Vipshop Holdings Ltd (VIPS) 2013 Q1 法說會逐字稿

Thank you for standing by and welcome to the first-quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, (Operator Instructions). Please be advised that this conference is being recorded today, May 15, 2013.

I would now like to hand the conference over to your speaker today, Millicent Tu, our Director of Vipshop. Please go ahead.

Thank you, operator. Hi, everyone, and thank you for joining Vipshop's third-quarter 2013 earnings conference call. Before we begin, I will read a forward-looking statement. During this conference call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations, assumptions, estimates, and projections about Vipshop Holdings Limited and its industry. All statements other than statements of historical fact that we make during this call are forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as anticipate, believe, continue, estimate, expect, intend, is/are likely to, may, plan, should, will, aim, potential, or other similar expressions.

These forward-looking statements speak only as of the date hereof and are subject to change at any time. And we have no obligation to update these forward-looking statements.

And joining us on today's call are Eric Shen, Chairman, the Company's CEO and Co-Founder; and Donghao Yang, the Company's Chief Financial Officer. At this time, I would like to turn the conference call over to Eric Shen.

Hello, everyone. Welcome to our third-quarter 2013 earnings conference call. This quarter, we are very pleased with our strong momentum, which once again, underscored the strengths of our unique eCommerce model, fueled by rapid growth in both active customers and the total orders. We more than tripled our revenues in this quarter to $311 million and outperformed our expectation, due to stronger post-holiday rebound in demand, which we will discuss later. Through growing scale and leverage in our business operation, we continue to expand our [facility] and the margins during this quarter, which our CFO Donghao will explain shortly.

To begin with, by building upon last year's strong growth momentum and this year's successful selling, our strategy and the success has changed the landscape in China's E2CE commerce market. This huge success has enabled us to quickly increase our profile with the major plants as well as Chinese shoppers. As a result, we continue to extend our leads over the competitions in China's fast-growing discount regional market.

For customers, they come to our website because they want the best of the market selection at the lowest price available. In order to satisfy them, we have a world-class merchandising team of over 300 experienced buyers dedicated to finding the best products from the best brands. For the brands, the demand capable, and the growing upon us to handle their excess inventory without hurting their brand identity. We helped over 6000 brands by quickly liquidate this inventory, and for over 800 of them, we have exclusive access to this merchandise. In doing so, we reduced any brand dilution, further stress our mutual trust with these products as well as ultimately providing customers exclusive access to products that are in high demand but limited companies.

None of these advantages can be quickly copied by general eCommerce plays overnight. The network and the scale effects from our unique online discount regional model offer our brand partners higher financial reasons hard to turn over, and that most importantly, reduce brand dilution, that further separates us from our existing or imagined competitors in China. These attributes provide us increasing confidence in our ability to continue our success.

At this point, let me turn over the call to our CFO, Donghao Yang, so that he may discuss this quarter's achievements and our future strategies in greater detail.

Thanks, Eric. And hello, everyone. I'd like to further elaborate on the key areas over the course of today's call prior to reviewing our financials. To begin with, we had another strong quarter of growth across the board. Total revenues increased by 207% year-over-year to $311 million. Despite being a typically slow quarter due to seasonality associated with the Chinese New Year holiday, we saw our customer activity and post-holiday spending rebound much faster and stronger than previous years, helping our topline growth exceed both our expectations and consensus estimates by a strong margin.

Gross margin expanded further to 23.4% while fulfillment expenses continued to trend down to 12.1% of total revenues as a result of our increased scale and improved efficiencies in our logistics network. Moreover, we continue to grow our GAAP net income, which came in at $5.8 million, thus demonstrating our balanced strategy of maintaining a strong topline growth, while improving profitability at the same time.

Second, looking at the huge growth potential of China's discount retail market, Pross & Fellows estimate that this market will grow dramatically from only $24 billion in 2012 to over $90 billion in 2015, representing a compound growth rate of 55%. As Eric mentioned, by leveraging the current scale reset associated with our business, we have been and continue to attract tens of millions of online shoppers as well as the brand aiming to target this group of online shoppers, which is expected to almost double from $219 million in 2012 to over $423 million by 2016 according to eMarketer.

Lastly, I'd also like to update you on our warehouse capacity expansion strategy. We are continuing to invest in our logistics centers and expanding our warehouse capacity. We expect to increase to 290,000 square meters by the end of this year to primarily accommodate the surging demand of our customers in China's northeast and eastern regions.

Now moving on to our quarterly financial highlights. Net revenues for the first quarter of 2013 increased by 207% year-over-year to $310.7 million. This tremendous growth was primarily driven by a 170% increase in the number of total active customers to $2.8 million and a [187%] increase in the number of total orders to 8.8 million. Like we highlighted earlier, this increase was primarily due to our continued efforts to optimize brands and product selections, increase the number of sales events, and increase the number of SKUs available on our website as well as mobile platforms.

In addition, we have been able to fully utilize the three logistics centers in Shanghai, Chengdu, and Beijing in regional subsites, which enhanced our ability to accommodate and target the increased demand in specific markets, further increasing our market scale and footprint. As our business continues to scale, we are able to skew up more premium inventory from brand suppliers with gradually larger discounts, further decreasing product acquisition costs. As a result, this led to gross margins further improving to 23.4% from 21.2% in the prior-year period and gross profit increasing by 240% to $72.8 million.

Moreover, as we discussed earlier, we continued to see improvements in operating margins as a result of the improving economies of scale and increased operational leverage with our business operation. More specifically, fulfillment expenses increased by 123% year-over-year to $37.7 million for the first quarter of 2013. This primarily reflects an increase in sales volume and number of orders fulfilled. As a percentage of net revenues, fulfillment expenses decreased to 12.1% from 16.7% in the prior-year period. As we discussed over the last few quarters, this improvement is very noteworthy in that fulfillment expenses are not only the largest component of our operating expenses but also critical to the customer experience.

This cost reduction was primarily due to the successful implementation of our distributed warehouse strategy and the strategy of shifting toward using reasonable and local delivery services. Also, they continue to expand our capacity to four warehouses which are strategically located in Shanghai, Beijing, Chengdu and (technical difficulty). In addition, we continue to shift more fulfillment needs to high-quality regional and local couriers, lowering our fulfillment cost while shortening delivery times to our end customers.

Marketing expenses increased by 124% year-over-year to $13.1 million. As a percentage of net revenues, marketing expenses decreased to 4.2% from 5.8% in the prior-year period. As discussed previously, by maintaining customer satisfaction and high repeat customer demand, we were able to realize significant cost benefits associated with word-of-mouth referrals. Going forward, we expect to further improve our marketing efforts through proactive sales marketing and PR campaigns.

Technology and content expenses increased to $7.9 million from $2.4 million in the prior-year period. As a percentage of net revenues, technology and content expenses remain stable at 2.6% compared with 2.4% in the prior-year period. This is a part of our continued efforts to invest in our IT system and mobile eCommerce capabilities to better support future growth.

General and administrative expenses increased by 70% to $9.8 million year-over-year. As a percentage of net revenues, general and administrative expenses decreased to 3.2% from 5.7% in the prior-year period. The cost reduction reflected our Company's continued cost control efforts and increased operational leverage. Driven by the growing scale of our Company's operations, improved gross margin and cost control, we realized $5.5 million in income from operations for the first quarter of 2013. This is compared to a loss from operations of $8.7 million in the prior-year period. Operating income margin was 1.8% compared to an operating loss margin of 8.6% in the prior-year period.

Non-GAAP income from operations, which excludes share-based compensation expenses, was $8.6 million compared to a non-GAAP loss from operations of $6.6 million in the prior-year period. Non-GAAP operating income margin was 2.8% compared to a non-GAAP operating loss margin of 6.5% in the prior-year period. Our net income attributable to ordinary shareholders for the first quarter of 2013 was $5.8 million compared to a net loss attributable to ordinary shareholders of $8.6 million in the prior-year period. Net income margin was 1.9% compared with a net loss margin of 8.5% in the prior-year period.

For the first quarter of 2013, we recognized $1.9 million income tax expenses as a result of our Company's growing profitability. Net income attributable to ordinary shareholders per diluted ADS was $0.11 compared to a net loss attributable to ordinary shareholders per diluted TDS of $0.33 in the prior-year period.

Non-GAAP net income attributable to ordinary shareholders was $9 million compared to a non-GAAP net loss of $6.5 million in the prior-year period. Non-GAAP net income margin was 2.9% compared with a non-GAAP net loss margin of 6.4% in the prior-year period. Non-GAAP net income attributable to ordinary shareholders per diluted ADS was $0.17 in the first quarter of 2013 compared to a non-GAAP net loss attributable to ordinary shareholders per diluted ADS of $0.25 in the prior-year period.

As of March 31, 2013, our Company had cash and cash equivalents of $231.1 million and held to maturity securities of $141.6 million. For the first quarter of 2013, net cash from operating activities was $71.1 million.

Looking at our business outlook, for the second quarter of 2013, we expect our net revenues to be between $330 million and $335 million, representing a year-over-year growth rate of approximately 144% to 148%. These forecasts reflect our current and preliminary view on the market and operational conditions, which are subject to change.

With that, I would now like to open the call to Q&A.

(Operator Instructions) Jiong Shao.

Operator, we can't hear the question.

And you have a question from Caroline (technical difficulty).

Operator, we can't hear the questions.

One moment. And we have a question on the line (technical difficulty) with Macquarie.

Something is wrong with the line.

We have [Marissa Sen's] line open.

Thank you for taking my question, and good evening Shen, Donghao and Milli. Firstly, congratulations on the very fourth quarter. We record that in the last quarter earnings call, you mentioned the new customer acquisition is one of your strategic targets in 2013. Could you please give us some color on new customer acquisitions achievement and new customers sales contributions in the first quarter, as well as how to include old customers shopping frequency?

(spoken in Chinese)

(spoken in Chinese)

So to answer the first question for new customer acquisition costs, actually the first quarter of this year was the lowest in our operating history. This once again demonstrate our net effect and scale effect. And also, as we continue to work with more high-quality brands and this will contribute positively to our acquisitions of new customers reduction.

My second question is regarding marketing at or having planning into 2013. As we know, we actually saw (inaudible) also in the first quarter. At the same time, we saw in the third quarter the active customers which were a record high in the low season of eCommerce. Could you talk about your marketing strategy in this year? Or will you continue to have some branding and marketing activity in the next few quarters?

(spoken in Chinese)

(spoken in Chinese)

Okay. As you recall, in 2012, we explained that our marketing strategy was primarily rely on word-of-mouth as a referral strategy, and we -- it's not really a marketing campaign or effort through ROI. So this year intends to continue to driving new customers and new traffic, we will spend more in terms of increasing Vipshop's branding amount of consumers in China. So obviously, the absolute dollars in terms of marketing will go up, but in terms of percentage to net revenues, we'll get it within a manageable and reasonable level.

Thank you. I have a follow-up question about marketing and promotion. We know in April 19, the Vipshop initiated a very successful promotional activity which lasted for two days. But this promotion rolls out from neighboring when? Or could you let us know your comments on the branding achievement marketing and performance in the promotions, and the management's attitude on the quarter promotion? Thank you.

(spoken in Chinese)

(spoken in Chinese)

Okay. So, obviously, given that we haven't disclosed second-quarter results, we are not in a position to comment specific on numbers. So one thing Eric would like to comment is we achieved significant success during the biggest promotion effort that we ever did since the founding of the Company. And obviously the sales, the net revenue dollars we generated historically high numbers. So this gives us a lot of encouragement. And going forward, depending on the timing and the conditions, the Company might launch a similar kind of campaign selectively.

Thank you.

Run Gar, JPMorgan.

Thanks for taking my question. Could you comment on recent entries of other B2C players into the flash sales market? And how do your resupplies react to more flash sale channels in the space? And do you see any pressure on your take rate due to this?

So let me just translate a question to Eric. (spoken in Chinese)

(spoken in Chinese)

Okay. So we are not concerned about competition because we believe we have built really high entry barriers and we have our own competitive advantage. First of all, Vipshop is a dedicated special offer discount retailer. As of now, we have over 5000 employees committed to discount retailing. So what we do on a day-to-day basis is to offer customers the best product selection at the lowest prices available. And as of March 2013, we have over 6000 brands monetized inventory quickly and cost-effectively. And just to point out that we have over 800 exclusive contracts with brands. And in doing so, the beauty is we can reduce the brand dilution intensity to further strengthen our neutral trust with these partners.

(spoken in Chinese)

Okay. And another thing to point out is we have really a dedicated and world class merchandising team of over 300 experienced buyers. Meanwhile, I think the inception of the Company we have accumulated a lot of experience. We have run a lot of sales events and developed really a quick quality business intelligence department to obtain a lot of data on customers. So, in a way, our analysis on their shopping behaviors will enable our merchandising team to continue to secure popular and high-quality products for shoppers. And these advantages are not easy for other general eCommerce players to replicate within a very short period of time.

(spoken in Chinese)

Okay. Another three points to highlight, unlike other eCommerce players that offer apparel products by a third-party platform, we provide one-stop integrated customer service. So processing capability for consolidating orders which typically consist of multiple items. And so the advantages that we mentioned just now cannot be quickly eradicated by a general eCommerce overnight. And again, it's a winner-take-all market. We continue to benefit from the global effect and network effect inherent in our business model.

(spoken in Chinese)

And so I have another question. Is the increase in average size a function of more items sold per order? Or is it the higher-priced tag per item from the high-end brands?

(multiple speakers) Sorry, we couldn't quite get your question. Could you please repeat that?

Sure. The increase in the average order size, is it more because it's more items sold per order? Or is it because of a higher price tag per item from the high-end brands?

Okay. (spoken in Chinese)

(spoken in Chinese)

While we see a very small increase in terms of the number of items within an order, we do see that a reasonable level of increase in the higher price of the brands that we offer. Because, as you recall, Q1 this year, the winter was longer than previous years. So that conjugated nicely to our average ticket size.

(spoken in Chinese)

Okay. So the items within an order increased around 5% to 10%.

I didn't get the last part. Could you please repeat?

Yes. Just to go back to the question, in terms of the items of the pieces of the progress within an order increased by 5%. That's what we saw in Q1 this year.

Okay, thank you.

Andy Yeung, Oppenheimer.

Congratulations on another good quarter, and also thank you for taking my question. So my first question is actually about your use of cash. So this will follow on recently your net cash and equivalents efficient has increased to almost [$270 million]. So can you give us an update on your expansion plan? Also your expansion plans for this year and next year?

Well, thank you, Andy, for attending our conference call. To your question, as we said to our investors during the follow-on offering, we're going to use our cash to invest in our warehouse expansion and IT infrastructure going forward. And this year, we're going to spend some of the cash in purchasing land and building company-owned warehouses. And now we are in negotiations with a few local governments in China to try to secure a piece of land and start building the company-owned warehouses.

And IT systems, as you may have already noticed -- in Q1, our IT and technology content expenses went up slightly compared to Q4, which actually reflected our focus in our investment in our IT infrastructure, including our mobile technologies and platforms.

Okay, got it. As a follow-up question on that, obviously, you guys have done a wonderful job achieving significant operating leverage at the time. But given your new investment plan for the warehouse and for continuing operations, as well as some of the IT investments, so can you help us quantify here what's the potential impact from this investment? And potentially also give us a timeline in terms of how we should pace expenses in our model?

Well, again, we're not providing a detailed guidance for the metrics that you were asking about. Again, our strategy and our focus is very clear. We're going to keep investing in our warehouse expansion and IT infrastructure buildout.

Got it. I understand that. Appreciate you taking my questions. Thank you.

Thank you, Andy.

Caroline Li, Goldman Sachs.

Thank you for taking my question and congratulations on the very strong quarter. I have a follow-up question on the competitive landscape. I understand that you talked about your competitors actually using more like a third-party business rather than principle business. If you had to turn the tables around and pretend that we are a brand supplier, what kind of cost structure do we face by partnering with your competitor?

Because the common knowledge is the third-party business will come on only 5% commission rate. Does that mean your supplier may benefit from lower commission rates by partnering with those smaller players? So that's my question number one.

My question number two is on the customer acquisition costs. Previously, you discussed how effective the new marketing efforts were on the new customer. But more specifically, could you describe to what extent the percentage of traffic you are getting is from leading websites such as (spoken in Chinese)? And what kind of commission you paid to them?

Last but not least, I want to talk about brand concentration. Because at a certain point, I think management mentioned the top 800, 900 brands have probably contributed to the lion's share of your overall sales. Could you give us an update in terms of what brand may be contributing those top sales? And recently, we are seeing increased pressure from brands like Nike in China to Clear Channel inventories. So to the extent you can discuss any specific brand performance there would also be very helpful.

(spoken in Chinese)

(spoken in Chinese)

So, Caroline, to answer the first question, actually, we're looking at the pay rate in two different angles. First of all, in terms of discount retailing, the top priority is not pay rate. It's all about volume. Just to give an example, if we pay a pay rate of 20% and within one day, we are able to monetize 50,000 SKUs, versus another eCommerce player with a pay rate of 5% and who is able to monetize 500 pieces within a day -- so obviously the answer is very clear. The plan was definitely to win with the eCommerce player who can monetize the biggest volume within the shortest period of time.

And another thing is although for third-party eCommerce players -- for eCommerce players they offer on their third-party platform -- although they take, for example, 5% concessionary rates, but their brands, they have to handle their own fulfillments, and they have to do the photo shooting, the modeling. So adding all these up, it will be very much similar to the pay rate that we get from a brand.

(spoken in Chinese)

(spoken in Chinese)

(spoken in Chinese)

Okay, so to answer Caroline's second question, I'll just give a brief translation. In terms of traffic, because we do not operate with (spoken in Chinese), we do not have any traffic from them. So that's a very brief answer. In terms of customer acquisition costs, actually it's on a declining trend. So going forward, we continue to expect a similar pattern in terms of new customer acquisition costs.

(spoken in Chinese)

(spoken in Chinese)

So in terms of the brand concentration, for the top 150 brands, if we look at the trend in 2011, 2012, we can conclude that we are able to double the sales of the -- we're able to double the net revenues that we -- with a partnership. So, for example, in 2012, let's say we were able to monetize $50 million for these 150 brands; in 2012, we were able to double that to $100 million. So, for 2013, we expect a similar kind of growth rate to increase the sales volume program.

(spoken in Chinese)

The top 20 brands generated less than 20% to our total net revenues.

If I may ask a different question, that would be my last question is, you had mentioned that there are some investments in mobile technology. Can you discuss just strategically how do you see mobile as a opportunity or risk to your existing business model?

One thing I guess I'm thinking is that because PCU now having a bigger screen, and your shopper, she could be presented with a large selection of available flash sales, while mobile, it's typically a much smaller screen for the available eyeball share, if you may, could be smaller. So will that be -- have a negative impact on the virtual shelf space you have available for sale at any given time?

(spoken in Chinese)

(spoken in Chinese)

So. although you mentioned some disadvantages of the mobile channel, but in fact, mobile applications suits our business model very well, because we run flash sales. So we would like to let consumers find brands and buy products anytime, anywhere. And for Q1, mobile generated approximately -- less than 10% of our total revenue. And so we expect that rate will continue to grow in Q2 and especially so in the second half of this year.

The mobile channel is very important, because a lot of consumers use the mobile more these days, especially the younger generation. So it's not that what we want to do with the mobile channel; it's the trends is catching up with us, and we need to really take advantage of this technology advancement.

Gene Munster, Piper.

Yes, good evening and Mike, congratulations. Follow-up on that previous question in terms of mobile. Is there a difference in terms of customer acquisition on mobile versus desktop? And any trends that might be helpful for us to know on the expense side, as mobile becomes a bigger part of your business? Thanks.

(spoken in Chinese)

(spoken in Chinese)

Okay. So the acquisition cost for new active customers on mobile is slightly higher compared to that of 4Q for PC. And the conversion rate from the mobile channel is a little bit lower compared to that from the PC end.

Is it -- when you say slightly, is that something that -- it's so small that we shouldn't really factor it into our model? Or is it something that we should consider when we think about our longer-term model?

Hi, Gene. Thank you for coming. This is Donghao. Well, to your question, in first quarter of this year, mobile traffic was about 8% of our total. So really, it's really up to you whether it's significant enough to be put into your models. But the trend is very obvious, that more and more of our customers are trying to get access to our sales events through mobile. So the trend is very significant.

Last year -- well, not last year but last quarter -- the fourth quarter of last year, about 5% of the traffic came to our website through mobile. And in Q1 this year, that number went up to 8%. So the trend is pretty obvious.

And then just one follow-up question on the -- I guess on the expansion/margin question. I know that you don't want to give specific guidance on that, but is there any, like, percentage increase in capacity you can outline? That might be helpful for us to think about the expense side, as -- are you going to be increasing capacity by 20% in the next year? Is there any sort of metrics along that? Thank you.

Okay, well, the increase of capacity does not necessarily have a pretty big impact on our margin, but it's actually to have the company-owned warehouses versus leased warehouses, meaning the big savings in terms of rental dollars, which is going to have a pretty big impact on our bottom-line. According to our own estimate over time, if we fully execute our current warehouse expansion strategy, we're going to be able to save, like, between 1% to 2% of our net revenue in fulfillment expenses, but that's going to happen over time.

That's very helpful. Thank you.

Thank you.

Jiong Shao, Macquarie.

Thank you for taking our questions. I have a question on your growth margins. I recall in the past you may have talked about your business model perhaps supports about 25% gross margins. And I think last quarter, you already were at 23%. I was wondering can you talk about the further margin expansion opportunity, particularly in light of some of the new entries into this particular business model? As you may know, players like (spoken in Chinese) recently launched a flash sale sort of business model as well. So that's my first question.

All right, let's answer your question one by one. All right. So in terms of long-term sustainable growth -- good gross margin level, I did say in the past, that I believe it's going to be around 25%, but it's long-term sustainable gross margin. It's a goal that we're working very hard to achieve as soon as possible over time.

And you mentioned other eCommerce platforms trying to enter our space, and you also named Danai as one of them. And, of course, we've also noticed that a few other potential competitors are trying to get into our flash sales model. But we are not overly concerned about those new entrants, because competition is not a new thing in our business. Starting from day one, Vipshop was growing by competing against other competitors in the business. So, new entrance -- first of all, new entrants is not a new thing-- or competition is not a new thing for us.

And then, as Eric had explained earlier, our business may look easy or simple to some potential competitors, but actually, the entry barriers are very, very high. For example, to succeed in our business, you have to have a very experienced and capable buyers team. And so far, Vipshop has by far the largest buyers team -- professional buyers team in the entire eCommerce space in China.

And second of all, we're primarily selling fashion apparel products that require very unique capabilities in terms of logistics. I'm not sure if you have ever been to our warehouse. Our processes, our warehouse floor plan layout, and equipment that we use and the warehouse management software that we use are totally different from other traditional eCommerce companies.

And then, customer service is also very different. For example, we have over 300 people in our call center. And you already know, we have about 20% of return rate, which is quite different from other commodity type of eCommerce business, like electronics or book retailers. So we have a very unique set of operational challenges. And over time, we have developed capabilities to address those unique challenges. And those capabilities have become high entry barriers as we understand. And if you look at our financials for Q1 2013, facing those new entrants in the business, our topline and bottom-line, and all the other operating metrics have improved.

So we will take those new entrants seriously, as we always did, but we are not overly concerned about them. We are pretty confident about our ability to wean the competition and become a dominant player in our business.

Thanks, Donghao. Now just one quick follow-up. You just mentioned having a very experienced buyers group. And I think you have mentioned in the past that particular element is your sustainable advantage, always a competitive advantage. I was just wondering now I think you have about 300 people in the group. Do you have a target -- do you think the number of the buyers is important? If it is, do you have a target for the end of the year? Thank you.

We don't have a specific target for how many buyers we're going to hire by the end of this year. Because this is a business that you can see a lot of operating leverage. And the other buyers -- first of all, we hire experienced buyers in the first place. And as our buyers get more experienced with the growth of our business, I think we can -- the productivity of our buyers is going to get higher and higher. So it's not like -- yes -- so it's not like, you know, for example, if we want our business to grow 100%, you need to double our buyers team. No, it's not like that.

And also, quality in terms of buyer team -- the quality is much more important than quantity. For example, most of the buyers have come from fashion magazine industry or traditional fashion industry. A lot of them were used to the magazine editors who are store managers. A lot of them are already very experienced. And in addition to the buyers teams that we have, we have been able to build very sophisticated business intelligence systems.

So with the help of that system, we can analyze the numerous sales events that we've already had in the past, which enables us to profile our customers, to be able to predict the preference of our customers, and to enable us to do marketing more accurately -- more precisely -- to our customer base. So all of that has been our competitive advantage.

Sure. Thank you very much.

I will now turn the call back over to Donghao Yang for closing remarks.

Well, again, thank you, guys, for taking your time to join us. And we look forward to speaking with you next quarter. Thank you.

Thank you.

Thank you for joining today's conference call. You may now disconnect.