Vipshop Holdings Ltd (VIPS) 2017 Q2 法說會逐字稿

Good day, everyone, and welcome to Vipshop Holdings Limited Second Quarter 2017 Earnings Conference Call. At this point, I would like to turn the call to Ms. Millicent Tu, Vipshop's Director of Investor Relations. Please proceed. Thank you.

Thank you, operator. Hello, everyone, and thank you for joining Vipshop's Second Quarter 2017 Earnings Conference Call.

Before we begin, I'll read the safe harbor 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 of our Vipshop Holdings Limited and its industry. All statements, other than statements of historical facts, we may 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 date hereof and are subject to change at any time, and we have no obligation to update these forward-looking statements.

Joining us on today's call are Eric Shen, our Co-Founder, Chairman and CEO; and Donghao Yang, our Chief Financial Officer.

At this time, I would like to turn the call over to Mr. Eric Shen-Zong.

Good morning, and good evening, everyone. Welcome, and thank you for joining our second quarter 2017 earnings conference call. We are pleased with the robust operational results in the past quarter. Our total active customers for the trailing 12 months ending June 30, 2017 grew by 32% year-over-year, reaching 58.8 million. Further, our efforts to manage the lifetime value of both new and old customers are bearing fruit assumed by the 7% year-over-year increase in average revenue per user in the second quarter. We continued to add popular domestic and international brands to our platform to enrich our product offerings. Our daily average SKUs online increased to 2.7 million from 0.8 million in the second quarter of 2016. Further, as our global brand awareness continued to improve, more and more brands are keen to partner with us, giving us opportunities to help brand enter the China market. We are also delighted to announce that we have made additional progress with our new Super VIP paid membership program. In the second quarter, we increased the number of trial members by 10x, and the phase 2 test results continue to show major improvement in average revenue per user. We are actively expanding our offering for our customers. Recently, we selectively added some SKUs in the Vipshop live channel to increase cross-sell, which, we believe, will drive increased shopping frequencies and average spend on our platform. We intend to grow this new category gradually and, therefore, do not expect it to meaningfully impact our growth and profitability in the near future.

At this point, let me hand over the call to our CFO, Donghao Yang, so that he may discuss our strategies in more detail and go over our operational and financial results.

Thanks, Eric, and hello, everyone. In the second quarter of 2017, we made solid progress in a number of our strategic initiatives, particularly in the exploration of Internet finance spin-off and the enhancement of our logistics capabilities. Additionally, excluding impacts on the internet finance business, our free cash flow for the trailing 12 months ended June 30, 2017 improved significantly year-over-year from a free cash flow outflow of RMB 93.3 million to free cash flow inflow of RMB 1.96 billion. During the second quarter, we added our 4 local warehouses in a number of strategic locations, namely Nanning, Urumqi, Jinan and Harbin, China. This brings our total number of local warehouses to 11, in addition to our 5 regional warehouse centers. In the past quarter, we also expanded our warehousing space home and abroad. Currently, we have approximately 2.2 million square meters of warehouses total, of which 1.4 million square meters is owned by our company. We added around 4,000 last mile delivery staff and around 700 delivery stations in the second quarter, bringing the total number of delivery staff to approximately 27,000 and the total number of delivery stations to approximately 3,500. We delivered 95% of our orders through our proprietary last mile network in the second quarter, up from 91% in the prior year period. Our national delivery footprint is a critical component of our overall ecosystem, which will continue to improve our logistics efficiency, increase our customer satisfaction, lower our cost and drive our long-term growth. Earlier this year, we announced that our Board of Directors authorized for us to explore a proposed spin-off of our Internet finance business into a dedicated entity, aiming to improve our cash flow and strengthen our earnings. We're pleased to announce that we have officially launched the spin-off of the Internet finance business, which initiated a Series A financing in the second quarter. Operationally, our Internet finance business is delivering solid results as well. In the second quarter of 2017, 4.4 million active customers used our consumer financing products, representing 179% increase from 1.6 million in the past year period. As of June 30, 2017, total balance of credit outstanding to customers was around RMB 3.3 billion, and the total balance of credit outstanding to suppliers was RMB 823 million. While this new business is growing extremely fast, we're pleased to see that our -- over 180 days default rate remains very low.

Now moving on to our quarterly financial highlights. Before I get started, I would like to clarify that all the financial numbers presented today are in Renminbi amounts and all percentages changes refer to year-over-year changes unless otherwise noted. Total net revenue for the second quarter of 2017 increased by 30.3% to RMB 17.52 billion, primarily attributable to the 22% year-over-year increase in the number of active customers to 28.1 million and a 23% year-over-year increase in total orders to 84.8 million. Gross profit for the second quarter of 2017 increased by 19.1% to RMB 3.86 billion, primarily driven by the expanding scale of the business. Gross margin for the second quarter was 22% as compared with 24.1% in the prior year period, primarily attributable to our investment in promotional activities for market share gain. Fulfillment expenses for the second quarter of 2017 were RMB 1.64 billion as compared with RMB 1.15 billion in the prior year period, primarily reflecting an increase in sales volume and number of orders fulfilled. As a percentage of total net revenue, fulfillment expenses were 9.4% as compared with 8.6% in the prior year period, primarily attributable to our expansion to support an increase in our last mile business outside of the Vipshop platform. Marketing expenses for the second quarter of 2017 were RMB 752 million as compared with RMB 672 million in the prior year period, reflecting our strategy to strengthen our brand awareness, attract new users and expand our market share. As a percentage of total net revenue, marketing expenses increased to 4.3% from 5% in the prior year period, primarily attributable to our strategic balance between promotional activities and our broader marketing efforts.

Technology and content expenses for the second quarter of 2017 were RMB 448 million as compared with RMB 392 million in the prior year period, reflecting our continuing efforts to invest in human capital, advanced technologies and our Internet finance business. As a percentage of total net revenue, technology and content expenses decreased to 2.6% from 2.9% in the prior year period.

General and administrative expenses for the second quarter of 2017 were RMB 579 million as compared with RMB 434 million in the prior year period. As a percentage of total net revenue, general and administrative expenses were 3.3% as compared with 3.2% in the prior year period, primarily attributable to an increase in share-based compensation as well as the impact from building our Internet finance business.

Our income from operations was RMB 622 million for the second quarter of 2017. Operating margin was 2.5% as compared with 4.8% in the prior year period. Non-GAAP income from operations, which excludes share-based compensation expenses and amortization of intangible assets resulting from business acquisitions, increased by 6% to RMB 888 million from RMB 837 million in the prior year period. Non-GAAP operating income margin was 5.1% as compared with 6.2% in the prior year period.

Our net income attributable to be Vipshop shareholders for the second quarter of 2017 was RMB 386 million as compared with RMB 452 million in the prior year period. Net margin attributable to Vipshop shareholders was 2.2% as compared with 3.4% in the prior year period.

Net income per diluted ADS was RMB 0.64 as compared with RMB 0.76 in the prior year period. Non-GAAP net income attributable to Vipshop shareholders, which excludes share-based compensation expenses, impairment loss of investment and amortization of intangible assets resulting from business acquisitions and equity method investments, increased by 7.5% to RMB 728 million from RMB 678 million in the prior year period. Non-GAAP net margin attributable to Vipshop shareholders was 4.2% as compared with 5% in the prior year period. Non-GAAP net income per diluted ADS increased to 1.18 RMB from RMB 1.12 in the prior year period.

As of June 30, 2017, our company had cash and cash equivalents and restricted cash of RMB 4.2 billion and held-to-maturity securities of RMB 343 million. For the second quarter of 2017, net cash used in operating activities was RMB 0.27 billion.

Looking at our business outlook for the third quarter of 2017, we expect our total net revenue to be between RMB 14.9 billion and RMB 15.4 billion, representing a year-over-year growth rate of approximately 24% to 28%.

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

(Operator Instructions) Our first question comes from the line of Ronald Keung of Goldman Sachs.

And just have a question on your cash flow. Could you just share with us how you're planning for your payable days when you negotiate with your suppliers, as we have seen payable days, actually, have gone down and receivable days have been partly distorted by your finance business. And that has led to a slightly weaker operating cash flow this quarter. So just want you to share what's your outlook for your free cash flow and for your CapEx expectations for the full year?

Actually, nothing has changed in our payable terms with the suppliers. And our operating cash flow, excluding impact from Internet finance business, decreased year-on-year and sequentially in Q1-- in Q2. But quarterly operating cash flow will be impacted by seasonality and it could fluctuate significantly from quarter-to-quarter. Hedging back the impact from Internet financing activities, the operating cash flow for the trailing 12 months ended June 30, 2017, actually increased to RMB 4.8 billion up from RMB 4.5 billion for the same period last year, which is very healthy. Free cash flow for the trailing 12 months ended June 30, 2017, was RMB 1.96 billion as compared with negative RMB 93.3 million in the same period last year, which was a remarkable improvement. Cash flow on a trailing 12-month basis can better reflect our real cash flow situation of the business. And for the full year, we do expect to spend around RMB 3 billion on our CapEx projects, mainly in our warehouse expansion projects. And also we're going to spend some money around RMB 0.5 billion to RMB 600 million to build the headquarters in Guangzhou.

Our next question comes from the line of Binnie Wong of Merrill Lynch.

So looking into second half, right, we understand that company was trying to reinvesting our margins to drive faster growth. And hence, we're looking -- we see a lower net margin, operating margin from previous levels of 5% on GAAP net margins that company has maintained in the past. So wondering how much of that is related to lower gross margin? I guess, that is primarily related to couponing and discount, and how much of that is related to marketing costs? And within that, how much is related to, like, branding marketing? The reason that I am asking is because I want to understand whether some of these investments are one-off? Or when should we expect a recovery in margins? Thank you for any color.

Let me take that one. Well, the year-over-year decline in gross margin in Q2 was primarily due to our increased promotional activity in April and June when we had 2 major promotions. And declined margins does not suggest weakened bargaining power with the suppliers, but indicates our active approach to reinvest to gain market share. We do expect our gross margins to stay at a similar level in the next couple quarters. But in the long-term, it will stabilize and improve. And also we're trying to balance growth and profitability as our scale continues to grow and efficiency further improves, we will expand our profitability in the long run.

Our next question comes from the line of Zoe Zhao of Crédit Suisse.

This is Alex asking on behalf of Zoe Zhao. So the first question is, what's the time line for the spin-off of Internet finance business? How do we book the revenue and costs related to the Internet finance business? And the second question is, what's our strategy to improve the order frequency and order size?

Let me take your first one. We're in the process of negotiating with potential [A1] investors. And the spin-off and -- both the spin-off and A1 financing are expected to be completed by the end of this year. And after the spin-off is completed, we will not consolidate the revenue and earnings of the finance business into the public company. So the impact from the Internet finance business will not be shown on our financials anymore after the transaction is done.

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So this quarter, we have seen a very nice, ample increase year-over-year due to the following reasons: Number one, category expansion; number two, better personalization; and number three, Internet finance contributing to ARPU expansion. And we have tried also the Super VIPs, all of which contributed very fairly to our ARPU expansion. And we continue to believe that the trend will continue to improve and get better down the road.

Our next question comes from the line of Natalie Wu of CICC.

So my question is regarding the fulfillment. I'm just wondering how much revenue contribution is from Zhaoqing logistics in this quarter? And what the percentage of order number if fulfilled by like this, but outside this [couple]?

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Well, in the other revenue line of our income statement, about RMB 200 million was from the -- was from Zhaoqing -- actually was from Zhaoqing services to customers or clients outside of Vipshop.

Our next question comes from the line of Alex Liu of Daiwa.

I'm asking on behalf of (inaudible). Would the management talk about the plan of category expansion in the coming 2 to 3 years, so typically, what type of categories would the management think about entering into or putting more emphasis on? And how big will these new categories account to our business mix in the time-off of 3 years? My follow-up is that how should we think about the future membership revenue from Super VIP program into this overall profitability outlook in the medium term?

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So Alex, I think, to summarize what Eric just said, we are actively looking for opportunities to expand category enrichment. So recently, obviously, we have communicated that we are adding more SKUs within the Vipshop lifestyle. This is still based on the merchant-driven. We still use our merchandisers to selectively adding more SKUs that would enrich the quality life of consumers, and obviously, to meet the consumption upgrade. And so far early data suggests that it is helpful and beneficial to improve the life -- the time spent on our site and also the ARPU on our site. So this is -- so I think, Eric just wanted to emphasize that these categories are just trying to cross-sell to enrich our product offerings. We are not trying to turn these categories into the major category contribution in our overall portfolio.

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And also with the marketplace business, currently it accounted only for 2.4% of our overall GMV. And we're looking for opportunities to increase this proportion gradually down the road. The categories that we are thinking would be big furniture, electronics and bulky item -- bulky home goods items. Again, the purpose would be to enrich to operate, expand the variety and increase cross-sell, and also we can leverage on our capability in terms of our merchandising too.

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We probably charged some fees with the Super VIP. Obviously, this is still in trial period. The purpose is not try to be profitable with these initiatives. We're trying to use the Super VIP program to improve the stickiness of our users.

Our next question comes from the line of Chu Sung of HSBC.

This is Heather (inaudible) on behalf of Chu Sung. I was wondering if you could give some color on gross margins and operating margins going forward. And whether you expect a decline to continue for 3Q and the full year or whether you expect the trend to reverse?

Actually, we do not give margin guidance for the next quarter or actually for any future period. But again, we do believe that our profitability, our margin level will stabilize in the next couple of quarters, and we'll improve it in the long-term. As -- if you look at the several factors that impacted our profitability in Q2: One was the lower gross margins; second was our investment to expand our last mile delivery services; and thirdly, our Internet finance business. For gross margins, as we continue to gain market share, as our business scale continues to increase, long-term, we do expect we're going to have greater bargaining power with the suppliers. So we are very confident that in the long term, our gross margin will stabilize and start to come back up. And then for the other 2 factors, they will both improve in the next couple of quarters as we continue to gain or to grow our logistics or delivery business outside of Vipshop, and also as we complete the transaction of the spin-off of our Internet finance business. So we're very confident that in the mid- to long-term, our margin profile or profitability will stabilize and improve.

Our next question comes from the line of Wendy Huang of Macquarie.

So the cash flow -- operating cash flow and the free cash flow, both actually turned negative in the quarter. I just wonder if this is kind of one-off impact from the promotions you did in second quarter or we should expect the continuing negative cash flow in the future quarters. Because I noticed the receivables increased at large, that's probably due to the consumer financing that you did in the second quarter, right?

Yes. Our current receivables went up mainly because of the growth of our consumer finance business. And as I said earlier, once we complete the transaction or complete the spin-off of the Internet finance business, that impact will go away. And also as I pointed earlier in the call, the quarterly operating cash flow could sometimes be impacted by seasonality and fluctuate significantly. So that's why we'd like to ask you guys to also take a look at our cash flows for the trailing 12 months ended June 30, 2017 and compare that number with the same period last year. Actually, that number went up from RMB 4.5 million to RMB 4.8 billion within a year. So basically, our cash flow situation has been much solid and healthy. And over the long term, we're confident that the cash flow will stay healthy and, actually, will continue to improve.

Our next question comes from the line of Alicia Yap of Citigroup.

I'm sorry, I joined the call late, just in case these questions have been asked. Just wanted to get a sense in terms of the overall margins trends going forward. I understand some of that, it could be because of the promotional events. But just also wanted to get some color because, obviously, both our peers have been also doing quite aggressive promotions. And for us, how are we going to manage our margins between the gross margin versus the sales and marketing expense?

Okay. Well, yes, our gross margin came down slightly compared to a year ago, mostly because of promotional activities in Q2. We had 1 big promotion in April and another 1 in June. And we do have couple other factors that impacted our net margins, namely our investment in our last mile delivery operations and also our Internet finance business. As I explained earlier in the call, we do believe that over the mid- to long-term, our margin profile will stabilize and come back up because the investment in the last mile deliveries operations and also the Internet finance business, those factors are mostly temporary, and will improve shortly.

Our next question comes from the line of Michael Chan of Nomura.

I'm asking the following question on behalf of Jialong Shi. So could management provide any color on the private label e-commerce business, like what NetEase (inaudible) started doing recently. Just wondering how management thinks of the outlook and potential of this kind of private label e-commerce business? And whether management have plans to enter this niche market in the future?

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So yes, you just mentioned that some of the companies are doing or considering the private label and some -- this initiative, Eric just mentioned, that in cases like these, that in Q4 this year, we might enter into the private label, in particular for the home start -- home goods category. In our client, we have a lot of SKUs and also a lot of brands, and have to make sure that the private label does not cannibalize with the existing brands SKUs that we are offering. So we're still exploring and trying to find a good optimization and combination. So that for some customers, if they want to pick and choose quickly, optimize their shopping route, which is fine. But you have other customers, who are still like lowering kind of selection-driven process which is also fine too. So we are still in the process of strategically figuring out what is the best optimization to cater for the private label business.

Our next question comes from the line of Paul Yufei of 86Research.

I have 2 questions. My first question is a follow-up on 3P logistics business. Could you share some color on the profitability of this business. For example, is this business any other break-even or making profit? And also my second question is that we saw the quarterly active customers continue to decelerate. Going forward, should we expect the trend to continue or reaccelerate in the second half of the year? And what is our strategy to drive the customer growth going forward?

Let me take your first question. The third-party 3P logistics services are actually roughly at the break-even point.

Okay. (foreign language)

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So just to reemphasize the 3PL logistics business, Eric just mentioned, is slightly profitable. And the priority and the preference is trying to provide services and consistent services to our business partners. And in terms of your second question on the user growth rate in terms of deceleration, so Eric just mentioned that in the past we probably invested a lot on the quantity in terms of user growth, but now we're focusing a bit more on the quality of the user growth, in particular, for the new users. And we're also very pleased to see that even for our old customers, the cohort and their ARPU trends are trending quite healthy and quite favorably. So this will provide us with more confidence to continue to follow this path to focus and thus higher quality customers are trying to increase their wallet share down the road.

Our next question comes from the line of Wendy Huang of Macquarie.

So this quarter, the consumer loan accounted for about 21% of your GMV versus 16% last quarter. And also, as you also confirmed earlier that this -- the consumer financing is part of reason that your operating cash flow actually turned negative this quarter. So I just wonder if you were actually control or keep the consumer loan contribution to the GMV at certain level to avoid the cash flow impact going forward?

Thank you for your question. The answer is, not really. Because as I said earlier, if the impact of the Internet finance business on our overall financials will actually be taken off by the end of this year when the spin-off of that unit is completed. So we'll continue to grow that business as fast as possible. And as I said earlier, when the transaction is completed by the end of this year, the impact will go away. So it's -- actually, we're not overly concerned about that.

Our next question comes from the line of Jeffrey Kwong of Maybank.

I just wanted to ask about your gross margin. So you said that we should expect to see stabilized gross margin. But if you look at in the past quarter, it's usually a slower quarter. So I'm wondering, should we expect that promotions to go slower in third quarter and maybe come back in fourth quarter? And also, how does your discount compared to our competitors? And how should we expect gross margin to recover if the promotions continue in the future? And also, could you provide the new customers number, please?

Let may take your first question on the gross margins. Well actually, our gross margin in Q3 will not necessarily be lower than Q2 because in Q2 we had 2 major promotional events, one in April, the other one in June. In Q3, typically we do not have -- we're going to still have some promotions, but not as big as the 2 that we had in Q2. So gross margin in Q3 will not necessarily be lower. And if you look at our historical data, that was also the case. Q3 gross margins was not necessarily lower than Q2. In the long term, the reason why we are confident that gross margin level will go back up and improve is because as we continue to gain more market share, as our volume continues to grow, we're going to have greater bargaining power with the suppliers, which will definitely help us increase our gross margin.

So Jeffrey, your other question on new user account. As you have noticed starting from this quarter, we do not disclose these numbers specifically because as Eric mentioned on the call, we would like to manage both old users and new users in a more holistic view. We would like to direct attention in terms of total active customers growth, and also the drivers in terms of ARPU and average ticket size, et cetera.

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So Jeffrey, we ran 2 major promotions during the past quarter, one was on 19th of April. And obviously, this is our specific company designated promotion. And obviously, in terms of pricing, we could enjoy the lowest prices because this is promotion led by Vipshop. But if you look at the one took place in June, obviously, it is a much bigger crowded space. Some categories, some SKUs, we managed to offer the lowest pricing, but not all. And Eric thinks that in the end -- in the instance -- in the occasions, for example, Singles Day, where everyone, again, joining to be in the big promotion. It is likely that discounting can be very, very competitive across the board. So I think that's the overall account.

Our next question comes from the line of Tianxiao Hou of T.H. Capital.

I have 2 questions. It is much more a fundamental question. Why it's related to users. Actually, it's not about how much you grow your users. I think the amount of investment coming, if there is a concern about the ceiling of the users. How high can you go regarding your eventual, the active customers or logistic customers. And to say that because things like e-commerce is additive to why. It's pretty much penetrated and every new customer's acquisition cost is really high without its core. So I wonder what's Shen-Zong's and management's strategy in growing the total user base going forward? That's number 1 question. Number two is related to the logistics and express delivers. If we look at China, you have 2 models: Alibaba is a platform model, [all stores always] deliver activities; JD's everything in-house. But now it's gradually open up to the cloud-to-deliver methodology. So look at Vipshop, you have like 27,000 delivery guys and 3,500 stations. It's definitely not enough to cover China in such a big scale. So is that developing in in-house deliver guys or team is the way to go, and if it is, why?

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So in terms of your first question the ceiling for the total users for Vipshop. Eric just mentioned, in China, they're altogether 500 million online shoppers. But for Vipshop, last year, we only had 50-something million. So obviously, that number is still growing annually. And we are also spending quite some money in terms of marketing to drive new user addition. And you can see over the past few quarters, new user acquisition costs increased slightly, but largely are quite stable. As far as Eric is concerned, as long as we can execute and deliver, providing good merchandise and good pricing, the user stickiness naturally will be coming to the platform, which will be also helping us to attract new users. So that's on your first question. (foreign language)

(foreign language)

In terms of the logistics, and as far as Eric is concerned, we have already benefited some of the benefit by taking it in-house. Number one, is consistency in terms of delivery services. And number two, we can scale up to take up customer return to our platform. And number three, we can also use it as a contact point to interact with our end users. And don't forget that in China, they're all together, at the moment, 30 billion packages in China. So look at the market opportunity, there's still plenty to go. And if we're able to scale it up and improve footprint and network, we can also use our network to have our business partners to deliver their packaging. Delivery -- the logistics business is actually -- has economic scale benefit. As long as we're able to grow volume in terms of and cost managing and efficiency improvement down the road, we anticipate to continue to reap some of these positive benefits to Vipshop. But also, as Eric just mentioned, we also partner with third-party logistic companies to take care some of the bulky items. But the majority of the orders -- over 90% of the orders are handled and delivered by Vipshop.

Our next question comes from the line of John Choi of Daiwa.

I have a couple of questions here. On your pro forma expense, it seems like, I remember that we probably see leverage coming back later. Could management give a bit more color around when should we be seeing the leverage to kick back in. And secondly, in terms of your quality of user. I understand that management has emphasized that you're trying to bring in more quality users compared to the quantity in the past few quarters. But can you give us a little bit more details of this cohort. What kind of customers are these people? And do they actually spend more time on your platform? Because one of the trends that we're seeing is that spending time on the platform seems to be important, and is that leading to more spending?

Let me take the first one. Yes, you're right. Fulfillment expenses as a percent of revenue went up from 8.6% a year ago to the current 9.4% and the majority of that increase actually came from our investment in our third-party logistics or last mile delivery services provided to customers or clients outside of Vipshop. In Q2 alone, we added about 4,000 people to our payroll at the last mile delivery unit. And then, we're expecting, in the coming quarters, as our business volume, the packages that we deliver for client outside of Vipshop continue to grow and the leverage to start to come in and you will see that in our financial numbers.

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So John, in terms of your question on the (inaudible) user and the cohort, so I think Eric was saying overall, in terms of the time spent on the website, we're seeing some improvement and the browsing frequency and purchasing frequencies also improved on our website too. We changed the internal KPIs for users starting in Q1 this year. So in terms of more qualitative data, the share on this particular metric may take some time for us to gather information and then to reflect and share that with you.

There are no further questions at this time. I'd like to hand the conference back to our presenters. Please continue.

Well, thank you, everyone, for coming to our call, and we do look forward to speaking with you again next quarter. Thank you.

Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.