OneConnect Financial Technology Co Ltd (OCFT) 2021 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the OneConnect First Quarter 2021 Results Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Speaker Patricia Cheng. Please go ahead.

Hello, everyone. Good to speak to you again. Welcome to the Q1 earnings call. On the line, we've got Mr. Ye Wangchun, Chairman and CEO of OneConnect; Mr. Luo Yongtao, CFO; Mr. Michael Fei, CEO of SME Banking; and Mr. Chen Xuhua, CEO of Gamma O.

Some housekeeping notes before we begin. First of all, you can download the earnings press release and presentation from the IR website.

Second, our remarks today will include forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements except as required under applicable law.

During the call, we may present both IFRS and non-IFRS financial measures. A discussion of the limitations of non-IFRS measures and a reconciliation to IFRS is included in the earnings press release.

I will now pass it over to Chairman Ye. His remarks will be in Chinese. A translation in English will follow. Ye, please.

[Interpreted] Hello, everyone. I am pleased to say that OneConnect has gone off to a solid start to this year, riding the coattails of the economic recovery in China as well as the continuing demand for digital solutions from financial institutions. We achieved revenue growth of 41.1% year-over-year as we build on the momentum from the rollout of cloud services platform last year, which more than offset the gap from the exit of low-value products. Even though the drop in business origination widened following industry and regulatory headwinds, revenue mix from third-party customers rebounded for 2 consecutive quarters.

Net loss also further improved with net loss ratio narrowing by 34 percentage points thanks to the strengthening of product management and continuous cost discipline. Further progress was made in customer expansion.

In the first quarter, we signed over 20 deals worth more than [CNY 5 million], 3 of which exceeded CNY 10 million. The contract spend is significantly higher than average. [From some] financial institutions issued a total digitalization of retail banking business, rebuilding a digital bank from scratch. This project reflects our all-around coverage of our clients' diverse needs and are a great testament to our technology plus business capabilities.

For the coming quarter, OneConnect remains committed to strengthening product value as well as customer value. We will continue to upgrade our products and enhance the end-to-end [domain] to improve the core competitiveness of our offering. For more mature products, we will further broaden the customer reach and volume. For newly launched ones, we will step up sales to third-party customers.

At the same time, we also seek to deepen the engagement with our customers. [Current] financial institutions have different needs. Through cross-selling and upselling, we will improve the wallet share as well as customer value.

Lastly, I would like to reiterate our confidence that as the Chinese economy returns to normal after this pandemic, the revenue growth rate this [quarter] will be no less than that last year. We also expect to get a double-digit percentage point improvement in the net loss ratio.

Thank you, again, for your interest in and support for OneConnect. Your comments and questions will be welcome as always.

(foreign language) Thank you, Chairman Ye.

Next, CFO Luo Yongtao will go through the financial results in more detail. Luo, please.

Yes. Thank you, Patricia. Good morning, everyone. This is my first results briefing. It's an honor to speak to you and present our results. The first quarter, as Chairman Ye said in his opening speech, was a period of consolidation during which we continued with our strategy to reinforce products and sales.

Starting with the top line. Revenue increased by 41.1% year-over-year to CNY 820 million in the first quarter.

Transaction activities provide a good snapshot of our business. Our revenue is driven by transactions or usage of our solutions. There are 3 main indicators that we look at: retail loan volume, SME loan volume and auto claims.

Retail loans processed by our system rose 11% year-to-year to CNY 14 billion, reversing from a drop in previous quarters, thanks to a pickup in risk management solutions, which I'm going to talk about in a bit. SME loans processed also posted an increase, up by 25% to CNY 7 billion. The number of auto claims processed rose 56% to 1.56 million.

You have all seen the impressive GDP growth China reported in the first quarter. Although the situation surrounding COVID-19 remains fluid and there are some up and downs in different sectors, the recovery of the domestic economy is generally underway. Improvements in transaction activities will further drive our business.

By business segment, the cloud services platform was the biggest driver of revenues, contributing CNY 181 million or 22% of the total revenue generated. The business was launched at the end of the second quarter last year, which means that we are unable to make a year-over-year comparison at this stage.

Our rapid growth shows OneConnect's ability to break into new markets just like 5 years ago when we established the company.

In terms of size, operation support was the biggest. Revenue rose 29% to CNY 212 million, representing 26% of the total. Roadside assistance and AI customer service continue to see strong demand from financial institutions. Risk management also did well, growing 21% to CNY 99 million.

You saw in the earlier slide the rebound in retail lending activities. Fast claims also falls under this category. Nonetheless, revenues from business origination continued to remain weak. It fell 34% year-over-year to CNY 118 million. As we explained on previous earnings calls, a combination of internal and external factors have been weighing on this segment.

Internally, as the intensity of product optimization was stepped up in the middle of last year, residual pressure from the exit [will start out] in first half of this year. Externally, there has been a tightening in regulation and industry changes towards the end of last year.

The impact is also evident in the performance of our customer groups. All 3 customer groups, Ping An, Lufax and third-party customers, saw a drop in business origination revenues.

Revenue from Lufax fell 9.9% to CNY 75 million as a result. The team is working hard to make up for the loss over the course of this year.

In respect to Ping An Group, revenue rose 92% year-to-year to CNY 436 million. The expansion into cloud services platform provides strong support, more than offsetting the drop in business origination.

In terms of third-party customers, this group did experience a bigger decline in business origination revenue because that was our first business line and the third-party ratio tends to be higher for more mature solutions. Despite having a bigger hole to fill, third-party customers delivered 14% revenue growth in the first quarter.

Aside from business origination, all other segments achieved an increase year-over-year. While business origination is still undergoing consolidation, we have seen signs of recovery. The 14% growth rate is higher than the level seen in the third and the fourth quarter last year.

Sequentially, the proportion of the third-party revenue has been rebounding from 34% in third quarter last year to 36% in the fourth quarter and now 38%. Even the timing of old product phaseouts and new product launches does skew year-over-year numbers. The quarter-on-quarter trend is a better indication of the progress made.

This is the same with gross margin. Year-over-year, the metric dipped from 34.8% to 34%. You'll have to take into consideration of the change in mix of solutions. Quarter-on-quarter, our non-IFRS basis gross margins rose from 42.8% in fourth quarter 2020 to 43.5% in first quarter this year.

Next, I would like to discuss operating expenses. The 3 main expense items all reported a drop in ratio. Let's look at them one by one.

Research and development expenses rose 17% to CNY 281 million. The rollout of cloud services platform does require more investment. As a percentage of revenue, the ratio was lower year-over-year from 41% to 34%.

We also spent more in sales and marketing, about 7% higher year-over-year to CNY 167 million as resources got directed to the promotion of new solutions. However, as a percentage of revenue, the ratio went down from 27% to 20%.

In terms of general and administrative expenses, we cut spending by over 6% year-over-year to CNY 180 million. As a percentage of revenue, the ratio dropped from 33% to 22%, representing an improvement of over 11 percentage points. The scale that we are building has led to a significant amount of operating leverage. Adding in cost discipline, operating loss ratio improved from 77% to 42%, a drop of close to 35 percentage points.

The bottom line also made similar progress. Net loss to shareholders fell to CNY 305 million from CNY 415 million. As a percentage of revenue, net loss ratio improved by 34 percentage points to 37.2% for the first quarter.

Overall, we are pleased to have had a solid first quarter. It is important to continue to innovate and grow a diversified revenue mix to address the changing needs of financial institutions in this evolving market.

I will now hand it over to Michael, who will talk about the progress in our sales efforts.

Thank you, Luo. Hi, everyone. If you have the presentation in front of you, actually, we have a second section talking about the business highlights. We have several case examples of our product and client case examples that we'll go through one by one together with you. The first one, our major drive for our revenue this quarter was cloud service platform. Our cloud is actually designed specifically to cater to the needs of financial institutions. Security, safety and compliance are the most important considerations for financial institutions and also the key differentiated factor for our financial cloud services.

On this page, you can see the client case example is a joint-stock bank. 95% of the test environment and 30% of the production inventory are now already on cloud. As a result, the bank is able to deliver resource much faster with more flexibility and also at a much lower cost. We had several successful third-party client signings on cloud services since the beginning of the year.

Next page is a case example for another joint-stock bank. We have implemented a corporate banking risk control platform for that bank. It covers over 80,000 of its corporate banking customers and over 70% of its corporate loan portfolio. We helped the bank consolidate over 20 types of various internal and external data to develop 80-plus labels. We also offer model platforms and rule engines.

We helped the bank develop over 600 early warning signals, early warning rules. Many of these rules are based on our understanding of the business. This is a testimony of our business and technology capability. The bank is now using this platform in its whole credit process from pre-lending customer profile to risk weighting, to post-loan management or even collection. We are actively replicating this product to other banks in China.

The third case is for a leading city commercial bank. Our mandate is to carry out the digitalization of the retail banking business. We started with smart banking consultancy services. We needed to first understand the existing business, what the bank wants, and then help redesign the solution that can achieve those objectives. Two of the products that have been delivered so far are the mobile banking application and operation middle office. Through the application and the middle [desk], we helped the bank create a digital platform for their whole retail banking workforce. They can run daily operations, management workflows, conduct various customer analysis, deploy task and feedback, share experience and insight, et cetera, et cetera. The platform now supports over 6,000 relationship managers and 8 middle office centers. Similarly, the product is being rolled out to multiple other clients.

The last example you can see here is to build a brand-new bank. In our full year results, we shared a similar client case example. We have the digital bank in our box that is putting all our capabilities in one bundle. This is not the first time that OneConnect was interested with the mission to build a digital bank. We've built a digital bank from scratch. This time, we got a mandate from a different country. This particular one is the country's first full digital bank. It comprises a digital mobile banking application, a core banking system, which will power the features such as remote banking services, loans, remittance, account openings as well as cardless eATMs, AI customer service, et cetera.

Many of the functions have already been launched, such as real-time QR code payment, which was the first in that country. As well as during COVID-19, the bank used our system tools to deliver digital disbursement of relief subsidies to all the citizens in the country as well as a simple 3-step online account opening process.

I hope these product and concrete examples can provide you with a better sense of our business and the impact we are delivering to our clients.

I will pass back to Patricia.

Thank you, Michael. Operator, we are ready for questions. Can you please open the line?

(Operator Instructions) Our question comes from the line of Yang Liu with Morgan Stanley.

Congratulation on the strong top line growth. I have 2 questions here. First one is on gross margin. Because we saw meaningful business mix change, no matter from a year-on-year or on Q-on-Q perspective, we see the business origination part and low-margin implementation part decrease, but the gross margin is still largely flattish. So could you please update us what is the progress so far? I think the company is cutting some low-margin business internally, but why, from the reported gross margin perspective, we can -- the positive impact is still not visible so far? And especially, we see the cloud platform is growing super fast. Is that still a relatively low-margin business at the current stage?

The second question is related with OpEx. We see a very solid OpEx control this quarter, only 7% year-on-year increase. Does management think that is a new normal or targeted similar growth for the full year? Or is it kind of a one-off impact due to some reasons?

Thank you, Liu Yang. Our CFO, Luo Yongtao, is going to take both of your questions.

Okay. Yes. Thank you for the question. I think I will probably combine your first one and second one together because they are related. The gross margin, yes, from a year-to-year basis is from 34.8% to 34%. It's a bit dipped about 0.8%. But the year-to-year basis is a result of the mix of our business just as you said. We launched the product optimization in 2019, and the intensity of the action actually was stepped up in the middle of last year. That one, the impact is -- gradually, we will see it.

But we compare this quarter and last quarter, Q1 last year. The major change is cloud proportion because, in last year, we didn't have the cloud business service. And this year, the cloud proportion is 22% of the total revenue. For the cloud services platform, as new launches in the early stage, the gross margin cannot be very high. So at this stage, it didn't contribute too much to improve the metric.

Actually, I think it's better to look at this metric on a quarter-on-quarter basis because, from Q4 last year to Q1 this year, the proportion of the business is similar or comparable because, in Q4, the cloud service platform is about 18% and this year is 22%. From Q4 to Q1, the -- on the IFRS basis, it's 34.2% to 34%. So I would say it's in a pretty same level.

But there is also another consideration we have to look at. It's -- because the gross margin on the numerator, we [have the] amortization of the intangible assets, it's a pretty flat number actually across the 4 quarters. But on the denominator, the revenue had some seasonality, and Q4 is much higher than Q1. From the number, we can see it's about 30% higher than the Q1 numbers. So if we exclude this impact, then we better look at the non-IFRS basis. So that's why on our slide, we compared the quarter-to-quarter comparison based on the non-IFRS basis. It's from 42.8% to 43.5%. So that's -- we can see that it's a rebound from the Q1.

And I think with ongoing of our product optimization and the gross margin improvement in the new launches, we will see the trend of the improvement of the gross margin going forward.

So the third one, can you repeat the question, please?

The question is -- we see the OpEx, sales and marketing, R&D, G&A increase is just single digit in the first quarter. Do you think that this kind of growth is sustainable? Or is there any one-off reason to lead to a relatively good cost control in the first quarter?

Yes. So the operating expenses, we will -- with more and more revenue, the scale we're building actually will lead to the operating leverage. We will see the operating expenses will go down further, actually. And some onetime input will be lower and lower in the next quarters.

I have a quick follow-up. Sorry, a quick follow-up here. I think the -- as you mentioned to use the non-IFRS metric gross margin and also mentioned about pretty good cost control or the R&D OpEx control, I just want to make sure there's no change to company's R&D capitalization policy.

No, no, no. We don't have any changes on this policy.

Yes. Actually, I want to also provide more information, more insight on the question you just mentioned on the margin. You have pointed out, and also Mr. Luo has said, we phased out some business organizations, business products in the past 2 years. But in the meantime, we also launched many new products. Cloud is just one example as we have explained in today's briefing. I have explained 4 examples here. In addition to cloud, we also have this risk -- corporate risk banking, risk management platform, the retail banking, also the digital banking in a box. These are all -- many of them are actually new products we have launched after our IPO.

And for all those SaaS products in the early stage, a lot of the standardization work is required so that the margin tend to be lower for this new product. But as we build more concrete examples, the cost will go down and the margin will gradually improve. So I think that also is one reason why you see our margin is relatively stable.

Your next question comes from the line of Hans Chung with KeyBanc.

So I have 3 questions. First, if you look at retail loans versus the business origination revenue, and I know we have been -- went through -- going to some optimization in our product portfolio, so -- but we actually see -- for the past few quarters, we saw a decline in retail loan year-over-year. And then we also see the decline in business origination revenue that tends to be directionally related. And -- but in the quarter, in Q1, we have seen growth in retail loans while we have seen even larger decline in business origination revenue. So I just wanted to know. How do we reconcile the trend underlying? And then -- so that's my first question.

And then second question, just I assume that our cloud revenue -- majority of cloud revenue is from Ping An customer. And then so if I subtract the core revenue from our revenue from Ping An Group, then it seems like we're about roughly low teens year-over-year and then down nearly 40% sequentially and seems are larger than before and then considering we have a lower base for first quarter last year. So I just want to know. Is there any color you can provide to help us understand like the dynamic in Q1 for our Ping An Group, the single customer? And that's second question.

And third question is -- I remember that, last time, we have a revenue outlook for the full year to be no less than last year, which will be 42% year-over-year growth. So -- and now we have -- for Q1, we have slightly lower, which was 41%. And are we continuing to maintain our guidance for revenue outlook for this year, 42%? And if so, that would imply a growth re-acceleration afterwards. And then what would be the driver for that?

Thank you, Hans. So 3 questions. The first one, let's have...

Patricia, I will take the first one, and Luo will take the second and third one, I think.

Okay. Yes. Let's do it this way. Thank you.

Yes. Hans, yes, very good question. You spotted the growth in retail loan volume. But the drop in origination revenue, well, the answer is actually quite simple. It's that because we have a shift in the loan portfolio we serve. So actually before 2019, many of the loans we served are those consumer lending without any collateral security. So the margins tend to be much higher for this type of loan services. But now, I think our portfolio has been shifting to those more collateralized lending, the mortgages, the car loans, et cetera. The net interest margin for this product is much lower compared with consumer credit and that also our service fee is much lower. So that explains why we have a growth in the volume but, in the meantime, a drop in the revenue.

Okay. On the second question, in the first quarter, the main driver is coming from the cloud services platform. But if we strip out the cloud, other business growth is about -- in the teen percentage. But I think for Ping An, we should look at it as a whole customer because the business coming from one single customer, we have some agreement between OneConnect and Ping An.

Also for Ping An, there is an impact from the product optimization for the business origination line because we have also business with Ping An falling to this line of -- business line. The -- actually, if we excluding the cloud, the other segments, aside from the business origination, is still growing. That is more than offsetting the decline in the business origination. And also, I think -- sorry. I think the -- for the Ping An, with the improvement in the business origination, I think that the income -- the growth will be coming back actually or it's maintained at a similar pace.

Yes. Just to add onto the Ping An question. I think we should treat Ping An the same as other client, yes. I don't suggest we actually strip out the cloud because we launched new product for Ping An. Also, we phased out old product. So I would suggest we look at the Ping An revenue as a whole, yes. Cloud is just one of the new products we provided to Ping An Group. There's another bunch of new product we provide to Ping An Group, too, yes.

So we just treat it as a whole. We have a new product, and we phased out all the old product. And we are confident that our services with Ping will be -- long term, will continue to grow our support to the Ping An group.

So am I correct? So we have, let's say -- yes, we sent out new product and phased out old product. And so the rationale behind the phaseout is because of the low margin, low value, just as we have seen in the overall -- the business origination segment, right?

Yes. Yes, you can say that.

Okay. Okay. Okay.

On the third question, I think yes. In Q1, the increase is about 41% but looking for the full year, actually, yes.

Yes. I think we will continue our product optimization, and we will have for -- have more efforts in the sales. So we are confident that, for the full year, we -- our revenue growth will be more than last year's rate. Yes.

Okay. Can I have one more question?

Of course. Yes, please go ahead.

Yes. I just wanted to ask about -- what's the implication from the launch of the digital currency by the Central Bank? And because I think for PBOC, they seem to adopt the hybrid model, which is traditional centralized database versus decentralized ledger technology. And so I just want to know. Like, is there any trend like -- or is there any rationale for the commercial banks that they may adopt the DLT, I mean, as opposed to the current legacy infrastructure? And is that something that we can benefit from the trend? Just -- maybe I just want to hear any color about the overall implication from digital renminbi. That would be helpful.

Thank you. Michael is going to share his thoughts.

Thanks, Hans. We are actually very closely monitoring the situation. We maintain a very close interaction with the Central Bank to understand the progress. At the current stage, we see actually most of the big 4, the big ones, piloting this digital new currency. We are monitoring situation to see when there will be a large-scale rollout of this digital currency application. And once I think it is kind of rolled out, the largest scale, definitely, there will be a lot of the requirements from those banks and also the merchants to upgrade their payment infrastructure.

Okay. So...

Yes, Hans. Yes, we can continue off-line on this topic.

The next question comes from the line of Ethan Wang with CLSA.

Thank you for presenting us with 2 examples of the cloud service, and that is helpful. But I just want to have more color on the cloud services. Can management share the current split of the revenue source from Ping An Group versus third parties? We believe that group accounts for the majority, but can we get maybe some numbers on that? That is the first question.

And the second question, so we understand that OneConnect serves financial institutions, but is there any plan or are we doing actually that to serve the government as well? Is there any opportunity here?

Thank you, Ethan. Why don't we ask Xuhua because he is in charge of the cloud business to talk about our cloud strategy to give you some better idea? And then the second question about the government business, Michael will take it.

[Interpreted] Thank you. I would like to firstly answer your first question. Last year, when we launched the cloud services platform, most of our customers are from Ping An Group. However, for the first quarter of this year, we are going -- we are adding more and more third-party customers, including financial holding companies, insurance companies and financial companies at the provincial level. For these financial company deals that we signed, most of them are over CNY 10 million, so we are confident that the number will surpass that of Ping An Group.

The second question about serving the government. Yes, we do serve government agencies, but we are very targeted. We are very targeted. We actually see government as a part of the ecosystem of us to providing financial technology services to the banks and the insurance companies.

I will give you one example. Last year, we actually launched an SME financing platform together with the Guangdong Provincial Government. The platform integrated over 200 different data sources from various government departments. And we used this data, we used this information to build credit profiles, to build customer ratings to help banks to do better SME risk assessments. And also, we leveraged on this platform to penetrate into many of the scenarios of SME financing, for example, supply chain finance, invoice finance, et cetera. So we will continue actually to replicate this model to other areas in China. In fact, we have several more signings with this provincial government starting from the -- early this year.

So the short answer is yes. We do see government agencies as one of our target customer, but we are very targeted. We try to build an ecosystem for financial technology services and help the financial institutions to grow their business.

Got it. Maybe just a very quick follow-up on this front because we've seen headlines surrounding our SBI -- JV with SBI in Japan. Since that's been terminated and SBI even quoted like some credible issues surrounding that, so do we have any comment there? I know the financial impact is limited, but how will this impact our overall strategy of growing overseas in the future?

Yes. Well, thanks for noticing this news. As you said, the financial impact will be very limited. I think the JV, there's success cases, there are failure cases, yes. Just unfortunately, the JV with SBI in Japan didn't work out for the past year probably because of the COVID or various other situations. So I think we mutually decided to close the JV. But our cooperation with SBI will continue. They remain a major shareholder of us. They are committed to the company, and we had a lot of cooperation out of -- outside of Japan, in Southeast Asia, Hong Kong, et cetera.

The next question comes from the line of Elsie Cheng with Goldman Sachs.

(foreign language) I have 2 questions. First one is just to follow up on the loan businesses. We do see a very nice growth recovery into the first quarter. I'm just wondering, for the next few quarters into this year, can we expect sort of a similar trend where we can have a growth recovery continuously to be higher into the year?

And then a follow-up question previously mentioned about retail loan business mix. In terms of secured and unsecured lending, do you have an idea like with the historical level? And what is it now? And into the next few quarters, how it will actually change?

Then the second question is more on the business update. Like based on some of the previous discussions, I just want to follow up. Is it more on the cloud side? What are the customer numbers, not in terms of the revenue as revenue contribution from third-party customers are small but in terms of customer numbers? What was the current level for the cloud business, specifically?

And the second thing here is about our overseas revenue contribution. We have seen a lot of developments in Southeast Asia for our overseas businesses. So I just want to have an update on the revenue contribution from this segment.

Thank you, Elsie. Michael will take your questions related to our lending solutions. And then the second one about the cloud business will go to Xuhua. And then finally, our CFO will take -- will talk about the overseas revenue.

(foreign language) So just very quickly to translate. I think for the loan service volume, this is one of the key KPIs, actually. For our different business lines, we monitor this growth of the volume actually month by month. And also, we hope that the trend will continue to recover as well as to the mix, change of loan mix. Unfortunately, we don't have the information on hand. We will try -- we will come back to you later if we have this more -- if we have this information.

(foreign language)

[Interpreted] For cloud services platform, altogether, we now have 38 customers, 8 of which are from Ping An Group, whereas 30 are third-party customers.

I would also like to give you more color on why we are seeing bigger market share from -- in financial cloud. First, we -- since we started building financial cloud in 2019, we've been seeing a clearer trend in regulatory and policy environment. The government is laying out more clearer policies.

And secondly is on technology. For many years, big technology companies have been developing public cloud, and they are leading in this area, whereas for financial cloud, all of us are newcomers. And Ping An, as an experienced group, we are -- we have leading technologies in financial cloud.

The third is our strategy when we are marketing. We focus on big customers, and we pack cloud service with other products of OneConnect. We specifically target commercial -- city commercial banks and financial holding companies and sell them a whole bundle. In addition, financial cloud is also the basis of technologies and products for OneConnect. Altogether, this is why we have been able to secure bigger market shares since -- starting from this year.

Okay. I'll cover the third question. So the progress on the overseas business. So far, we have entered 20 overseas markets, so far mainly in Southeast Asia, such as Indonesia, Malaysia, Singapore and Cambodia. And so far, we have about over 100 customers already. And on this group, we -- our solutions include like risk management, fast claims and a banking system.

Also, we launched our VB in Hong Kong last year, as probably you have known that. It's one of the 8 VB in Hong Kong. But I think our strategy is a little bit different from others. We mainly provide the online banking services for the SME customers. So it's also in line with our overall objective to support SMEs.

In terms of the proportion of the revenue in -- the revenue coming from overseas is still small. It's still in the low single digit so far. But with progress, I think we will see more and more weighting coming from the overseas revenue. Thank you.

(foreign language) Thank you, Elsie. Operator, do we have anyone else on the line?

We do have one more question from the line of Alex Yao with JPMorgan.

I just have a very quick follow-up on the cloud business. Can you talk about the competitive dynamic in this market segment? I.e., aside from you guys, who else is providing the similar cloud services to financial institutions? And also, what's your competitive advantage in the financial cloud market?

Thank you, Alex. This question will be -- will go to Xuhua.

[Interpreted] Right now in financial cloud, we are competing with Ali, Tencent and Huawei. We think our advantages in financial cloud include 4 aspects. Number one, we are more secure. As Ping An financial cloud originates from Ping An Group's financial business, we have great focus, and we prioritize the security of our cloud. Secondly, in terms of compliance, we are closely working with the regulators to improve our compliance capability. Thirdly, our financial cloud works with a variety of platforms. We are able to incorporate local cloud with public cloud as well as private cloud. Fourthly, in terms of cost, as Ping An financial cloud has been in operation for many years, we are confident that we can maintain our cost at a very competitive level.

Lastly, in the industry, we know that, other than cloud, we have PaaS and SaaS. For us, we have been improving our capacity in PaaS since 2019, so we are confident that we can outperform our competitors. Secondly, we can also connect SaaS to PaaS, whereas our competitors may only provide PaaS services.

I think that sums up our earnings call today. We have overrun a little bit. Thank you for staying with us. And thank you, everyone, for joining the call today. We appreciate your interest in following us, and we look forward to speaking with you again. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]