MOGU(US:MOGU)2025-07-31 10:10Part I Key Information This section details MOGU Inc.'s KOL-driven fashion platform, complex VIE structure, and associated business and operational risks Company Overview and Corporate Structure MOGU Inc., a Cayman Islands holding company, operates its KOL-driven platform in China via a VIE structure, consolidating financials despite legal and regulatory risks - MOGU Inc. is a Cayman Islands holding company, not a Chinese operating company, that controls its PRC operations through a VIE structure to comply with foreign investment restrictions31 - The company relies on contractual arrangements (e.g., voting proxy, equity pledge, exclusive service agreements) to control the VIEs, which allows for financial consolidation under U.S. GAAP but carries significant risks as these arrangements have not been tested in court313436 - The company has been identified by the SEC as a "Commission-Identified Issuer" under the HFCAA in the past but was not identified for the fiscal year 2024 filing and does not expect to be for fiscal 2025, as the PCAOB was able to inspect its auditor in 2022. However, future inspection capabilities remain uncertain5657 VIE Revenue Contribution | Fiscal Year | Revenue Contribution from VIEs (%) | | :--- | :--- | | 2023 | 26.3% | | 2024 | 25.3% | | 2025 | 35.1% | Condensed Consolidated Statement of Operations (FY 2025) | (RMB in thousands) | MOGU Inc. | Other subsidiaries | Primary Beneficiaries of VIEs | VIEs | Consolidated Totals | | :--- | :--- | :--- | :--- | :--- | :--- | | Third-party revenues | — | 1,965 | 89,753 | 49,515 | 141,233 | | Third-party costs and expenses | (3,183) | (6,359) | (136,652) | (101,272) | (247,466) | | (Loss)/gain before income tax | (62,557) | (54,201) | (54,256) | 62,856 | (59,734) | | Net (loss)/gain | (62,557) | (54,268) | (54,256) | 62,084 | (60,573) | Condensed Consolidated Balance Sheet (As of March 31, 2025) | (RMB in thousands) | MOGU Inc. | Other subsidiaries | Primary Beneficiaries of VIEs | VIEs | Consolidated Totals | | :--- | :--- | :--- | :--- | :--- | :--- | | Total assets | 1,112,046 | 609,497 | 1,542,178 | 717,530 | 858,227 | | Total liabilities | 603,091 | 1,107,606 | 1,084,839 | 1,699,220 | 321,227 | | Total shareholders' equity/(deficit) | 508,955 | (498,109) | 457,339 | (981,690) | 537,000 | Risk Factors The company faces significant business, corporate structure, China-related, and ADS risks, including regulatory uncertainty and potential delisting - Business & Industry Risks: The company has a limited history with its current KOL-driven, Live Video Broadcast (LVB)-focused model and has experienced declining revenues. A substantial portion of GMV is generated by a few top KOLs, creating concentration risk90101117 - Corporate Structure Risks: The VIE structure is subject to PRC government scrutiny and may be deemed non-compliant with regulations, which could lead to severe penalties, including relinquishing control over operations, potentially rendering ADSs worthless9294220 - China-Related Risks: The PRC government has significant influence over operations and may tighten regulations on overseas listings, data security, and anti-monopoly, which could hinder future offerings and impact business. The risk of delisting under the HFCAA remains if the PCAOB is unable to inspect the auditor for two consecutive years in the future93237281 - ADS Risks: The dual-class voting structure gives co-founder Mr. Qi Chen 83.4% of the aggregate voting power, limiting other shareholders' influence. The trading price is volatile, and the company has previously received a non-compliance notice from the NYSE for its stock price falling below $1.00295304305 - The company has identified three material weaknesses in its internal controls over financial reporting as of March 31, 2025, related to insufficient U.S. GAAP expertise, inadequate reconciliation between accounting and operational systems, and a lack of periodic review of high-risk activities in the accounting system205207208 Information on the Company This section provides a comprehensive overview of MOGU's business, history, organizational structure, monetization strategies, technology, and regulatory landscape History and Development of the Company MOGU Inc. launched Mogujie in 2011, established a VIE structure, acquired Meilishuo, listed on NYSE in 2018, and expanded with Ruisha Technology and new office buildings - Launched the Mogujie online fashion platform in February 2011334 - Commenced trading on the New York Stock Exchange under the symbol "MOGU" on December 6, 2018337 - Acquired Ruisha Technology on July 26, 2021, to expand merchant service capabilities339 - Changed the ADS ratio from 1 ADS representing 25 Class A shares to 1 ADS representing 300 Class A shares, effective March 28, 2022339 Business Overview MOGU operates a KOL-driven online fashion platform in China, focusing on live-streaming, leveraging AI for personalization, and monetizing through commissions, marketing, and financial services - The business model is centered around Key Opinion Leaders (KOLs) who create engaging content, primarily through live video broadcasts (LVB), to drive user purchases342343 - The number of established LVB hosts has been declining, from 165 as of March 31, 2023, to 108 as of March 31, 2025353 - Monetization streams include commissions from merchants (typically 5-10%), marketing services, technology services for online operations, and financial services for users and merchants375376377378379 - The company utilizes Artificial Intelligence and Big Data analytics to personalize user experience, recommend products, and manage credit risk for its financial services382383 GMV from Live Video Broadcasts | Fiscal Year Ended March 31, | GMV from LVB (RMB billion) | | :--- | :--- | | 2023 | 5.9 | | 2024 | 5.1 | | 2025 | 3.5 | Organizational Structure MOGU Inc., a Cayman Islands holding company, controls its PRC VIEs through contractual agreements, enabling financial consolidation despite lacking direct equity ownership - The organizational structure is designed to comply with PRC laws restricting foreign investment in value-added telecommunication services, using contractual arrangements to control the VIEs491 - Key contractual agreements that provide control include Shareholder Voting Proxy Agreements, Equity Interest Pledge Agreements, Loan Agreements, Exclusive Consultation and Service Agreements, and Exclusive Option Agreements492495498500503 - The company's PRC legal counsel opines that the ownership structure and contractual arrangements are valid and enforceable under current PRC law, but acknowledges substantial uncertainties regarding future interpretation and application of these laws506507 Property, Plant and Equipment MOGU purchased two office buildings in Hangzhou in 2020 and 2024, but has not yet obtained property ownership certificates, posing a risk to legal rights - Purchased an office building in Hangzhou in August 2020 for RMB 209.0 million and began operations there in October 2023508 - Purchased a second office building in Hangzhou in January 2024 for RMB 77.7 million509 - As of the date of the report, the company has not yet obtained the property ownership certificates for these buildings, posing a risk to its legal rights to the properties510 Operating and Financial Review and Prospects This section analyzes MOGU's declining financial performance, including revenue and net loss, liquidity challenges, and critical accounting policies Operating Results MOGU's FY2025 operating results show declining revenues and key operational metrics, with a net loss of RMB 60.6 million - In FY2025, total revenues decreased 11.9% YoY, mainly due to a 31.9% decrease in commission revenues from lower GMV. This was partially offset by a 53.9% increase in technology service revenues542544 - The company recorded an impairment charge on long-lived assets of RMB 18.0 million in FY2025, an increase from RMB 9.9 million in FY2024, attributed to fluctuations in the real estate market526552 Key Operational Metrics | Metric | FY 2023 | FY 2024 | FY 2025 | | :--- | :--- | :--- | :--- | | Total GMV (RMB billion) | 6.1 | 5.2 | 3.6 | | GMV from LVB (RMB billion) | 5.9 | 5.1 | 3.5 | | Active Buyers through LVB (million) | 1.6 | 1.3 | 0.9 | | Established LVB Hosts | 165 | 129 | 108 | Consolidated Results of Operations (FY2023-FY2025) | (RMB in thousands) | FY 2023 | FY 2024 | FY 2025 | | :--- | :--- | :--- | :--- | | Total revenues | 232,076 | 160,344 | 141,233 | | Commission revenues | 147,514 | 109,742 | 74,697 | | Technology service revenues | 58,867 | 33,288 | 51,236 | | Loss from operations | (187,448) | (79,172) | (101,140) | | Net loss | (186,406) | (66,959) | (60,573) | | Net loss attributable to MOGU Inc. | (177,984) | (59,285) | (62,557) | Liquidity and Capital Resources MOGU's liquidity significantly weakened in FY2025, with cash and cash equivalents declining to RMB 82.0 million due to operating and investing cash outflows - Capital expenditures decreased significantly to RMB 15.1 million in FY2025 from RMB 94.4 million in FY2024575 - As a holding company, MOGU Inc. relies on dividends from its PRC subsidiaries, which are subject to PRC regulations on profit distribution and statutory reserve requirements. Total restricted net assets of PRC subsidiaries amounted to RMB 466.2 million as of March 31, 2025578 Cash and Cash Equivalents | As of March 31, | Cash and Cash Equivalents (RMB million) | | :--- | :--- | | 2023 | 416.2 | | 2024 | 358.8 | | 2025 | 82.0 | Summary Consolidated Cash Flow Data (FY 2025) | (RMB in thousands) | Amount | | :--- | :--- | | Net cash used in operating activities | (67,916) | | Net cash used in investing activities | (207,930) | | Net cash used in financing activities | (822) | | Net decrease in cash | (276,766) | Critical Accounting Policies and Estimates This section outlines critical accounting policies, including business combinations, goodwill, long-lived asset impairment, revenue recognition, investments, and expected credit losses - The company accounts for business combinations using the acquisition method, requiring significant judgment in allocating fair values to identifiable assets and liabilities581583 - Goodwill is tested for impairment annually. A full impairment charge of RMB 63.5 million was taken in FY2023, reducing the goodwill balance to zero589 - Long-lived assets are reviewed for impairment upon triggering events. Impairment charges of RMB 21.2 million, RMB 9.9 million, and RMB 18.0 million were recorded in FY2023, FY2024, and FY2025, respectively592593594 - Revenue is recognized under ASC Topic 606. Commission revenues are recognized on a net basis upon user acceptance of merchandise. Technology services revenue is recognized as services are rendered or upon completion of transactions596598604 - The company adopted ASC Topic 326 for expected credit losses on April 1, 2023, using a modified retrospective approach616 Directors, Senior Management and Employees This section details MOGU's leadership, compensation, and workforce, including the dual-class share structure concentrating voting power with the co-founder - Mr. Qi Chen, co-founder, serves as Chairman of the Board. Mr. Yiming Fan is the Chief Executive Officer621622 - Total cash compensation for executive officers and directors for the fiscal year ended March 31, 2025, was RMB 7.5 million (US$1.0 million)627 - The company has a dual-class share structure. As of May 31, 2025, Chairman Qi Chen beneficially owned all Class B ordinary shares, granting him 83.4% of the aggregate voting power658661 - The total number of employees was 347 as of March 31, 2025, a slight increase from 308 in the previous year but down from 407 in 2023654 - The board has three committees: Audit, Compensation, and Nominating and Corporate Governance. The company follows home country (Cayman Islands) practices, resulting in deviations from certain NYSE corporate governance standards, such as not having a majority of independent directors313645 Major Shareholders and Related Party Transactions This section outlines MOGU's major shareholders and key related party transactions, primarily focusing on VIE contractual arrangements and dealings with Tencent - The most significant related party transactions are the contractual arrangements with the VIEs, which are fundamental to the company's operational structure in China664 - A shareholders' agreement provides Tencent with a veto right on any proposed transfer or issuance of MOGU's securities to Tencent's competitors, as long as Tencent maintains at least 50% of its current shareholding666 - As of March 31, 2025, the company had amounts due to Tencent of RMB 3.5 million (US$0.5 million) for technology services and payment processing fees675 Financial Information This section confirms the inclusion of consolidated financial statements, absence of material legal proceedings, and the company's policy of retaining earnings for growth - The company's consolidated financial statements are appended to the annual report677 - MOGU has no current plans to pay cash dividends and intends to retain future earnings to fund business growth and operations680 - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business678 The Offer and Listing This section details MOGU's ADSs listing on the NYSE under "MOGU" since 2018, including the ADS to Class A share ratio change - MOGU's ADSs trade on the New York Stock Exchange under the ticker symbol "MOGU"683 - The ADS to Class A ordinary share ratio was changed from 1:25 to 1:300 on March 28, 2022, to address NYSE compliance criteria regarding the minimum trading price683 Additional Information This section details MOGU's corporate governance, including dual-class shares, and tax implications for investors in the Cayman Islands, PRC, and U.S. - The company has a dual-class share structure: Class A ordinary shares have one vote per share, while Class B ordinary shares have 30 votes per share. Class B shares automatically convert to Class A upon transfer to non-affiliated parties690691693 - As a Cayman Islands exempted company, MOGU is not obligated to hold annual general meetings and follows home country practices that differ from NYSE standards695712 - There is no corporate, income, or capital gains tax in the Cayman Islands. However, if MOGU is deemed a PRC resident enterprise, it could be subject to a 25% tax on its global income, and dividends paid to foreign shareholders could be subject to a 10% withholding tax757759761 - For U.S. Holders, there is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which would result in adverse U.S. federal income tax consequences. The determination is made annually and depends on the composition of the company's income and assets769771 Quantitative and Qualitative Disclosures About Market Risk This section details MOGU's market risks, primarily foreign exchange and interest rate fluctuations, and notes the company does not use derivative instruments for hedging - The company's primary market risk is foreign exchange risk, as its business is denominated in RMB while its ADSs are traded in USD796797 - As of March 31, 2025, a hypothetical 10% depreciation of the RMB against the USD would result in a US$0.7 million decrease in the value of its RMB-denominated cash and cash equivalents800 - Interest rate risk exists from interest income generated by cash and short-term investments. The company has not used any derivative financial instruments to manage its interest rate or foreign exchange risk exposure801 Description of Securities Other than Equity Securities This section details the fees and expenses associated with MOGU's American Depositary Shares (ADSs), administered by The Bank of New York Mellon - The Bank of New York Mellon acts as the depositary for the ADSs807 - For the fiscal year ended March 31, 2025, the company did not receive any reimbursement from the depositary for ADS program expenses812 ADS Holder Fees | Fee Type | Amount | | :--- | :--- | | Issuance or Cancellation | US$5.00 (or less) per 100 ADSs | | Cash Distribution | US$0.05 (or less) per ADS | | Depositary Services (annual) | US$0.05 (or less) per ADS | Part II Controls and Procedures Management concluded MOGU's disclosure controls were ineffective as of March 31, 2025, due to three material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025820 - Three material weaknesses in internal control over financial reporting were identified: 1) Lack of sufficient financial reporting and accounting personnel with U.S. GAAP/SEC knowledge; 2) Insufficiently designed controls on reconciliations between accounting and operation systems; 3) Lack of periodic review of high-risk activities in the accounting system822823829 - Remediation efforts, including hiring qualified staff and enhancing control design, are in progress but were not fully implemented as of the report date824825827 - As the company's public float was not over US$75 million on the determination date, it is exempt from the auditor attestation requirement on internal control over financial reporting for this annual report828 Corporate Governance and Other Matters This section covers MOGU's corporate governance, including audit committee expertise, accountant fees, share repurchases, home country practices, and cybersecurity risk management - The board has identified two independent directors, Mr. Andrew Hong Teoh and Mr. Shengwen Rong, as audit committee financial experts832 - In May 2024, the board authorized a new share repurchase program for up to US$8 million of ADSs or ordinary shares, valid until May 12, 2025. In FY2025, the company repurchased 15,323,400 Class A ordinary shares841843 - The company follows home country (Cayman Islands) corporate governance practices, exempting it from certain NYSE requirements, including having a majority of independent directors and a minimum of three members on the audit committee845 - The company has implemented a cybersecurity risk management program overseen by the board of directors and has not experienced any material cybersecurity incidents to date849851852 Principal Accountant Fees (PricewaterhouseCoopers Zhong Tian LLP) | (in thousands) | FY 2024 | FY 2025 | | :--- | :--- | :--- | | Audit fees | RMB 3,900 | RMB 4,500 | | Tax fees | RMB — | RMB — | | Other fees | RMB — | RMB — | Part III Financial Statements This section presents MOGU Inc.'s audited consolidated financial statements for FY2023-2025, prepared under U.S. GAAP, including the auditor's report and detailed notes Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers Zhong Tian LLP issued an unqualified opinion on MOGU's consolidated financial statements, highlighting debt securities valuation as a critical audit matter - The auditor, PricewaterhouseCoopers Zhong Tian LLP, issued an unqualified opinion on the consolidated financial statements864 - A critical audit matter was identified concerning the valuation of available-for-sale debt securities, which required significant management judgment and a high degree of auditor subjectivity869870871 - The company changed its accounting principle for current expected credit losses on certain financial instruments in fiscal year 2024865 Consolidated Financial Statements The consolidated financial statements for FY2023-2025 detail MOGU's financial position and performance, including assets, liabilities, revenues, and net loss - The company recorded a full impairment charge of RMB 63.5 million against goodwill in FY2023, resulting in a zero balance for goodwill as of March 31, 20251063 - The company repurchased 15.3 million Class A Ordinary Shares for a total consideration of US$0.1 million in FY2025 under its share repurchase program1099 Consolidated Balance Sheet Summary | (RMB in thousands) | As of March 31, 2024 | As of March 31, 2025 | | :--- | :--- | :--- | | Total current assets | 507,815 | 485,561 | | Total non-current assets | 430,547 | 372,666 | | Total assets | 938,362 | 858,227 | | Total current liabilities | 321,836 | 320,875 | | Total liabilities | 323,908 | 321,227 | | Total shareholders' equity | 614,454 | 537,000 | Consolidated Statement of Operations Summary | (RMB in thousands) | FY 2023 | FY 2024 | FY 2025 | | :--- | :--- | :--- | :--- | | Total revenues | 232,076 | 160,344 | 141,233 | | Loss from operations | (187,448) | (79,172) | (101,140) | | Net loss | (186,406) | (66,959) | (60,573) | | Net loss per ADS (Basic) | (20.90) | (6.85) | (7.14) |