Zepp Health Corp (ZEPP) 2022 Q1 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corp.'s First Quarter 2021 Earnings Conference Call.

(Operator Instructions)

Today's conference call is being recorded. I will now turn the call over to your host, Ms. Grace Zhang, Director of Investor Relations for the company. Please go ahead, Grace.

Hello, everyone, and welcome to Zepp Health Corporation's First Quarter 2022 Earnings Conference Call. The company's financial and operating results were issued in our press release with newswire services earlier today and are posted online. You can also view the earnings press release and the slides which we will refer on this call by visiting the IR section of the company's website at ir.zepp.com. Participating in today's call are Mr. Huang Wang, our Chairman of the Board of Directors and Chief Executive Officer; and Mr. Leon Cheng, our Chief Financial Officer. The company's management will begin with prepared remarks, and the call will conclude with a Q&A session. Mr. Mike Yan, our Chief Operating Officer, will join the call for the Q&A session. Before we continue, please note that today's discussion will contain forward-looking statements under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's annual report on Form 20-F for the fiscal year ended December 31, 2021 and other filings as filed with the U.S. Securities and Exchange Commission.

The company does not assume any obligation to update any forward-looking statements, except as required under a pretable law. Please also note that SAP's earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial information. That press release contained reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to our CEO, Mr. Huang Wang. Please go ahead.

Hello, everyone. Thank you for joining our call.

The last several months have been challenging given the ongoing COVID-19 pandemic, compounded by geopolitical and lag. Against these backdrops, we are pleased that our first quarter revenue came in aligned with our guidance. We achieved CNY 0.8 billion in revenue, representing a decrease of 34% year-over-year. Our revenue was affected by the decrease in Mi-Band 6 treatments, as consumers are waiting for the new generation Mi-Band launch as well as reduce dilational spending as consumers cut back amidst the inflationary environment supply chain and logistics interruptions due to lockdowns and other registrations as part of the pandemic prevention and control measures in China also impacted our first quarter. We should highlight, however, that the first quarter has also typically been a slow quarter for sales due to seasonality.

Despite all these headwinds. We were also pleased to see that our revenue mix continues to shift towards our self-branded products, which now contributes more than 65% of our total revenue. This demonstrates once again the broad appeal of our products as we focus on connecting health with technology to enhance users' istyle and help them effectively manage their health conditions to further build out our sales channels, we continue to expand and deepen our partnerships with large retail outlets in the overseas market.

As a result, we show particularly strong performance in North American region, where our self-branded products revenue surged by more than 110% year-over-year. These achievements are a testament not only to our own successful operations besides challenges and uncertainties, but also to the lifestyle evolution we are part of with health care services supported by smart wearable devices, transforming people's daily lives.

We expect the undeniable benefits of smart wearable devices coupled with innovations in software, sensors and other hardware to provide continued tailwinds to our future growth. As we strive to be a leader in this mega trend. We have been working relentlessly to harness the power of technology to enhance our products and have established a comprehensive AI algorithm system.

Income passing sensors plus health Big Data, which we incorporate into our product design to help our users realize their health and fines scores. To that end, we are preparing to unveil our next-generation smart watches. Today, we launched our upgraded outdoor watch PLX-002 to this enhanced newer frequency GPS.

Later this year, we will also upgrade our most popular GTS and GTR and big series add newcomers to our basic and sports product line. These devices, both meaningful multidimensional enhancements in health-related functionalities, style and algorithms, among others.

Additionally, we continuously upgrade and add new features to our existing products to enhance user experience. For example, we rolled out a firmware update for AmazFit GTR 3 and GTS 3 series devices in late April and added a text based phone for incoming calls as well as optimization for the alarm clock feature, music downloads and system servability. We also recently made meaningful inroads in our exploration of the medical-grade health care industry and launched the first product in our smart hearing aid product line.

That clarity one and adjustable, comfortable, invisible and discrete device. For those with hearing loss and especially for those who don't want others to notice.

Notably, Zepp Clarity One offers modern just health device. It also comes with a customer-first best-in-class support team guided by audiology professionals to ensure the best possible experience for users. Last but not least, our collaboration with Xiaomi continues to be fruitful.

Just today, we launched Mi Band 7, and we look forward to building on the previous processes of the past generations of this powerful product line and taking its journey 1 step further.

As we remain committed to connecting health with technology, we continue to drive technological innovation through collaboration with universities and by engaging our user community.

Together, with the University of Science and Technology of China, we launched our first Zepp OS technology and health campus innovation context, inspiring students to develop apps for smart wearable devices that can improve people's health management habits. We also collaborate with UC Berkeley on their Caltech event to encourage users worldwide join our Zepp OS ecosystem.

The core values that we hold dearly here at depth will continue to help our users better manage their health and wellness and design their life by healthy choices. Our inclusive and innovative Zepp OS ecosystem has drawn developed globally to design apps and watch basis on our platform.

Contributing to our foresting user community that is more vibrant than ever. To conclude, we are making progress amidst the macro economy uncertainties.

Going forward, we will continue to invest in and capture the enormous opportunities in the health care services industry by focusing on technological innovation in AI chips, health big data and algorithms, as well as our product portfolio expansion. Despite the short-term impact from geopolitical conflicts, the pandemic resurgence and the associated supply chain and logistics challenges. We are very excited about that Zepp's long-term prospects as we remain dedicated to shaping the technologies of tomorrow while meeting the needs of our users today. This time, I will now turn the call over to Leon to go over highlights of our first quarter financial results.

Thank you, Huang. I would like to start by highlighting some of the key metrics driving Zepp's development. Before providing further details on our financial performance, I would like to briefly elaborate on the macro environment issues we have faced so far in 2022, which is shaping up to be a year packed with challenges.

The Q1 2022 lockdowns of China's Tianjin and Shenzhen in addition to the significant disruptions in March 2022 to our export route through Shenzhen into Hong Kong vital to our global supply chain and product availability has interrupted our deliveries and sales worldwide.

Furthermore, the pandemic related restrictions in the Yangtze River delta since March also had some impact on our supply chain in early Q2. Moreover, the global semiconductor shortage continues to constrain our supply chain, albeit our supply chain team has been working hard in seeking alternative solutions to resolve the ongoing situation.

Separately, escalating geopolitical strife among countries, notably the conflict between Russia and Ukraine is creating turbulence dampening consumer confidence cost inflation, which all led to a slowdown in consumer discretionary spending. These adverse conditions weighed down our revenues generated and our overall gross margin. Together, these factors have affected our Q1 results and continue to impact our ongoing Q2 2022 performance. Despite these ongoing headwinds in 2022, we reported revenue of RMB 0.8 billion in Q1. Income within our guidance range against a very difficult macro environment. Our revenue was down 34% compared with Q1 2021.

Again, the decrease was mostly driven by the decrease in the bank sales. In the meantime, COVID-19 and chip shortages also constrained the growth of our self-branded products. I have to say that we are very proud of our self-branded products performance, especially in light of all these headwinds.

Our self-branded products contributed over 65% of the total revenue of the quarter. We believe our self-branded products will continue to gain momentum as we further develop our product capabilities and enhance our brand's market recognition globally. Now let's look at gross margin, which can be affected by product mix, product launch timing and product life cycles, including model upgrades.

Our first quarter 2022 gross margin was 20.1% compared with 22.5% for the first quarter of 2021 and 19.3% for the fourth quarter of 2021. The lower gross margin versus last year was mostly affected by the increase in freight costs and pandemic while the improvement versus Q4 2021 was supported by refinements to our product mix, including an increased proportion of self-branded products.

Turning now to costs, which has been a key focal point of mind, both in terms of absolute amount as well as a percentage of sales. A portion of operating expenses are fixed. So it takes time and creativity to gradually reduce these expenses. While we have to carefully balance our cost controls with the expenditures to fuel growth, I'm pleased to report that we have already seen a decreasing trend in total operating expenses since Q3 2020.

Going forward, we'll continue to rightsize our operating expenses from their current level in order to deliver a profitable growth in the following quarters. First quarter 2022 operating expenses decreased slightly in absolute terms compared with the same period in 2021. However, at 40.6% of sales, they represented a percentage increase when compared with the first quarter of 2021, during which operating expenses were 26.9% of sales. This was mostly driven by the lower top line.

Given the headwinds I just explained above, we're consistently streamlining costs to protect future profitability. Hence, spending on research and R&D in Q1 2022 was RMB 146.4 million, a decrease of 3.9% year-over-year, though given the low revenue levels comprised 19.3% of revenue versus 13.3% for the same period last year.

The lower spend in absolute terms reflects our effective R&D expense controls. Q1 2022 selling and marketing expenses were RMB 103.1 million, an increase of 13.6% year-over-year, comprising 13.6% of revenue compared with 7.9% of the revenue for the same period in 2021, mainly due to higher advertising and promotions for self-branded products and the increase of overseas sales personnels to serve the local market.

G&A expenses were RMB 58.2 million in the first quarter of 2022, representing a decrease of 10.9% year-over-year, largely due to effective cost controls. It accounted for 7.7% of revenue compared with 5.7% in the same period in 2021.

Regarding net income, the first quarter of 2022 saw a adjusted net loss of RMB 75.7 million compared with adjusted net loss of RMB 29.0 million for the first quarter of 2021.

Now turning to balance sheet. As the Shenzhen lockdown in March, impeded key component supply, hence our production, our inventories grew in Q1 2022 by RMB 281.3 million versus December 31, 2021. We are optimistic that chip shortage and oversupply in issues will start to ease in the second half of this year.

Despite the challenging circumstances, our balance sheet remains robust. Cash and cash equivalents as of March 31, 2022, was RMB 1.02 billion compared with RMB 1.09 billion as of March 31, 2021, as we continue to implement disciplined working capital management practices. In November 2021, the Board approved the allocation of up to USD 20 million towards a share repurchase program. In Q1 2022, we continue the repurchase program, reflecting our confidence in our growth strategy and financial performance.

We have bought back US $6.9 million worth of shares until March 31, 2022 and intend to carry on with this buyback program. In addition, the company paid out the special dividends for 2021 to ADS holders on April 15, 2022. Lastly, moving to our outlook. Due to the ongoing challenges, our outlook for the second quarter of 2022 currently projects net revenue to be between RMB 1.8 billion and RMB 1.30 billion. compared with RMB 1.84 billion in the second quarter of 2021. The second quarter performance is very much driven by new product launch timing.

As the Mi Band 6 was launched in March 2021, while Mi Band 7 launched today, May 24, 2022. This outlook also reflects the continued uncertainty of the potential effects of COVID-19 pandemic on sales and electric component delays as well as the lower discretionary consumer spending. Given this outlook, we will continue to apply strict cost control measures and disciplined working capital management through 2022. Please note though that our outlook is based on existing market conditions and reflects the management's current and preliminary estimates of the market and operating conditions as well as customer demand, which are all subject to change. This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.

We will now begin the question-and-answer session.

(Operator Instructions)

Our first question will come from Jan Luo with PF Securities.

And congratulations for first quarter. First of all, can you share some view about impact by the core in Shanghai because I find that the COVID is very serious this time. I mean, the impact about your operation and supply chain and custom?

Yes. Thank you very much. The impact of Shanghai is relatively small to us versus the impact on Shenzhen right? Because most of our supply chain and factories are based out of Southern China rather than the Yangtze Delta River area, which I just mentioned. However, we do have our factory in 1 of our factories in Suzhou, which is actually creating or making some new products for our company as well. since the lockdown was kind of constrained within Shanghai, the impact is relatively limited to us for Shanghai as a region. However, since Shanghai was among 1 of the top cities in China who -- there's a lot of consumers who are purchasing our watches, right?

And the 2 months locked up in Shanghai obviously dampens the sales outlook for our Q1 as well as our Q2 sales for China. But however, we'll try to promote our products across China in different regions so that we could compensate for the shortfall in Shanghai.

Okay. And the second question is about the market trend. So i see that global political development changes day by day and receive food price even rising in some emerging markets. So how do you forecast the consumer electronics market and the smart watch market in the next span of the year?

So yes, it's a good question. We do notice that there's a few issues which I mentioned also in the script that we do see some slowdown in Russia and Ukraine as a specific market -- and we do see the slowdown on consumer discretionary income in markets like Europe and also in the United States, we see that people's discretionary income is very much squeezed to some extent, by the inflation, right? So overall, there is a certain degree of a decrease on the discretionary spend from the consumers.

But however, we also see some interesting signs of our brands actually taking over other brands, for example, in the United States and also in certain parts of Europe, we are performing better than the others, right? So the future is still a very fluid picture. As you can see that in our guidance, our Q2 number is already much better than our Q1 number, and then we do have high hopes that in Q3 and Q4, together with our new product launches on the whole year level. We should still have at least similar level of the revenue as 2021 or even with a single-digit growth to that extent.

But this is all very early to -- for us to predict, and if you look at the growth of the smart watch market, at least from the IDC report, which we see at this moment in time, which probably doesn't reflect the latest insights we have, they are still pointing to a growth of the overall market in the years to come. So we're still relatively optimistic about the wearables market, which we operated in as well.

Our next question will come from Kevin Chang with China Renaissance.

And congratulations on the good results. I have a question regarding your upcoming outlook. Since your guidance for 2Q, it's pointing to a very strong Q-on-Q rebound growth. Would you telegraph it as mostly driven by the new Mi Band product or also our own brand product as well? And how do we see I say the Xiaomi related revenue contribution. I think this past quarter, it was only down to about 35%. How do you see this trend going forward for the rest of the year?

Yes, chang, a good question. So on the outlook, as I said, Q2 is already pointing on a strong quarter-on-quarter rebound. And the -- our quarterly number is very much linked in to the new product launch time. As I've said just now, Xiaomi 6 the launch time was March last year. And then in Q2, you actually can account for a full quarter, which was the fact in last year. But this year, the new Mi Band 7 was only launched now, and we will start selling as per June 1.

So we can only account for the new product sales for a month instead of a whole quarter. So that actually kind of explains the difference between Q2 last year sales versus Q2 this year sales. On your question regarding the Xiaomi mix in our revenue, I think the non self-branded products would continue to grow together with Xiaomi. So in the outgoing quarters, we would definitely expect that Xiaomi revenue would increase versus the current level. And that increase would also go into July and August. So basically, it's going to be very much in Q3 and Q4. And on the Xiaomi mix, obviously, it's going to -- our self-branded products is also going to grow because as we mentioned in his script that we also launched our T-Rex new product today, and we are going to launch our new baseline pop watches in June as well. And not to mention the new GT series, which are scheduled to be launched in Q3.

So our self-branded products launch time is also more skewed towards June and Q3, Q4 rather than last year, it was a little bit earlier in the year. And then -- so that actually creates some kind of mismatch on the revenue outlook for our sales for this year, right? So what I'm saying is on a full year basis, I think I just mentioned that in the previous answers as well. that full year revenue for the company should be -- we're still looking at least at the same level in absolute amount versus 2021 or with a single-digit growth. And on the mix between Xiaomi and our self-branded products for sure, our self-branded products will take a bigger mix in this overall number. But of course, in the coming quarters, in Q2, Q3, Q4, you will see a proportional increase of Xiaomi's weight in the overall revenue mix of ourselves.

So I hope that gives you some flavor on the outlook for the year.

Right.

Very clear. Also, I have a second question regarding our own brand product. What kind of the functional upgrade are we focusing on this year? And how would you expect this change our product ASP or margin profitability wise due to these new upgrades?

Okay. Now so let me try to answer the easy ones. Obviously, the product ASP, we definitely want to see increase of our self-branded products. And we do see an increase from Q4 last year to Q1 this year, and then this trend should continue, right? That's on the product ASP part. And on the self-branded products, I think, as you know that we have different lineup of the self-branded products to kind of cater for different consumers tastes, right? The -- for example, the newly launched T-Rex 2 product is very much focusing on outdoor and on, for example, the accuracy of the GPS and the hard core sports and outdoor activities, right? While our GT series, which is actually one of our biggest launch, which we're going to have in Q3, it's going to be very much towards the mass and which is creating kind of a competitor product for the apple watch and the Samsung watch.

We do have our low end, the so-called deep and pop series, which are very much focused on the entry-level watch users. And these are very much the value products which we used to address the demand of the bigger mass who is very sensitive to price and to compete with all those potentially the white label products. right? So different product lineup we have would have different appeal to different consumers.

And I think most of the update you will see this year from us is going to be coming from, for sure, the specs and the feature upgrade of the watch, that's number one, both from screen, from the battery standby time, et cetera, et cetera. And also it's going to come from the Zepp OS, which we launched last year, and as we mentioned in our script before, we're creating an ecosystem using that OS, and we're trying to make it more apps, which are more appealing to the consumers. And I think the third one is definitely the house functions, which we're going to have, be it on SpO2 based on blood pressure measurement and other century update of our watches. So those 3, hopefully, is going to lift our ASP for our self-branded products.

Our next question will come from Clive Cheung with Credit Suisse.

My first question is a follow-up to Leon's comment just now on expansion in Zepp OS. I think given the macro environment being challenging and we could see decline in shipments or slowdown in shipment growth at least. Are we looking to accelerate the monetization of Zepp OS in terms of new application offerings or app offerings?

That's my first question. My second question is on the OpEx. I think previously, we have a target of achieving approximately $300 million, give or take, in terms of kind of OpEx per quarter. Given the lower or lower revenue this year, do we have any color or any planning on a target for this level of amounts of OpEx?

Thank you, Clive. I mean, those are very good questions. So let me first comment on the Zepp OS monetization yes, for sure, we are actually trying to make that OS the differentiating factors for our products compared with the others, right? And then you probably noticed that we have announced that we have different third-party OS actually working inside the Depot, for example, Spotify, for example, GoPro. And we're going to actually add a few more of those popular apps which are helping the users and which are being appreciated by the users.

We're not going to just going for the mere amount of amount we're actually going for the quality, and we do have certain services, which we actually went online in a small handful of countries by Q4 last year, which is our sleep and focusing type of services, which is actually connecting the hardware together with the AI-powered music to help you to sleep better and focus more, that type of functionality, we're actually growing it out as we speak in more geographies as we speak, right?

So obviously, we'll definitely try to widen the use of Zepp OS and actually try to build and link more popular third-party apps towards our Zepp OS. So hopefully, that answers your first question. and move to the OpEx, right? Our OpEx in the past quarters has always been hovering around $300 million, give or take, per quarter, right? In certain quarter, if the top line is going way above our threshold. I mean we may allow the team to spend a little bit more.

But if you take the average, we're actually below the line of $300 million per quarter for last year. And then the same goes for this year, and then we're actually signaling a rightsizing of our cost, and we are actually trying to make a step down on this cost level as well. But you might -- because a lot of this is actually linked into people, right?

And then even if you want to rightsize the people, you know that you need to incur cost first before you see a step change on the cost base. We're doing that as we speak. So in Q2, you probably would still see a similar kind of $300 million mark for the cost, but then you should be able to see a step down from Q3 onwards on the cost level so that we can achieve a rebound and capture the upside once the demand comes back.

If you're looking for a guidance on how big that step-down would be, I think for the time being, you can use a range of 10% to 15% versus its current level, which we reported in Q1.

Our next question will come from Abishek Sahu with Templeton.

So the first question I have is on the mix in the current quarter. So how -- what is the growth that you're seeing in Amazfit? And going forward, in the coming quarters, what kind of growth would you expect to sustain in the Amazfit products?

Yes. So Abhishek, I mean, very good question. So the Q1 number Is kind of a slow quarter because from a seasonality perspective, Q1 is actually also the lowest demand quarter for the consumers.

So -- and this year, Q1, as I mentioned in the script, we're kind of having a perfect storm whereby there's Ukraine and Russia conflict, and then there's also a lockdown of our factory in Shenzhen for a week towards the end of the quarter. So that all compounded together. It's kind of hammered our revenue for Q1, not only the Xiaomi ones, but more so on our self-branded products. So if you actually strip out all that effect, I would say, our self-branded products should continue to grow, maybe not at the double-digit growth rate, which we reported last year, but at least it should be a growth versus a decline, which we reported this year, right?

And if you look at the outlook for Q2, obviously, we already see that the supply chain, the lockdown kind of eased in China, and that all has a positive impact on us. so that the self-branded product sales for sure is going to be bigger than Q1. But whether or not it's going to be on par with last year, for sure, that is something which we are working towards. And then for the full year number for the self-branded products, I think we still want to change the mix overall. So basically, as I mentioned in the previous answers towards the other analysts. At this moment in time, we're still looking at from an absolute amount perspective, overall company's revenue will be at least flat versus 2021 or with a small single-digit growth.

for the year. And to achieve that, that will be all coming from our self-branded products growth, right? So that's from a seasonality perspective, I think what you would see is that Q1 will be the lowest, Q2 gradually improving. And then Q3, Q4 will be the quarters which is going to make the year and which are also traditionally the high seasons given the prime day sales as well as the Double 11 and Christmas sales in Q3 and Q4. I hope that gives you a color for how you look at the revenue growth for and the mix for this year.

Got it. And Also, just on a related point, while the mix continues to shift in favor of the self-branded products, shouldn't that -- in terms of percentage margins, shouldn't that lead to a much higher number than the 20% that we are currently reporting? I would have thought that the self-branded products come at a much higher margin, right?

That should, Abhijit. I mean that's a good question. So what you saw here is that already versus Q4, there's a step change. So there's already a 1% increase on the overall margin versus Q4 -- and Q4, our self-branded products was already accounted for more than 60% of the mix, right?

So -- and Q1, there were certain one-offs, for example, the freight cost was extremely high versus the run rate we had in 2021 because of the lockdown and those type of macro issues.

But then that -- those factors are also gradually going away in Q2 and then as we go into the second half of the year. So what I'm saying is that you would definitely see from a seasonality perspective, also the self-branded products together with the new product launch, which there was no -- there was 0 in Q1 and there's going to be a few of that in Q2, and then there's going to be a lot of that in Q3.

Then this effect would definitely push the gross margin of self-branded products up in Q2 and then also gradually going up in Q3 and Q4. So yes, to answer your question, I think you would see the bottom of the gross margin now and that, that should gradually going up as we entered into the second half of the year.

Understood. Another issue that I wanted to understand is just the quantum of the buyback that we have done so far. If we were to go by your expectations for the full year and a gradual improvement through the year shouldn't we accelerate the pace of buybacks if we believe that the business is undervalued, right? So that is one. And Also, any updates from you on the ADR listing? And what are the scenarios that we are looking at currently? And is there any risk of a delisting at all in your view?

Yes. So let me first comment on the buyback. Yes. So we're actually continuing our buyback. And then to be honest, by March 31, that was the number (inaudible). Nearly we continue to buy back the shares as we speak. I think by the end of Q2, when we publish our Q2 results, you will definitely see that number going up.

So -- and we will continue with the buyback as we move towards the second half of this year. And then we do still have a space to do that. So that will definitely committed and continue to do so. And with regard to the delisting risk, as you mentioned, I think that's a systematic which is overhand across all the Chinese tech companies.

We do -- we're actually monitoring the situation very closely, and we're considering different options including the second listing in Hong Kong and working closely with our audit firms to get the PCAOB clearance. So those are being worked upon as we speak. And if there's an update for sure, will push out a release on that front. But I guess in the short term middle term, we don't see any risk or a negative impact from that. or to be -- or take it another -- yes, to say the least that we think our company is undervalued, and that's why we'll continue to do the buyback as we committed to do.

Got it. And finally, from my side, how should we think about the Xiaomi relationship evolving, right? I mean if the smart bands as a category were to continue declining. And if we are not expanding the relationship into other categories, then how should we think about the engagement with Xiaomi.

Are we in discussions for other product lines for other categories? What could be the nature of our relationship going forward, please?

No. So our relationship with Xiaomi is and has always been very strong, right? So that's why we launched the Mi Band 7 today together with the CEO of Xiaomi, right? And that relationship will remain strong, as mentioned by our CEO, and then we're already working on the next-generation band for next year with (inaudible) doing that already. right? And then to answer the second part of your question, for sure, we're exploring with them on different form factors of products and different categories, but that's still in discussion, and we cannot say too much, unfortunately, in this call. But then whenever there's a progress on that, we would definitely issue a separate press release of it.

As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact Jobs Investor Relations department through the contact information provided on our website. This concludes this conference call. You may now disconnect your lines. Thank you.