Q3 2020 ZTO Express (Cayman) Inc Earnings Call
Good day and welcome to the Z.T.O. Express third quarter financial results Conference call.
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I would now like to turn the conference over to Sophie Lee. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining us today, the Companys results in the Investor Relations presentation on were released earlier today.
On the company's eye on that I R.W.P.O. dotcom.
On the call today from DTR, Mr. Mason life, Chairman and Chief Executive Officer.
Weakening yen Chief Financial Officer.
Well I will give a brief overview of the Companys business operations and highlights followed by Dave who will go through the financials and guidance. They will both be available to answer your questions. During the <unk> session that flow.
I remind you that this call may contain forward looking statements made on Derby Safe Harbor provisions of the private Securities Litigation Reform Act of Mighty Mighty five.
Such statements are based on management's current expectations and current market on operating income.
And when they two events that involve known or unknown risks uncertainties and other factors.
Of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results performance or achievements to differ materially from those no forward looking statement.
Further information regarding this and other risks on.
Certainties and factors is included in the Companys filings with the U.S. Securities and Exchange Commission.
The company does not undertake any update.
Update any forward looking statements as a result of net.
You information future events or otherwise, except as required under GAAP.
It is now my pleasure to introduce Mr. me some line Mr. Lai waste julies prepared remarks, and their entire team Fortunately for stage I suppose.
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[laughter] Your line don't allow me to translate from.
Oh, hi, everyone and thank you for joining us today.
Quarter on 2029 from some degree industry growth, how full volume by 37.8% to achieve 22.3 billion pounds, so year over year.
CTO achieved 4.6, it's really impossible volume gets the water and extended our bodies on market share by 1.9 percentage points to achieve 20 point.
51.2% growth rate.
On the quarterly record setting be so what else is out.
Well look salaries you scale it.
Bench, we continue to thrive and a 10 day, how level of service quality and customer satisfaction.
Fierce competition from the state in a casino lens flight on year level net profit.
However, one point 21 billion adjusted net profit was 8.2% year over year decline was relatively less abrasive.
Any sort of quarter of 2000 net we.
We remained focused on your strategy.
Salaries volume growth why not operating lease and they spend.
And on our market.
First of all we continue to increasing back on Monday infrastructure in development.
Well, let's see capital expenditure first a three quarters, which.
Really in which the past the total amount for the whole year up to 19.
We acquired larger tracks on land and the pure to scarce resources science about though.
Mark.
Having quite simple imports now on to <unk>.
We forgot.
True that's what station capacity.
Particularly the Andy who you are we shoot.
By the end of the fourth quarter high capacity talk made up more than 80% of 5250 sales on the vehicles in operation.
And the way she will enter into Twitter increased it to one to 1.3.
We have also further.
You too.
Gotcha.
Yeah, So what our total wore express delivery cost for possible decreased by 6.7% yeah.
Why you make transportation on the 14th.
Then or not.
Well construction of new end up we don't own sporting hobbies, and the facilities. We have raised the level of automation and digitization to enable day countries. Our flotation that our same always latency weighted at least that's what teaching from.
Moving further improvement of the capacity and efficiency on.
Well.
Secondly on.
On your two de layer and wait forever.
On their network.
At the end of the quarter.
Over 5000 why on Earth.
Direct network.
Nearly 30000.
I bring approximately 99%.
Well as 92% on villages across Uh Huh.
Well coordinated lies in the local policies are supportive of harbor net on there.
Sales.
And profit that's true.
We've made what do you hope on first from cash reserve to east there.
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Well, we have to to ease the pain direct fiber network on there.
He's day, they are good and they need feared and body weight.
Oh, hi, and eliminate underperforming.
Oh, there to optimize overall network quality.
Sorry, that's [laughter] afterwards, well on.
Net charge offs pickup and they'll be from me and <unk>.
Okay.
Any sport and growth on a couple of volume.
Service quality and help reshape they shouldn't be across our entire network.
Certainly we have started to establish scale you never line last mile point.
Neil and the tiny all collaborate on that where people eat salad weighted development of lock muscle.
And we actively managed to lock box sales as well as virus express well from a week's worth it.
At the end of the quarter telephone number on fiber line multiple.
Good day 5000.
And approximately 46% don't laugh mouth that lever, we utilize the masters alternative to home delivery.
We have laid a critical foundation for managing on smallpox.
Profitability altered our shirts average day.
I do have 100 million and more in the future.
September 29, 2000, net that 20 year old successfully completed secondary listing in Hong Kong.
We took the opportunity to reflect on the past and look forward to the future.
From a leap believe that express celebrate industry volume contribution to society has just gone.
And the meaningful payback to property marine industry have not yet arrived.
The South Dakota, <unk>, Oh, you hang on.
Okay change it's 2057.
In which 20 represents the year on 2020.
On the healthy recovery on China, Inc. I mean, it's driving the seller weighted growth so China property from industry.
And 67, and the humble beginning number Oh, hi, so on the first day of our business.
They are from speaker.
Sure Mark the new email Barber journey ahead, we're it's easier ways to enhance its income ABSSSI attach waste the bar scene, however, fast at the person.
And to innovate for the future.
On this past the thing those day shopping gala ever possible body was close to 100 on 30 million.
The cumulative number of orders from on November 1st to the 11 exceeded 800 on 20 million and that's relative possible border exceeded 760 million.
We have been witnessing continue organization you from rest marketing practices and the free easy format.
Okay, so to the ever sold fragmenting ecommerce menu.
Express Threed marine industry has [laughter] salaries himself consolidation and Oh liquidation.
Relying on the maximizing go and they efficiency.
Asked anybody can serve almost everyone.
Shortening the distance between production and consumption so end users.
With increasing due on although he resources and the ability to gain access any weight and that youd like more [laughter].
Price is likely to be here, well be able to develop comprehensive logistic service capabilities and become increasingly.
Vantage.
No that's tend to our CFO me, yes, let's take us through our financial.
Thank you chairman and thank you so see hello to everyone on the call.
As I go through on financials. Please note that unless specifically being spent on numbers quoted are in RMB related to third quarter of 2020 and percentage changes before the year over year comparisons for the quarter beat.
Detailed analysis about financial performance unit economics, and cash flow are posted on our website and I'll go through some of the key highlights here.
Driven by steady economic recovery, China Express the degree industry maintained its strong growth momentum from previous quarter.
On your group parcel volume by 51.2% to 4.6 billion in the third quarter.
On market share further expense it by 1.9 percentage points to 20.8%.
Total revenue increased by 26.1% to 6.6 billion.
Yes, Pete core to core express the debris business declined by 8.4% or 30 cents, which was relatively moderate compared with our industry peers.
The 30 cents price line included 20 cents for incentives or subsidies to support our network partners to grow market share, while maintaining confidence and keep the network stable.
Three cents decline came from increased use of lower price singles day to digital wave bills. That's.
That's five cents decline was associated with par so we drop.
Average weight or partial declined 7% to 1.0 for cash flow.
Total cost of revenue increased by 43% to 5.2 billion.
Well core express delivery business unit cost of revenue.
Decreased by 6.7% or seven cents.
Your net transportation costs declined by 9.2% or five cents to 53 cents, primarily due increased use of self owned high capacity trailer trucks.
Units, so sorting costs declined 8.5% or three cents to 29 cents as a result from increased level of automation and improved economies of scale.
Gross profit decreased by 12.9% to 1.4 billion in gross profit margin decreased 9.4 points to 20.
1% as a combined there was a result of.
Volume increased unit price decline any proved cost productivity as previously described.
Its DNA increased by 28.5% to 374 million, mainly due to increased headcount and average salaries and a higher depreciation and amortization expenses.
Driven by increased Capex investment.
S.G. any cost as a percentage of revenue remained low at 5.6%, where our corporate cost structure remained stable.
Income from operations, excluding SBC decreased by 17.2% and associated Martin Hi was 9.2 percentage point, which is narrower than the gross margin.
Decline because of positive S.G. any leverage and increased other operating income, namely the T. Super deduction, Inc.
Government subsidies and tax rebate.
Operating cash flow was 1.5 billion for the third quarter increased 4.4% from 1.4 billion last year.
Capex increased by 29.1% to 2.2 billion well this quarter as we expanded our investment in infrastructure and also facility construction and upgrade.
Looking forward a year, we are likely to exceed.
Our six to 8 billion total year Capex plan to reach 10 billion.
We are able to secure larger tracks of land.
As this quarter and those are also in the pipeline right, it's such estimate.
The negative income tax of 27.8 million resulted from a corporate income tax refund of 200.7 million that was received in this quarter well wholly on subsidiary John Hi, Joan Tong Ji network, which was recognized.
As a key software enterprise, hence qualified for a preferential tax rate of 10% for tax year 2019.
Now turning to business outlook.
Considering the current market condition, and our prioritized go to achieve accelerated market you're going on.
While still managed to maintain our target level of earnings.
The company maintains its current annual guidance.
Parcel volume is expected to be in the range of 16.2 billion to 17 billion, representing a 33.7 to 40.3 percentage increase year over year.
And adjusted net income is expected to be in the range of 4.8 billion to 5.2 billion, representing a 1.7% to 9.3% decrease year over year.
These estimates represent management's current view of the market condition.
And our preliminary.
Oh, so subject to change.
This concludes our prepared remarks on.
Operator, please open the line.
Thank you.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
On the first question comes from Ronald Kailong of Goldman Sachs. Please go ahead.
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Yeah, we sure what's really on the kids, who don't not bullish on Friday. So thank you Nigel you handle on Sofia two questions. Just first just want to ask about the competitive landscape with these new entrants from from.
Jane on T., just how do we see the outlook, particularly for 2021, given this year's kind of already nearly concluding with 2021, what how do we see ask piece and how profit per pound so trends might make me look heading into the net.
Next year and then my second question would be on community growth purchased the sarsfield seemingly some new models up that that would be that's growing for groceries enforce on what the the ecommerce. Good. So given that we have 65000 last mile posts do we see this as an opportunity for us for our franchisees in being the.
So pickup location and well with this kind of group purchase model have any impact on what we see as express delivery growth outlook for the next few years. Thank you.
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Thank you. Thank you for your question, let me on translate for Jim on My first question relating to the competitive environment.
We have commented that it is an overall trend that is inevitable and have seen no world, including developed countries such as you asked about Japan on.
Before the market shares are stabilized.
Process of competition is not avoidable Oh, we have observed in China. The express delivery industry has yeah. It has been in the past in in still continuing to consolidate and at the same time. The polarization is also taking place.
With the bigger ones getting bigger and the smaller ones are slow in growing their scale and volume.
Oh, we think that when the market on.
Our no longer equally shared as of recent on what we've seen in China market.
They will be.
And one or two players.
Standing there market share to 30% or even 40% or greater.
And when that comes on the price will stabilize competition will no longer be.
Driven by price because we still firmly believe express businesses depend largely on his capacity and capability.
As the murky sheer becomes more clearly stated or clearly differentiated from.
Price will reach its turning point.
Chinese market has great potential we have witnessed 10 billion annual growth in the past and also expected greater expansion in this year.
As markets stabilize this when the growth is still there profit will naturally return. So it is a natural progress there.
We are experiencing.
The second question regarding group.
Community growth purchase.
First of all the nature of such new form of Commerce is in essence going from offline to online. It is additive to express delivery industry on it it's very positive.
And then also.
Did or express still to be industries.
Has the vast network and resources.
Throughout the country.
It could be.
Fully utilized and it is indeed as we observed.
What's taking place in the community growth purchase is there is a collaboration or the energy because of the utilization of some of the idle resources by our network partners because as you indicated there last mile presence.
So these two forces join together it not only helped.
On a community group purchase activity to reduce their cost and at the same time allowed on network partners.
To utilize their resources to participate into skiing as well in no profit.
We think this is indeed as you said a collaborative relationship.
Thanks.
And on.
The next question comes from Bailing Zone of Citi. Please go ahead.
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Hi, John.
So my first question is regarding transportation costs, although this isn't quite in line with my or expectation compared to we've got a the competitors transportation costs are doing the simple there it looks a little bit weird. So I want to bid on boy on the transportation cost compared to the second quarter, we know the Tal.
Uh-huh you may recall work on what's the impact puzzle all compared to the second quarter in comes off the top recovery.
And on what's the average along the way to the second quarter. This go to quarter on the fleet and what is the average weight on the possible and the average mouth age on the positive.
My second question is a follow up question on the compensation costs and if we do the simple calculation. We can see our two major competitors already made a few cents net profit and the number one and number five players on all I'd love, making and as like on mentioned the previous night, well they'll do the inflection points.
So on that a whole lot on it will be on what could be done on a single trigger event on it it into the older players love, making where we have choose the path not shared targets from she.
<unk>.
Thank you buying for your question I'll address your first point and then Jim and I will address the second.
Regarding the transportation cost I think the second quarter and the third quarter comparative from because the E. T. C fee benefit that was there for the second quarter and third quarter is no longer there and then also there is a biax so on a fee collection for the trucks.
That are running on the free way on the highway Dod is indeed on a unit.
On call raises increased for the whole industry now looking at our numbers I should comment that our level of cost is normal based on our normal volume and.
For the increased number of vehicles that we have on on the road or there is a increased depreciation on that could be one of the differences.
Your friend says compare to our peers and then secondly, what is indeed included in the transportation cost each competitive from companies are not necessarily exactly the same so.
So we believe first of all as I stated our level of cost is new on wall, a again the level of volume that we reported.
And then two there are potentially cost structure differences that caused the difference.
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I see your face how piece on it.
But see it probably takes hamatsa this year.
Regarding then when the turning point on the price would calm and chairman commented that it is still on driven by the basic basic view of supply and demand relationship.
For express delivery industry, the key particularly for.
The the model that we are looking at the net were partner model you can look at those into two aspects. One is the transit capability. The other is a good thing.
Good day every capability so capacity quality of services is all.
The key are all the key factors determining where to price would go on when you do have huge capacity and the volume is also increasing from a demand side then the if everyone in order to fill the capacity.
The price will decline, but yet there is going to be a point, where your capacity advantage rules over everyone else's and particularly so when you bought it if you refer to the comment that we made earlier in our prepared remarks.
Network partners capabilities is a critical element because they have to be matched up in sync with the transit platform.
We see T or have on on one hand consistently investing you know on infrastructure and at the same time now as the volume continued to increase we saw the need by our net were partners and also some of the partners.
Proactively express their desire and need to expand their on capabilities for pickup and delivery on because it does also require some level of sorting. So we are able to use our financial resources to help to support them.
Our network healthy level of on network, and the net where partners confidence level on a relatively more stable and sound. So if I may supplement on to what chairman has made if you were truly looking for eight a. signals or signifying.
Events, perhaps we should watch closely and look closely to how our network partners are doing are they investing are they expanding with the backdrop of volume increases. If they are also investing they're expanding and they're synchronized capability on our there too so.
Toward the entire brand than cost scale advantage will further be at.
Yeah harvested and quality of services will be maintained at that brand will continue to thrive.
And the price will no longer be.
Yeah, the price will no longer be the tool, but the capacity will be the determining factor of bringing in more on volume and hence the price will be determined by the taker and the price where we do.
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You'll get the GAAP when adding back on interest expense yet how it goes on to the opinion turnarounds on bad debt Ginger walking on hoping it's actually true I do wish would you.
On the impact of day, each you see from the second quarter in the two third quarter differences is about five cents and some of the other details because we do not.
We do have these analysis, though we do not disclose.
This growth this so for for competitive purposes.
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Yeah from a follow up question on the tax rate.
And Oh I.
So instead of course shirt on Joan Tong from God have terrible text on attacks in Brussels, but that's on my own calculation I think the textbooks on it's not a complete yet so how long it will continue on debt for the next to the hold Oh. This is where I'm on for next year on years, its going on just feeling jaunt, a 10 person to it.
Yeah. Thank you for your question I think I need to clarify the key.
So from your enterprise and a new high technology, a in a price our true rent that this thing is from a city patient those.
Those are the two.
One is for three years, the high new on technology.
Technology and enterprise for three years and then the one that we received for this quarter is related to only one year Oh certification for joint on GE for the year 2019. It is the entire amount for the differential.
Oh, 5%.
Well, we have free.
So also obtained another three years of certification for being the high New enterprise and so we have just started a new cycle for the three year, but the certification.
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The next question comes from Harlan Dal of Kiechl Securities. Please go ahead.
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Oh, Oh, Oh, Oh field action JV, Baltimore, Washington, I don't like Oh, My God, Oh, One day, all go well she's on quite a while on the ones you true quite well.
On the comp.
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The sales in the.
Going on.
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Oh, no GAAP, Oh, well I'll jump on warming, Illinois.
Well, we got bought up on won't go watch it today.
On the number one on Chicago Oh, he joined after that so we're going to talk show on.
Walking down that will range all what is your I phone Oh on line on scorching bulk capacity Oh.
This year, our absolutely on choice 'cause glop, so I would like to know what is optimal economic on capacity.
As yet on how much will increase.
Sure.
My second question is about Oh quite strategy on I would feel the GE has caused conditional on it.
And when we haven't bought on why don't you well on.
Hello autos.
While our market share growth so how about on your strategy on.
Well, we'll be more aggressive on price and please be.
On market share.
Okay. That's my question.
Thank you Ms. Wong from your question.
Regarding the capacity Oh first of all the statistics on this year, we're looking at on optimum level from a production the seven.
Yeah that next year, we are expecting to be somewhere on 80 to 85 million or the investment first of all easy yes. Indeed for all express core businesses, we are investing in facilities automation and also upgrade from our existing sorting.
Centers for their automation and also the scale on and also the Capex is related to our investment for developing a comprehensive service logistic Park for example on some of the land that we are purchasing.
On designing now are not only for express delivery itself, we are looking to build.
On a facility that is catering for multi purpose logistic needs. For example, we do have the LTL businesses and we we also are building resources for the warehouse the in warehouse processing and also on delivery we are.
Oh strategically, placing the resources needed or assets needed for a cold chain operation.
The the also.
All these.
Comprehensive logistic capabilities require larger tracks of land and its advantage is for them to be housed under same roof, hence better cost efficiency as well as timeliness we.
We are able to provide differentiated time definite products.
At a lower cost.
And the second question relating to the profit.
No.
The competition is.
There, yes, we are further.
The accelerated we have further accelerated this year, but we do know that as the Mark This year are becoming more and more concentrated and also polarization continued to I take place.
Our capacity will be driving for even more market share again.
The.
The profit pressure is indeed experienced by everybody and we think a prolonged on drawn out battle or join on price War is not.
Beneficial to anyone, especially when the price competition at certain market is not sustainable because the price sensitivity by the merchants.
So we do like to accelerate and that's also what we've done in this year, we accelerated our maintained a level of profitability.
On the bully speaking relative to the peers and into next year. We will also on one hand watch closely Oh, the market development, including continued growth the level of growth Oh, So total econ economy, and a a package Inc.
I mean volume and we will also look at what the competitors aren't doing on some of them on have reached the level of a minimum of 10.
Potential that they could bear we are aware of that so with that in mind, we do intend to continue to accelerate to.
Finish this so it's a process or or advanced this process as much as we individually Ken.
Why don't you won't go Oh, what song was true Jack on holding true no growth. So I wont be more teaching institutions that opinion, Oh, Gee, that's who can be true.
Why that should go shop.
That's true genius <unk>, she channel what moving in a way that Dol by channel by channel balance.
Oh excuse me thank you.
The next question comes from Lin Shen of JP Morgan. Please go ahead.
[laughter] Latonya from Sophie <unk>, what it once you spoke on your two of course, it's harder to from the warm on Cogs to grow a debt.
On T. Boone could be on cheap to want be told upon that woman talk us through your was your free not dumb portion, though should help from us. So do your shot show them a took a suit you wait to some of that these onto the true earlier tone took a ball pits.
In simple John.
From a warm welcome hawk on them to do it conducts you do it just comes out there on a dual Chicago to go out twice on T. Dodgers, what are the key to publish on phone Dubai.
Number on each from two flow talk to growth minions deposits from appears on to this is helpful or come to the thumb called lead on to kind of watch [laughter] up.
On the financial but my question is regarding the Companys strategy. So if we look on a sequential trend.
So caught on the plus did show some recovery on the same time coming from market share declined slightly from last quarter. So it doesnt mean that sort of started you switched from buckets your focus to profitability focused and they're going to need next year I sort of competition or increase what will be your company's strategy from.
How to balance between a buck is true and the profitability. Thank you.
Our strategy has not changed.
And the third quarter results are consistent with on strategy.
Indeed, if you look at just by that quarter. The synergy of market share is lower than the second quarter, but you need to look at the seasonal differences. If you look at the trend from last year.
By quarter market share is fluctuated.
If you look at the total year to date on market share has consistently expanding he is here we have expanded more than last on it. This quarter, we have expanded more than last quarter on 1.9 points first is 1.6 points by quarter I remember correctly.
And then so again on strategy has not changed we are.
In historically, maintaining the balance between the Threed the volume and the quality of services and also profit ability.
This year, we are focusing more on prioritizing the volume gain on the market share in a week we accelerated.
The growth in order to further widen the gap of our lead.
And going forward into next year it'll be the same if not I'm more focused on volume growth because again as the previous question that we answered we do like to accelerate and take opportunity to bring.
Moving forward the turning point.
Oh, that's usually handle [noise].
The next question comes from Perasa Jain of HSBC Hong Kong. Please go ahead.
Thank you operator, and thank you might have been from this opportunity I have two questions. First you have explained pretty comprehensively about the competitive landscape, but I just want to understand that how much pain khanjar.
Ken other toned up here in dealer before the price discipline emerges so when I look at your EBIT Pope awesome.
At this quarter versus the same quarter last deal it seems like if the same intensity or the.
Same pressure.
Pressure continues.
Ladies soon majority on you appears well start to bleed at the cash flow level.
Do you think that that could be an inflection point.
Or you think that given given their balance sheet or perhaps the support.
They can continue to compete on net price, even after losing money on.
On my second question is if youre accounts receivable have seen a jump in third quarter, let's see on historical average I understand Barclays sort of flex on of higher revenue.
But is there anything more to that in terms of extending longer credit.
To to customers, who are facing the pain do we see a risk off any write off on that thank you.
Thank you for your question.
Yeah.
First question then.
The competitive environment, yes, Indeed, if you look at the overall.
Overall performance I think everybody else is already announced their numbers. So its public and could do to comparison, yeah for US we said our decline is more moderate <unk>.
Not only on that to the S.P. line, but also on the profit line and now you do need to look at the operating profit because there are some one off items that we do enjoy it for this quarter. So if you look at the gross margin minus the Oh Gee is g. any that is Abe.
Better indication of how we are performing now simply from the S.P. standpoint, you can see that we have not necessarily having to dish out more of the subsidies then everybody else right. We were 18.4% which is at the low end of the range I think the highest range could go on to a in that.
30% or if it's more so it is a good indication that we do not need to give out more subsidies to own net where partners on because everybody else are really suffering and indeed, if you look at.
The trends look at what's going to err on base from a cash perspective, yes, there is really.
On the towards the end if we may at the lower limit is is almost there.
For the industry can bear it right because we all hear for profit.
And particularly so.
Given the network partner model versus a vertical model, where you could make sure all the last mile or the end to pick up and delivery are protected by or by the headquarter. It's not the same it is a weird you maintain your level of profitability at the same time Matt.
Surmise, what you could do a and minimize what you don't need to do right to support the net were free to continue to grow. So it is all on a relative term on all the others. The engine to our taking on a lot of burden. So yes I agree with you. This is also one other aspect to look at.
Hi, it's similar to what I commented on earlier, if the network partner.
The incoming volume on our investing for the flow here that means they are I'm more confident and then they'll remain stable on a as opposed to worrying about what's going to take place and perhaps to leave the business or a defect to other brand for example, but that is what we will.
So closely watch in the marketplace.
And then on a GAAP seasonable.
Oh I'm sorry go ahead, yes.
No on the just on that question before we moved it Conversely, when is it fair to understand there for that debt.
It's not necessarily Po de or 40% market share, but price discipline may emerge before you are the top line mid reach that level given the amount of pain that effect on overall is witnessing a is it a fair comment.
Oh sure I think this is my view on on there.
There are various aspects or perspective that we are looking at if I may just from all together the the one she is the debt market share gain that gap between us and the second or third.
Sure, that's well and it's true.
Our capacity.
Equity driven cost advantage is gonna be state it in the numbers.
On numbers I mean, and then huh.
Thirdly, no cat, Oh, net where current right partners if they are stable.
Stable if the network has not gone but did.
Moving some of the calls if you see that.
Aliana or on non operating on sees operation then the problem is huge it's been because.
A net where partner model right you have fun on limited level control. So the 30 to 40 per se, it's what we believe.
Well, we're certainly most certainly by.
Slide a stable environment now, where we are targeting is by year or 2022 to reach 25%.
Thank God is already a very.
Reasonable assumption to draw on is at that time.
Hi, it's starting to.
Become stable and.
From that point on.
Well become a gradually increasing given normal.
Yeah, Hi type of Oh improve.
So [laughter] 30, or 40 from well to pay as the and most likely day and the.
Scenario.
We are.
Oh and the Chinese market is you one or you cannot door.
Hi early debt.
We'll have maybe two or three and so in that sense, we think 30 or 40% up by one player is reasonable.
Okay. Thank you.
This concludes our question and answer session on it then.
Well the second question accounts receivable.
This quarter, we have our K eight accounts pay businesses increase on near 100% on okay.
Okay customers do enjoy a term or.
Hi, there be so about 70% or so of the accounts receivable you relate to our <unk> customers.
And then on that so we do.
A level of our net where partners some of them do you see Oh a term a those are limited selected network partners on.
By meeting certain requirements. So those are still based on the volume reasonable level of.
Oh.
Okay. Thank you so much.
Thank you.
This concludes our question and answer session.
On France has now also concluded. Thank you for attending today's presentation and you may now disconnect.