Fang Holdings Limited
Q1 2016 Earnings Call Transcript

Published: 2 Jun 2016

[Operator:]

Ladies and gentlemen thank you for standing by and welcome to the CP Briefing Call on Fit and Proper for Quarter One 2016 SouFun Holdings Limited Earnings Conference Call. [Operator Instructions] Now, I would like to hand the conference over to your first speaker for today, Ms. Joyce [ph]. Please go ahead, ma’am.

[Kent Huang:]

Thank you, operator. Hello, everyone and welcome to Fang’s first quarter 2016 earnings conference call. I am Kent Huang, Fang’s CFO. Joining me today are Vice Chairman and CEO, Mr. Vincent Mo. Before we carry on, I would like to remind you that during the course of this conference call, we may make forward-looking statements, statements that are not historical facts including statements about our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainty. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. SouFun assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Potential risks and uncertainties, including but not limited to those outlined in our public filings with SEC, including our Form 20-F. Now, let’s take a look at the numbers. First quarter 2016 results, Fang reported total revenue of $204.6 million for the three months ended March 31, 2016, representing an increase of 52.3% from $126.0 million from the corresponding periods in last year, primarily driven by the growth in e-commerce services. Revenue from e-commerce services was $130.9 million for the three months ending March 31, 2016, a 154% increase from $51.5 million for the same period of time in the last year primarily due to the rapid growth of real estate brokerage services for secondary home. Revenue for marketing services was $30.4 million for the three months ended March 31, 2016, a decrease of 25.1% from $40.6 million on the corresponding periods in last year primarily due to the offset by our e-commerce services. Revenue from listing services was $24.1 million for the three months ended March 31, 2016, which is higher than the $23.6 million for the corresponding period in 2015. Revenue from internet financial services was $10.6 million for the three months ended March 31, 2016, an increase of 200% from $3.5 million for the corresponding period in 2015 primarily due to the rapid growth in our financial services to the real estate brokerage services. Revenue from value-added services and other services was $8.5 million for the three months ended March 31, 2016, an increase of 27.8% from the $6.7 million for the corresponding periods in 2015 primarily due to the growth of our data and research related products. Cost of revenue was $209.6 million for the three months ended March 31, 2016, an increase of 357% from $45.8 million for the corresponding period last year. The increase in cost of revenue was mainly attributable to the increased staff cost. Operating expenses were $105 million for the three months ending March 31, 2016, an increase of 44.3% from $72.8 million for the corresponding period last year. Selling expenses were $61.6 million for the three months ended March 31, 2016, an increase of 27.3% from $48.4 million for the corresponding period of 2015, primarily due to increased advertising and promotional expenses. General and administrative expenses were $43.3 million for the three months ended March 31, 2016, an increase of 77.9%, from $24.4 million for the corresponding period in 2015 primarily due to the increased staff cost. Operating loss was $110.2 million for the three months ended March 31, 2016 compared to operating income of $7.5 million for the corresponding period last year. Income tax expenses was $5.2 million for the three months ended March 31, 2016 compared to income tax expenses of $5.6 million for the corresponding period in 2015. Net loss attributable to Fang’s shareholders was $113.7 million for the three months ended March 31, 2016 compared to net income of $6.1 million for the corresponding period in 2015. Loss per fully diluted ordinary shares and ADS are $1.87 and $0.37 respectively for the three months ended March 31, 2016 compared to earnings of $0.05 and $0.01 for the corresponding period in 2015. Adjusted EBITDA defined as non-GAAP net income before income tax, interest expenses, interest income, depreciation and amortization was $100.4 million loss for the three months ended March 31, 2016 compared to income of $11.3 million for the corresponding period in 2015. As of March 31, 2016, Fang had cash, cash equivalents and short-term investments of $708.4 million compared to $880.5 million as of December 31, 2015. Net cash used in operating activities was $67.2 million for the three months ended March 31, 2016 compared to cash flow used in operating activities was $54.7 million for the same period of time last year. Business outlook. Fang adjusts its total revenue guidance for 2016 from $1,060.2 million, representing a year-over-year increase of 20%, to around $1,148.6 million, representing a year-on-year increase of 30%. This forecast reflects Fang’s current and preliminary view, which is subject to change. Thank you for taking time to join us today. Now, we are ready to take questions. Operator, please.

[Operator:]

Thank you, sir. [Operator Instructions] We have the first question from the line of Hillman Chan from Macquarie. Please ask your question.

[Hillman Chan:]

Hi, Vincent and Kent. Thank you for taking my questions. My first question is about the outlook for the secondary home transaction market. So, due to the tightening measures in certain top tier cities, actually the second home sales, was getting weaker in recent months by April and May. But on the other hand, the lower tiered cities still hold up pretty well, so could Vincent talk about the outlook for SouFun second home business in second quarter and also for the rest of the year? And related to that, how should we think about your headcount plan for the second home as well as the direct sales business? That’s my first question. And I have another one.

[Vincent Mo:]

Thank you. This is Vincent. Our secondary or resale market, e-commerce business has the biggest growth among our all lines of business products. As you see from the number in that quarter one, it’s increasing.

[Kent Huang:]

Increased 57% quarter-over-quarter.

[Vincent Mo:]

Secondary, I think it’s….

[Kent Huang:]

And the year-over-year is like close to 6x.

[Vincent Mo:]

Yes, close to 6x. So, we have seen in the past 5 months as of this year, March, the months of March we had the most transaction volume and close to – the resale only close to 20,000 units a month since the cooling down of the major markets in China for April and May. And our transaction units have been around 15,000. So, we have seen slightly changing of the market recently. And the reason is mainly the new regulation from the government of those major markets. So, that’s the major reason. But going forward, because we are still in the early stage of penetrating into the major markets and other markets in China as well, so it’s my expectation that our resale market, in multiple ways, the total transaction volume and units, they are going to keep on going up. And the market share will also keep on going up. So, that’s the expectation from my side based on my – 1.5 years experience in the past.

[Hillman Chan:]

And for the headcount related to second home and the resales business, could you talk about the...

[Vincent Mo:]

Okay. Yes, I am sorry I forgot that part. Up to today, we have close to 40,000 staff members and most of them are brokerage agents in our resale e-commerce division. So, we will – I think in our arrangement, we are going to stabilize this number for some time, which means we are going to hire – keep on hiring people. And also at the same time, we are also going to fire those non-qualified or low performance agents. To the end of the first half of the year, this month, the end of this month, I think we are going to keep the 40,000 people for the time being. But in the second half of this year, it is the plan now. We are going to continue expand our sales team and continue to strength our sales force in the 28 cities we are already in, plus some other cities we are also planning to get into. So, that’s the guidance.

[Hillman Chan:]

Got it. Thank you, Vincent. And my next question will be on your sign up of the offline stores. I think we have been setting those up since late last year and to boost direct sales business. So, could you talk about like the KPI that we have for these offline stores whether those stores have achieved our original target? Thank you.

[Vincent Mo:]

Yes. The offline shop is supporting to our transaction e-commerce business. It’s my belief that we are not going to rely on offline shops to make our business great. We are still relying heavily on our online resources and our way of doing the agency business in the resale market. Up to today, we have more than 600 shops established among our 28 cities. So, going forward, I think we are expecting more than 1,000 shops going forward. But that number is still a fraction of traditional agency companies. It’s about one-tenth of the biggest agency companies in the whole country. So, the strategy for us is that we are going to rely heavily online with support from offline shops.

[Hillman Chan:]

Okay, got it. Thank you very much, Vincent. That’s very helpful.

[Vincent Mo:]

Thank you.

[Operator:]

Thank you. Your next question comes on the line of Nora Zhang from Merrill Lynch. Please ask your question.

[Nora Zhang:]

Good evening, management. Thank you for taking my questions. I have a question regarding your financial business. So, what is the strategy for the financial business going forward after you stop the down payment loan services?

[Vincent Mo:]

We started our financial business about 2 years ago. Up to today, we have seen a rapid growth in this sector. In quarter one of this year comparing to quarter one last year, we had over 200% growth, top line and our financial service is also profitable. It’s very healthy only – about around 1% bad debt, the default rate, so which is very healthy. Going forward, we are going to focus very much on our – in supporting our agency business in both the resale market and the new market. So, we are going to do mostly providing services to our resale market clients and our new market clients rather than shopping around out of our businesses so far. So, that’s the plan. Because with our increase in the transaction in resale market and the new market our financial service business will have a very healthy and high growth rate going forward. The main challenge is that how can we convert our resale market clients and the new market clients to our financial service clients. So that is the challenge. But with our ecosystem there and acquisition of new clients, the cost of that is low. And the risk management is under control. So, I believe in doing this, the financial service sector will continue its growth in the coming – in the rest of the year.

[Nora Zhang:]

Thank you, Vincent. That’s very helpful. I also have another question about your competitor – about the competition. So, one of your major competitor, Homelink, has just finished another round of financing and we expect Homelink to increase their investment and marketing spend in the second tier cities, where SouFun originally had – originally has advantage. So, do you think that your – SouFun’s market share will be threatened by Homelink in those cities like Wuhan and Chongqing and other secondary cities where we are doing well? And that’s my question.

[Vincent Mo:]

Yes, thank you for the question. As you know, we are new in the market, we are only less than 1.5 years new in this market and we are now #2 nationally. So, which is something gives me a very strong confidence to aggressively move forward. So, of course, we are watching out for competition in the market, but I think we do have the advantage there. And with the online advantage and with our increased maturity of our business of management scarce and how to manage this new brokerage and online agency business, so I believe that we are going to maintain our market share in most of the cities we are in now, including the big cities. And actually in the past five months, we have steadily increased our market share in most of the cities we are in. So, it’s my belief that going forward we are still confident to increase our market share and competition is good to the market, the industry and it’s also good to us, because we are now a major player in the market already and we are also trying to learn from our competitors and from the industry. And I believe that [indiscernible] and as we did in the past 1.5 years to maintain and to increase our market share.

[Nora Zhang:]

Thank you. That’s very helpful.

[Vincent Mo:]

Thanks.

[Operator:]

Thank you. Your next question comes from the line of Amanda Chen from Morgan Stanley. Please ask your questions.

[Amanda Chen:]

Hi, good evening Vincent and Kent. Thank you for taking my questions. I have few questions here. So, first one is a quick follow-up regarding your 600 shops offline And Vincent, I think you mentioned that you have 600 shops among 28 cities, could you please share the breakdown by different cities, different tiering of cities? Thank you.

[Kent Huang:]

Sales in different cities.

[Vincent Mo:]

Okay. I am sorry I don’t have the numbers before me, but I do have some rough numbers. In Beijing and Shanghai, each of the cities we have over 100 shops concentrating in Beijing and Shanghai. In other cities, we have less than 100. Mostly, I think we have 5 or 6 cities we have around 50 shops online and street shops. Other cities have less than 30, 20 shops. So, that’s the current situation. Other than the shops, we have another – we have other 400 offices in the office buildings, not on the street. So together, we have a little bit more than 1,000 offices among these 28 cities.

[Amanda Chen:]

Got it. Thank you. So, just want to clarify this, offices is service centers were mentioned in previous quarters, right?

[Vincent Mo:]

Yes.

[Amanda Chen:]

Okay, thank you. And the second question is regarding operating metrics versus the commission rate for the secondary homes will we increase the commission rate in the next few quarters? That’s one. And the second is the transaction volume per agent per month, what’s the current level and what will be the number in 2016? Thank you.

[Vincent Mo:]

Okay. For the commission, we – actually we just made our decision that we are going to increase our commission rate from country a sum of 1% to a sum of 1.5% starting from this month across our 28 cities. So, I believe even though that our commission, a total commission of 1.5% is an increase to our original commission rate, but it’s still the lowest commission among the major players in the market. So, we still have the price advantage in competing with our competitors, so in the coming half year. So, that’s the current situation. Another part of the question is...

[Amanda Chen:]

It’s transaction volume. Yes, is the transaction volume…

[Vincent Mo:]

Yes. The transaction – yes, the efficiency, I am sorry, it’s right. We did an internal analysis. Based on the total number of agents we have now, we are not seeing the efficiency increasing, but if we divide our agents into groups like those agents who have – who has – those agents who have walked within our fang.com for over 6 months, their efficiency is much higher than those who have been working here for less than 6 months. So, I think it’s a good trend. It’s a good signal that because we are here in this market, new. And with a longer history or longer experience in this market, we can steadily increase our efficiency of our agents.

[Amanda Chen:]

Got it. So, could you please share what’s the efficiency of the senior salespeople in our company?

[Vincent Mo:]

Kent, you may add.

[Kent Huang:]

Yes. The senior guys, Vincent just mentioned, has been with the company over 6 months, usually have higher efficiency, usually the average is close to 1 unit per month per agent, and then which is significantly higher than the newcomer to the company, with basically those junior sales agents. And one thing I want to point out is through after 1.5 years, so Fang right now already has over 10,000 senior core agents with us, which means those guys have been with the company on the platform over 6 months. So, we are expecting those agents, it’s going to keep providing productivities in the coming quarters. And with our training system, we believe we will be able to bring the average productivity to a higher level in the coming quarters.

[Amanda Chen:]

Got it. Thank you. Very helpful. And the final one is regarding your breakeven target by fourth quarter of 2016 I know this quarter’s loss is a little bit higher than people expectation due to the seasonality. How do we should look at the profitability in the next few quarters and can we still reach the breakeven target by the end of this year? Thank you.

[Vincent Mo:]

Yes. I think I said that in my – in the news release. I said that too in our last quarter release, where based on my operation data and also the things happening within the company. So, one way the efficiency is going up and the other things that we are optimizing our operating system across the company from the resale market to new market and to home furnishing sector as well as the financial services. So, all these segments, all the divisions of the company are targeting at going profitable in the coming quarters. On the other hand, as I just talked about that we are trying to have more revenue in like in the resale market that we are increasing our commission rate by – from 1% to 1.5% starting from this month. Although that said, we are still charging the lowest in the commission rate in the market. So, we still have some room to mobilize. So in doing all of this, I believe that our quarter four turnaround, we are confident with that.

[Amanda Chen:]

Got it. Thank you. Very helpful. I look forward to your breakeven results. Thank you.

[Vincent Mo:]

Thank you.

[Operator:]

Thank you. The next question comes from the line of Ming Xu from UBS. Please ask your question.

[Ming Xu:]

Hi, Vincent and Kent. Thank you for taking my questions. So, I have two questions. So, first one is the financial one, so I noticed that you raised – revised up your revenue guidance for the full year. So, just want to understand how much of that rate come from a commission rate, particularly on the secondary resale business and how much of that rate come from maybe a volume, a better outlook on the sales transaction volume? That’s my first question.

[Vincent Mo:]

Okay. We have some macro thinking. Yes, we – again we adjusted up our annual guidance for the revenue to over $1.1 billion. It’s based on multiple factors, the adjustment of a commission rate and our market share and transaction volume, all of this across resale market and new home market and the financial services as well. So, 30% – from 20% to 30%, it looks like some 50% up, but it is still a conservative number here. So, we believe that 30% is something reachable and we are actually expecting higher in a number to the later part of this year, we are going to give out update in again next quarter. So, that’s the status quo. And Kent, you may add some color to the detailed numbers if you have that.

[Kent Huang:]

Right. Well, for secondary business is obviously the key for our business especially top line right now. And then for the last couple of quarters, we can see actually the way or percentage of revenue coming from secondary actually keep growing and then by this quarter, secondary top line growth 57.6% quarter-over-quarter and the revenue wise growth, 58% quarter-over-quarter. So, we see the company stabilize at current secondary business plateauing, which we – the platform we believe will be able to increase the transaction volume and the revenue as well. So, by the end of this year, the secondary business is going to provide even more percentage to our top line.

[Ming Xu:]

Thank you. So, my second question is still focus on the resale business, so I think one of the priority for you for SouFun this year is to improve the market share and the sales volume in the Tier 1 cities, because we know that last year you actually made very significant progress and claimed the #1 ranking from Tier 2 cities, but in Tier 1 cities you still lagged far behind your key competitors. So, this year you mentioned earlier that you want to open three shops in Beijing and Shanghai and try to make some progresses. I think – maybe let’s take an example – let’s take Shanghai as an example. I think based on some data we track that you actually made very significant progress in Shanghai. Like in Q1, I think you still maybe stay at maybe third or fourth rank in Shanghai, among other agents, but in April and May, although the total market volume dropped a lot, but I think your volume is very resilient and keeps growing so that I think now you actually you are #1 in Shanghai, which I think is pretty remarkable. So, could you maybe – I think this maybe example – a very good example for to look at your future growth. So, can you maybe share with us some more color on your operations in Shanghai, for example, how many agents you have? What’s the efficiency that you can achieve now? And what’s your hiring plan for the next three quarters? And also maybe – so basically I want to understand the kind of unit economics on the city level better? Thanks.

[Vincent Mo:]

I wish that – I wish you are right that we are the #1 in Shanghai. I am sorry, I cannot claim that. We are actually either #2 or #3 in Shanghai now. And either #3 in Beijing and we are #1 in Guangzhou and we are really not in the top 3 in Shenzhen, so that’s the four we call it Tier 1 cities, but as you mentioned that we did make progress in Beijing, Shanghai, Guangzhou, those three major cities in the past months. So, the market share is increasing in those cities. But still, as you probably know, we still have some distance from the #1 players and so that’s the reason that we are going to try from different angles, try to catch up and get closer to our competitor, to the leading competitors, as possible. And with respect to your detailed information about Shanghai, we have now close to 10,000 agents in Shanghai. So, that’s the current situation. We added actually – we added about 5,000 plus people after the Chinese New Year, after February. So, that’s I think probably one of the reasons that our volume and units are still very resilient there and actually is going up. So, that’s the number.

[Ming Xu:]

Sorry. And also what’s the efficiency in terms of numbers of transaction per agent per month now in maybe in Shanghai or in other Tier 1 cities?

[Vincent Mo:]

As we discussed earlier, if we divide the – our agents into two groups roughly those who have been with the company for over 6 months and those who have been with the company less than 6 months, for those agents, senior agents, with a longer history with the company, there are efficiencies much higher than those junior agents in the company. Shanghai, the senior agents average around 0.6, that’s about senior ones, 0.6 units a month. For those newcomers, it’s less than 0.3. So that’s roughly the number.

[Ming Xu:]

Thanks, Vincent. So final question, could you update on us on the progress in the Wanli deal, because we know that a month ago – about a month ago, the government had some restriction on the backdoor listing or privatization of ADR companies. So maybe you can share some color on the progress of your own deal?

[Vincent Mo:]

Yes. We have lots of new things going on in the past when you are including the [indiscernible] transaction. As far as I know and as far as I am allowed to talk, so we are quite on track in moving this transaction going on and we are trying to meet all the requirements of the regulators and both board and the shareholders as well. So, we have launched all of those progresses both domestically in China and also through in the U.S. So, everything is on track.

[Ming Xu:]

So you still expect that to be down in second half?

[Vincent Mo:]

I have – I don’t know the timing because as you know, the regulator – regulation in China is the – we have to pass through and get approved from the regulators. So, we are trying as requested to move the things forward.

[Ming Xu:]

Okay, thank you. It’s very helpful. Thank you, Vincent.

[Vincent Mo:]

Thank you.

[Operator:]

Thank you. There are no further questions at this time. I would like to hand the conference over to the speakers for today. Please go ahead, sir.

[Kent Huang:]

Hey, operator. It seems like we have two more.

[Operator:]

Yes, sir. I will just show up. So, we have the next question from the line of Monica Chen from Credit Suisse. Please ask your questions.

[Monica Chen:]

Hi, management, Vincent and Kent. Thank you for taking my questions. I am asking question on behalf of Aaron Joe [ph]. So, I have my first question, which is actually a follow-up on the commission rates in your secondary home business. Can you share with us a little bit more color on how the increase in the commission rate to impact on our revenue and probably our margin, because actually we observe a slightly more than expected cost of services in this quarter that lead to an active gross profit margin? So, I am wondering does this have something to do with the potential commission rates? That’s my first question. And I have the follow-up.

[Vincent Mo:]

Right. The commission rate, we have decided to raise 1.5% after we raised – after current level is 1%. And then we are going to give us obviously more room or occlusion going forward for the – for example, right now, under 1.5% commission, under current productivity, I think the whole business will be able to breakeven already, because right now, for example, in the first quarter, our commission, the effective commission rate actually close to 0.7% and that’s why that’s actually a major reason why we see the cost is kind of higher than we originally expected. So, let’s assume we will be able to raise to 1.5% and just under current productivity, which is actually around 0.5 units per month on average. We will already be able to breakeven for these ventures. So, another scenario is if we back to normal, because of seasonality and other reasons, let’s assume that’s now close to 0.6 or 0.7 units per agent per month, then the mathematic is roughly 1.1% or 1.2% commission is going to be through breakeven enough for us to breakeven.

[Monica Chen:]

Okay, thank you. Also I have a second question because we noticed actually your revenue from marketing services and the listing services has slowed down in recent quarters. So, I just wondered does management have any plan new strategy to re-grow the advertising and listing business and what will be our outlook for advertising and listing for the rest of 2016 and for the year of 2017? Thank you.

[Kent Huang:]

Right, right. That’s right. Actually, there are two questions, marketing services and listing services. For listing services, actually for this quarter, our number is kind of stable like if you compare to the last quarter or compare to a year ago. And another thing I would like to say is the total paying subscribers has actually increased 23% compared to a year ago and then another thing very important is the ARPUs. As you know, last year, there is some promotion ongoing. And then in this quarter, our ARPU is back to $100 range, which is very important to us, because with the increased ARPU plus the increased subscribers, we are very confident in this sector to growth in the coming quarters. Actually marketing sectors, yes, we do see some note down in these sectors because of many reasons. As you know, we are offering multiple services to the developers right now, especially we are offering direct sales services through the developer, which is pay-for-performance and then also of course in the meantime, we will be providing marketing services, which is still very important business for us and then our clients with actually our client numbers increased 15% compared to last year. So, we think with all this together, we would be able to provide more comprehensive services to the developers to serve their needs. And then going forward, we think our marketing business is going to be very important to us and we are still very confident with the developer.

[Vincent Mo:]

Other than Kent just said, we are also promoting some new products, advertising products to our developer clients, like those online broadcasting, those what is that, right, the mobile broadcasting elsewhere, so that our developers they can have more choice to promote their products. It is still my belief that although there are e-commerce coming up to provide transaction services to our developers, it’s their belief that appropriate advertising with appropriate advertising our developers, they can sell much faster probably at a better price, so we are going to work on that.

[Monica Chen:]

Okay, thank you Vincent and Kent. That’s all my questions. Thank you. Very helpful.

[Operator:]

Thank you. The next question comes from the line of Alvin Jiang from Deutsche Bank. Please ask your questions.

[Alvin Jiang:]

Hi, Vincent, Kent and Joyce. Thank you for taking my questions. I have two quick questions. The first one is still on the commission change, can you give us some more color on the commission change. Do you rollout in all cities over China or you start from like batch by batch? And also, when you raise this commission rate, do you have any like extra discount due to these nominal commission rates or shall we expect this to be crude commission rates? And the second question is on the headcount, can you give us more color of this year’s headcount plan and the allocation of the new headcount in the second half? Thank you.

[Vincent Mo:]

I will take the first one, and Kent, you take the second one. Yes, as we talked about during this conference call that even if we – even we are increasing our rate we are still charging the lowest rates among the major players in the market. Our rate is 1.5% after the adjustment and the market rate is from 2% to 3%. So that’s the practice. We are implementing this flat fee across all of our major cities, those 28 cities. We believe the rate is still low and that it’s much better to manage and also it’s one voice to all the property buyers and the sellers among these 28 cities. So with that in mind, we are not implementing a discount to the rates in the cities, because it’s already low, so we are just implementing for the rate.

[Kent Huang:]

Okay. I will take the second question about the headcount. Currently, by the end of Q1 this year, we have roughly 50,000 total headcount and then across the resale, the secondary sectors account for roughly 40,000 headcount and out of that, 90% is sales agents and then roughly 10% is the back office supporting personnel. There is one thing it’s actually very important is the optimization the company is working on in the recent quarters, although we keep ending up the sales agent in the past quarters, but however, we are streamed from personnel – non-performing personnel from the other sectors. So, we will be able to keep our total headcount kind of stable at 50,000, although we actually we add roughly 13,000 to 14,000 in the secondary sector alone.

[Vincent Mo:]

Yes. Growth and market share are still our priority going forward. But we also want to see efficiency and we also want to optimize our operations based on our experiences in the past. With those in mind, if we needed we are going to continue add people going forward. We don’t have up limit there. And as long as we can move on with more market share and with higher efficiency data we are going to move up.

[Alvin Jiang:]

Great. Thank you. This is very helpful.

[Operator:]

Thank you. There are no further questions at this time. I would like to hand the conference over to the speakers now. Please go ahead, sir.

[Kent Huang:]

Yes, thank you so much for joining us for this earnings call. We are looking forward to updating you in the next conference call. Thank you.

[Operator:]

Thank you. Thank you, ladies and gentlemen. That does conclude the conference for today. Thank you all for participating. You may all disconnect your lines now.