Autohome Inc (ATHM) 2018 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by for Autohome's Third Quarter of 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded. If you have any objections, you may disconnect at this time.

It is now my pleasure to introduce your host, Joyce Tang, Autohome's IR Senior Manager. Ms. Tang, you may begin.

Thank you, operator. Hello, everyone, and welcome to Autohome's Third Quarter 2018 Earnings Conference Call.

Earlier today, Autohome distributed its earnings press release, and you may find a copy on the company's website at www.autohome.com.cn.

On today's call, we have Mr. Min Lu, Autohome's Chairman and CEO; Mr. Haifeng Shao, Autohome's President; and Mr. Jun Zou, Autohome's CFO.

After prepared remarks, Mr. Lu, Mr. Shao and Mr. Zou will be available to answer your questions.

Before we begin, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ material from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the Security and Exchange Commission. Autohome does not undertake any obligation to update any forward-looking statements, except as required under the applicable law.

The earnings press release in this call also includes discussion of certain unaudited non-GAAP financial measures. The press release contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures and is available on Autohome's IR website.

As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on Autohome's IR website.

I will now turn the call over to Autohome's Chairman and CEO, Mr. Lu.

Thank you, Joyce. Welcome, everyone, and thank you for joining us today to discuss our third quarter 2018 results.

I'm pleased to report another strong quarter in which our revenue, excluding direct sales, increased 35% year-over-year to RMB 1.89 billion, which outpaced overall market growth despite the relatively soft macroeconomic environment in China.

Please allow me to start with a quick review of our successful and ongoing 4+1 strategy, which is to transform Autohome from a content-led vertical media platform to an automotive eco-platform based on data and technology.

As data and technology is the core infrastructure, over the past few years, we have made aggressive investment spanning a wide scope of hardware, software and talents in order to aggregate vast amount of data from the entire auto ownership cycle and to seamlessly link and integrate this data from all of our business result units with more advanced algorithm. As a result, we innovated a highly precise segmentation in terms of User, Value, Needs and Behavior, we call UVN-B model, thus, substantially enhanced the intelligent recommendation based on people-like-you (PLY) behavior profiles and next-best action, NBA, decision-making.

These advanced data capabilities enabled us to commercialize a series of successful data solutions for OEMs and dealers like (CheZhiYun) and the Smart Sales series. Currently, we have started to further monetize our data capabilities with the development of intelligent total marketing solution based on the UVN-B model, capable of differentiated advantages in accurate user segmentation, dynamic customization, precision outreach, efficient delivery and consistent performance. As a strong testament, we have completed 8 projects for OEMs, which have all been very successful. For example, one of these OEMs has significantly increased conversion at each stages throughout the online sales funnel, of which the followers increased by 192%. The interested users increased by 36%. Users with a purchase intention increased by 80%. And the final conversion from leads to transaction increased by 39%.

We now have 11 OEMs partnering with our intelligent marketing solutions. We are confident that our intelligent total marketing solution will provide unparalleled value of all of our enterprise partners, therefore, increase our overall revenue stream in the future.

Aside from data technology, 2 key factors have also been essential in driving our execution over the past year. Number one, first and foremost, our high-performance digital content platform is the largest in the automobile industry. It consists of immersive, original, professional and user-generated content as well as a highly engaged and interactive community with an expansive library and listing information.

A few notable content milestones from 2018 include: one, aggregating over 10,000 renowned PGC contributors; two, successfully launching Alternative Energy and Youth channels with over a 1 million DAUs, respectively; and three, proactively converging O2O auto fan clubs throughout CheYouQuan with over 87,000 groups nationwide. All of these efforts have resulted in consistent traffic expansion with DAUs accessing our mobile websites and the primary app increasing 48% year-over-year.

In addition, revenue from mobile advertising increased 40% compared to the same period last year, representing 57% of our media service revenue. As the next step, we'll try to continue expanding our leading content platform with an AI-enabled content generation tool to further facilitate dynamic content customization based on user preference.

Number two, the other factor is our talented, versatile and hard-working professional employees. With diverse backgrounds predominantly across the Internet, media, automotive, financing, data and technology industries, our team works closely together to capture the opportunities that have helped build and grow this incredible company for more than a decade. Our best-in-class professionals set the high-standard culture within Autohome in which we can envision a clear long-term strategy with strong execution and core values aspiring Autohome to better serve our enterprise clients, consumers and shareholders.

Now please let me provide some highlights about our business operations. In addition to the media business performance, for which I just provided an update, our paying dealers have continued to increase to over 26,000 as of the end of third quarter 2018 with the sequential lead volume growth of 27%.

This growth is primarily due to: one, our relentless focus on optimizing overall leads operation for higher conversion rates; and two, our efforts to empower dealer clients to better digitize their operations with intelligent recommendation, tailored showroom displays and personalized experience to acquire, engage and retain their users.

For the auto-financing business, we facilitated RMB 4.2 billion in loans and insurance in the third quarter, representing approximately 41% sequential increase. As for our used car C2B2C platform, as of October 31, our merchant loan products issued a cumulative credit line of about -- over RMB 5.5 billion, which was granted to more than 2,300 select off-line used car dealers.

For data service, besides the total intelligent marketing solution I just mentioned, as of October, over 30 OEMs and over 8,000 dealers have used our data products.

In conclusion, we have entered a new -- next phase of our strategic initiative, focusing on transforming Autohome into an intelligent-connected automotive ecosystem with AI, big data and cloud, we call ABC, in order to further enable our users and clients for closed-loop transactions.

Looking ahead, we will continue to leverage our unique strengths in traffic, lead, content and data to drive the convergence of social content data and technology; two, further advance our user engagement; and three, better serve automakers and dealers.

With that, I will now turn the call over to our CFO, Jun Zou, for a closer look at our third quarter 2018 financial results and business outlook.

Thank you, Min. Hi, everyone. As Min has already highlighted, we are very excited to report another solid quarter. Please note that as with the prior calls, I will reference RMB only in my discussion today.

Net revenue for the third quarter was CNY 1.89 billion, representing a 35% year-over-year increase, excluding direct sales; of which media services revenue once again outperformed the underlying auto sector, increasing 20% year-over-year to CNY 901 million. Despite perceived headwinds in the physical auto market, Autohome continues to be automakers' partner of choice and continues to gain further share from their budgets.

Lead generation service revenue increased 20% year-over-year to CNY 739 million, primarily driven by ARPU increase and an expanded dealer client base, which is a strong evidence that we continue to build confidence among dealers.

Online marketplace and other revenues increased by 620% annually to CNY 248 million, excluding direct sales. a significant part of this revenue increase was generated from auto-financing and data solutions, so we are very pleased with increasing market demand from these new initiatives.

Moving on to costs. The cost of revenue decreased slightly by 3% year-over-year to CNY 215 million. If excluding the cost of direct sales from the third quarter of 2017, the cost of revenue would have increased by 4%.

Now for operating expenses. Sales and marketing expenses in the third quarter were CNY 677 million compared to CNY 422 million in Q3 of 2017, mainly because of the increased cost in off-line execution and branding expenses. Product development expenses were CNY 297 million compared to CNY 207 million in Q3 of last year. Again, this reflects our commitment to technology advancement and our professional talent.

Finally, general and administrative expenses were CNY 100 million compared to CNY 87 million in Q3 of last year.

Overall, we delivered an operating profit of CNY 698 million, representing a significant increase of 32% year-over-year. Additionally, adjusted net income attributable to Autohome Inc. was up 55% year-over-year to CNY 737 million. This increase was primarily the result of consistent top-line growth, streamlined operational efficiency and effective cost control while simultaneously supporting the success of our new initiatives.

Non-GAAP basic and diluted earnings per share and per ADS for the third quarter were RMB 6.26 and RMB 6.18, respectively, compared to RMB 4.07 and RMB 4.01, respectively, in the corresponding period of last year.

As of September 30, 2018, our balance sheet remained very strong with cash, cash equivalents and short-term investments over CNY 8.3 billion. We generated operating cash flow of CNY 641 million in the third quarter of 2018.

Let me now address our fourth quarter 2018 outlook, which reflects our current and preliminary view on the market and operating conditions that may be subject to changes. At this point, we expect to generate net revenue in the range of RMB 2.11 billion to RMB 2.13 billion. If we exclude the impact from our client sales business -- our direct sales business, this represents a 32% to 33.3% year-over-year growth rate.

In summary, we are very pleased with our year-to-date performance thus far, with the significant growth across our core business lines and the satisfactory progress of our new initiatives. As we look forward, we continue to be cost discipline, while expland new business development. We expect new initiatives, including data financing and transaction will become equally material as our core media and lead generation businesses in driving our future development.

Thank you. And with that, we're ready to take your questions.

(Operator Instructions) Your first question comes from CICC by Liping.

So I have one question related to the industry and your core business. So with another soft new car sales data released in October, actually, there are market concerns about next year's industry growth, so what's the management's view on that? And how will be our core business growth momentum? And in addition, I'd like to know what will be the growth -- what will have the most growth potential in our new business initiative? Yes.

(foreign language) So let me answer the question in Chinese. (foreign language) Well, if you look at this year, on the later half of this year for a few months, we do see an active growth for the auto market. (foreign language) This is very closely tied to the macro economy. (foreign language) So that's why for next year, we do believe we are quite prudent in terms of outlook of the auto market next year. (foreign language) We foresee it would be quite difficult for the market to grow as robustly as a few years back without a stimulus policy and a stimulus supporting policies addressing this market. (foreign language)

However, for Autohome, we're still very confident in our development. (foreign language) Well, I would like to elaborate more on 2 angles. One is from our internal objectives, another is from the OEMs. (foreign language) We are going to continue to increase our wallet share.

(foreign language) If you look at the number of the leads we generated for the later of half year, it's increasing. (foreign language)

And also, we are very happy to take the feedback from the OEMs. They are telling me that the conversion rates from the leads to sales doubles the market average. (foreign language)

So under such above mentioned scenario, we believe our market share will continue -- our wallet share will continue to increase. (foreign language) And secondly, we just launched our smart marketing campaign. (foreign language) Just 2 days ago, in the Wuzhen city of China that hosted the International Internet Conference (sic) [World Internet Conference], and we held a subconference we discussed a lot of OEMs. (foreign language) In terms of this smart or intelligent marketing, we already completed 8 campaigns, and we're going to receive 3 more. Our total would be 11. (foreign language) So each of the campaigns, they lasted for 2 months. (foreign language) I firmly believe that next year, we're going to add more of such campaigns next year. (foreign language)

All these new campaigns and the projects were going to bring new revenue to the company. (foreign language)

Another traditional business, which we generate a lot of leads on the used car business, and the number of the leads for used car sales is increasing. And next year, we would foresee this momentum would carry on and this would not be affected with softer new car sales market.

(foreign language) So all these are from our internal angle.

Next, I want to elaborate more on the OEM's angle. (foreign language) We understand that the current downward shift of sales in the auto market is a big pain point for the OEMs. (foreign language) So we believe that the smart OEMs, they would have better control over how much they're investing in the branding. (foreign language) That'll be the long-term investment in the branding.

(foreign language) That is for the long term.

And currently, the sales down are for the short term, so that's why they would not bring down their budget for the short run. (foreign language) And what we get allocated are their short-term marketing budget. (foreign language)

And all the OEMs, they're very clear of how to put the short-term dollar money in which budget. (foreign language) We have come up with a formula, which is the total number of leads multiplied by the conversion rate. (foreign language) Who can maximize this number will get the maximized dollar in terms of marketing money. (foreign language)

According to the feedback from the OEMs, we generated about 50% to 60% of the total leads they received. (foreign language) And also, as we mentioned, our conversion rate doubles the market average. (foreign language)

With such a high number of leads generated and a high conversion rate, we don't worry that the OEMs will decrease their marketing dollars on us. (foreign language) So in terms of our internal data and the OEM's feedback, we are very confident we will continue to grow. (foreign language)

Now let me answer your second question, which is about the new business. (foreign language)

As we said, our traditional business, including the media business and the leads generated business, they will continue to grow, but the growth rate may decelerate. (foreign language)

When the macro economy is so soft, you cannot expect us to grow as robustly as a few years back. (foreign language) But we want to make sure it will continue to grow. (foreign language) So to achieve a sustainable growth rate, the new business does matter for us. (foreign language)

In terms of the new business, for example, the data business and the finance business, it will account more than 10% of our total revenue. (foreign language) And we hope that these 2 business will continue to grow in even bigger share in the total revenue in next 2 to 3 years. (foreign language)

So we will continue to push forward these 2 business, and this is only the first year or the starting point for this new business. And the next year, we would wish to further grow these 2 business. (foreign language) And next year, we're going to launch our fifth business line. Although we understand it would be quite difficult, but we will try our best to launch this new business, which is our trading business. (foreign language)

The trade business is also a light asset business, which would be very different from the traditional or e-commerce business, which we have to put the money down and buy in and resell, and this is a light asset trading model. (foreign language)

Now we are negotiating with OEMs to discuss the possibility of launch the CPS model, the cost per sales model. (foreign language)

Next, we are going to launch 2 lines, one is a collaboration with the 4S dealership stores. (foreign language) And the second way is we would get into the lower cities and also put it as an Internet-based business. (foreign language)

And that is the traditional OEMs business. Next, I also want to touch upon the EV car, the electronic vehicle cars. (foreign language)

You know there are EV car OEMs that don't have existing channels for distribution, so that's why they don't have any burden to collaborate with us. (foreign language)

And the third one is we would create a closed cycle for the transaction of the used car business. (foreign language) We have the trusted dealership partner network, which already have more than 500 members. Till the end of this year, we're going to grow the membership into 1,000 dealers. (foreign language)

So we will try our best to launch our new business and explore more in the future. (foreign language)

Our goal is to grow the traditional business in a moderate growth level and also set up all the new businesses. (foreign language)

Okay, that's all for the answers. Thank you very much.

(Operator Instructions) Your next question comes from Eddy from Morgan Stanley.

(foreign language) My first question is about the transaction business development, and you mentioned last week in the Ping An Open Day that it will accelerate the transaction business development, especially on the back of the intelligent marketing. And second question is about the lead generation and media service, the core business. Is there any preliminary view regarding the ASP lift of the lead generated package to dealers as well as the OEM's -- their budget for next year?

(foreign language) So thank you, Eddy, for the question. Now let me take this question. Talking about CPUV and CPS, I already elaborated on the CPS model before. (foreign language)

For the CPS business, this is a real transaction business or trading business. (foreign language)

For the CPUV, actually, it's based on the OEM's request. We actually would count the single unified lead generated maybe by multiple person. It's -- we will count the people who visited the store and consider them as a single lead. It's like a combined lead.

So unique visitor, excluding redundancies.

(foreign language) So based on the already existing 8 projects and the coming 3 projects, altogether 11 project, we will charge the OEMs based on the CPUV model, the unique visitor redundancy model. (foreign language) So this is actually a new element added to the existing business model of our CheShangHui. (foreign language)

So this business, the revenue would be booked under the traditional business. (foreign language) However, the 2 business not only contribute to the traditional business revenue but also bring up a lot of new business like the data business. (foreign language)

As I said during the open day, we said the OEMs do need the clear data on each step for the smart marketing intelligence to bring what are the leads for them; and for each of the steps, they would have a precise targeting of the customer. (foreign language)

Because the CPUV model is already proven to be very successful, so next year, we're going to massively roll it out with all our strategic partners. (foreign language) For the CPS, we would create them as the online order. (foreign language)

For the users, after they place order, they have to put some down payment or security payment, and this is not refundable. (foreign language)

In this way, with a down payment or security deposit the OEMs can lock in such customers already online. (foreign language) This is a very critical step for us, but we understand it's quite difficult. (foreign language) We have to embrace such challenge and we have to be brave enough to take this step. (foreign language) The next question addressed is about the outlook for next year. (foreign language) We just began to start to negotiate with the OEMs about next year. (foreign language) For the dealers, if we make the reverse calculation and actually lost share for each of the leads we generated, we charge RMB 25. (foreign language) We also heard from a lot of channels saying that if the 4S dealership stores they go get their own leads, the cost can be RMB 200 to RMB 300 per lead. (foreign language) So we are really cost effective to generate effective leads. (foreign language) Next year, we're going to bundle the new products with our existing very successful products. We want to -- after we bundle, we can push forward the comprehensive product offering to our customers. (foreign language) This is just getting started and hopefully, this would bring new growth to the company next year. (foreign language) All the new business we're talking about, including the data services, the intelligent marketing services, the ultimate goal is we want to help the 4S dealership stores to increase their sales conversion rate. (foreign language) Let me give you one example, let's -- do not tell the exact name but just give you as an anonymous example. Two months ago, there is a 4s dealership store that leads generated, the conversion rate is only 1.6%, which is quite low. (foreign language) After 2 months efforts, till the end of October, their leads conversion rates have jumped to 4.9%. (foreign language) If we can truly help the 4S dealership stores and OEMs to convert a higher conversion rate, I think the pricing can be -- cannot be a problem. (foreign language) We're going to negotiate with OEMs, including the framework strategies with them. (foreign language) As we said, when the whole market is getting softer, the OEMs do have concerns over their sales and we also have concerns to help them to improve the sales. So we believe that we would have very good collaboration to increase the sales. (foreign language) I can tell you, I personally took a lot of time to visit more than 40 OEMs this year, face-to-face meetings, negotiations, I meet them, I also invite them to visit over us. (foreign language) I have to say we have deepened our relationship with the OEMs. (foreign language) With the launching of the intelligent marketing, we do believe that we will have more interaction with the OEMs. (foreign language) For example, all the OEMs who get involved in smart and intelligent marketing, they send out their working team, and they're stationed in our Autohome for 1 week or 2 weeks. We sit down together, we come up with strategies together and figure out how can we better embrace each other and also, collaborate. (foreign language) And once more, these 11 OEMs, they shared the data with our data. (foreign language) And this can never be imagined before. (foreign language) And we also have a more higher-level executives understanding and friendship, so in this way, we really deepened the friendship with 11 OEMs. (foreign language) So the OEMs provided very positive feedback on our job, and they have much more higher recognition level on our services. (foreign language) Okay, that's all for answering your 2 questions. Thank you.

Your next question is from Monica from Crédit Suisse.

(foreign language) So I have one question about -- so this year we have launched a lot of new initiatives and they have been making very good progress. And next year, I understand we'll continue to launch more products and new services. And just want to understand what are our key investment areas for next year and the margin trend for next year.

(foreign language) I would like to invite the CFO, Mr. Jun Zou, for the question. I may add up more comments.

Okay. Well, Monica, thanks for the question. I guess, for next year and on, we'll continue to invest in our new business such as data financing and transaction. And now we have implemented very effective cost-control programs on our core business which help us to enjoy economy scale in core business. And we are also rolling out a very high-margin new business, such as our big data and smart sales services to OEMs and dealers. And now we are building a trading and financing marketplace in which we are actually sales -- we are an agent and do not take an inventory or balance sheet risk. So those business will be a high-margin business in the long run, of course. But in the short term, of course, as we mentioned before, we may share some of those income or commission with partners of ours -- such as dealers or maybe consumers that actually start to utilize our platforms. But overall, in the long term, we think we're positive on the margin trend.

(foreign language) Let me add a few more comments. Just recently, we have launched up a new strategy. (foreign language) We talked about how can we leverage on our users, customers, and try to build a smart platform, an eco-platform, for the whole auto business. (foreign language) Ever since our new team get into the business, in the mid of 2016, we have experienced a few stages. (foreign language) Stage one, we call it B Stage, which is Big Data Stage. (foreign language) We invested a lot of resources in building the infrastructure for the Big Data. (foreign language) And also based on this platform, we developed a lot of data-driven products. (foreign language) All these data products can be tools for your OEMs and dealers to do analytic works. (foreign language) Now we get into stage 2, which is -- we call it AB stage. (foreign language) The A means AI, B means Big Data, so it's AI plus Big Data stage. (foreign language) We come up with marketing solution, (foreign language) which is intelligent marketing. (foreign language) We actually moved one step ahead because last year we just offered Big Data, which is a tool, and this year, we launched Big Solution, which is intelligent marketing solution. (foreign language) Now we are thinking whether we can launch the third stage, which is ABC stage, (foreign language) which is AI plus Big Data plus Cloud solution. (foreign language) We want to leverage on the OEM data, Autohome's data and the Ping An's data to establish a private cloud. (foreign language) So we can leverage on this private cloud to offer a comprehensive solution for the OEMs. (foreign language) So leveraging on these 3 sources of data, we can comprehensively offer OEMs better upgrading on its RMB, on its sales and marketing, and also post-sales services. (foreign language) We already have the initial ideas. The next step, we're going to put on the resources and make this achievable. (foreign language) That's all. Thank you.

Your next question is from Hillman from Citigroup.

(foreign language) So regarding the OEM advertising and dealer subscription business, how do we see the competition from DongCheDi -- in both of them, given that the fast-rising DAU and time share of DongCheDi. Thank you, management.

(foreign language) Let me echo on this question. Firstly, competition is anywhere, and it's -- actually, you can find competition anytime, anywhere. (foreign language) We believe competition is benefiting the whole business to further develop. (foreign language) I believe no matter who want to be successful in this auto vertical market, the magic formula is what we have mentioned, that is, the number of leads multiplied by the conversion rate. (foreign language) We believe that Autohome do have lot of advantages and competency with this regard. (foreign language) After I get into the Internet business for years, I deeply identify that the 2B business and the 2C business, the DNA matters differently and differs differently. (foreign language) For example, the 2C's gaming business, if you get one game right you can quickly grow and expand. (foreign language) But this model doesn't fit into the 2B business. (foreign language) The 2B business made a top level strategy designing and it needs to put a lot of concentrated resources. (foreign language) Only in this way can you deeply serve your customers well. (foreign language) And also, it takes time to establish the business ties with your 2B customer, and the business penetration rate can never be achieved overnight. (foreign language) For example, this year, when we launched the data service business, it's quite difficult to do the marketing because for 2B business the decision-making process can be very long and there are lot of cycles along the decision-making value chain. (foreign language) And also for the 2C customers, the auto sales are very different from the fast consumption goods. (foreign language) For example, on the Double 11's Day, if you place order on the fast consumption goods, it will take you only a few seconds or a few minutes or just, maximally, 1 day to place an order. (foreign language) But for the auto sales, a general buyer usually spent 2 months or even 3 months before they place any order. (foreign language) So for this way, you cannot just entertain people and make the leads. (foreign language) As I said, during the open day, it is very rare for people just watch 10 seconds or 15 seconds short video and then they place order to buy a car. It is not that fast. (foreign language) So the leads that very professional content is needed to support the purchasing behavior. (foreign language) And we also need all kind of tools to convert the leads. (foreign language) We also need the support from Big Data. (foreign language) Then through step-by-step, you can guide the users to generate leads. (foreign language) So you -- we need professionalism as well as it is time consuming. (foreign language) The formula is quite important. The number of leads multiplied by conversion rate, you have to achieve this result high. (foreign language) To make this high, you have to build a very good App or website, which would be very attractive to the users and which would serve their needs to viewing and searching for and purchasing cars. (foreign language) Well, this is not necessarily undermining other competitors. We believe everybody have their own strength, and we will also learn from other's strengths. (foreign language) For example, the short video, we're trying to deepen our understanding about the short video and use it. (foreign language) And also, we offer something new which is not easily copied by others in the short term. (foreign language) For example, we just announced that we're going to launch an AR/VR show for the auto, online show in China next year on August 18. (foreign language) And we hope that we can attract at least 50 million visitors. Our goal is to reach to 100 million visitors. (foreign language) We are already talking with lot of OEMs, and they showed a lot of, tremendous interests in participating. (foreign language) We understand that the competition is always there, so that's why each of the competitors do have their own strengths and advantages. The ultimate winners would be who can serve the customer better and who can help the OEMs to achieve more sales. (foreign language) Okay. That's all. Thank you.

Your last question comes from Wendy from Macquarie.

(foreign language) Okay. So I have 3 questions. Sure, I can translate myself. My first question is a follow-up on your ABC private cloud strategy. We all know that cloud business for most of the Internet companies is heavy CapEx and loss-making. So just wonder with your collaboration with OEMs and also Ping An how will be the cost structure for your future cloud business? And second, you gave a great example about how the lead conversion came through by almost 3x with intelligent marketing campaign. So I just wonder, does that imply the price increase potential for your leads, can be like 2 to 3x in the longer term? And lastly, regarding the light asset transaction business, you're going to aggressively roll out next year. How should we think about pricing strategy? Or how will you determine the CPS? It will -- will it be a back out from the formula -- the magic formula you just mentioned, the leads multiply the conversion rate?

(foreign language) Thank you. Let me answer the first question regarding the cost of the private cloud. (foreign language) In terms of the cloud technology, we are leveraging on Ping An's technology. (foreign language) We already have a quite matured cloud platform. (foreign language) Actually, what we are focusing more is not like the small players or small gems. They put lot of attention on hardware, like the service, et cetera. However, we pay more attention to the software side, for example, the data. How can we can -- put all the data together and make an effective solution. (foreign language) We are now talking with OEMs because we know its collective efforts for everybody to join hands together, just like we did in the smart intelligence marketing. (foreign language) And the second question, although, I gave example of how can we enhance the leads conversion rate, but actually, different products differ, and dealers differ from each other, and OEMs differ from each other. So it's not necessarily translating into how much more we can raise up the price. (foreign language) But one thing is for sure. We would charge by the CPUV model. (foreign language) Now the last question, regarding the pricing on the CPS model. This is even more complicated because it depends on whether it's dealership model or lower-tier city website model, so it's different. (foreign language) For example, if we're working with dealers, we would never hurt the dealers' benefits or their interests. So in this way -- otherwise, they will not collaborate with us. (foreign language) And also for the secondary website, in the lower-tier cities, because we have to take into consideration not the logistics cost and other costs and the fees, so the fee modeling would be different. (foreign language) But roughly speaking, you can make your calculations by utilizing the conversion rate. (foreign language) We have to negotiate with OEMs one by one because each of them differs from each other. Okay. That's all. Thank you.

Thank you. Due to limited time, I will now turn the conference back to the management for closing comments. Please continue.

Okay. Thank you very much for joining us today. We appreciate your support, and we look forward to updating you on our next quarter's conference call in a few months' time. In the meantime, please feel free to get in touch with us if you have further questions or comments. Thank you.

Thank you, ladies and gentlemen. Thank you all for your participation. You may all now disconnect.