VNET Group, Inc. (VNET) Q3 2014 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you, everyone, and welcome to 21Vianet Group's Third Quarter 2014 Earnings Conference Call. [Operator Instructions] Before we begin, I will read the safe harbor statement. This call may contain forward-looking statements made pursuant to the safe harbor provisions for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors, not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these forward-looking statements. All forward-looking statements are expressly qualified in their entirety by the cautionary statements, risk factors and details of the company's filings with the SEC. 21Vianet undertakes no duty to revise or update any forward-looking statements for selected events or circumstances after the date of this conference call. With us today are Mr. Josh Chen, Chairman and Chief Executive Officer; Mr. Frank Meng, President; Mr. Shang Hsiao, Chief Financial Officer; and Mr. Eric Chu, Vice President of Capital Markets and Business Development. Following management's prepared remarks, we will conduct the Q&A. At this time, I would now like to turn the conference call over to Mr. Josh Chen, 21Vianet's Chairman and Chief Executive Officer, for opening remarks. Thank you.

Good morning, and good evening, everyone, and welcome to 21Vianet's Third Quarter 2014 Earnings Conference Call. We had another quarter with solid growth momentum supported by continued strong secular tailwinds. Demand for our traditional strong verticals, such as e-commerce, online video, social media where margin very robust. But most importantly, we have noted 2 emerging growth drivers for our core business and their business. First is related to our tool cloud industry. We are beginning to see larger deployments from domestic cloud service providers. Generally speaking, a nationwide consumer arranged [ph] cloud deployment that secure the access points need at least 1,000 cabinets to support the service offering and a corresponding traffic. This creates huge demand for large tailor-made data centers. Going forward, one of our operating priority will be to serve VIP customers in a data center business, and we have seen very positive early results. We are happy to announce that we have already signed a 7-year agreement to provide infrastructure service for Alibaba cloud business. In the first phase of this multi-phased engagement, we will build and operate a new state-of-art data center with around 1,000 cabinets. By leveraging our data center infrastructure expertise for hosting needs, our client will be able to rely on 21Vianet for data center buildout implementations with maintaining the focus on their core business. We are also working with other customers on similar large-scale potential deployments. Second key growth driver is related to the mobile industry. In the past few years, we have seen not only strong growth in mobile device, but also a steady migration of mobile users from 2G to 3G, and now recently to 4G. The improving mobile technology and the proliferations of mobile applications and games result in much higher usage mobile data per users. This combination of mobile user growth and the usage growth per user is generating exponentially growth in mobile data, which translate into demand for data centers, where these data centers are stored, processed and then transmitted. With these growth drivers, we anticipated accelerating growth in our data center business for the foreseeable future. Now I would like to discuss our MNS business. In the last several quarters, we have seen challenges in this space, mostly due to an industry-wide pricing decline, greater competition and VAT system migration. Despite these challenges, we feel that these industry changes are for the better in the long term, as we believe that these reflect transmission -- transition in China from transit-based traffic transmission to peering-based transmission. Such a transition occurred roughly 10 years ago in the developed markets such as U.S. and Europe, which ultimately lead the Internet infrastructure in this market to move to the left [ph] level. We believe we are just starting to see early signs of such a change. Recognizing this change, we are proactively preparing MNS business by ultimately [Audio Gap] We were increasingly focused on the higher-margin MNS business and the higher-quality customers with less working capital requirements. Additionally, with Aipu and the DYX secured as a large encrypts. We are also looking to establish and build open platforms in each ecosystem and gradually expand this ecosystem over time. Lastly, we are working with reputable agencies such as CNNIC to help our customers acquire Internet infrastructure resource such as Autonomous System numbers, IP address and a DNS infrastructure. This flagship a very important resource will enable our customers to enjoying the benefits offered by peering-based Internet transmission technology. In July 2014, we have also signed agreements with international Internet organization, ICAT [ph] and ISC to deploy a mirror for the route server in our data centers. This deployment of the 2 new servers will materially improve the response time and therefore increase performance and user experience for Chinese Internet users. At this point, I'd like to hand over the call to our President, Frank, to talk about our IDC business and the cloud business in more detail.

Thank you, Josh. In the third quarter, we continued to make inroads on new strategic partnerships and the initiatives, supported by these encouraging developments and the surging Internet traffic growth, as well as more favorable regulatory environment in China. We remain optimistic about our core IDC business and the cloud enabler services, and are committed to continuing to execute our growth strategies and to capture these emerging opportunities. During the third quarter, we have completed the Aipu and DYX acquisitions and have started the integration process into our core operations. As we stated before, each of these 2 businesses represents the industry leader in their respective markets and meets our strict criteria strategically, operationally and financially. Once integrated, they will not only help improve the operating efficiency in our core business, but also serve as the cornerstones on our strategic road map as we develop our open ecosystem for China's Internet infrastructure market. In October, we announced a strategic partnership with China Internet Network Information Center or CNNIC, the government administrative agency responsible for managing domestic domain name registry and other core Internet infrastructure services in China. This agreement will allow 21Vianet and the CNNIC to closely cooperate on conducting fundamental research and developing an open Domain Name System or DNS Internet platform in China. In November, we announced a strategic partnership with China Academy of Telecommunications Research or CATR, a division of the Ministry of Industry and Information Technology. Under the terms of the agreements, 21Vianet and CATR will closely collaborate on cutting-edge research and development initiatives in connection with the next-generation broadband industry in China. We believe this partnership will help us build our open and a mutually beneficial broadband ecosystem for all participants in the Chinese Internet industry. Now moving on to our cloud enabler services. We see strong promise in both Microsoft Azure and Office 365 services, which now support over 20,000 enterprise customers, including not only many multinational corporations, but also a significant number of domestic companies. For our Azure customers, we also introduced the WebDirect payment services in late September and the hybrid storage solutions offered by StorSimple in late October. The launch of these services allow us to further expand our offering and attract new customers. Our cooperation with IBM also continues to progress mostly as we successfully completed the commercial launch of the IBM private cloud businesses at the end of Q3. Another new initiative this past quarter was our expanded cooperation with the Foxconn, a leading global electronics manufacturer. In early October, we established a joint venture with Foxconn to jointly build and develop a global supply chain for the IDC and the cloud computing infrastructure markets. This collaboration will allow us to pool resources and technologies together in a way that boosts our operational synergy, as we work together to provide a superior cloud-enabler services to domestic and international customers. Finally, I would like to briefly touch on the industry awards we received for our cloud computing services. Our Microsoft cloud business unit was awarded the 2014 China's Most Influential Cloud Computing Service Provider and the 2014 Innovative Cloud Computing Solutions awards at the 2014 China IT Market Annual Conference. These awards not only provide recognition for our cloud computing capabilities, but they also help promote our cloud services as we expand our research and penetrate more deeply into the mainstream market. At this point, I would like to turn the call over to Shang, our Chief Financial Officer, to go through our financial results.

Thank you, Frank. Good morning, everyone. Before I begin discussing our financial performance, I would like to briefly touch upon 2 items. First item is the cash flow statement. Starting this quarter, we are including a cash flow statement in our quarterly earnings release in an effort to be more transparent with our financial disclosure. Second, I would like to highlight the improvement in our accounts receivables with our days sales outstanding or DSO decreasing from 107 days in the second quarter to 92 days in the third quarter. We expect our DSO will further improve in coming quarters. Now moving on to our financial results. Before I begin, I would like to state that we will present non-GAAP measure today. Our non-GAAP results exclude certain noncash expenses, which are not a part of our core operations. The detail of these expenses may be found in reconciliation table included in our earlier release. Also note that all the financial number we are presenting today are in RMB amounts unless otherwise noted. Our net revenue for the third quarter of 2014 increased by 51.5% year-over-year to RMB 778.5 million. Net revenue from hosting and related service increased by 52% year-over-year to RMB 513.2 million, mainly due to an increase in total cabinets under management and demand for the company's CDN and cloud service, as well as the contribution from a recently completed acquisition but partly offset by the transition to the VAT system. The MRR per cabinet RMB 10,433 in the third quarter of 2014 as compared to RMB 10,789 in the second quarter of 2014. Net revenue from our managed network service increased by 50.4% to RMB 265.3 million in the third quarter of 2014. This increase was mainly because of contribution from acquisition, partly offset by the incremental competition and the transition to the VAT system. Adjusted gross profit increased by 78% to RMB 264.5 million. Adjusted gross margin was 34% in the third quarter of 2014 compared with 28.9% in the prior year and 30.1% in the second quarter of 2014. The increase in gross margin was mainly due to the higher margin revenue contribution from acquisition and Microsoft cloud service. Adjusted operating expenses increased to RMB 198.4 million. As a percentage of the net revenue, adjusted operating expenses was 25.5% compared with 17.8% in the prior year period and 20.2% in the second quarter of 2014. Most specifically, adjusted sales and marketing expenses increased to RMB 84.9 million from RMB 35.9 million in comparative year period due to the expansion of our sales and service personnel associated with the acquisition completed in the third quarter. Adjusted general and administrative expenses increased to approximately RMB 81.9 million from RMB 36 million in comparative year period, mainly due to an increase in headcount associated with the growth in the company overall business and acquisition completed in the third quarter. Adjusted research and development expenses increased to RMB 31.7 million from RMB 19.7 million, which reflects our effort to further strengthen its research and development capability and expand our cloud computing service offering. The difference between the adjusted operating expenses and our higher GAAP total operating expenses amount is mainly due to change in the fair value of contingent purchase consideration payable, which was a gain of RMB 64.9 million and share-based compensation expenses of RMB 9.3 million. The change in the fair value of contingent purchase consideration payable resulted from a decrease in the present value of [indiscernible] cash and share consideration as of September 30, 2014, associated with our company past acquisition. From a profitability perspective, adjusted EBITDA for the third quarter of 2014 increased by 61.3% to RMB 153.9 million from RMB 95.4 million in the comparative period in 2013. Adjusted EBITDA margin for the quarter was 19.8% compared to 18.6% in the prior year period and 20.1% in the second quarter of 2014. Our adjusted net profit for the quarter was RMB 16 million compared to RMB 29.5 million in the prior year period. Adjusted net profit margin was 2.1% compared with 5.7% in the prior year period and 3.5% in the second quarter of 2014. Adjusted diluted earnings per share for the quarter was RMB 0.04, which represent the equivalent of RMB 0.24 or USD 0.04 per ADS. As of September 30, 2014, our cash and cash equivalent and short-term investment was RMB 2.2 billion, equivalent to USD 361.3 million. At the beginning of September, we announced the program to repurchase up to USD 105 million of the equity shares. As of October 31, 2014, we have bought back 1.6 million shares, and USD 17 million still remain under the buyback program. Looking at our financial outlook. Currently, we expect fourth quarter of the 2014 net revenue to be in the range of RMB 812 million to RMB 848 million, which at the mid-point represent growth of approximately 61% from the comparable period in 2013. Adjusted EBITDA is expected to be in the range of RMB 152 million to RMB 168 million, which at the mid-point represent growth of approximately 68% from the comparable period 2013. Net revenue for the full year of 2014 are expected to be in the range of RMB 2.84 billion to RMB 2.87 billion, which at the mid-point represents approximately 45% growth over 2013. For the full year 2014, adjusted EBITDA is expected to be in the range of RMB 551 million to RMB 567 million, which at the mid-point represent approximately 53% growth over 2013. These forecasts reflect the company current and preliminary view which is subject to change. This concludes our prepared remarks for today. Operator, we are now ready to take some questions.

[Operator Instructions] Your first question comes from the line of Matthew Heinz from Stifel.

I was just wondering if you could help us break out the contribution of Microsoft cloud revenues during the quarter, and what your go-forward outlook is for -- kind of implied in your 4Q guidance in the overall '14 guidance for cloud revenues both from Microsoft and IBM. And then secondarily, I was hoping you could give us some context around the breakdown in network services from -- between legacy revenues and the Aipu contribution in the quarter.

Okay, thanks. This is Shang. Okay. Let's talk about cloud revenue. In third quarter, the cloud revenue actually is around RMB 7 million, okay? I think in the first quarter we did mention about RMB 3 million; second quarter, RMB 6 million; and this quarter is RMB 7 million. And the company lowered the expectation, okay, from the original RMB 40 million, okay, for the Microsoft, okay, for 2014 now down to between RMB 25 million to RMB 30 million, okay. The main reason is even we are signing with a lot of customer, okay, on the use of the Windows Azure and Office 365. But the usage, okay, for the per customer actually did not ramp a lot. So we think these new business probably need more time, okay, to ramp up the revenue, okay. After all, our Office 365 and Windows Azure, okay, they commercialized in March and April this year, okay? So this is for the Microsoft, okay. And for 2015, okay, right now we probably will expect, okay, each year to revenue. We show growth at least 100%, okay. Whatever [ph] we achieved in 2014, then we should be able to expect 100% growth in the following years. That's Microsoft. And for the IBM. Actually, IBM, we commercialized in the very late of the September. And right now, okay, we only have 1 quarter to go. Okay, we did not see any revenue in the Q3. But for the Q4, right now, we expect should be between somewhere around like RMB 2 million, okay, for the revenue, okay? So that's the current status because the whole process for the IBM was delayed for a quarter, okay. So that's for that. And in terms of MNS, okay, and also the Aipu all those numbers -- okay, we're talking about many numbers. So after the call, okay, we will provide you the detail for that, okay.

And your next question comes from the line of James Breen from William Blair & Company.

Can you just talk about the recent Unicom deal and what the implications are for you there? And then on the network side of the business, can you just talk about any competition you're seeing from other resellers of the Unicom and telecom facilities?

Okay. This question, we will pass our -- to our CEO, Josh Chen to answer, okay.

Yes, and we'll take a couple of seconds to translate for him.

[Chinese]

Okay, what Josh is saying -- let me do the translation, okay? What Josh is saying is we signed with the China Unicom and Alibaba, okay? The contracts are already signed. Phase 1 is for 1,000 cabinets. That 1,000 cabinets are already been signed for 7 years, okay? In Hangzhou, actually, the Phase 1 cabinet had been deployed, okay, into very late September. So we should be able to starting to see the revenue in the Q4. But remember, that's Phase 1, okay.

[Chinese]

Okay. What Josh's saying is for the customer, we paid -- directly paid the consumer, particularly, for those customers, they have the intention to provide the cloud service, okay. [indiscernible] part for the cabinet is Phase 1 is a minimum 1,000 cabinets, okay? So right now, at this moment, we just signed 1,000 cabinets, but we should expect to see multiple thousands more, okay, from the Alibaba in the year of the 2015, okay? We already deployed the Phase 1.

Okay. And then just on the network side, are you seeing any competition in terms of pricing in the managed network business?

[Chinese] MNS?

Yes.

[Chinese]

Okay, this is Eric. Let me translate for Josh on this one. So what Josh was saying is that, so if you look at the China overall Internet infrastructure versus the U.S., in China, we are literally just going through a transition from a transit-based economy to a peering-based economy, which is where the U.S. is today. So this transition in the U.S. or Europe market occurred roughly 10 years ago in 2003, 2004-ish. So in China today, for example, we have less than 300 Autonomous Systems numbers, AS numbers in short, that have been signed to networks, big and small. And in comparison, if you look at the U.S. market, today, there are 28,000 AS numbers. So these represent 28,000 networks, big and small, that's interconnected with each other in the highly distributed way. And that essentially is what enabled, in short, the efficiency of the overall Internet infrastructure in the U.S., in the developed economy. So in China, what Josh was saying is that today, we are going through this transition from a transit-based transmission Internet traffic transmission towards more and more peering-based Internet transmission. And during this transit, there will be some challenges as we have seen today. But as we mentioned in our prepared remarks, we are working very diligently to address a lot of these challenges to making sure that we adjust our business models accordingly, adjust our revenue streams, how we look at -- evaluate our revenue streams accordingly.

[Chinese]

Yes. So this Eric translating for Josh again. So we are -- if you look at the -- in the more advanced economy such as U.S., looking at well-established data center business models, such as Equinix, the core of that business model is essentially hosting plus a free-peering of customers at the data center location. But in China, we are not quite there yet. However, we are definitely going in that direction. Again, during this transition, there will be some pricing pressure. There will be some challenges to the business model. However, we are very, very glad that the entire country, primarily driven by the demand, by the end users, by all the enterprises, we are going towards that direction. So again, we have developed strategies, specific measures to address these challenges.

[Chinese]

So one of the core strategies for us to address this challenge during this current transition is to focus more and more on higher-margin revenue stream and higher quality customers. From a higher margin revenue stream perspective, we are increasingly focused on the customers who rely more on high-quality services, who pay more attention to alternative service providers from companies like ourselves, and who are not as price sensitive as some of the other companies. So that's on the margin, high-margin revenue side. On the quality of customers, we are focusing more on customers who do not have as much of working capital requirement, who do not require as loose as a credit terms from us. So for those customers who are increasingly sort of shifting away from those customers but more towards on high-quality customers who value our proposition.

And the next question comes from the line of Cheng Cheng from Pacific Crest Securities.

My question is on, I guess, cabinets and I guess the number in Q3 and also kind of thinking for Q4, and also if the 1,000 cabinets for Alibaba was included in that Q3 number or not.

Okay, thank you, Cheng Cheng. The cabinet, we deployed, okay, in Q3, okay, was 1,200 cabinets, okay. Original, we do expect, okay, we do expect, okay, close to 3,000 cabinets. So 1 big data center actually in Xuzhou [ph] has been delayed due to power supply issue, okay. That will be delayed to the next year. But for the Q4, we have 2 major big data center, okay, are scheduled to be deployed. Okay. One is Beijing Daxing data center, okay, around 2,000 cabinets. The other one is a Beijing Xi-Chen Tyco [ph], okay, also probably more than 2,000 cabinets will be deployed in Q4, okay? So that's our current deployment plan. The Alibaba, we deployed 1,000 cabinets. Right now, I think in Q3 -- towards the end of Q3, I think server has been put around, okay, somewhere around 600 cabinets. So we see -- we should be able to see very high utilization rates, okay, from the 1,000 cabinets, okay, in Q4. So that one already count, okay, in our Q3 number. Okay, Cheng?

Yes. Sorry, just as a follow-up. I was wondering on utilization rates, historically, they've dropped a little bit when you had a high quarter of cabinets installs like in this quarter, it's a pretty sharp decline in utilization even though new cabinets was lower than expected. So I'm just wondering if there's any more color you can give on the utilization rate part of it?

Okay, we calculate our utilization rate, it's under weighted average [indiscernible] okay. In second quarter, okay, towards the end of the second quarter, the company actually have deployed somewhere around 1,800 cabinets, and that did not actually put a big impact in the Q2 but hosting were impact, okay, in our Q3, okay. Since this quarter, we deployed -- since Q3, we deployed only around 1,200 cabinets. So we shall be able to expect the Q4 utilization rate, okay, either stay in 70% or be even higher because of the 4,000 cabinets we are scheduled to deploy, okay, again, we'll be deploying towards the very end of the December, okay. It's under our weighted average calculated, okay?

Your next question comes from the line of Colin McCallum of Crédit Suisse.

Three questions from me, if I may. First of all, can you give us, I think, just 2 numbers regarding Aipu for third quarter? I think, really, you should be able to give us publicly the revenue recorded from Aipu in third quarter and the EBITDA, the adjusted EBITDA recorded from Aipu in the third quarter. If you could give us that now, that would be extremely helpful. Second question is just regarding cloud revenue. The slowdown in Microsoft from doubling Q-on-Q into second quarter to only growing from RMB 6 million to RMB 7 million in third quarter. What was the cause of that very significant slowdown? And how can you sort of make the assumption that it's a time issue which will then result in revenues growing later. If you've seen that much of a slowdown Q-on-Q, what's the kind of the reason behind it? And what will -- what can you see would fix that situation such that the growth rate can pick up again? That was the second question. And then third question is just on your EBITDA guidance for fourth quarter. If you were to meet just the lower end of that guidance, it would imply actually a decline in EBITDA Q-on-Q. I just want to be quite clear, that is what you're seeing. And can you just explain why EBITDA might decline quarter-on-quarter into fourth quarter?

Okay, let me start in -- to answer the last question, okay. So EBITDA, we lowered down the guidance. I think the major reason to lower down this guidance is because the company lowered down the Microsoft revenue. Microsoft revenue actually are also incremental revenue. You can consider them as they were contributor to our net profit and EBITDA because the cost for us to run the Microsoft operation, the main cost actually are people. The company, we are now responsible for any infrastructure, okay? So all the server, okay, network will be purchased by the Microsoft. So we don't have a depreciation, okay, on our P&L, okay, for the Microsoft. So because of those things, those additional revenue, we lower down, okay, USD 10 million to -- between USD 10 million to USD 15 million revenue over there. Those are incremental revenue, okay? So somehow that means that's also the loss of the EBITDA, okay, for the company, okay, in your guidance, okay? The main thing is [indiscernible]. And also the IBM. Since the delay, okay, for more than 1 quarter, and the IBM, over there actually, we are lowered down USD 7 million to USD 8 million, okay, original guidance. And those things are also the incremental revenue, okay. So that's the main reason for us to lower down the EBITDA. And for the current revenue, I think, on the earlier remark, okay, by Frank, we already mentioned, we did sign a lot of customers. The customers signed up everything. The way we sign, with particular for those VIP customers, those VIP customers, they did committed, okay, say certain amount of the usage during the 12 months period. But in each quarter, the company can only charge, or I can say the partnership can only charge based on their actual usage, okay? So since we deployed this service, commercialized in March and April this year, majority of the customer we signed, I have to say, should be between May, June and July, okay, that's during that period of time. We already signed more than 20,000 paid customer. 80% of that, actually it's -- was from the domestic company and 20% on that is from multinational company, okay. And one of the main reasons, okay, the revenue did not pick it up is actual usage for those company are still very small. So the revenue, okay, actually did not ramp it up as we originally expected, okay. And Microsoft and the company, okay, right now one of our major initiatives is to helping, okay, the signed customer, okay, to use, okay, this service soon as possible. So most of them are new, okay, signed paid user, okay, some of them. So those service still have been used in their MIS department, let's say, management information department, okay. I think sometime, they probably need more time, okay, to integrate those usage into their current IT infrastructure. Once that can be complete, we do expect -- they will gradually expect those cloud service to the whole company, okay. So if we based on the Microsoft model in the beginning -- because Microsoft deployed the cloud service in the 2009, okay, for the Windows Azure and also Office 365, and they released the earnings, okay, months ago, okay. In the last 12 months, okay, these 2 cloud contribute USD 4.4 billion, okay, of the U.S. dollar, okay, for the Microsoft revenue. That's our total market outside of the China market. So also what Microsoft, okay, what's their advice to the company is in the beginning ramp-up, okay, that will take a little bit more time, but once the people starting to use and expand internally and the revenue will be ramped up very, very quickly, okay. So we do have a reasonable, okay -- reasonably, okay, let's say, even this year, we achieved between RMB 25 million to RMB 30 million. We do have the reasonable belief, okay, and that revenue will continue to ramp up, okay, of more than 100%, okay, annual basis. Okay. That's the #2 question. And #1 question about the Aipu consolidation, okay, we can provide the gross margin EBITDA number and also the revenue and everything, okay, and all contribute -- we will mention also to you the MMS revenue, et cetera after the call, okay, because too many number, I don't want to discuss on the call, okay.

No, but sorry, just to ask this again, I'm not asking for a lot of numbers, I'm asking for 2 numbers. And I don’t think it's unreasonable, that you should be able to tell us that given that you just bought the company. Why can you not give these 2 numbers [indiscernible] for the quarter?

Okay, I think that revenue should be -- I can give you the ballpark of revenue, okay. That revenue should be somewhere around RMB 110 million, okay, to RMB 130 million -- RMB 120 million, something like that, okay.

And the EBITDA?

EBITDA. I think the EBITDA number should be -- I need to double check on that, okay. It should be like 25% to -- okay, 20% to 25%, okay.

This is Eric. Just one more thing I wanted to add there because this is brand-new acquisition, so our auditors are still reviewing some of the -- some part of this transaction. So the financials will be finalized when we file our 20-F early next year, I guess, March, April of next year. So that's one thing. The other thing I wanted to mention is we do -- because these are new acquisitions, so we do have integration costs as well, as you know, for any new acquisition. So that will impact our EBITDA for this year as we integrate the businesses. So just want to -- a couple of points I wanted to give you a quick heads-up.

That's helpful. So the 20%, 25% EBITDA margin on that RMB 122 million -- RMB 110 million, RMB 120 million, that is pre-integration cost. Is that kind of what you're saying, Eric?

That is correct.

[Operator Instructions] There are no further questions on the line. This time, I would now like to hand the conference back to the management team for closing remarks.

Josh? Okay. Thank you, everyone, okay. And after the call, I think, the management will continue to discuss with each sales analysts, okay. Thank you.

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