Q3 2019 Earnings Call
That's our in listen only mode. After managements prepared remarks, there will be a question answer session.
Today's conference is being recorded if you'd have any objections you may disconnect at this time.
Destroyed the meeting over to your host pretty beams conference GE at all.
Thank you and welcome to our third quarter, two helping Nike Inc. earnings Conference call. Joining me on the call today are Mr., Richard do Judy Dot Com group's CEO Mr. Li shoot C. O M Treaty retail searches, we well see all studio jurisdiction Sidney Huang CFO John .
Our chief strategy officer for today's agenda, our CFO senior well well discuss highlights for the third quarter 2019.
No despite reach our CEO other management will join the queue. I know you session before we continue I refer you to our Safe Harbor statement <unk> earnings press release, which applies today's call as we will make forward looking statement.
Oh, so called Incruse discussions of certain non-GAAP financial measures. Please refer to our earnings release, which can changed a reconciliation of non-GAAP measures. So the most directly comparable GAAP measures. Finally, please note that unless otherwise stated all figures mentioned during these conference.
Scott.
I would now like to turn to call or two hours sample Phoenix.
Thank you yeah Hello, everyone.
Thank you for joining us today.
We're very pleased to report another strong set of results for the third quarter 2019.
Net revenue growth continued to Reaccelerate became 28.7% the highest growth rate in the past five quarters.
Given by our low tier city penetration strategy.
You put Dakota, the growth rate for electronics and home appliance categories, you know what tier cities.
With more than double that off tier one tier two cities.
And the most although top 25 categories, so higher and accelerated growth rates more tier cities as well.
Overall.
Well with 70% all from new customers you truthfully came from go tier cities.
She was a new bucket.
And the closely.
Both purchase orders and the GMB.
She was cities reached the highest levels in the past six quarters.
Himself Tropic.
Due to innovative marketing activities and a better user engagement through our upgraded mobile interface.
The Judy mobile and May you.
Grew 36% Isa pemba their highest growth rate in the past eight month.
While our mobile deal you.
35% in Q3.
Five to.
Five quarters.
This may surprise, some people well not familiar with China's lower tier city consumers and think they'll meet interested you low price [laughter] already product.
Have seemingly flourish on other possible.
The reality is that consumption upgrade has been quietly occurring in these regions.
Average consumers may have relatively lower absolute income.
Perhaps somewhat similar or even higher disposable income than tier one city residence due to significantly lower housing costs.
That's these consumers learned to shop online.
The gradually discovered the different value propositions unique two different e-commerce platform.
Well, Judy Dotcom, all obsession with custom experience since day one.
Continue to help us over the better half of middle class consumers, but in those tier cities.
It is a universal choose that middle class customers value quality assurance everyday low prices and first class services.
Especially for high value products, such as the three see an home appliances.
All products, where consumers pay particular attention to the quality.
Such as the food baby products home furnishings.
And health care products.
Well that we think all competitors.
Well not only introducing ecommerce too many first time users.
But also providing easy benchmarks.
Yes, two buddy differentiate and to secure the most valuable customer.
This can be validated by our average ticket size over 200 on B.
Lower tier cities.
Very important indicator for the quality and sustainability of our customer base.
Thanks to lower tier city consumers.
The market, leading position in the electronics and home appliance categories.
That's being photos Vincent.
Revenue growth rate accelerating to 22% in effect into supportive.
The fastest in the past five quarters.
Amid everlasting competition and a slowing industry.
Which grew in low single digits into three according to China's National Bureau of statistics.
In other words, we have been taking tremendous market share during the quarter.
Some of you may wonder what happened to all the subsidies that people have been raving about from our competitors.
Oh this time I'll archrival itself Cooper publicly that subsidies cannot bring sustainable business.
This it has learned the hot way from its own coffee experience over to you.
Hundreds of millions of people be happy to spend a 99 cents on ankles.
And they may spend at 99 cents everyday items just for fun.
But let's do is purchases most consumers don't just look at a price alone.
It will evaluate at least two other elements before any large purchase decisions. The first is trust can I trust the sellers on the possible are you selling authentic products.
Well I get what I see on my end up on the waitlist four months before getting that discounted item.
The answer is a mix at the best on the overcrowded marketplace problems.
The second is service.
Do you have professional in school. So this large appliances.
And I'd be tone, it's easy to you fight on like the product.
People may not care about a service when they buy a 99 cents petty item.
Because they can't just throw it away.
But the one day buying large ticket products.
Definitely Kim.
Here comes the hop to.
It takes use of heavy lifting.
Build the supply chain expertise service capabilities and fulfillment infrastructure needed.
Affect the customer experience in those categories.
And in that process to optimize operating efficiency.
I'll solidifying our competitive moat.
The Best example is three years, so when the largest the marketplace possible lifted the largest offline home appliance and electronics retailer in China.
Two Johnny a top stuff.
With massive subsidies throughout the past few years.
But they have failed a lot of miserably as we predicted for years ago [noise].
Now widely reported in the Chinese price.
So any wants to do worrying about subsidies hurting our core categories.
Refresh your memory and think again.
It's driven by the same retail fundamentals that we have reiterated all these years.
There's no shortcuts in this business.
By the same token Oh general merchandise categories enjoyed accelerated growth of 36% in Q3.
Led by FMCG products.
Another extremely difficult adequate for pure marketplace operator.
To reach meaningful scale, we saw without significant subsidies.
Well also pleased to see that net service revenue grew 4% year over year the fastest in the past four quarters.
In a contributed 11.9% of our overall revenues driven by strong momentum from third party logistics and advertising revenues.
External revenue has now contribute a 40% to Judy logistics total revenues a standalone basis.
From less than 20% just two years.
It has grown more than 300% from the same quarter of 2017.
When we decided to expand the sticks into a self can sustain business.
Supported by its consistently top ranked customer satisfaction scores in the industry.
[noise] into sort of quarter, Populus mugging was 14.9% compared to 15.4% in the same quarter last year.
This it affects the reinvestment of the first half onetime gains that I mentioned on our last earnings call.
Yes, we have to reinvest it roughly 40% off the 1.8 billion nonrecurring gains from the first half so the gross margin in Q3 to drive our lower tier cities strategy.
The works very well.
And do you have to them. It it's a much more effective strategy than a massive subsidies by some of pop kids.
I guess elsewhere, he will give us the for the economies of scale in both procurement and operating efficiency.
Which will afford our customers even more pricing benefits.
Setting, an even higher BAW for competitive.
While driving our photo growth and margin expansion next year.
This is the beauty of a one p. business model.
Self reinforcing virtuous cycle.
He has worked extremely well for all the number one party retailers.
Either by country, all by category around the world.
You have to be number one to enjoy this virtuous cycle and you have to have a lower cost structure they everyone else.
I'm not running.
The books.
And to snowboard.
Turning to though.
Another aspect Alt, a snowball effect is operating leverage.
During the third quarter, all of whom expense ratio improved by 91 basis 0.6, 0.5%.
Pad to 7.4% in the same quarter last year.
The improvement was driven by economies of scale SGT logistics expanded its external order volume kidney.
And it seems.
Good food people operating arguing.
And the G D. One key fulfillment expense ratio.
Our marketing on D. and GE an expense ratios also meaningfully.
In the same quota.
Given by highly effective management.
And operating leverage from higher sales.
As a result, non-GAAP operating margin reached a 2.2% in the third quarter setting a new bucket.
Judy retail in particular achieved I look good segment operating margin of 3.3%.
And he was achieved in a quota of have you doing about.
I hope this solid performance Tempe Gamesmanship life.
On a path to our committed.
High single digits long term profit margin for the KDB.
Our free cash also increased significantly year over year during the quarter.
Kill them by lower Capex.
And the proceeds from the phase one closing off that I see logistics costs pump.
You're not free cash flow Paypal.
As I mentioned in recent quarters.
Judy logistics.
Judy Management group.
It was formed to pursue financial returns as he managed business.
We have full can call.
They did capex into a separate line specifying available for sale nature, which has been reported net of related proceeds on itself. This is the second time, when we reported a net cash inflow on by following the first time in Q1 this year.
I hope to see more cash inflows from its in the future.
For the trailing 12 month.
Free cash flow with <unk> <unk> <unk> billion.
50% higher.
And our non-GAAP net income in the same carrots, which was another bright spot in our business.
Now, let's discuss our fourth quarter financial outlook.
We expect net revenues grow between 21 person and 25% on a year over year basis.
Neither of a highly successful singles day promotions.
I'll taking into account to potentially slowing national retail sales based on the MBS report published yesterday.
[noise] on the buy side, how October closer to maintain Brazilian and aware clearly gaining market share.
Finally.
Other than expected earnings in the fourth quarter, well raising the full year non-GAAP net income items to be between 9.8 billion and 10.5 billion on B.
The affecting Q4 seasonality and the continued reinvestment of the first half onetime gains discussed earlier.
After the midpoint of this guidance.
We would grow our 2019 non-GAAP net income.
By over 200% from the 2018 level.
And to grow a case of 43% from the 2017 level.
More importantly, this low bust earnings growth is on top of our ongoing reinvestment in our core business, which positions Judy dotcom to enter through saw them punchy was tremendous growth momentum.
Concludes my prepared remarks.
And I will now turn the call to Richard for a few quick remarks.
[noise] Archie isn't it.
Okay go age and I'm sure.
Yeah.
Jim on the Tanya.
I don't know Virginia.
Remedy.
Not tomorrow.
For your cash flow.
<unk>.
I mean element to that kind of yet.
That Oh sure jotted revenue net income.
Figure touched a lot you forgot.
Well imagine, but Jim late shelving, who do you Oh.
I mean I'm sure many young children.
Well I'm really not showed that level.
Baltimore Trunnion that John no.
I sure that filtered down to a you get them enough.
She don't they have got measured Oh, maybe on the up I am sorry.
Thank you.
Everyone I would like to take this opportunity to give you a brief introduction our strategy plan in 2020 and for this year as you have seen that we have achieved a promising without in terms of rubber revenues and nights margin as well as cash flow and for the next year based.
The based on the achievement of the previous three factors will continue to work, increasing our T.N.V. and consumption.
Customers customers customer space as well as technology services, and we believe that only by improving.
Every aspect of the four elements.
Achieved so quality growth up the whole company.
But that's not bad what's your.
No sorry geopolitical on yet.
You don't yet either again.
Sure.
Schedule, and then payroll and you don't forget that you're switching their passion.
The children, who will not Hydro war, Oh I'm not sure. So she is it wasn't union that you will show sure if others will do not.
Which I used that but other than me.
Well, let you.
Oh, Hey don't do that.
They don't.
Im not sure, though no I already or do not drawn up oney the.
And in a positive.
We have been investing heavily on the investment our technology services and these has been quite larger than the growth of other revenues and we will and for this year you have seen a significant gross revenues of our technology services.
Actually achieved three digits growth this year and into feature for the next to five years continued to.
We'll continue to gain the benefits and the improvement on the revenues our technology services and this will be even bigger than ever overall revenue growth and wouldn't leave the technology services revenue will be the p. asking for that increased our revenues and.
And and letting all huh.
Net income yes.
Yeah, well million JB do you taking that meet our men 400 million Julio I don't.
Oh My Gosh, what do you hold these you tell me that you had you can draw down.
Joe do you.
<unk> government that afternoon, though tree, but I know you can lead.
We have to strongly and no matter eight our JV retail logistics ndtv digits. The technology is our key driving forces only through technology as a long term corn competitiveness.
Im not funeral.
But on a general.
Yes, well done a job.
Well done the journalism and good luck.
Sure.
Technology will always helps us to bring up all the user's experience lower the cost and improve operating efficiency.
Yes.
Yeah sort of 11, agenus cheer affordable <unk> little bit wouldn't that cool.
Leave it for the well not off label.
And the second belief is that we strongly believe the income from tax technology services Wildbrain, even for their benefits and returns and profit for other stakeholders.
So did I go attain meal.
I will tell you it probably a box should be the how about you shared idea.
And overall, we believe will the next year no matter if on the revenues and other prospects, we will achieve even better reads out thank everyone.
We cannot move to the today's session.
[noise] [noise]. Your question answer session off this conference call part enough moments in order to be fair, it's all callers who wish to ask questions. We will take one question at a time from each caller.
If you have more than one question Keith your question shoring.
The question he would get after your first question has to be addressed.
Ladies and gentlemen, I'll begin the question and answer session.
In order to be [noise].
If you wish you asked the question. Please press star, one like a telephone and weak pretty into Vietnam.
If you wish to cancer equal rights fees from the founder Heskey.
Your first question comes from the line up well know cue from Goldman Sachs. Please ask your question.
[noise]. Thank you. Thank you Richard Sheila you ongoing Sydney smelting and Josh.
Every strong results and a further accelerating revenue, particularly for the lumpy retail and profitably.
So would love to hear it just your thoughts, particularly as Richard talked about the 2020 strategy just what do we see as the positive and maybe less closer to tractors just into the 2021 p. growth I could pick up a lot. Your base I can think of Fiveg. So anything that you see other drivers for next year is one key growth.
Similarly for electronics appliances and FMCG.
My sense is mostly.
Whether we are targeting a similar gross.
As last year.
20% and any color on that would be great. Thanks.
Yeah.
Right.
[noise] funds or what was the Sheila.
So, but you know going forth woman, who is critical.
So.
Well.
Well.
Yes.
Yeah.
Oh.
So where would you.
Well the.
So as you said that [noise].
Well, what should you blend that you all women.
Well, maybe woman, though we all though.
With a game in the tumor showing tremendous you put on the true I'll go ahead.
Youre sure why you give us or.
You don't tell her that shows you that yet.
Good interest here.
You bet.
But the senior trillion.
Yeah from it and thought about out Oh done on the Google or kind of pool and I'm jealous of the Jim Jim Crandell.
Trillion utilization level that you would hear from and go down about.
Russia, let's take one of them the pool.
He's got a norm and the slogan for a bit women.
Those are true.
So things are tissues.
From the children.
That's helpful women behavior.
Well do the today show limits.
Well go puncture thing you will go.
As you move down in <unk>.
Got it.
I'm doing three.
She like Oh, Gee DVTEL, let me just to give you two reasons for the philosophy <unk> development, although one business.
TV, if I recall on company based on the the capacity of our.
Supply chain. So many in the past now into future will continue to improve our ability honest and king and working together with other partners to increase our efficiencies and lower the cost on a sequential site to provide unique advantages to this market and secondly, we touch screen means to you.
Just experience and we believe that's a retailer he issue.
With a a month and for this year, we have done a lot of work overall cost the company to ensure they enhancements users' experience and so our NT as monitoring we have seen users' experience has very tangible progress.
Okay, moving all the investments on improving the user experience not only on the new car new customers and also our existing customized we would not have responded to ensure they have unique experienced shopping on our platform. So in all our supply chain and our commitment to other usage spiritedness insured.
He business faster development.
Thank you.
Your next question comes from the line of Edeniq Young from Bank of America. Please ask your question.
Hey, good evening guys. Thanks for taking my questions.
Two quick questions.
Oh, the low what she is Cts competition.
Number one and Oh Gee you said this I'm just wondering how are we seeing similar uses a using different apps, but I'll try and get from politics or are we seeing a more unique user segments that are coming true JD.
And then my second Oh, <unk>, our cooperation fall when scheme and not the old flying we tell partner that can.
Can help us any competition, we didn't let tier cities. Thank you.
Okay.
[noise] within she's or some show Sars.
Dozens of isn't a good food they'll go or no do whatever whatever who is going badly though.
I think our I can't see platform, which is mainly the new channel. We time, it's the lowest your sticky customers has been introduced to online by the end of October eight has seen let them to.
Five online so based on the commentary I would just share a few observation.
Do you saw the Eagle, giving you saw them.
Good.
Children.
You go said on this did even Ebola.
So we shouldn't that I know that 11.
Uh huh.
<unk>.
And for the GDP plus one it's good to access 0.18, the first the tier access point out we chat and another debt well.
We introduced a month ago.
Juicy video.
I don't know, though.
So I think look we're unlikely, but you should know silver different you'd rather have a bigger.
So those premiums hemoglobin go how do you feel nickel I couldn't Duncan.
The characteristics of the users Oh geez.
The majority of them are coming from the lowest you're thinking and their shopping behavior. It's more on social in house and have a very high conversion rates studying stuff there arps value and speaking as it's relatively low compared to the main side [laughter] boroughs.
Yes, I feel you didn't go to conduct so that's how you harsher my daughter.
We've got the water.
So you can PRASM.
You can see those films.
No I'm sure a pool.
Well thought out a.
Cardinal courses to love them, where they would you like about doing.
I will.
Hi towards a usual, though the usual doesn't come through the.
What happened, though Oh Paula.
She was the P.J. women, but.
And how is that the product on TV platforms products is quite different from all remain sites Oh Gee, maybe the products is mainly brand products and you see platform, we are developing products based on China.
Excerpt attention.
Yeah, what overtime that feel about any future, it's going to develop into 1000 into how identified a high quality manufacturers and help them to bring the product on a kinky platform.
Oh, the customers from the low.
Are there will be.
She said she daughter shoulders.
Yeah, you a pool.
Hello.
[laughter].
She probably too.
Our people getting done or something.
And then the.
Yes.
If I remember.
When do you all core once.
Do you do.
Thank you.
So be sure. So yes, yes, yes, you're going though.
And also we realized the killer T users, they're shopping preferences, it's rather complicated they'd like to be more into Iraq, having more entertaining.
Factors in their shopping behaviors is not.
Very simple buying habits. So on by using these feature we will work Oh, that's well as to reach has a lot of the functions.
They're buying a buying behaviors on our platform.
So well who's on this week.
If you look what I wasn't quite young change to the.
No no the.
Cool you'll know either some.
A quick gummed up but do not change lupu, how can we all this uh huh.
She I'm sure you locked in the Gundog, Egypt till visual Uh huh.
[laughter] Toby.
I also want to share with the development and expansion opportunity platform. We've also identified those well that's well that and says who have very pretty pervasive.
<unk> ability to give them more presents our main sites and we believe there's a good cost for lowered your city customers. They also having the willing lays a need to shop on the sites in the long run.
Yes.
Even though you can.
You know who will go away.
Sure Murphy.
Sure woman.
Okay.
Oh, well go about do well be shoes.
She has either so.
Where are you.
Are you sure.
Sure, especially will show the Oklahoma and choose who are the Asia or what do you don't lesion, you'll see young though she lives are totally sure what we've done.
Well.
She will be how are you doing a junior pigeons young audiences I'd be how you a woman usually don't overview.
And I, just want to respond to little bit more Albert relationship ways. A 10 cents. So think its oliver shareholders and a very important partners and some of you have realized realized at the end of October we checked has made certain who to prevent some.
And over a promotional activities to impact the social.
Interaction behaviors, we cat and be true I think for the long term. It's a good sign because for US we always exercise on the user experience and this will help us to guarantee this aspect.
<unk>.
So I just add one more point Eddie's first question.
Well the users.
A lot you city users are buying from different up four different categories, Oh, just stick to one up our survey no before we got a more data from <unk>.
Survey in the lower tier cities suggests that majority of the lower tier city users do use multiple app.
I phone basically use multiple platforms.
And that they will no pick they take the platform based on the categories. They are buying.
So that's the current observation in the tier one tier two cities you may see you know relatively more you [noise].
210 for majority of their purchase is now with our Q. She application basically we are creating a do brand strategy.
Well our main.
Idiap will you knew.
Target deep.
Net income.
Humorous in the lower tier cities well the GE up we'll target the relatively low income.
Yes, a into <unk>.
And so we can also dang gain more insight on below what you said you consumers. So we can better them.
For promoting Archie deeming up.
Our core category of products.
That's probably helpful. Thank gosh Ashish.
Welcome.
Your next question comes from the line Yeah Yep from Citigroup. Please ask your question.
Hi, I'm good evening management, Thanks for taking my questions and congratulations on the strong set I'll be south.
My question is related to you all see too and initiate teeth on the appliance friends.
Some of your befriend shade out on attracting the brands to partner with J.D. and given the C. N model. It's also getting more competitive on east competitors going after the same branch out will that have any you know nacco due impart to JT my jeans and Florida.
Oh on relay the question tease that out for the same uptime friends. If the speech will and S.K., you has a higher or lower margin than the standardized a S.K. you a if you could share also roughly the foundational GMB coming from teach when category are these quadro and how much you.
Oh, I expect that to grow into thank you.
[noise] [noise] Oh, what do you know conductivity, because our police department workable.
When we don't usually this war.
[noise] you like [noise], let me share they do some.
She's meant that we have laid off each went so far.
Because these are people that big well.
[noise] I'll tell you got enough I mentioned on the I'd you can make auction for the $3 or whatever maybe two years as.
Well I teach annuity man or woman the snow social though.
Total revenue she's sort of selling and she was older than can be plans.
Because people are people that have been pretty neutral, though im wondering how should the you know from girl who are teaching the.
Sure No soon shot show there.
And two to three years ago, we have started oversee to unload though and this is starts age in the category. Some IP products and have achieved an amazing success and all these I teach categories actually our platform over 70% of product I see you I'm too JB.
And besides not only impacted our platform, but actually how deep influence to the China I T a industries online and offline.
Or to know that if I'm trying to <unk>, well I mean should.
Oh, no material, but anyway.
Peter how though from what you wish as Doug you got a you hadn't Fuji she led.
And for this year, we have also made all of our strategic proposals to fill the categories, especially on the two categories, a home appliances and FMCG product.
Uh huh.
How do you live in carbon sheet harder.
Some people that <unk> issued by the users losses Gardner because it wasn't true.
We have all deals you're going though we're moving there how many five held the you'll poor, though she will hurt either.
So for the older Dog food you pool judicial Jude you show the ones you will know people, having the I'm sure.
To that and you trenches Chicago you too much on each years old school quite soon though.
People.
In the hematology.
The Gulf, we won't do though Sofia.
And compared with other I liked platforms I believe there are two advantages to produce feature on products onto the platform first of all we're a company driven by technologies have Abbas to date have you returned to it returns of.
Robert users common and the searching data into viewing data and combined all these data and working together with other partners will help us to generate the most to tailor made product in a timely manner.
He will be when you go a music. So do you movie you go because will show, which is we'll know what she should you know a woman's are obviously, Jim I don't easy local kind of ours.
Being tier one thing going she will come together competencies option.
Civil War between done though.
Allow me to Oh, we showed you a few pseudo suitor for that and we'll kind of low singles will it be problem you cheap harder from you know who have received which is a budget of two dogs.
You are you treat people don't could do talk a little bigger injury.
Secondly per se did he said Rachel platform and especially over one p. business. So these schemes, but I'd advantage to work closely together other brand up no together on producing those seats rental and Inbetween. We have other capacities on the supply chain. These give us a better Rick.
Possibility and their capacity to produce the most to.
To produce the love. The fact is pro that together with partners and the partners will become one more willing to work with us to a great success.
Okay.
Well here, though a little harder had much older people feel pool the leader.
You will that impact so sure she won't be there.
John go to juggle that gets into some of whom looking from the faltered due to harvest <unk> Dutch shortly.
Typically.
Joe di to them and start with <unk>.
September show the Cook a human volunteers.
Are you make award quote unquote.
Uhhuh closer daughters, I'm, the Cologuard Earth English only a more sort of holding the who know me should always utopian parcels of directory.
In June .
On the eastern shore, though she cohu dish or whatever.
Yes, so well.
So what you're doing the legal painting.
And we have realized that four different categories. The industries that purpose to produce each one product will be different and some of them our genes. Each one product to avoid price conflicts and by doing see too I'm more tailor make products will help them to reduce the complex a conflict opportunity.
And it's what some other brand partners they want to go deeper into China smartly to the low what you're thinking and we know that they some of our traditional supply chain, because it's not an easy way and for J.D., we would like to be the company on the process with our partners to together reach new use as you know what you're saying.
It's together, that's why based on our powerful supply chains.
It will be very unique opportunity for the partner for our Brentanos to work with us to be more attractive reach all the customers in the low what you're thinking.
Well you people I want to lever humid <unk>.
I will go into Hong yet.
But before I move them move you.
Yeah sleep well at the midpoint of funnel, but if you don't get done. The can you talk don't do you guys will.
See what problem so warm the job postings on these loans are woman.
What do you can be lumpy.
Okay sure. What's your thought I'd you disruption, that's usually try to actually see problem woman completion.
The UK fund our mission on during the quarter looks you made the geological Sarnia woman should habits in the <unk>.
Yes.
And in terms of the lot margin because different brands have different goes and different formats. It's very easy it's very difficult to give you fight measurement, but generally speaking other seat you outside a very competitive and there's obviously, there's always ways. We can also make reasonable interest advantage.
On profit out of that any although you have already seen the success. We made on that I T. I, just kind of Grace and it has occupied a strong market share and that we believe these will be competing other categories as well so well out one more quick she's got off the problem future with equal Hugo.
From him a BBB.
I mean as usual, we'll continue our efforts I see two I'm any create the proportion of our platform in Q.
Two puts putting layman's terms.
So it tends to give you example on Siteone margin, it's it's a triple weighing situation.
So for example, you know fall.
You know because a lot of the brands would try to protect their offline retail network.
Oh the world monitoring.
Sales price, which limits our ability to give more value to consumers. So for select you know only very large brands.
Can do that.
And then at same time do would also resist giving us <unk> you know even lower procurement buys just to prevent us from selling lower price to consumers spot by C. N. We can really breaks through both a one is that because it's a customized.
Product so we wouldn't disrupt the brands all flying retail channels. So we can twice the product loa to give consumers more benefit too is that because of that same reason and we tend to buy a very large volume what do you see too.
I'm products, so we can get even lower.
Human price.
So we can also maintained very healthy margins and while we cant also support the friends to sell a much larger volume through our powerful channel. So it's a couple Wayne situation for us he twin.
[noise]. Thank you.
Your next question comes from the line of Thomas Chong from Jefferies. Please ask your question.
Hi, Good evening management for taking my question.
Oh.
Okay.
Oh.
Yes.
Well I wasn't trends.
And how to think about.
As we go.
Yes.
Uh huh.
Thank you.
So what are they are underway.
Well just wells Kt logistics.
Our meals.
Rather would over time we.
Do you feel it all on the show you some.
And this season.
Gee.
Next year I would you be logistic strategy, we're continuing to focus on the efficiency in crave and it gives us experiencing house.
Well not wage issue, though a real Google shopping event.
Well move on royalties you own toward the.
Yeah. This is on schedule.
And we'll also step up efforts are reaching to larger markets like spending over logistic Mac match work.
So our mcquade.
Turning to buy though.
I.
I'm going to antifungal systems as well.
And you will also work for their.
And our capacity to support our open.
No market.
On our among was only job to good jobs and they would oats useful.
Oh, yes, obviously that would or would you do longer so I just wasn't it.
Oh, you back before the will also step of efforts on our technology deployment and the revenues from technology will continued out next year.
Well most activities with Oh, <unk> Oh, but.
Yes.
The wage she zone, so violent move you.
How are you.
Some way to do them.
And for our external auditors revenues from external or does have a concept for over 40% off the overall revenues of JB Lowe just.
For the next year that race <unk> <unk>. So in terms of the fulfillment of the profit a we will seek for the improvement instability.
The only thing if you do the yes.
Oh, yes movie.
Say, though we more whoever comes off on the new who Julie you apologize.
In the results from this quarter, our fulfillment fee ratio has been jobs, thanks to all the increasing scale.
Bunch of I can't really long shots on goal says on the Blue gene.
Some of it kinda via Julio.
Do you John banks, when can talk to that column won't get a deal do you feel you know they've got your house.
Yes, and things were continued to going down into the low what you're thinking well have some short term impact our cost, but long run with <unk>. If that's a film and see where we are still having assays to improve think.
I guess.
Your next question comes from the land Sean choice from Taiwan. Please ask your question.
Good evening and thank you for taking my question I congratulate patients are a great set of results I've a question on the user growth I'm, obviously, I'm actually going to a larger cities. Yes. You know we started to see a user growth acceleration can management give some color on what you know what kind of user growth momentum will further see.
You know 2021 onwards, or how you know how much opportunity do you see I see compared to yourself and your peers and secondly, I just quickly I'd, Richard I think I'll mention about the technology given that you know industrial Internet is one of the key themes that a lot of the other internet companies talking about can you provide us like how this will change.
Our business strategy for GE or whatever the areas that we're looking into thank you.
[noise].
Oh great.
[noise] on the question about USIS growth.
So there was also due to the world than that of who's on which I know that will <unk>, who believed all pursued by feel good color on the into Chicago former somebody on the civil work would resemble the U haul.
Just on the going up until the project.
[noise] and as I mentioned in lots of causes all we are targeting other efforts for the you both on the both feel our customers acquisition and old customers maintenance on the first half of the here we have done a theory of internal R&D and <unk>.
The.
We went from about $1 million dollar volume you used to Fujian woman, who don't where the volume although the <unk> Oh.
I do them without them you're going to fuel.
And Oh, the existing customers, we are setting up our efforts on their operation to increased they're activity our platform and stuff out there and maintenance on their platform. There are valeo and the satisfaction rates keeps going up.
The second anywhere.
We do not woman Shimon, though you can go through pinball machine, though function and cool pool.
For the other thing the books was either function.
Hosts are you able to truly actually quite a bit I go dark.
Yes.
And also I want to emphasize that we focus a we booked I would be Netherlands growth all users and we do you want the my youth Ruth Lake immense age safe and as sustainable way and that eventually the quality of users will be.
Any sustained through our.
Care for healthy faltering process.
He told us to listen to you. So as you said one future Bill Bill do adult Bordeaux them down quarter Docker shot you diesel. So you are used to build <unk>.
On the maintenance of Albert users, what do we pursued as the indicators approving all asked.
Not only a mere number a improvements to say to see how many uses we have acquired in a short period of time.
<unk>.
Thank you.
So <unk>, which was the traveling so I don't know if he has heard a question, but you know I can quickly a share that you know the technology services.
We have in mind is more about no to read.
Ah that we have accumulated over to use the call. We had retail I for service concept. So so much of the did not the know how and.
It is already being trends.
Two solutions.
And do we have seen a demand.
The industry 40 solutions, so those could be a clearly the starting point there will be more in the pipeline that you know we will.
Discuss more when we have products available [noise].
[noise].
Your next question comes from the line of T. along from Credit Suisse. Please ask your question.
Hi, Thank you management for taking my questions and congratulations again on the results Oh, one quick follow up before.
So I want to know.
I know that we recently launched it I, but I want to know in 2020 I have we earmarks.
Meaningful amount of silicon marketing expense to promote it I would that have any impact on the overarching with their marketing May show a and my main question is actually on the chicken margin I understand that third quarter GP margin was impacted because of we invest much reinvestment. Other friends have so I went off as I want to know after.
Oh the gains for the remainder up that here in 2020 are we going to see a.
I've trend of GP margin from a young your perspective at yes. Thank you.
[noise] future through a month or.
Do you drew a war or Mcgill yields are you them Uh huh.
James You will know who are your Vodafone Ah.
True Chicago.
Well then are you doing yoga should be.
It's actually hopefully will be Herman though.
Stop them from Doe.
I don't know, which I know a woman visual this Oklahoma go home food, though.
Well I mean, if we'll do the tremendous gosh I pointed out usual do bush.
Global usual drug to treat moving from initial group.
[noise] she laugh Genie retail on the question about seems to eat a the GNC platform Ace one of our business model to reach for their market and I've been mentioned that we will seek different ways and different models to grow over market. So the juicy platform will not make oh wait in.
Our marketing fee next year I'd say just is that.
Last question, we are seeking a comprehensive improvement indicators. So we won't just to put you like why indicator grows.
For for that.
And so I'm on the second question I know you know obviously, we haven't done our 2020 budget process.
So I can't give you a definitive answer but in general.
Oilfield equal gross margin should expand.
And for the same kind of ways because of the economies of scale I have sway I mention a pass.
So, but you know I just wanted to also point out.
That the gross margin and expense line.
Sometimes you should look at typically I give you. One example.
And you know sometime.
And the more open to not lower price. If you use the effectively can be the best marketing spending.
In other words, you can't safe marketing costs.
By promotion.
And you know so sometimes lower smog could mean marketing expense as well clearly thats what happened in Q3.
Our marketing expense ratio actually.
Decreased by 2.6%.
More than compensated for growth on shortfall. So you really have to look at these both mark and expense lines are in a holistic fashion.
Thank you.
But I.
I don't feel things from sea lice.
So when we got trillion do you mean true, though too good people who.
The year, which I will briefly would dog ultra government bundle.
Ah typically go too lumpy Ludovico cooks, which of course as usual visual union. The from what you do the several as usual.
Notably criminal huge now, though food aren't really sharp.
And your work are familiar with shoe, though magenta, Georgia.
Yes.
And that she like I just want to add.
Since the end of last year, we have made all of our strategies to grow our business based on quality development Tenda sustainability, Oh, we have seen from all the numbers of the possibly cost. This year. These are older demonstrations of our commitment on a quality growth and in the future.
We were speaks to these principles.
To achieve quality and sustainable growth. Thank you.
Your next question comes from the line up Natalie Wu from <unk>. Please ask your question.
<unk>.
Taking my question then congratulations.
Altrus kinase ship, something which is about the increase <unk> incremental margin.
Thank you all know what she STB Oh gosh in.
Oh, okay.
Great change I wonder if it fits in that as you all shapes your possible. Thank you.
Yeah, well, let me know cooked to answer the first question, though we haven't really internally analyzed.
In a.
Very detailed away.
But you know we have.
The same price in lower tier city in high tier cities.
And cost structure is also similar so.
You know in general the cost structure and the margin profile should be a lot of similar but you know do all differences in for example category consumption pattern that might be different. So we are but we have not analyze this in more detail but.
They should be more or less similar.
[noise] coffee money.
Fulfillment expenses I in terms of older density clearly our tier one city will enjoy most benefit.
But you know we have.
Covered 99% of counties and district.
And we don't necessarily have the same.
No perfume and promise in the vote remote areas.
We do cover 90% roughly 90% of orders.
Within 24 hours.
And they tend to be and tier one tier two cities and a major.
Tom areas.
In the most populated a lot tier cities. So it's it's actually well designed to optimize the cost structure in the lower tier city as well.
So what are they.
There's always some people who use or.
[laughter] pulled up should lead the de should the chauffeured should we younger beautiful to know the fuel all Harvey.
So that we ought to know how might we be here.
Be will Mclachlan Lister docs, it's an appeal to loosen by media you made permanent home and if we can now be Rahul will know children.
The Guardian.
You made Hammond <unk> go much golf.
True.
On a daily appeal to get those who don't even though it's probably going to go through my goal could I know you what you're looking at you would look okay.
That's really how city legit [noise].
This question, it's true that different had a great well have different performance in the lower tier cities for example, what I call and why they smartphone the growth mainly come from the lower tier city.
And for the big sites refrigerator ours.
Lower to the customers like them pretty much very much because they have a larger house.
And Oh, so for the luxury products lower tier city, our customers are buying one more our platform because the traditional channels do not support there or purchase me, but all these examples now to get the conclusion that the larger cities like the big ticket product. So we have to reach.
CNS <unk> analysis, it under with different categories.
Thank you.
What about it take great take rate on <unk>.
Right now, it's a <unk>, 0.6% covering the a payment cost <unk> beat up Sheila the woman doubled over the milk yourself. If you look when it was I would the event.
Hi.
Good good I, just don't view them with our you'll.
The coding, though the function of what are you going abroad.
So I've got to Google to Neil.
And for the take rate in the team she platform in general we will have a very low take rates to encourage merchants on our platform I'm. Most of the product will have a a 0.6 and for some of the product will be about one point.
That's helpful. Thank you.
Thank you.
We are now approaching the end of the conference call I'll now turn the call over to TV Dot Com Jia Dong for closing remarks.
[laughter] once again, thank you for Johnny I said, Hey, they don't hesitate contact us if you have any further questions. Thank you for your continued support and we look forward to talking with you.
They keep participation in todays conference.
[noise] well job.
Thank you.
Yeah well.
Yes go ahead.
Oh.
This concludes the presentation you may now disconnect good day.