Thank you, Operator, and hello, everyone. Welcome to BlueCity’s fourth quarter and full year 2020 earnings conference call.

Joining us today are Mr. Baoli Ma, Chief Executive Officer; and Mr.

Ben Li, Chief Financial Officer. We released the results earlier today.

The press release is available on the Company's IR website at ir.blue-city.com, as well as from Newswire services. A replay of this call will also be available in a few hours on our IR website.

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 expressed 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 during today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings release.

Also, please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese renminbi. With that, let me now turn the call over to our CEO, Mr.

Baoli Ma. Mr.

Ma will deliver opening remarks in Chinese, I will than translate his remarks. After that, our CFO, Mr.

Ben Li, will take over to discuss our business and financial highlights. Mr.

Ma, please go ahead.

Thank you, Lingling, and hello, everyone. Thank you for joining our earnings conference call today.

We had an exceptional year in 2020, despite the challenging COVID-19 environment, we remained focused on our growth strategy, and achieved encouraging results. First, our NASDAQ IPO was a remarkable milestone in our long journey.

Since founding our predecessor Danlan website over 20-years ago, we have prepared for the recognition and social acceptance of the LGBTQ community. Being a public company, we will further broaden our user base and help us to connect with the LGBTQ community globally.

We believe we can make a wider and a meaningful impact in the world, with our unwavering goal to create value for society, promote diversity and foster a sense of belonging for our members. Second, we demonstrated the strength of our portfolio strategy.

We can pull different levers quickly, which makes us agile and able to grow faster. For instance, we acquired and quickly integrated LESDO and Finka into our operations, leveraging our experience in technology, those acquisitions strengthened our leadership positions in the LGBTQ community.

After acquiring LESDO in August, we quickly introduced a new version in Q4. As a result, by February of this year, LTSDO’s MAU increased 3.1 times since the acquisition.

Meanwhile, Finka’s MAU reached a historic high of 730,000 in December, representing 15% growth in one month, since the acquisition. In the fourth quarter of 2020, our total monthly active users of our portfolio apps reached 7.6 million.

These two acquisitions were the beginning of our multi-brand, multi-demographic strategy that enabled us to leverage and optimize our technology and operating system to support each unique recognizable brand, and provide differentiated services in each specific growth of our community. We intend to accelerate the growth of each brand, and believe, they will soon make meaningful revenue contribution.

Third, we regularly evaluate and adjust our global expansion strategy, based on the geopolitical situation and local community revenue. In each region, we customize our offerings according to user behavior and the needs of the local community.

For example, we introduced a major update to the Blued mobile app in Latin America, which generated positive feedback from local users. By February 2021, MAU had doubled since the launch of the new version, reaching record highs in both Mexico and Brazil.

Looking ahead, we will continue to introduce more localized and the diversified services, tailored for the local community. Fourth, we improved our organizational structure in order to maximize our operating efficiency and productivity.

Starting from 2021, we reorganized our company from a functional structure to a business unit oriented structure. This will enable our BU leaders react quickly to the dynamic changes in the online social networking industry and as LGBTQ community.

And more importantly, it will further accelerate our product innovation and optimize our product offerings. Furthermore, we attract and retain great talent to support this new organizational structure.

We hired two new Vice Presidents with 10-years of experience, focused on Internet-enabled products, user growth and global expansion. They will lead domestic and overseas business respectively, and manage the whole operation together.

We look forward to working with them closely and benefiting from their valuable insights and extensive experience. Finally, I want to mention our effort in Corporate Social Responsibility, or CSR, which is one of the most important aspects of our culture.

Since our founding, we have been dedicated to creating value for society and promoting diversity. Into last year, we were honored to be ranked as one of China's top companies for Corporate Social Responsibility, as compelled by the China CSR Research Center.

More recently, I'm excited and honored to be the fourth person from China Mainland to be recognized as the OUTstanding 100 LGBT executive list from INvolve, a global network and the consultancy, campaigning diversity and inclusion. This remarkable accomplishments come through our commitment to CSR.

We want to make this a better tomorrow for everyone. And we believe, our greatest impact on the world will come from our growing global presence and associated CSR efforts.

Now, let's move on to our growth strategy in 2021. For years, we have consistently executed our long-term strategy.

Let me give you some updates on our latest thinking. First, we continuously enrich our products and service offerings to engage and cultivate our community more deeply.

We are committed to build our Blued app as a comprehensive community platform, to offering more radio content and promoting community functions to drive up engagement. Making the life training model more attractive through innovation and offering more options for membership services.

With LESDO and Finka, we are investing heavily in technology and marketing, and leveraging on the strength of our product portfolio to expand our user base and achieve faster revenue growth. Domestic growth is the first pillar of our growth strategy.

Second, we are expanding business overseas. We are in the early stage of global expansion, which leaves us plenty of room to grow.

We will drive growth through entering new markets and strengthening our leadership in existing markets, such as Latin America, which is a focus for 2021. We will continue to localize product offerings and run various online and offline events to quickly attract users, with further accelerate monetization in mature overseas markets, through well-managed live streaming operations and better pricing of membership services.

In addition, with the huge potential for Finka to extend overseas, because the product is more appealing to younger generation. And we hope we can achieve meaningful progress in the second-half of this year.

Third, we are pivoting our service strategy from family planning to strictly health-related products and services. The family planning business never gained great traction, while health-related service centered on HIV prevention and treatment have huge potential.

We believe He Health, our well-recognized the health-related service can be the engine for our next phase of growth. In Q4 revenue from He Health increased more than eight times year-over-year, reaching RMB11.4 million.

We intend to obtain an internet hospital license and build a comprehensive diagnosis and treatment platform for men's health. Now, let me hand the call over to our CFO, Ben, who will provide details on our business and financial performance.

Thank you, Mr. Ma.

And thank you, everyone for joining our call today. For the fourth quarter, total revenues were RMB278.9 million, up 24.2% year-over-year.

We remain committed to enhance our monetization capability and the diversifying monetization methods, in order to generate a sustainable growth. We are pleased that our revenues for membership services and He Health continue to achieve robust growth in this quarter.

Monthly average users on this Blued app grew by 12.5% year-over-year, reaching RMB6.6 million, out of which 47% MAUs were from overseas. Monthly active users on our non-Blued app reached 980,000.

DAU over MAU for this quarter, on the Blued app remained stable as 44%. Total paying users on the Blued app were 518,000, up 37.9% year-over-year.

In addition to our solid financial growth, we also made meaningful progress in product innovation. We launched a voice chat room function on the Blued app in Mainland China.

Users can join chat rooms to have real time, community focused audio conversations with other members, based on their preferred language, friends and interests. We believe, this function will resonate with users and expect the full rollout sometime in April.

Meanwhile, a separate voice-based app called [indiscernible] for our community users is expected to launch by mid-April. Together with the community feature and catch function we introduced in the last quarter, we have been relentlessly devoting resources to product innovation that improve the user experience and deepens the bonds of our community.

We continue to drive LGBTQ awareness. A recent example was the Let Love Go Home campaign launched to coincide with the typical family reunion activities of the Chinese New Year holiday.

This campaign helped our community members to find a greater sense of belonging at home and cultivating more acceptance from family, thus bridging the gap between generations, and generate [indiscernible]. We live streamed an online real roundtable session between an openly gay influencer and his mother, who together candidly discussed his experience in announcing his a self-identity.

In March, we also partnered with UNAIDS on the Zero Discrimination campaign, that's aimed to end discrimination and inequality in the Asia-Pacific region. BlueCity brands, such as Blued, LESDO, Finka and He Health and Danlan Public Interest together voice to the opposition to prejudice of all kinds, especially that based on sexual orientation and gender identity.

The campaign was executed using a combination of themed posters, interview with experts, live broadcast and short videos. These successful events increased our visibility and strengthened our dominance in leadership in the global LGBTQ community.

Going forward, we will organize and participate in a wider variety of social and public events to promote LGBTQ awareness around the world. Finally, I want to note our enhancement of corporate governance.

We are currently upgrading our ERP system with Oracle EBS, which streamlines business process, facilitates information flow between all business functions and finance reporting, based on a well-designed control infrastructure. We expect this project to be completed in the first-half of this year, and it will improve our overall efficiency and the integrity of financial reporting.

Now, I will go through our financial highlights for this quarter. Before I go into details, please note that all numbers presented are in RMB and are for the fourth quarter of 2020, unless stated otherwise.

All percentage changes are on a year-over-year basis, unless otherwise specified. Detailed analysis is contained in our earnings press release, which is available on our earnings release, as well as our IR website.

Total revenues increased by 24.2% to RMB278.8 million, driven by better monetization of our diverse services offerings. Revenue from overseas contributing 9.5% of the total revenue, increased from 5.1% in the same period last year.

Quarterly paying users on the Blued app increased by 37.9% to 518,000. Revenue from live streaming services was RMB223.9 million, up 18.7%, mainly due to more paying users and higher average spending per user on live streaming services.

Our quarterly paying users for live streaming services increased 8.6% to 144,000, while ARPPU was RMB1,550, an increase of 9.0% compared to the same period of last year. In the fourth quarter, we launched a new live streaming strategy that drives engagement in large group of our mid-layer and long tail users, with limited spending power, such as promoting new features to enhance participation and developing more first to purchase incentive features to calculate the paying habits.

This new strategy complements our current high spending program and provided differentiated and diverse options to different cohorts of users. On the supply side of live streaming, we’re inviting more tailored agencies and promoting more individual live-streamers to join our tailored agencies.

Those initiatives create a good ecosystem for consistent improvement in producing higher quality diversified content, and in turn, to attract and retain our users. Those adjustments of strategy brought temporarily pressure on our short-term performance of live streaming services.

But, we believe the strategy provides holistic solutions and it would pave the way for a more sustainable model, which can be exported to our overseas market and other product portfolios. Revenues from membership services was RMB22.2 million, up 46.5%.

Our quarterly paying users for the membership services increased 51.5% to 415,000, pardon me -- 415,000. While ARPPU were RMB53.6 roughly flat compared to the same period of last year.

We expect accelerated growth for our membership services, as we drive the monetization efforts in both domestic and overseas markets. Revenues from advertising were RMB19.0 million, up 35.4%.

Other revenues was RMB13.7 million, up 108.7%, driven by growth in He Health merchandise. Cost of revenues increased by 29.0% to RMB209.3 million.

COGS is composed mainly of revenue sharing costs and commission costs. The increase in COGS was primarily due to two reasons.

First, the seasonal effect, which usually share higher incentive to streamer during our year-end events, especially for the year to celebrate our successful IPO. We offered an either higher year-end bonus to our best performing talent agencies and the live streamers and special tax.

Second, as we mentioned the new strategy that we launched in live streaming services, which resulted in higher cost. However, we believe it will generate a higher lifetime value and increase transaction volume and frequencies.

We expect that those investments will be paid off in the second-half of 2021. Gross profit was RMB69.5 million up 11.8%.

Gross margin was 24.9% as compared to 27.7% in the same period last year. The year-over-year decrease in gross margin was mainly due to the radically slower growth of live streaming service revenue, and the one-time live streaming related costs incurred for this quarter.

Operating expenses were RMB143.6 million, up 82.5% due to increase in selling and the marketing expenses and staff salaries, and IPO-related to share-based compensation. Selling and marketing expenses were RMB49.7 million, up 56.7% due to higher advertising and promotions in overseas markets, and increased headcount in sales and marketing personnel.

Technology and development expenses were RMB37.3 million, up 9.0%. The increase was mainly due to the increased staff costs in technology and the development personnel.

G&A expenses were RMB56.5 million up 345.5%. The increase was mainly due to share-based compensation capacity, as well as increased professional fees and staff cost.

Net loss was RMB73.1 million compared with a net loss of RMB7.2 million last year. Adjusted net loss was RMB36.0 million compared with adjusted net loss of RMB15.0 million last year.

For full year of 2020, our total revenue increased by 35.9% to RMB1.03 billion, driven by the increase in the total paying users of our online services and the diversity of our revenue streams. Gross profit was RMB311.0 million up 46.2%.

Gross Margin was 30.2% improved by 2.2 percentage points from 28.0% in the same period last year. The increase in gross margin was mainly benefited from the reduced live streaming revenue sharing percentage and the higher revenue contribution from membership service.

Net loss for 2020 was RMB221.9 million, compared with net loss of RMB52.9 million in 2019. The increase was primarily due to share-based compensation expenses related to the IPO.

The adjusted net loss for 2020 was RMB39.9 million, narrowed from the adjusted net loss of RMB52.9 million in 2019. As of December 31, 2020, we had cash and cash equivalents and term deposits of RMB611.8 million, compared to RMB380.3 million as of December 31, 2019.

Now, let me talk about next year's guidance. We expect our revenue outlook of RMB1.41 billion to RMB1.46 billion for the full year 2021, representing a 37% to 42% year-over-year growth.

However, the year-over-year growth for the first quarter of 2021 will remain relatively slower, primarily due to our newly adopted new live streaming strategy, as well as a large increase in the number of paying users in first quarter 2020, during the COVID-19 outbreak, which resulted in an unexpected revenue growth. We expect that the robust revenue growth will resume in the second-half of 2021.

Well, that concludes our prepared remarks. Let's now open the call for questions.

Operator, please go ahead.

Good morning. My first question is about the changes to live streaming.

Could you be more specific on what the expenses were related to those changes? And in what way you expect that to increase lifetime value of your live streaming customers?

So, I'll translate to Mr. Ma first, okay.

Okay. Hi, Laura.

And there are three points regarding to your questions. The first one is that actually comparing to the percentage of revenue sharing with talent agent [indiscernible] ordinary person, like the ordinary streamers share a lower percentage.

And we intend to increase that actually to increase the engagement from the ordinary streamers. And, in turn, that will attract more users to join our platform.

And hopefully, we can improve the number of paying users in the channel. The second is that actually we are inviting more agent talent to join our platform.

Currently, we have quite limited number of talent agencies on our platform. And we are going to invite more agent talent agencies to provide more kind of professional and high quality content on our live streaming platform.

The third is that, from the revenue side, actually the revenue are recorded from the paying users virtual gifting. And we intend to launch new features to the streamer site, generating the revenue from streamer site, which they can, you know, through our platform, they can purchase like promotion choose to increase their traffic to their own channel.

That's a straight point.

Thank you. And last question on the launch of your business in Latin America, how will that compare in terms of a push, initial push compared to your launches outside of China into other Asian countries?

Laura, I'm sorry, we are not quite following you clearly. Can you repeat the question?

Sure. Your initial advertising spend or your initial launch spend to launch Latin America, how will that compare with your initial spend when you launched BlueCity’s apps outside of China into other Asian countries?

Thanks, Laura. I will translate your question.

Okay, I will translate. Mr.

Ma’s answers. The first Laura, actually, for every new app entering into new market, the initial launch always is the most difficult part, okay.

And we intend to spend more on the initial launch, and after that, once we gain the reputation we can easily spread our brand and to attract users through word of mouth. As we are in the leading position in Southeast Asia, and we can quickly leverage all the marketing channels into Latin American markets.

Actually the marketing channels are quite similar to the Southeast Asian market. We usually tend to use Facebook, Google channels, as well as running offline events with local agencies.

In terms of the average spending, we see that it's kind of middle years, in the middle between our high net wealth countries such as Japan, Korea, it's like the middle range. Thank you.

Thank you.

Thank you. I will translate for myself.

Good evening, management. Thanks for taking my questions.

So, I noticed our revenue growth slowed down slightly in 4Q. But our 2021 guidance imply a growth acceleration this year.

So just wondering can you talk about the growth strategy this year, especially for He Health you mentioned is going to be our second growth engine. So can you talk about the required investment in this business?

And also talk about to achieve the revenue growth guidance, what else investments do we need to do for this year? And then my second question is about our M&A strategy.

Can you also talk about M&A strategy this year compared with last year? And then where will our target be, for example, in China or overseas market to expand our international footprint?

Thank you.

So, for the first question regarding the growth strategy in 2021, I will answer this question in four parts. First is the monetization opportunity overseas, and we see a great potential in overseas markets, especially in live streaming and the membership services.

Before that, we are in the very early stage of monetization overseas. And we will enhance the operations in life training and provide more membership service products and offerings, security rates, the paying habits of overseas users.

Therefore, we see a huge potential of revenue growth overseas. Second is the revenue contribution from Finka.

And after like three months of integration with Finka, we found that there is still plenty of room to grow for Finka business, especially in live training and membership services. We found that based on Finka's user profile, they have higher willingness to pay for high quality services.

Partly, Finka's revenue structures tend to be more healthy; it's like more than 30% from live training around 30% from advertising and another 40% from membership services. Therefore, that leveraging on our financial support and the technology support, we will offer more features in live training and in membership services to drive our paying ratio of Finka users.

Third is that we continue to see there is a huge growth opportunities in Blued membership services. As you all know the membership services is a recurring revenue and have higher gross margin.

For Blued membership services, we will offer more interactive features, we will adding more features to behind the pay wall trying to cultivating our users paying habits and intend increase the paying ratio of our users. Fourth and the last is as you mentioned, is our He Health strategy.

He Health, internally what we position He Health as [indiscernible]. It's like that He Health will be our meaningful driver for our recent years.

First, the opportunity for He Health is huge. We started from providing HIV-related services and then we became quickly expand that service goes into more housing, privacy related services and into the well-being of men's health.

And we see that through the partnership with pharmacists and many pharmacy manufacturing pharmacists, we can easily take leverage on the pricing negotiation. And right now we currently are going to obtaining the Internet hospital license in the near future, and we are pretty confident that we can build a comprehensive men’s health platform and wrap up that business very quickly.

Now for your second question, -- sorry let me translate that answers first. Thank you.

And first, that based on our mission is that we are tend to be a comprehensive lifetime provider for the LGBTQ community. So, we choose our acquisition target more carefully.

We tend to choose the target shares a similar vision with us. And so that we keep active dialogue with our potential acquisition targets in America, Japan and Europe, keep a good dialogue with them and seek for opportunities, so that we can work closely together through partnership or other forms of M&A.

Thank you.

Okay. Thank you.

Thank you for taking my question. Congrats on your solid fourth quarter results.

My question is about the two successful M&A deals last year. As you have included that MAUs in the latest reports, so could you please add more color on the integration plans, and one where you expect the company can benefit from the synergy you achieved via M&A deal?

Thanks.

Thank you for your question Brian. And let me just a simple translation here.

Actually, we're quite pleased with the integration of Finka and LESDO. You can see that the MAU growth of Finka and LESDO are very encouraging.

You can see that in our scripts. And we haven't disclosed the latest MAUs of Finka, it's like its reached even higher compared to the end of last year.

So it's like that our portfolio strategy has proven to be right. And through our portfolio strategy, we can sell more users in -- kind of more users, so we can extend our user base.

And each of our quarter portfolios will position them quite differently, so twice of more different group of users. For example, we will quickly launch another voice-based app called [Indiscernible], and to try to cover more users who like to use the voice-based app.

So, it's that we aim to be the match group in the LGBTQ community. And we are trying to launch more new apps or new features try to cover and serve more different groups within the LGBTQ community.

Thank you.

Thank you.

Thanks for taking my questions. Within live streaming, can you talk about which products have the most meaningful revenue contribution currently?

And what new products have the most potential for growth going forward?

I'll just translate that. I think you are asking that, nice to hear you again.

This is Ben, and I will do the translation to Mr. Ma first.

Hi, Austin. This is Ben.

I will just do the translation myself. Mr.

Ma just explained that for existing revenue pie that apart from the live streaming he deemed or the management deems now the membership services revenue, it is going to -- is actually taking a very majority important role for now. And for the future, the most potential impactful revenue service pie contributor is coming from the health-related services, Austin.

Regarding the so called health-related services, actually it's mainly related to private treatment for men here in China. So, currently we do see the HIV-related treatment for the exposure prophylaxis and post-treatment et cetera.

Actually the HIV community here in China, we had our internal analysis is around 1 million population. So, we do see -- it is going to be a huge -- because people have to taking lifetime drugs to get a qualified treatment.

So, we do see it is going to be a recurring revenue and a best entry port for us to get into there. Not to mention that HIV treatment is only a start for the private treatment for men here in China, and also other demands from for men like the hair issue, like the sexual malfunction issue, et cetera, Austin.

Thank you for that. Just following up a little bit.

What live streaming products drive the most live streaming revenue? And what are some new live streaming products you're excited about?

Interesting question. I want to translate.

Austin, we have to say this so virtual gifting model for live stream means is kind of existing for years. So, we keep innovating by developing new features trying every effort to figure out what to do to better leverage our position for live streaming revenue service contribution to our revenue pie.

And what Mr. Ma explained for only one example is that, but that's too minor.

I'll explain, because his earlier speech was also mentioned that, currently our revenue many from the people who purchase the virtual gift on platform right. So actually, sooner or later we are going to develop a new feature that's actually, the live streamers might purchase some services features from the platform.

So basically, we are telling you that we are going to just not doing the monetization from the viewer’s audience side, but also from the live streamer side. So that's number one.

Number two, Mr. Ma Gao just added that, for example, we're going to create some interesting functions like taking the number -- the zoom number, how important for a zoom number for a lucky trial here in China.

Number six, number eight meaning locking et cetera. So, we are going to develop something like that say, taking example.

So, we keep innovating from time-to-time, Austin.

Thank you. That's very helpful.

My last question is regarding competition. When you launch into new overseas markets, for example in Latin America, where you're focusing in 2021.

Do you typically find one or two well entrenched competitors that are already there? Or is it typically a very fragmented market that doesn't have any scales, competitors of note?

That's easy answer. But, anyway.

Yes, sure. Austin, actually, in Latin America, there are only one named actually that's famous U.S.-based competitor of us already there.

And due to the population, Latin America having a large population over there, and also the user behavior is not a product was kind of very popular already on site. So basically, as a latecomer, we enter into those new markets.

We have to deal with it very carefully, starting from a market analysis. We interview, we engage with third-party consultants on the standard, the user behavior engagement based on those local players and the local users on a general matter.

And also, we identify those gaps, the demands of the users locally have not been satisfied by the existing player. So, back to your question directly that there are only one meaningful peer in Latin America market.

Yes, still there are some demand that we do see a huge opportunity. We could do something meaningful over there in general, Austin.

Okay. Thank you very much for taking my questions.

Sure. Okay.

I think that’s all, operator.

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