about 60% of total online e-commerce market shares. In addition, we all know it is a platform with mature e-commerce infrastructure construction, Currently, Ruhnn is operating widely with Alibaba in our business.

[Foreign Speech] And for our business cooperation with Alibaba, if you look at our full-service model through which we sell our own brand women apparel products in the online stores opened in the Alibaba platform including both Taobao and T-mall. So nearly 100% of our product sales are completed on Alibaba platform.

[Foreign Speech] For our platform model, we have extensive cooperation with Alibaba. So various monetization channels like the jointly operated online stores or online sharing stores. Currently all of such services revenues are generated through the Alibaba platform. So through online sharing stores opened in the name of the Company’s KLO, we connect consumers with products from multiple third-party merchants or brands in the same online store, where merchants are responsible for the order fulfillment and after-sales services for their respective products sold. This accounts for nearly 20% of our total services revenue on the platform model.

In addition, as you mentioned blooming e-commerce live streaming here in China, it is playing more and more important job in both our full-service model and the platform model and it has emerged as an important monetization channel on top of our live streaming platform also accounted for the majority of our e-commerce live streaming revenue.

[Foreign Speech] In the future, we would expect Alibaba continue to be the most important e-commerce platform here in China. However, following the emergence and development of other e-commerce platforms and the enhancing of e-commerce function of certain social media platforms, there are a good opportunities or great opportunities for Ruhnn to cooperate with all of them.

[Foreign Speech] Furthermore, we need to mention that Alibaba is our significant strategic stakeholder and a long-term key business partner. So in the New Year — in the new fiscal year 2021, we will continue to maintain our close business cooperation with Alibaba.

[Foreign Speech] And for the JD platform, Ruhnn also needs to direct our KOL private traffic from their social media platforms to the JD e-commerce platform. This is potential — there is potential cooperation possibility or talks between us.

[Foreign Speech] You know PDD is an emerging e-commerce platform originating from the lower-tier cities and market, which doesn’t match with our KOLs and our KOLs sales or characteristics in some way, but along with the continued diversification of our KOLs, especially the self-incubating KOLs or the third-party KOLs, we do expect there is a limited cooperation room between us including the e-commerce live streaming business.

Besides, as Ruhnn is deeply rooted in the e-commerce platform and the more and more e-commerce platforms further to explore lower-tier market here in China, it will certainly bring us more and more demand from such lower-tier cities or lower-tier markets. Thank you.

Lei SunFounder, Director and Chief Executive Officer

Operator?

Operator

Thank you so much. As there are no further questions. Now I’d like to turn the call back over to the Company for closing remarks.

Lei SunFounder, Director and Chief Executive Officer

Thank you, operator. Thank you, once again, for joining us today, everyone. If you have any further questions, please feel free to contact Ruhnn’s Investor Relations department through the contact information provided on our website or through our Company’s IR agency TBG. Thank you, everyone, Thank you.

Operator

[Operator Closing Remarks]

Duration: 78 minutes

Call participants:

Sterling SongSenior Director of Investor Relations

Lei SunFounder, Director and Chief Executive Officer

Jinbo WangChief Financial Officer

Min FengFounder and Chairman

Ellen LiSWS Research Co. — Analyst

Bo PeiOppenheimer — Analyst

Vicky WeiCitigroup — Analyst

Qi-Ying HuUBS — Analyst

Gregory ZhaoBarclays — Analyst

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