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Ruhnn Holding Ltd (NASDAQ:RUHN)
Q2 2020 Earnings Call
Nov 26, 2019, 7:00 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 Earnings Conference Call for the Second Quarter of Fiscal Year 2020. [Operator Instructions]

I will now turn the call over to your host, Mr. Sterling Song, Senior IR Director of Ruhnn. Please go ahead.

Sterling Song -- Senior Director of Investor Relations

Thank you, Vanessa [Phonetic]. Good morning, everyone, and welcome to Ruhnn Holding Limited earnings conference call for the second quarter of 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. Min Feng, our Founder and Chairman of the Board of Directors; and Mr. Jacky Wang, Chief Financial Officer will begin with some prepared remarks. Following the prepared remarks, Mr. Lei Sun, our Founder, Director and CEO will also join us for the Q&A session.

Before we continue, please note that today's discussion will contain forward-looking statements made another safe harbor provisions of the US 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 US 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 required by law.

Now I will turn the call over to Ruhnn's Founder and Chairman of Board, Mr. Min Feng. Mr. Feng will deliver his remarks in Chinese, followed immediately by English translation. Mr. Feng, please go ahead.

Min Feng -- Founder and Chairman

[Foreign Speech]

Hello, everyone. Thank you for joining our earnings conference call for the second quarter of fiscal year 2020. In the second fiscal quarter, we again maintain stable revenue growth, while further diversifying both our business model and the monetization channels. All of this effort have created a solid foundation while long-term sustainable growth and solidify our leadership position in China's internet KOL e-commerce sector.

[Foreign Speech] We are very pleased with our outstanding second fiscal quarter financial and operational performance as GMV increased 32% to RMB924.4 million. And the total net revenue increased 15% to RMB272.7 million both on a year-over-year basis. We also realized significant margin expansion, resulting in gross margin of 44% compared with 34% in the year ago period. Notably benefiting from our improving operational efficiency and effective cost control, we achieved adjusted net income attributable to Ruhnn of RMB2.5 million compared to an adjusted net loss for the same period of last year, excluding the third fiscal quarter, which include the annual. The second quarter of fiscal year 2020 turned out to be the first profitable quarter over the past two years. This is a significant turning point in the company's history.

[Foreign Speech]

In addition, we continued to accelerate the expansion of our business and the platform model. In our second fiscal quarter, platform model GMV increased by 258% year-over-year and contributed slightly more than half of the total GMV with net revenue from services through the platform model increased by 85% year-over-year as part of our long-term growth strategy. Our goal is to maintain business operation running in and asset-light manner in order to continually improve operational efficiency and profitability and to achieve rapid and a healthy top line growth, while improving the operational matters.

[Foreign Speech]

The rapid development of our business under the platform model underscores the successful progress [Phonetic] of our strategic initiatives, which focused exploring of innovative KOL monetization channels along with strong execution. The online sharing stores business, we initiated at the end of 2018, through rest of second fiscal quarter and have become one of our strongest growth drivers. Through sharing stores opened and into the names of our KOLs on Taobao platform. We connect consumers with products from multiple third-party merchants in the same online store, while merchants are responsible for the order fulfillment and after-sale services for their respective products sold. This flexible operating model help us reduce inventory risks and customer stickiness, while earning profit and accelerating growth. Our solid performance within our sharing stores business again proved the powerful marketing capabilities of KOL, the advanced big data support and strong precise matching capabilities.

[Foreign Speech]

In addition, e-commerce live streaming has additional monetization channels for our KOL, through which our KOL can help promote the latest categories of high quality of products for their fans. As of today, we have seen quite positive feedback from KOL fans and achieved better than expected GMV outcome.

[Foreign Speech]

Leveraging our exceptional capabilities in KOL incubation and comprehensive training, the number of our KOL is progressively increasing, which is one of the -- in positive growth driver. As of September 30, 2019, the total number of KOLs signed by Ruhnn reached 146 with the average [Phonetic] number of fans on multiple, social, media platforms reaching approximately 190 million. This distinct personal style of our KOL not only meet the diverse needs of customers for total costs and the product, but also cater to various marketing demand of different merchants as well as brand characteristics. This in turn help us attract more merchants on brand picking cooperation with us, hunting the recognition of our KOL and strengthening our core competence, as the number one KOL incubation in China. Looking ahead, we will continue to improve our comprehensive internet KOL identification, cultivation and support with an ongoing go up achieving robust top line growth and a healthy profitability through the diversification of a KOL pool and at the optimization of our KOL structure.

[Foreign Speech]

By leveraging our diversified business models, outstanding internet KOL incubation capabilities, advanced technology support and consistently optimized supply chain, Ruhnn has become the first choice of a growing number of retail brands as of September 30, 2019. We partnered with 845 brands compared with 350 brands as of September 30, 2018. The comprehensive services we provide range from production, product design, marketing and supply chain management, [Indecipherable] further improve our precise matching capabilities between KOLs and SKUs, and offer high-quality services for more third-party merchants on the brand.

[Foreign Speech]

Turning to our strategic partners in the second fiscal quarter, we maintained our stable and close working relationship with Alibaba, our significant strategic stakeholder and a long-term key business partner. Our sharing store business on Taobao platform grew at a fast fleet [Phonetic] with the support of Alibaba's solid e-commerce infrastructure and then creative Internet KOL ecosystem, becoming one of our most important monetization channel. We're also deepening the cooperation with Alibaba in the product marketing business of KOL, live streaming on Taobao platform and exploring more cooperation opportunities in new areas.

In addition, we also collaborated with Weibo and Bilibili, two of our other important shareholders and other media platforms such as as TikTok, Kuaishou, and Little Red Book in live -- in KOL live streaming and the other KOL monetization business. We'll explore new types of innovative e-commerce business with an open-mind through collaboration with this media platforms.

[Foreign Speech]

With the expansion of our business, Ruhnn is growing, I'm pleased to share good news that we've relocated our headquarter earlier this month. Relocation allows us to better accommodate future business expansion, which in line with our long-term development strategy. The new headquarters with upgraded office facilities and the convenience location provide an elevated employee experience and allows us to attract and retain local talents.

[Foreign Speech]

Looking ahead to the rest of this fiscal year, with promising marketing opportunities on the horizon, our focus remains on further strengthening our core competencies and extending our monetization panel. We will continue to progress our strategic initiatives [Indecipherable] while accelerating overall business growth, achieving sustainable profitability and maximizing shareholder value in the long run. As the first mover in China's Internet KOL e-commerce sector, we feel confident that we can maintain our leading position as well as contribute to the development and an improvement of China's Internet KOL e-commerce ecosystem.

[Foreign Speech]

With that, I'll now turn the call over to Jacky Wang, CFO of the Company, who will provide you an update on the Company's financial performance for the second quarter of fiscal year 2020. Jacky, please.

Jacky Wang -- Chief Financial Officer

Thank you, Mr. Feng and Mr. Sterling, and hello, everyone. I will begin with some key financial highlights for our second quarter of fiscal year 2020. We are very pleased to maintain the growth momentum in the second quarter of fiscal year 2020. Net revenue increased 15% to RMB272.7 million with services revenue from the platform model increased 85% to RMB64.8 million. Our gross margin continued to expand in the second quarter fiscal year -- second fiscal quarter, leading to improve the bottom line. Gross profit increased 47% year-over-year to RMB119 million with gross margin increased to 44% from 34% in the same quarter of last fiscal year.

Most notably, during this quarter we achieved adjusted net income attributable to Ruhnn of RMB2.5 million compared to the adjusted net loss attributable to Ruhnn of RMB16.1 million for the same quarter of last fiscal year. As mentioned earlier by Mr. Feng, this is the first quarter we realized adjusted net income over the past two years, excluding the third fiscal quarter, which include annual Double Eleven event. Net cash provided by operating activities was RMB7.2 million compared to net cash used in operating activities of RMB9.1 million in the same quarter of last fiscal year.

Before we move on to the detailed quarterly financial performance, I would like to remind everyone of some additional information regarding our KOL classification. We have been disclosing our KOL classification based on GMV facilitated during the past 12-month. For example, top-tier KOLs facilitated GMV of RMB100 million or above, and established KOLs facilitated GMV between RMB30 million and RMB100 million in the past 12 months.

However, as a result of the significant expansion of the Company's business under the platform model, the Company generated an increasing amount of services revenue from advertising services provided us through its KOLs, that does not have associated with GMV. As an additional matter to assess its [Phonetic] KOLs performance, the Company recently adopted a new classification criteria for its KOLs based on the total services revenue generated by the KOLs under the platform model during the previous 12 months in addition to the classification of our KOL based on GMV. For example, platform top-tier KOL generated a sales revenue of RMB10 million or more in the past 12 months under the platform model.

Our platform top-tier KOLs increased from [indecipherable] as of September 30, 2018 to five as of September 30, 2019, while platform established KOLs increased from three to 14. This demonstrates our capabilities in KOL incubation and cultivation. You can refer to the earnings press release for more details.

Looking forward, we expect to maintain our growth trend, especially in the platform model. As a leader in China's Internet KOL e-commerce industry, we have high confidence in our capability to achieve our financial goals through the diversification of business models and improves -- and the improvements of operational efficiency.

Now, let's move onto detailed quarterly financial performance. Net revenue increased by 15% year-over-year to RMB272.7 million, primarily attributable to an increase in services revenue through the platform model and to a lesser extent due to an increase in revenue from product sales from online stores opened in the name of top-tier KOLs.

Revenue from product sales through the full service model increased by 2% year-over-year to RMB207.9 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, and was partially offset by the transition of the business model of some online stores opened in the name of the Company's emerging and established KOLs from the full service model to platform model.

As a result of such transition, the number of the Company's KOLs serving the full service model decreased to seven as of September 30, 2019 from 25 as of September 30, 2018. On the other hand, product sales revenue from the Company's online stores opened and the top-tier KOLs that were in operation in both period increased by 36% in the second quarter of fiscal year 2020 as compared to the same quarter of fiscal year 2019.

Thanks to the rapid growth of GMV, the percentage of GMV facilitated by our top-tier KOLs in the full service model decreased to 46% in the second quarter of fiscal year 2020 from 48% in the same quarter of last year. In particular the percentage of GMV facilitated by one of our top-tier KOLs further decreased to 35% in the second quarter of fiscal year 2020 from 37% in same quarter of last year.

Revenue from services through the platform model increased by 85% year-over-year to RMB64.8 million. This increase was mainly attributable to the following factors. Number one, the increase of the number of KOLs serving the Company's platform model from 89 to 129. Secondly, the improved performance of such KOLs as evidenced by the increase in the aggregate number of the performance top -- of the platform top-tier established are [Phonetic] emerging KOLs from a total of 12 to 31. And then thirdly, an increase in the number of brands with which the Company cooperated in its advertising and marketing business from 171 to 308. Cost of revenue decreased slightly by 2% year-over-year to RMB153.7 million.

Gross profit increased by 47% year-over-year to RMB190 million following the increase in our total net revenue. Gross margin increased to 44% compared to 34% for the same quarter of last year. The increase was primarily due to the increase of gross margin in product sales attributable to the enhanced efficiency in supply chain management and the inventory level control.

In addition, they increased [Phonetic] proportion of the Company's service revenue under the platform model, which generated a higher gross margins than product sales. Sales revenue accounted for approximately 24% of the total net revenue with a gross margin of 60% in the second quarter of fiscal year 2020 compared to 15% of the total net revenue with a gross margin of 45% in the same quarter of fiscal year 2019.

Total operating expenses increased by 92% year-over-year to RMB184 million. Included in total operating expenses was a non-cash share-based compensation expense of RMB47.4 million, inclusive of share-based compensation expense of RMB45.4 million for the first tranche of the stock option that's became vested immediately, and also a non-cash amortization expense of the intangible assets in relation to exclusive cooperation rights of RMB5.2 million in the second quarter of fiscal year 2020 compared to zero in the same quarter of last fiscal year.

Excluding such non-cash effects, the share-based compensation and amortization of the intangible assets, total operating expenses increased by 37% year-over-year. Included in the total operating expenses, there are [Phonetic] fulfillment expenses increased by 16% year-over-year to RMB35.2 million, and our sales and marketing expenses increased by 81% year-over-year to RMB80.2 million.

Excluding the non-cash amortization of share-based compensation of RMB7.5 million and the non-cash amortization expense of the intangible assets in relation to exclusive of cooperation rights of RMB5.2 million for the current quarter, sales and the marketing expenses increased 52% year-over-year, which was mainly attributable to the increased expense for KOL incubation, cultivation, content production and the training to support increased activities for the Company's KOL, sales and advertising business, and the increased promotion expenses.

General and administrative expenses were RMB68.4 million compared to RMB21.1 million for the same quarter of last fiscal year. The increase was mainly due to the share-based compensation of RMB38.4 million in the second fiscal quarter compared to zero in the same quarter of last fiscal year.

Loss from operation was RMB65 million compared to RMB15 million for the same quarter of last fiscal year. Net loss attributable to Ruhnn was RMB50.1 million compared to RMB16.1 million for the same quarter of last fiscal year. Adjusted net income attributable to Ruhnn was RMB2.5 million compared to an adjusted net loss attributable to Ruhnn of RMB16.1 million for the same quarter of last fiscal year. Basic and diluted net loss per ADS was RMB0.61 compared with basic and diluted net loss per ADS of RMB0.25 for the same quarter of last year.

Adjusted basic and diluted net income per ADS was RMB0.03 compared to an adjusted basic and diluted net loss per ADS of RMB0.25 for the same quarter of last fiscal year. In terms of our balance sheet and the cash flow as of September 30, 2019. We had a cash and the cash equivalents, restricted cash and short-term investment of RMB772.1 million compared to RMB103.8 million as of March 31, 2019. Net cash provided by operating activities was RMB7.2 million compared to net cash used in operating activities of RMB9.1 million in the second quarter of fiscal year 2019.

Now turning to our outlook. We remain confident into our -- in our growth prospects and reiterate our previous guidance. For the full fiscal year 2020, we expect net revenue from product sales through the full service model to be between RMB980 million and RMB1.13 billion, representing a year-over-year growth of between 4% and 20% and net revenue from services through the platform model to be between RMB280 million and RMB380 million, representing a year-over-year growth between 86% and 152%. This forecast reflects the Company's current and preliminary view on the current business situation and market conditions, which is 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

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Bo Pei of Oppenheimer. Please ask your question.

Bo Pei -- Oppenheimer -- Analyst

Good evening, Mr. Feng, Jacky and Sterling. Congrats on the -- another great big quarter. So I have a two questions regarding the additional classification of platform KOLs. So number one. Now the company present KOL's based on GMV facilitated or service revenue generated during the past 12 months. Is there any relationship between the threshold criteria of GMV and service revenue?

And then second question, is there any overlap between top-tier KOLs based on GMV and top-tier KOLs based on the service revenue as of this quarter? And is it correct to say that there is an aggregate of a top-tier KOLs based on either GMV or service revenue? Thank you very much.

Min Feng -- Founder and Chairman

Thank you, Mr. Pei. I will answer your question. Okay your first one -- those are two different set of criteria for the classification. One is based on GMV for [indecipherable] and the other is services revenue from our platform model. So management sets the platform KOLs based on services revenue generated, including not only the criteria, you know, not only the certain services, revenue was associated GMV but also including the advertising services revenue that does not have associated GMV.

However, we did consider that take rate are calculated by the services revenue as compared to associated GMV based on our careful research and the internal analysis. For example, our top-tier KOLs facilitated that GMV of RMB100 million. And during the past 12 months, and well, equally, you know for our platform top-tier KOLs generated services revenue of RMB10 million or more in the past 12 months. So you can see this, right. The RMB100 million GMV and has a relationship with RMB10 million and service revenue. And for your second question, we will now really look at those two classification together, we would rather to look at them separately as they are based on different criteria. The classification of platform model based on services revenue is treated as an additional and a supplemental information to our investor.

However, to answer your question directly, as of September 30, 2019 as the three top-tier KOL based on GMV facilitated are all endured the full service model and it does not overlap with the five additional platform top-tier KOLs. Therefore, I think you are right to see that we have five additional platform top-tier KOLs in addition to the existing three top-tier KOLs. Thank you.

Bo Pei -- Oppenheimer -- Analyst

Got it. That's very helpful. Thank you.

Operator

Your next question comes from the line of Qi-Ying Hu [phonetic] of UBS. Please ask your question.

Qi-Ying Hu -- UBS -- Analyst

Okay, sir. Good evening. And thanks for taking my question. I have two questions. The first one is regarding to your KOL expansion strategy. So do you have a target number of Q1, Q2, Q3 KOLs in next two years? And do you plan to establish some partnership with other KOL, KOLs and their studios? And a following question is on KOL monetization. As we see, robust growth of e-commerce livestreaming this year. So I'm wondering, how is your view on this sector short and long-term growth potential and competition. And how is your current position? And thanks.

Sterling Song -- Senior Director of Investor Relations

Hi, Qi-Ying. Could you please translate your question to Min Feng for us so Min Feng can answer your questions please?

Qi-Ying Hu -- UBS -- Analyst

Okay. Sure. [Foreign Speech]

Min Feng -- Founder and Chairman

Okay. I will do the translation. As of September 30, 2019, we have signed long-term agreements with 146 KOLs, covering RMB108 million, the majority of which are young millennial female people in China who are pursuing fashionable products. As you know, we mentioned earlier, each month we will interview something like 800 to 1,000 candidates and after careful evaluation and testing finally, we will sign agreements with five to 10 candidates with long-term contracts. We anticipate by the end of fiscal year 2020, we will have approximately 200 long-term KOL.

And the second question is regarding the different tiers of KOL. I think you can refer to the movements of different tiers of KOLs during the past two quarters, we have disclosed in our earnings release, you know the number of platform, the number of platform top-tier KOLs increased to five as of September 30, 2019 from one compared with the same quarter last year and the platform emerging KOL increased to 14 as of September 30, 2019 compared with three of the same quarter last year.

You know, we are highly confident in our capabilities in KOL incubation and cultivation. So in the future, KOL of both tiers will keep stable and the fast growing basis and also with the development of our platform business, cooperation with third-party KOL and third party is also one option for us. Currently, the cooperation, the percentage for the cooperation with third-party KOLs or sales revenue account was very small percentage, but you know our Ruhnn has very strong business resources as well, we have very precise matching capabilities between SKUs and KOLs. So through the cooperation with Ruhnn's we believe third party KOL also have a very good monetization channel for themselves. So that is our answer for the first question. Thank you.

Sterling Song -- Senior Director of Investor Relations

[Foreign Speech]

Min Feng -- Founder and Chairman

Okay. Actually, as you mentioned for the e-commerce live streaming. It's true that e-commerce live streaming has been growing very fast this year it is flying actually is very fast and there appears quite several super top-tier KOLs for super broadcasters. Actually e-commerce live streaming is not something new for Ruhnn. You know in the past, Ruhnn has been recommending women's apparel to our fan base another our full service model through e-commerce broadcasting to our fan base and speaking of e-commerce, live streaming related to third-party brands. This can be regarded as a new monetization channel for us. Because through e-commerce, live streaming our KOL can recommend high quality specific product to their fan base. As of today, we have seen quite positive feedback from our fan base and we can, we have achieved better than expected GMV outcome.

So this will greatly enhance our KOL monetization capabilities and will enhance our monetization channels as well. So compared with e-commerce live streaming on Taobao, for us, for Ruhnn we have a very big advantage that is all our KOLs on Ruhnn platform will have very large available fan base on different social media platform because our KOLs can communicate or interact with their fans on social media platform. In this way, the conversion rate our e-commerce live streaming is much, much better, it's much, much efficient. So, on the other hand KOLs for Ruhnn can recommend high quality product to their fan base, it is -- can also be regarding a kind of pay back to their fan base.

For example, one of our top-tier KOL initiative -- e-commerce live streaming in Taobao platform in this September, which brings about very good results but in the future in the e-commerce live streaming of factor, we will continue to try and continue to invest, we are highly confident these new methods will bring Ruhnn and our KOL very positive results. Thank you for the questions.

Qi-Ying Hu -- UBS -- Analyst

Thank you. Thank you very much.

Operator

Your next question comes from the line of Alicia Yap of Citigroup. Please ask your question.

Alicia Yap -- Citigroup -- Analyst

Hi, good evening. Thanks for taking my questions. [Foreign Speech]

Three questions. The first question is related to the, if we compare the product revenue versus the product GMV to your service revenue to service GMV, the revenues to GMV ratio seems to be declining on the sequential basis and this seems to be suggesting maybe the monetization rate is a little bit decline. So I just wanted to understand what are the recent decline, is that being related to the seasonality from and then the second question is related to, if you could give us some the splits between within the service revenue what is the pure advertising revenue and what is the commission revenue and also the reasons for the big improvement on the gross margin for service revenue to the 60% this quarter.

And then lastly if you can give us some color on any achievements on your performance during this. [Foreign Speech]

Jacky Wang -- Chief Financial Officer

Thank you, Alicia. Let me take your questions. Okay. The first one, you are talking about in fact quarter-over-quarter basis for the product sales and revenue and for our product sales and revenue in the Q2 of our fiscal year 2020 as compared to the prior quarter. It should be remain flat as compared to Q1 in fact by consideration of the seasonality factor that you mentioned that you have and it is true that if you look at the GMV in the second quarter and of fiscal year 2020, right, as compared to the first quarter it increased, I think it's around maybe 10% for GMV.

However, if you look at the revenue recognized, it's in fact decrease. The major reason in fact -- fall it for the different a period the GMV and the related revenue is accounted for its recorded -- sometime the GMV it's not really matched 100% to the revenue recognized, in that period. And GMV, I can't give you a little bit more color regarding that, GMV is accounted in the period when customer pays the order and to pay the money right when they pay the order, so they will consider in that month.

However, product sales revenue is recognized when the customer receive the products for us and you know the women's apparel and then accepted the product and they may be the -- they click the acceptance and upon the completion of the purchase cycle in Taobao online store and at that time we will recognize revenue, which may be lag behind above 15 days or 30 days after the order was placed. So for the women's apparel, sold in our online store, we launched the new SKUs every month and it's usually accounted for the majority of that revenue recorded again that month. Therefore, after each day to launch the new SKU might affect the period related revenue is recognized. For example, right, for September 2019. We launched the SKU by the end of September, close to the end. So which means the related GMV was accounted into September in the second quarter, while majority of the related revenue is -- will be, will be recognized in the coming October.

That's the major reason for the lower ratio. So that's why if you look at the quarter-over-quarter it might be some fluctuation regarding the ratio. But if you look at maybe for a whole year, I think that might be more reasonable. And I think your second question related to the breakdown of the service revenue, for our service revenue, about or over 50% are generated resulting from -- are generated from the advertising services. And the joint store or the sharing store might count for 20% each. So the -- and then the remaining 10% or maybe for other monetization channel like other promotional marketing method like the live streaming but it's a smaller percentage and I think your third question is a related to the service revenue, right?

Alicia Yap -- Citigroup -- Analyst

Margin.

Jacky Wang -- Chief Financial Officer

Is it regarding the regarding the margin -- the margin of the service revenue or?

Alicia Yap -- Citigroup -- Analyst

Yes, yes. The gross margin improved quite significant to 50%.

Jacky Wang -- Chief Financial Officer

Yeah. Got it, OK. In the second quarter of this fiscal year, we got our gross margin by of 60% for the service revenue and there it's a much higher -- it's higher than the prior year. Two reasons, one is that from prior year and in fact in the current year, we have restructured on the lower KOL service fee for the resulting from the service revenue, because cost of revenue of some basis revenue of platform model, it's a purely the service fee we paid it to our KOL. So we lowered and there maybe be a reason. Second one that in prior year, we contracted with third-party KOLs and under the platform model, which have much lower gross margin, that's another reason. But if you look at the current year, we do not really have, we do not really have a you know a high percentage of the revenue generated by contracting with third-party KOL.

And your last question is related to the Double 11 event for the current year. Yeah, it's a good news to the company. In fact we achieved our target and we, the GMV generated during that period is about 100% increase as compared to the prior year. Thank you.

Alicia Yap -- Citigroup -- Analyst

Thank you.

Operator

Your next question comes from the line of Ye Zheng of TH Capital. Please ask your question.

Ye Zheng -- TH Capital -- Analyst

Thanks for taking my question. My first question is related to the model transformation, I mean have you finished the whole transformation. We've seen that you closed up 17 stores this quarter and 31 last quarter, and your GMV from service sales is impressive. Just wondering what's your plan in the future quarters? On the top of that, I'm curious to hear your thoughts on this non-GAAP net income, it's profit this quarter. So does the management view this as a continuing trend in the future quarters?

My other question is about the revenue this -- that's positive. Thanks.

Jacky Wang -- Chief Financial Officer

Thank you. Let me take your question. And regarding the first one, you are talking about the transition from the full service model to platform model, and in fact that's process started from the middle of calendar year 2018, the company started the transition of the business model of certain online stores opened in the name of the company's emerging and established KOL from full service model to the platform model. And as a result of such transition, you also noted that the company's online-stores decreased to 23 as of September 30, 25 [phonetic] from 91 of September 30, 2018. And we expect the transition will be completed by March 31, 2020 the end of our fiscal year 2020. And upon the completion of the transition, our full-service model will include mainly the online stores opened in the name of our top-tier KOLs. And we believe that the transition will -- the transition kind of resulted in a lower increase percentage in our total product sales in the current quarter as compared to the same quarter of last fiscal year, as you mentioned just now, however, product sales revenue from the company online stores opened into the top-tier KOLs in the which were in operation in both period.

If you look at that one, that's increased by 36% in the second quarter and of fiscal year 2020 as compared to prior year. We expect a much better profitability level from the full service revenue upon the completion of the transition. Regarding the second, your second question regarding the non-GAAP adjusted net income, yes, the second quarter of fiscal year 2020 is a first quarter that we have achieved non-GAAP adjusted net income during the past two year excluding the third quarter, of course, which one include the annual Double 11 events. Although there is seasonality factors, affecting our results, we, I think I can tell you that we remain confident that we will achieve our overall profitability targets for the full fiscal year 2020 on a non-GAAP basis and your third one and so, can you repeat your third one?

Ye Zheng -- TH Capital -- Analyst

I've just passed that, didn't ask that question. Yeah.

Jacky Wang -- Chief Financial Officer

Oh you passed that. Okay, thank you.

Sterling Song -- Senior Director of Investor Relations

Okay, thank you.

Ye Zheng -- TH Capital -- Analyst

Thanks.

Operator

Due to the limited time, we will finish the Q&A session. And now I'd like to turn the call back over to the Company for closing remarks.

Sterling Song -- Senior Director of Investor Relations

Thank you, Anita. Thank you again. Thank you everyone for joining us today. If you have any further questions, please feel free to contact directly through our IR department on the contact information on the website or through our IR firm TBG Investor Relations. This concludes the conference for today. Thank you everyone. Operator?

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Sterling Song -- Senior Director of Investor Relations

Min Feng -- Founder and Chairman

Jacky Wang -- Chief Financial Officer

Bo Pei -- Oppenheimer -- Analyst

Qi-Ying Hu -- UBS -- Analyst

Alicia Yap -- Citigroup -- Analyst

Ye Zheng -- TH Capital -- Analyst

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