Good afternoon, ladies and gentlemen. Welcome to the momo.com conference. Management is beginning your call, and I'll be standing by for the question and answer session. Thank you.
Thanks, operator. Welcome everyone, everybody who joins our first quarter earnings conference call. For today's call, President Jeff Ku will kick off the opening remarks, and I will discuss the financial results. After that, we will open the lines to questions from analysts and investors. I would like to remind you the following discussions, including the response to your questions, reflect management's view as today's only. We do not undertake any obligations to update or revise this information. Also, we have uploaded equity report and the latest presentation on our website for your reference. With that, I will return the call over to Jeff.
Thanks, Terrisa. Hello, everyone. Thanks for joining us today. Let me start with sharing some highlights of the first quarter of this year. First, our first quarter group revenue was TWD 25.1 billion, growing 9.5% year-on-year. The B2C revenue increased 11.3% year-on-year. We attributed the lower than expected year-on-year growth to the macro uncertainties, more public holidays and the post-COVID reopening. In particular, we saw that customer have allocated their spending more toward leisure activities such as dining out and domestic and overseas travels. Plus, there were more long holidays in Q1 this year.
The number of overseas departures from Taiwan in the first two months of the year rose to more than 1 million, a figure that is 15 x higher than a year earlier, following Taiwan's decision last October to relax its COVID border control. The recently published Q1 GDP number of Taiwan showed a 3% year-on-year contraction, which was bound to have an impact on customer spending allocation, particularly on the discretionary goods. In first quarter, the total retail market here grew 5.3% year-on-year despite the unfavorable GDP number, mainly because of the Lunar New Year and other long holidays. The online sales increased just 1.5% year-on-year, which is the lowest point in recent years. Although momo.com still achieve a higher growth rate than the market, each of our five product categories experienced different market conditions.
Among them, house goods, household items, PC, smartphone, apparel, facing weaker customer demand. Nevertheless, our B2C take rate held well to 13.14%. More importantly, our OP margin was up to 4.2%, reflecting the scale benefit. On the customer loyalty side, active customer numbers increased for the 68 straight quarter and it grew at 7.3% year-on-year. Revenue per active user also increased by 3.7% year-on-year. momo.com and the Fubon co-branded credit card holder spending accounted for 32% of the B2C revenue. Our co-branded credit card holders purchase 2x more frequent than non-card customers.
Regarding our TV shopping, although it only account for less than 4% of our total revenue, TV shopping's Q1 revenue dropped 19.4%, which was the largest drop in recent quarters and had negatively impacted our margin rate. Because TV merchandisers usually carry high gross margins, the accelerated decline rate was worse than we expected. Therefore, we have sped up the transition to live streaming, social commerce. Its monthly viewership, active users, revenue, all have shown significant growth. We will continue shifting resources from TV operations to foster its growth, and we are very confident in its potential. Looking ahead, we remain cautiously optimistic about the rest of the year. We think people's lives will gradually go back to normal. Reopening effect will diminish with time. Taiwan online market penetration is still low and it will regain the growth momentum.
However, we also notice the micro-uncertainty will affect the customer sentiment and in turn, their spending. All of these factors made the future hard to predict. We hope the macro environment in the second half of the year will get better. Because of those unexpected headwinds, our revenue target will move towards the mid-teens at the low end of the original target. As far as operation margin is concerned, we maintain the previous target of similar to last year. Finally, I'll touch on logistic infrastructure part. We now have totally 55 warehouses versus 54 in last quarter. After aggressive expansion in the last few years, this year warehouse footprint increase will slow down. Instead, we will streamline the operation process, work on efficiency improvement, and be prepared for the South Distribution Center during the operation at the end of the year.
As for the central distribution center, it currently moves ahead as planned and is currently working on getting those required government permits ready before its construction can start. Finally, on the ESG part, we are working on the TCFD report. We believe this will be one of this kind of a report published in Taiwan by an e-commerce player. We also have received a few of ESG related awards, which you will find a reference in Teresa's report later on. I will turn the call over to Teresa to review the financials in more details.
Thanks, Jeff. Let me walk through first quarter result and operations update. Our group revenue reached TWD 25 billion, increased 9.5% year-on-year. Given the TV revenue dropped 19% year-over-year, its revenue weighting decreased to 3.7% versus 5% in the first quarter last year's. You can see the good take rate was down to 14.5% from last year's 15%. At the same time, the EBITDA margin was down to 5.5% versus 5.7%, also because of the business mix change. Net income to the parents increased 7.6% year-over-year, the basic EPS reached NTD 4.07, which can be attributed to the operating profit of TWD 1,092 million and the non-op gains of TWD 20 million.
Moving to the B2C, its revenue increased 11.3% year-over-year, continued to compound and grow much faster than the total online sales of 1.5% year-over-year. B2C take rate held well to 13%, owing to the similar product mix of last year's. More importantly, B2C EBITDA was up 12.5% year-over-year. EBITDA margins was up to 5.2% from 5.1%, driven by stronger bargaining power as we scale, as well as operating efficiency improvement. Cash position in the first quarter was TWD 7.5 billion. 6.7% quarter-on-quarter decrease was a result of bulk of last quarter's AP due at first quarter. 10.7% year-over-year decrease was primarily owing to the PP&E acquisitions and cash dividend paid. Moving to the inventories.
Our inventory is under consignment model, meaning our customers are paying cash much earlier before we have to pay to our suppliers. This model implies our customer are essentially financing our growth through the prepayment. In the first quarter, total working capital for MOMO's operation was solid and healthy at TWD 4 billion, while the cash conversion cycle was -20 days. On cash flow. Free cash flow turned negative was result from the bulk of fourth quarter AP due at first quarter. CapEx spending, including TWD 173 million, the construction payment for the SDC. Last year's basic EPS was TWD 15.72. Management has decided to distribute a cash dividend of TWD 15 and a stock dividend of TWD one per common shares. This slide show the CapEx budget for this year's.
During the first quarter, TWD 5.2 billion was paid mainly for the warehouse's facilities. Having discussed the financial highlights, let's turn to the industry dynamic and operation updates. In the first quarter of the year's, retail sales totaled TWD 1.1 trillion, up 5.3% year-over-year. The Minister of Economic Affairs attribute to more people returning home over the Chinese New Year's holiday, as well as rising consumptions by international traveler following the easing of border restrictions last year's. General retail, including the department store, supermarket, and CVS, rebounded 9.7% year-on-year from low base last year's, thanks to the COVID normalization and the rising store traffic. While total online sales rose 1.5% against 12.6%, the high base during the COVID period.
In terms of the market shares, in the first quarter, momo.com accounted around 20% of total e-commerce market shares, and slightly over 3% for the total retail sales. Moreover, as you can see from the upper left bar chart, online retail penetration in Taiwan remained low at roughly 13%, as compared to around 30%-50% by the Asian peers, especially China and South Korea, suggesting very positive tent growth opportunity for momo.com to capture as an e-commerce market leader in Taiwan. Next, let me touch on momo.com's operational updates. Momentum across the major five categories was slower than expected. You can see from the bar chart, 3C and home appliance increased 11% versus last year's high base, 20%. Household this year increased 10%. Beauty and healthcare around 16%. Fashion luxury around 9%.
Sports and leisure 17%. That's impacted by the, again, the high base and also a reopening impact due to the strong recovery in service and also the overseas spending coming out of the COVID era. Also more public holidays this year's negative impact on the product e-commerce spending and also the economic uncertainty globally affects consumer sentiment. However, each category continued growing at multiple of the segment, indicating that we are still at early stage of the product e-commerce growth cycle. As of the first quarter, the numbers of the brand increased 9% year-on-year, and the active SKU was up 26% year-over-year, driven by growing revenue scales and network effect, meaning we are further gaining tractions with the brand suppliers and widening our industry leading positions.
Regarding key customer metrics, the number of monthly visitors in the first quarter was largely flattish at 12.4 million against the COVID high base. Active user numbers increased year-over-year for the 68 straight quarters and growth 7.3% year-over-year. In the meantime, revenue per active user also cost sequentially increased. On warehousing, these numbers, the net warehouse increase will slow to seven versus 10 last year's. Regarding customer service, we believe customers are always dissatisfied, even when they report being happy and business is great, even when they don't yet know it. Customers always want something better, and we desire to delight customers, which will drive us to invent on their behalf.
With the support from two new DCs, plus the existing NDC, along with the ongoing satellite warehouse expansion, our competitive threshold of our warehousing and fulfillment capability should be further raised through the offering the same-day delivery services across the major six cities in Taiwan versus only northern Taiwan population right now. Looking ahead, having a more comprehensive logistic footprint in the coming years, our infrastructure will simultaneously serve the faster ramp of the hybrid 3P business in the mid to longer terms, and offering logistic as a service for both brand and also the hybrid 3P customers. On the new initiative. Our recent strategic effort in initiating the hybrid 3P business are expanding product offering to long tail, which will help accelerating per customer spending for the longer terms.
We are pleased to learn the number of hybrid 3P suppliers increased nearly one times year-on-year in the first quarter across apparel, fashion, home improvement, toy, and food and beverage, et cetera. In the meantime, we launched customer review and star rating in the first quarter. We incentivize the customers to fill out the reviews by offering free momo.com coin. Of course, we encourage customers to leave photos and honest positive feedback, which will improve products and the customers' experience. So far, the initial feedbacks are good. Last, live streaming. Its monthly average viewers of our two regular channel increased nearly 20 times year-on-year. Active users increased nearly three times. In the second half, we plan to increase the momo.com more collaborations with KOL influencers to live stream featured products and engage with the shoppers.
As we continue to grow, we will work to maintain a culture that embrace new business. We will do so in a disciplined way, with an eye on the returns, potential size, and ability to create a differentiations that customers care about. Regarding the ESG performance, momo.com has awarded the top five positions for the seven consecutive years of the Securities and Futures Institute's Corporate Governance Evaluations. We are very proud of it. In closing, we believe what is good for the customers is good for the shareholder. Operator, we are now ready to begin the QA session.
Thank you. Ladies and gentlemen, we will now pull for questions. If you'd like to register for a question, please press star one on your telephone. Thank you. Thank you. Our first question comes from Bill Lin with JPMorga n. Please go ahead. Thank you.
Okay. Thank you, Jeff a nd Terrisa. Thank you for taking my question. I have two questions here. First of all, regarding to Jeff Ku's guidance, the company's lowered down the group rate for this year to like mid-teens. I'm curious to know if we're looking for a longer term end goal with the launch of South Distribution Center and the Central Distribution Center. Will the company think that the revenue growth rate can go up faster to like high teens or even 20% in the next two, three years? Second is, I think given the company has been strong in the non-3C categories and is launching the Hybrid 3C, I'm wondering what is the trigger that we can accelerate the growth in 3C categories? In past few quarters, the 3C growth is a little bit slower.
I would like to know what is the main reason behind this, and if there's any strategy that the company can push out the 3C revenue to grow faster again. Thank you.
Okay, thank you for your question. The first regarding the two distribution center need during our operation. Will that help our business? Certainly well. I think we shared before our current revenue in the northern part of Taiwan account for 60%, 55%-60% depending on the season. We think it's, there's a lot of undiscovered demand that exists in other parts of Taiwan, and because of lack of the better service. With those two distribution center joining in certainly will help. To what extent is really hard to give you a estimate at the moment because there's not only one factor going to affect that.
I think, this, the past quarter slowed down and this year's macro uncertainty are affected by a lot of different reasons and most of them I have touched upon in my previous talk. But those are temporary. I think even the rising interest rate, COVID, post-COVID reopening, it's going to gone in just in the matter of time. When all those outside factor being eliminated, everything needs to go back to the trend. I think in Taiwan, the online trend is still going up. We still have the low penetration rate. We have to go together with the rest of the world. I think we will retain the growth momentum. However, no one knows when that time will be certain. Hopefully, it will be the second half of the year.
The second question is, does 3C always become a revenue driver now this 3C slow down? What's our view on that? I think this 3C demand is really, it's a global issue. I think you guys can see the news from all the different industry sectors, all report a slowing in electronic components, the finished product. I think that all get impacted by the same reasons. During the COVID, people have over-bought a lot of this kind of e-equipment. They're facing the economic downturn, people shifting their spending to the discretionary items with the priorities. Certainly will impact the customer demand in this category. However, my view is 3C is always a strong category in the electronic commerce. makes. No matter which market, it will be always an important segment. When this period pass and people will pick up the demand, we will regain the growth momentum.
Yeah. Operator, we can have next question. Thank you.
Thank you. Ladies and gentlemen, our next question comes from Harvie Chou with Credit Suisse. Please go ahead, Harvey. Thank you.
Okay, thank you for taking my question. Just a quick follow-up on your guidance. Generally, I see that the top line guidance for the year has been upheld toward the lower range of the guidance range for about, I think, mid-teens, I think year-over-year growth, despite the softer first quarter sales reporting. This will imply accelerating momentum in terms of a year-over-year growth for the remaining of the year. Just a quick question. Could you briefly discuss your view for order in second quarter and maybe the seasonality trend for the remaining of the year? What quarter do we expect the strongest momentum to catch up the shortfall as recorded in the first quarter? Lastly, have we seen any uplift from TWD 6,000 cash distribution? How have we been, or even to target further for this incremental budget increase from consumer? Thank you.
Right. Answer your last question first. So far, we don't see a great help from the government's 6,000 subsidy. I think, based on our observation, people tend to use that money for other purpose, leisure activity I mentioned about or maybe pay some taxes. It's tax season now. That also relate to your first question, how, what's our view on the rest of the year? It's really difficult or hard to really see through. Our view is the second quarter will not be very good. May is the tax season and, rising interest rates are still hanging in the distance. That will impact the how people want to spend.
However, we hope the second half and every dust going to settle and also customer sentiment so that they will be sure for the future and then their spending behavior will go back to normal. Luckily, if that happen and the plus, the first quarter always be the biggest season of e-commerce. Hopefully, the all the shortfall going to be made up by the second half of the year. I have to stress again, it's no one can be sure. I think we still watch for every development in the whole economy.
Okay. Understood. Basically we are in our forecast or meetings for the year, we are basically building in like a accelerating momentum into second half of the year instead of maybe, pick up from second quarter in terms of year-on-year comparison.
That's right.
Okay. Okay. Okay. My second question is that, with your co-branded card with Fubon, it seems that the after Costco issuance right acquisition, a momo.com coin, cashback benefit has also been lowered down on momo.com platform as well from originally, 5% to 4% this year. On the back of a macro highway, do you think that this also create other layer of uncertainty to your guidance? In order to achieve your target for meeting for the year, do you think that you may need to maybe chip in more sales and promotion effort, which may end up with a larger margin pressure to your profitability? Thank you.
Yeah. In the economic downturn, I think every industry faces different kind of a difficulty. certainly, cost saving is one of the primary things people want to take on. cut back from 5% to 4% is a consensus among bank and us. based on first we want to save some cost and secondly, we want to see whether the real loyalty going to kick in because we have compared with the market, 4% is also attractive enough. based on that, we think we the impact to the business should be minimized. we have decided to cut that 1% back.
However, we will reinvest that 1% in different area, hopefully to get a better return, which means for those, traditionally low spending, customer segment or, to be discovered customer behavior, if we can invest in those area, maybe we can get more return to our in their buying frequency or ticket size. We basically just shifting how we spend our marketing dollar from one area to the other.
Lastly, maybe on your longer term, maybe strategy. I think momo.com has been becoming more active recently in terms of the development of momo.com ecosystem, including the recent partnership announcement with Taiwan Mobile for buy now, pay later services. Could you give us an overview on what are the area of interest in order for momo.com, like in order for momo.com to cultivate the ecosystem. For example, we see Japan giant Rakuten having good financial coverage, including banking, security, insurance, sporting and broadcasting, and even mobile network. From momo.com ecosystem perspective, what can we expect the ecosystem to be like, say in a year or a few year time frame from momo.com? Thank you.
There are a few ideas still under cooking, so probably not a good time to discuss them yet. However, we because of the relationship with the group company, so we have frequently exchanging those ideas and try to realize as much as we can. You just mentioned one, buy now, pay later, launched by Taiwan Mobile. Also we have Took over the electronic group business, my group from Taobao to momo.com. Those are the example which has already happened. There are still more, and we hopefully we can still working with a good company. I want to mention others. We also try to work with company outside the group using momo.com coin as a tool to create a more to enlarge the benefit, become a momo.com's customer.
We try to engage with different channel or some of our merchants to make sure when they buy things or shop at their place, they also can enjoy the benefit of being the momo.com customer, which means use momo.com coin to get a better service, and we will announce them when time is ready.
Okay. Thank you. Thank you for your time.
Thank you. Our next question comes from Angela Hsu with Citigroup. Please go ahead, Angela. Thank you.
Hi, management. Thank you for taking my questions. A few from my end. First one is on the slide 15, I noticed the number of the main warehouses, for 2023 is now 19, and that's actually down from 21, in your previous presentation in February. Does it factor in our plan to shut down some warehouses? Also, if so, can we get some update on that and if there is any timeline on the closure of the warehouses? Thank you.
I think probably because of, we actually have three kind of, three different type of the warehouses. From outside, you only see two type. One is the main warehouse and the other is a satellite warehouse. Among the main warehouses there are two different kind. One is long-term rented. The other are short-term rent. I think probably the number difference because of a few of the short-term rented one actually terminates the lease. I don't know the number, I think the IR are going to double-check that and re-reply you later. I think that is the reason for it.
Does that mean, we are going to close two factories because they are short-term lease, sorry, warehouses?
No. Because there was a time we need a warehouse so badly and need it urgently, so we really has to not much of the choice. You just have to commit one. You know, that doesn't fit his long-term purpose, so you will sign a short-term lease. W e sometimes sign the lease as short as one year or three months if just for the Double Eleven only. Now we are leasing more of the larger or better located place or warehouses, we kind of will swap them out.
Got it. My second question is about our initiatives. How much sales in first quarter comes from third party and also advertising? Do we have a full year target?
We do internally have full year target. Those are very new, young business, so we don't give any financial guidance yet. They are still quite small, so not significant enough. Once they reach to the certain size, we will announce in this meeting.
Got it. Thank you.
Thank you. Our next question comes from Daniel Chan with UBS. Daniel, please go ahead. Thank you.
Hi, Jeff and Teresa. Thank you for taking my questions. Could you hear me?
Yeah.
My first question just I want to follow on the marketing spending. The total marketing spending will remain the same. We just allocate to from eBay to other areas. We will incur incremental promotion to try to attract customer. Is my understanding correct?
Yes, maybe not 100%. What I mean is we don't intend just to save that part of money. The intention really is to invest in other area, but whether it will be exactly the same amount, I don't know. Roughly.
Okay. Maybe we'll conduct a promotion or discount to attract customer, just like what we did in the second half of 2022.
Maybe, yes.
Okay. Okay. Got it. My second question is for B2C take rate. What's the negative factors that offset the favorable economic change? B2C take rate remains flat year-on-year. I'm just trying to understand why B2C take rate didn't expand this quarter?
I think mainly is the product mix. Teresa has explained in his presentation. The product mix of first quarter this year is quite similar to the first quarter of last year. If you can see the take rate are quite similar as well.
Okay. Thank you. My final question is that, what is the number of registered members as of Q1?
We have stopped reporting the re-registered members because that number becomes so high and also contains some double re-registered ones. From now we change to the monthly act active visitor and active users. I don't have that number, but those are accumulated member numbers for last, I don't know, 15 years or more. Basically, I think that the stats for managing that number is less important.
Okay. Got it. That's all my questions. Thank you.
Thank you. Our next question comes from Casey Chan with Alliance. Please go ahead. Thank you.
Hi, Jeff and Terrisa. Can you hear me?
Yeah.
Yes. Thanks. Firstly, also on to follow up on the full year guidance. If I look at page, you know, 13 of your PowerPoint, it seems like, for first quarter, your lower than expected revenue, probably, you know, one of the reasons probably, shift in offline, online, help behaviors. As you sort of guide down on this year revenue growth, are you basically assuming this shift, either temporary or not, will proceed into second or third quarter?
We certainly assume this behavior shift are affected by a few of the outside reasons, and I briefly talked about. Those reasons going to disappear, but no one knows when that going to disappear totally and also the leftover effect going to last. We do know it will not go away in the second quarter of the year. Hopefully we think the second half of the year will be better and, but that's everyone's guess. I think. We just have to based on that assumption and prepare our business plan, so do it accordingly. If things doesn't turn out as we expected, then we'll certainly will adjust our actions.
Got it. Thanks. My second one, on your core customers. If like, if I look at the revenue mix, more revenue are generated from, you know, either the foodpanda cardholders or your core customers, which, you know, grew about 7% year-over-year. Overall member active monthly visits are only, you know, kind of flat year-over-year. My question is, as your more of your revenue generate from these core customers, does that mean your marketing spends, you know, you can also save the marketing spends? As I guess, you know, those customers are, you know, less sensitive to marketing campaign or am I wrong on that?
Okay. That is how I going, how I would like to read on the number on page 15. The monthly average visitor has a number around 12 million, which is probably 50% of the total population of Taiwan. As you know, some of the purchasing entries are made for the household, not for individual. You are not able just for the domestic market. As an e-commerce player or any retail player, you won't be able to have everyone as your customer because maybe in the household, only the mother responsible for buying things. I think that monthly average visitor, the low growth of that means we pretty much reach to everyone in the market, the difficult to find a new visitor.
There's still a gap from TWD 12 million to 3 million a quarter as an active customer, which means I may have, still have the opportunity to turn the other two-third of the, of the visitor become a buying customer this quarter. That means we probably can have a 100% penetration of the all eligible buyers in the market. That's how I going to read it. To me, the more important is, do I have more customer buying this quarter, and then do they buy more often or do they buy more or less? Regarding the co-brand card customer, because co-brand card give 5% rebate and now reduced to 4%, still quite a lot.
Which means most of the heavy users or loyal customers, they have to have one because I don't think anyone will give away 4% for nothing. Everyone bound to have one co-brand card. That, together with our marketing promotion, make the number very high, which as a part of the B2C revenue percentage, I think That is just naturally going to happen. Heavy users have to have a card, and therefore they have a card and they get a rebate point, and the rebate point trigger them to buy more. That's exactly why we designed this co-brand card. That's exactly we expect the number going to account for a big percentage of our revenue. I think that's a good sign of customer loyalty.
Understood. Very clear. My final question is just a quick verification. I think in your opening remark, you mentioned there was a loss of TWD 1 million, not sure, revenue or something in first quarter due to the public holidays. Can you elaborate on that?
Oh, no. What I mean is, there are... In the first two months of the quarter, means during the New Year, New Year holiday season, there are more than 1 million Taiwanese go overseas to travel. More, yes, and which is 15 times than last year. Of course, last year because of the COVID. That also tells people spend a lot of money doing those leisure activities. Dining out, travel, doesn't matter overseas or domestically. That's going to hurt their purse. They're going to hurt their wallet share. They allocate less in purchasing other goods. That's the reason why you find a lower growth rate over the first quarter of this year.
Okay. Okay. That's very clear. That's all from me. Thank you.
Okay. We have seen a couple of questions from the website. I think I personally will reply each questions to you. Because of the time constraint, this will conclude today's conference call. Thank you all for joining today's call. We very much look forward to speaking to all of you again next quarter. Have a great day today. Bye.
Bye-bye. Thank you.
Thank you. Thank you for your participation. This concludes our conference. Goodbye.