Q3 2021 AiHuiShou International Co Ltd Earnings Call
Good morning, and good evening, ladies and gentlemen, thank.
Thank you for standing by and welcome to the a T renew Inc. Third quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode.
We will be hosting a question and answer session. After management's prepared remarks.
Please note today's event is being recorded.
I will now turn the call over to the first speaker today, Mr. Jeremy G director of corporate development and Investor Relations of the company. Please go ahead Sir.
Thank you Hello, everyone and welcome to Asia, Renews third quarter 2021 earnings conference call.
With us today are Mr. Terry Chen, our founder Chairman and CEO and Mr. <unk> Chen our CFO.
Our third quarter 2021 financial results were released earlier today and now available on our company's IR website at IR dot to issue a new car.
For today's agenda Cary will share his thoughts on our third quarter performance and some updates on our strategy for our CTO level service intuition model.
<unk>, who will discuss the financial highlights for the third quarter of 2021 both.
Both Carrie and racks will join the Q&A session.
Before we continue I refer you to our safe Harbor statements in the earnings press release, which applies to this call.
Any forward looking statements that the company makes on this call today are based on assumptions as of today and the country does notes and to take any obligation to update to update. These statements. Also this call includes discussion of certain non-GAAP financial measures. Please refer to our earnings release.
Which contains a reconsolidation of dunker titers to GAAP measures.
Finally, please note that our lives otherwise stated all figures mentioned during this conference call I am chimney, B and all comparisons are.
Although our year over year basis.
I will turn the call to carry for a business and strategy update.
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Hello, everyone and thank you for joining us on our third quarter 2021 earnings conference call. We are delighted to share our recent business developments for this quarter as well as our strategic reasoning.
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Before we start let me share some thoughts regarding China's policy. According to the actual sample carbon dioxide, peaking before 'twenty, Turkey released by the State Council in late October the Central Authority issued a framework to address initiatives, including the promotion business model combining in trash and recycling.
It clearly establishes synergy between the development of the circular economy and carbon reduction initiatives.
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What do you believe this backdrop is favorable to the development of Iranian.
Our business model is characterized by sustainability and the ability. If you renew is the leading player in definitely went up pretty well in consumer electronics transactions and services our business evolution derived from industrial Internet model and is in accordance with the nation's calls for the development of the circular economy.
We have strong visibility on our long term development, while steadily evolve with the industry.
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Now I'd like to walk you through some of our business highlights for the quarter, so as you're well within zone.
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We achieved notable organic growth in the third quarter with a year over year increase of 56, 6% in total and 48% in total net revenues respectively. As a percentage of total net revenues net service revenues increased to 15, 2% from 13.
One 4% in the same period last year.
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In terms of one P business product revenues from our father, increasing by 45% year over year. This was driven by the steady expansion of our age has store network and our volume off pretty long device tradings with strategic partners, such as JD Dot com.
We set a target of adding 200 stores per year at the beginning of 'twenty or 'twenty, one and we have realized the target ahead of schedule as of September 30, the number of offline stores increased to 956, we are very attentive to the quality of our newly opened stores as we can.
Spanned rapidly while also ensuring that we maintain healthy operations in our existing stores.
In terms of our trading club division with J D. We had another strong quarterly revenue growth at 79, 2% year over year, we are great at the port of a one stop trading on J D. In the third quarter to provide users with a more convenient shopping experience, especially and in fact as preparation for the launch of <unk>.
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Notably it appears that the plane on consumer electronics transaction industry was basically immune to the macro challenges in the third quarter. So you elaborate consumer acceptance to watch trading services and shopping for pre owned devices increased during a slowdown in economic conditions and consumer spending.
This demonstrates the circular economy is ability to thrive even during economic slowdown.
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The second highlight is the development of our relevant revenue mix trending in a favorable direction service revenues increased by 67, 3% year over year and accounted for 15, 2% of total net revenues for the third quarter. The increase in service revenues was primarily due to the expansion.
And generally all of our marketplaces and the steadily rising service take rate.
This demonstrates that Accuray news.
Value added services and the consignment model I are widely acknowledged by merchants and consumers.
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The third highlight is that we are on track to reach profitability in the near future in the third quarter 2021, non-GAAP operating loss and non-GAAP net loss half looking ahead, we anticipate non-GAAP operating profit and are confident in securing non-GAAP profitability for the fiscal year of 'twenty to 'twenty two.
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Outside of these highlights I'd like to take a moment to introduce some details about our strict strategy update on C. D level service integration.
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With us on that.
We take allocate we really allocate.
We're enforcing each city and integrate our core capabilities all season would be it would be in b to C offerings locally so establish a cohesive operating unit in each city will then review the financial performance of each city and provide incentive to the local teams.
We then measure city level market penetration rate to evaluate and optimize growth strategies locally.
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First of all China secondhand mobile phone market has relatively strong geographic characteristics on both the supply and the demand side and the market penetration rate within each city is a very important indicator.
We calculate the penetration rate as the number of recycling water divide it by news July itself picks Shanghai as an example, our penetration rate increased to 12, 5% in 'twenty or 'twenty, one from my 0.3% in 2020. However, the bigger picture in China is that the penetration rates in 70% of cities.
Below 5% this numbers indicate that the feeling is still quite high and it's meaningful to exploit the growth potential of local markets.
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City level service integration is an extension of your range for all of our Omnichannel platform strategy through the consolidation of our CTO b to B and B to C offerings. Following the acquisition of I'll call them marketplace. In 2019, we are able to offer integrated platform capabilities in hundreds of cities for a more refined.
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Third is the natural Paas and the evolution for our company to explore the city level service integration strategy. Following the successful establishment of our supply chain capabilities service scenarios and customer service capabilities over the past decade.
As of November although total number all Asia stores nationwide exceeded 1000.
September 30th we have seven regional operation centers.
<unk> 70 level operation stations or 200000 merchants registered as buyers worked out or some P. J T market site and the sales team of nearly 500 people to promote T. J D marketplace. These form a solid foundation for the integration of all our offline capabilities within each local market, we aim to expand consumer.
Rage and to provide premium consumer services through Amtrust stores, and Paas selections doors, while attracting and incremental supply of goods locally.
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We believe this strategy is meaningful in for FX Theta.
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First city level service integration kind of effectively drive business growth, we will be able to evaluate growth performance and market potential at a micro level.
Just a quick dive deep into each of the business offerings.
Vivek cities, leading to more effective operational optimization.
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Secondly, we can't optimize team structure and personnel improved resource allocation and enhance the synergy between all three business offerings further improving operational efficiency and our cost control dysosmia ease of Schindler.
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Certainly, there's new management matrix enhances our manage management and structure.
We are able to review of the financials of each city unit to ensure a fair incentive mechanism.
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Last but not least the strategy sharpening our competitive edge.
The point on the consumer electronics industry, its not purely online it requires both online traffic and offline operational capabilities.
Over the years, we have invested in offline consumer wage and accumulated profile and technological capabilities.
What we find punishment within HDD unit will fortify our mode.
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In the past few months, we have established initial proof of concept for our city level service integration strategy. Since July we tested the model with our two pilot cities in long haul Hubei province, and who draw after zone policies in terms of G. M. The growth rate in the pilot cities during October.
And if he can't be outgrew that often national level. We are delighted to see that you speak of the of our city level service integration and are optimistic about its future results.
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Three years ago, we proposed a strategic goal of establishing a thousand stores across 100 cities as of today. Our total number of offline stores has already exceeded 1000, having achieved this milestone we are setting a new strategic goal of achieving 100 billion Jeremy per year in <unk>.
'twenty two we will rule out city that will service integration in 50 cities in the next three to four years, we will gradually expand its implementation to over 100 cities, we seek to secure scalable generally growth to exceed 100 billion RMB by 2025.
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Furthermore, on November 15th we made our announcement regarding changing the name of the company from actually show international to renew which stanfill, all things were new and updated the domain of our corporate and I, our websites to a T. M. Dot com following our initiative to unify our brand at home and abroad.
We continue to actively engage with both domestic and international stakeholders and timely and transparent manner.
With great that we also continue to devote ourselves to long term value creation for the environment and for society, along with the development of circular economy in China.
I mentioned also CFO Rex to get all your charts housing work with that I will hand, the call over to our CFO racks to go over the financials.
Six correct. We're excited to report another strong quarter of growth momentum continued with beyond expectation scale and revenue growth.
For a sequential improvement in revenue mix and the margins.
We'd like to share with you some financial highlights before we go into a more detailed look at the numbers.
Note that all amounts are in RMB and all comparisons are year over year basis, unless otherwise stated we.
We maintained strong financial growth with total net revenue increasing by 48% exceeding the high end of our previous guidance range service revenue as a percentage of total revenue improved to 15, 2% from 14, 2% over the previous quarter.
<unk> grew by over 56%, while our non-GAAP operating loss further narrowed to $228 5 million gross margin fall. When people are still spending has remained stable at 53% compared with purpose quarter going forward, we will focus on consumer electronic categories, including smartphones.
When she business.
[noise] reinforces the price side of high quality problem to products and continue to improve customer services.
Additionally, we will expand our retail footprint print.
Rationally and improve the operating efficiency of all of our stores for platform. So as you see average take rate continues to improve.
Crossing to four 6% of your sort of quota you know tissue, our b to B platform enhanced service capabilities to small and midsized merchants and the law, there's a threshold of conducting trading services.
So much has seen low tier city markets and upgraded our services to improve user experiences.
We also optimized our b to C consignment to service capabilities with Jim before concern intermodal <unk>.
<unk> to 20% of the total Piper Jeffrey.
And then got fulfilled gross margin remained stable at 12, 8%. This number has been around 13% to four six quarters. We aim to further cut down fulfillment expenses leveraging automation to an origin advanced consistent now.
Now, let's take a look at the detailed financials.
For the quarter total revenues increased by 48% to <unk> 962 million total <unk> increased by 36, 6% to two 8 billion.
Net product revenues increased by 40.
5% to what's on the 600.
$65 million, while Jimmy fall when she business increased by 58, 3% to one 9 billion.
The increase was mainly driven by the record gross you know trading business collaboration with JD as well as the opening of new stores nationwide.
The iPhone <unk> why not came to market in late September and it just shows no significant tumor growth driving force in Q3 revenues, but in Q4, you install ultra deep in your squirrel by 79, 2% in Q3 and additional cost of sales gross off wouldn't be devices on par putt also contributed.
Net service revenues increased by six six to seven 3% to $297 3 million, which N V for marketplaces, including parts of your pipeline you've pushed up by two six upon the 1% to $6 4 billion. This was mainly driven by strong demand from consumers and the merchants are light.
And the continued expansion of our platform network effects as our.
Platform service capabilities improved so overall service take rate of our marketplaces grow to four 6% and the service revenues account for larger proportion at 15, 2% competitive switching point of 4% to use third quarter, Kentucky.
Our revenue mix continues to developing a more beneficial deduction.
Mexico to meet to our operating expenses.
Operating costs and expenses increased by 49, 5% to Tucson, but 123 million to provide greater clarity on the trends.
Operating basically expenses, we will show the trends of our non-GAAP expenses, which better reflects the views of management.
As a non-GAAP measure, which excludes share based compensation expenses and amortization of intangible assets, resulting from business acquisitions total operating expenses increased by 49, 1% to Tucson, and a 1.5 million before I go into details I'd like to mention that we did not have any share based compensation.
Expenses, he was sort of caught up in 'twenty.
Merchandise costs increased by 46, 8% to what's on the 400.
43 million. This was in line with the close of our when she brought US goodness, we didn't have any adjustment to merchandise costs fulfillment expenses increased to five 6% to 110% to 273 4 million. This increase was primarily due to first an increasingly pushing their cost.
And action was the company's growing business, especially as the upfront investments. He was expansion of store number and a sustainable operation station network and second the increase in logistics expenses and the operation Center related expenses, which were in line with increasing sales of prolonged consumer.
In electronics.
Excluding share based compensation expenses.
Fulfillment expenses.
Expenses increased by 57, 7% to $266 6 million.
Sitting in the marketing expenses increased by <unk>, 8% to 299 million. This increase was mainly due to first an increasing sales promotion of coupon expenses in connection with our two CPA niche development and second an increase in personnel cost in connection with the Companys growing.
And third an increase in sales commissions in connection with terrific acquisition and the sourcing of prelim the devices.
Non-GAAP, selling and marketing expenses, excluding share based compensation expenses and amortization.
Of intangible assets, resulting from fitness acquisitions increased two 5%.
Since year over year to $205 6 million.
And then kept sitting in the marketing expenses accounted for 10 point of 5% of total revenue decreased by approximately 1% sequentially.
General and administrative expenses decreased by 2% to 42 million. So there was no significant change of comparator was purpose quota.
Excluding the share based compensation expenses.
G&A expenses decreased by seven 8% to $26 2 million.
The decrease in G&A expenses was refractory to an improved cost efficiency.
Middle and back offices.
The origin of content expenses increased by 71 point or 1% to $65 2 million. The increase was primarily due to the increase in personnel costs in connection with the.
Expansion of the Companys research and development activities.
Technology and content expenses, excluding SBC and amortization of intangible assets.
Chris the parks.
62, 3% to $59 3 million.
As a result, I wouldn't have kept our operating loss was narrowed to eight quantify immediate quarter from 'twenty. One non-GAAP operating margin was magnitude, 1.5% competitive was negative <unk> five.
5% in the same period last year.
As of September 30th Cantone, with cash and cash equivalents short term investments and funds receivable from third party payments service provide us increase of two two so on the 500 sort of intermediate.
<unk> was solid at $114 million as of December 31st putting plenty of notice September we procured on their devices in preparation for the shopping festivals during China's national team and the Golden week and single state and topped up so balances to sort of pocket payment service provider in preparation for peak.
It offered a cycle during the Golden week.
Graduating the covenants these funds.
As of now we believe sufficient to the quantity on hand will be able to fuel our business development and our strategic partnerships with which generate lasting shareholder value.
Now turning to ultra first we expense growth target for the fiscal year 'twenty one to remain unchanged.
For the fourth quarter of opinion as to what the company currently expects total revenues to be between RMB, two 3 billion and RMB 235 billion. This forecast reflects the companys current and preliminary views on the market and operational.
However, some might be mouth uncertainties for example, the occurrence of the COVID-19, there was a.
Variants in multiple regions in China, which adversely impacts our off price thoughts and opinions.
This concludes our prepared remarks for today operator, we are now ready to take questions.
Thank you we will now begin the question and answer session.
So we're asking a question you May press Star then one on your Touchtone phone.
If you are using a speaker phone we ask you. Please pick up your handset before pressing the keys.
So we're drawing a question. Please press Star then two.
When asking a question. Please state your question in Chinese first and then read.
To your question in English.
Everyone on the call.
Today's first question comes from George you with.
Please go ahead.
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The first question is related to the <unk> gross margin.
We've seen it when people with margin declined slightly year over year. So we would like to know is it because of the competitive pressure or any other.
In particular reading.
My second question was related to our strong growth momentum, we like the company had.
And also the guidance.
Try to understand what's the volume and the L. D. Behind it is like you know strong growth T. N V momentum and I wish I understand like L. D and you know if I remember off devices or transaction volume, which one should be the main driver of the future growth and how should we understand that trend. Thanks.
Okay Gotcha.
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So thank you for a question firstly I would like to address your question regarding the gross profit of our <unk> business supply constraints have become hot wings off the pre owned industry, we ensured accessibility to resources of premium pre owned devices by investing in top off coupons.
I've coupons increased the cost of procuring.
Procuring probably owned devices such investments are reflected in the increase in merchandize Cogs, which directly impacts the gross profit.
In addition, there were adjustments to the recycling channels to ensure a healthy growth the company lowered the propulsion outflow SP, but high gross margin Corporation from other channels. That's impacting the gross margin, we think that the gross margin for one P business will remain stable with modest improvement.
We tend to increase the recycling price for the betterment of users at the right at the recycling and along with higher sales prices in the future the improvement of the company's overall gross margin will majorly come from the growing contribution of service revenue, while lumpy business contribute continues.
Contribution.
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So to address your question regarding the competitive landscape regarding competition overall issuer and you had strong growth momentum. This is thing in January growth off wanted business and <unk> business as well there is a steadily expanding our overall take rate of marketplaces as well as the narrowing that gap.
We love our business Operation has limited impact from pure players. This is backed by results from our data provider. We firmly believe that the pre owned industry is driven by the supply chain capabilities. We believe that our all round development of supply chain capabilities. The fact is as competitive as.
Through the third party data providers, we notice decreases in traffic off European players and the second half of 2021 as reduced marketing investments in the third quarter.
We are confident that T. J T marketplace is an attractive platform to meet our small business owners and that the negative impact from two B P. J P marketplace from its pure players remain limited, even though the pure player platform take not negligible service fees.
I'd like to mention that the city level service integration that we are implementing will give better play to our offline capabilities and structure management advantages and will further widen the gap with our peer players.
<unk> with ICR, Glenn on the Sunday to join so to go from the front line.
Some type I was unclear condo sandy do them at the time being until sometime soon.
All subjects.
Sue.
We also have a phone call.
To Yamana C. English hover about out year would be impossible to answer.
How about what about the C U E.
Email to go to go you'll pull in Norway.
Yeah, Tayo eager and cheap item or should we are the only truly what your poll card.
So on the all unions some people to support that assortment the means.
Tune in Tucson.
Tucson, Blah blah blah blah.
Bustle junior in kitchen suite went down some of the year.
When you.
Do something Jim we consolidate Egypt could you shop, you will cause I'm not you'll see it.
Google much Antinion Katrina, both Keytruda Tobata to go downhill.
Also the tenure Palm Beach.
But it sounds about in cheap no matter who's in that window. So do you see the numbers.
Absolutely.
Amino acid blocks. So you can probably go sometimes how much did you.
To address or pressroom regarding the number of consumer products transact peaked in the third quarter, so the non or actually decrease.
Excuse me the number actually increased by 23, 4% year over year as you can tell from the earnings release to clarify there were differences in country division from pipe, a fun being namely Pedro about though I've found bidding is an innovative project to attract traffic to pipeline marketplace with lower ASP.
P beatings from one RMB.
This is is no longer an operation with key investments out to the operations.
Although in the third quarter, there were 150000 transactions on pipe I found bidding compared with 850000 in the same period of 2020. The business has minimal impact on G. M. D. S. E. S. P was about 50 RMB the pro forma increase in three of these transactions were.
Sorry, 38, 7% increase year over year.
Okay.
Yes.
Thank you. Our next question from Lucy Li of Goldman Sachs. Please go ahead.
Thank you Jack Henry that Jeremy.
<unk> nano yeah Jack.
What do you make that into a Nike side and you watch them as you pointed out.
Okay can we I think I'm doing the minimal amount of GTT.
She's actually that she should do we can get him well. She did you know the one kind of unusual because you can't languish amount of Peru.
Okay that clarifies that cause your particular swimming around a woman that we couldnt get them case, I think that going forward.
No holding why don't you go one T shirt from it will be a militia might you know we haven't been easy.
When I.
Congrats management for the specific topics and I. Thank you for sharing I have two questions here, Firstly I would like to learn more about the city level Pinsent operation model in terms of.
Information stack and how do we measure success, what's the kind of investment we're looking at and what it does mean that we're shifting our.
Focus to offline.
And the second question, it's on the business update with a question.
Okay.
I'm sorry.
How much is each L E T PA.
And does that mean.
Putting Brazil, you as a woman to machine to one term fundamentals in China also woman power machine you would've saw them in the publishing dominantly was sharing short answer Sheila Chinchillas changing E.
Chancellor with anger and changing the changing the equal change in that.
John that you can pizza.
The woman that she was telling me how your assortment free time someone other than me.
She said something a little different high CRP started with all of them. The Cougars homes opened 17 sugar when we shouldn't shy below nipple cheap so I'm in Shandong.
Got it good talking to you.
Each of our tools from wishing the peaceful now so I'm sort of free content to the government.
So Gordon you'll you can draw that I was out of India.
Goodbye.
It will be the change of the social how food.
So it's really done well, we don't do as she goes from T E.
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The machine.
Kinder you indulge functionally do you open depot in the PGM cleaning Amit so it shows up on the woman shows on Shin young who he or she is on the pipeline.
So yeah, we should shut up how about in Asia, but didn't sense, social, especially you're also not just you spoke on that too much into it.
If you then go to your sympathies and got up to go food.
The wife, I mean, you haven't looked at.
And result summed up to go to go to Joe's auto good country to go to the total so she had good book to go tell me Brooklyn Union children.
Okay, so to clarify that implementing our city level service integration does not mean that we are transferring our strategic emphasis pure purely to the offline model are actually you are over the years, we have accumulated ample resources for earn out figured out well service integration.
Cleaning 1000, H F stores on the supply side 500, b to B cells and service specialists for merchant.
Assessing there are 67 figure level operation stations for localized quality control and operational support on distributions, we integrate online sales channels, including pipeline marketplace and like streaming sales channels and the offline display and sales channel through pipelines the vectren stores.
These resources were re arranged locally not only improve service agility for local merchants, but also reduce cross regional shipping and processing, which ultimately.
Optimize the inventory turnover.
Either one to answer but as you know Judy this is luciano on liquidity towards single family at nighttime.
So in terms of the implementation there are four priorities.
Quami functional D. There's plenty of ulcers WOMAC retracing, some should you need a photo too. It's also like when you're doing in Gpus into the one you didn't you couldn't clearly couldn't she could equal the illusion that level or maybe it's a plato soothing shindo Cogs.
G B when he took the G. So I'm going to need to do to Tony <unk>.
First on management city managers will be in charge off local operation and management, we are developing a new performance review and incentive Mccann is them to keep C. D managers engaged while revealing the local defense progress of each offerings and EBIT in detail.
Yeah, Dan says Shuja jeans, chuckled shoot well Mr. Tong Sidoti Peter Peter just until you know we feel good that the team Joe do you kind of called out with me, it's Antoine Jean at some sort of what would you kind of usual kind of Australia, yeah, we shouldn't judge that until you put a decent uncle podium so but.
New social something that took affordably.
So some in Jimmy Choo could even consider to go green tea team tons are we done with the Ginger motion the horse right.
We will be also.
And we will be also used <unk> T cells, but the thesis almost Susan Susan <unk> mobile.
Secondly on operational metrics.
City level operational metrics will be with you would add some localized extension to the operational review of our three main business lines as such we are able to evaluate all of our offerings aggregates empowerment of local play on the transaction market and local retail stores. Our long term goal is to exploit local market penetration.
Some of them for us so when you go to sleep junk Arizona.
The teams ago don't totally endorsing that because I mean to go jump how about your insurance settlement in the German to go did you put out some time at the cohorts ago total Daiichi. She she couldn't put it closer to a phone to sheet, which I'll walk through the door.
Before you.
Third thirdly on local collaboration we aim to attract more qualified partners and obtained premiums sources of supply locally sort of opening up the franchise of H F score.
Level operation stations had high selection of stores and the supplier qualification to consignment sellers on pipe high market place.
So you will not lose out.
So you've got hopefully will show some where you saw demand about Congo.
Congo.
When did E G change shop, so G Shinji, new children didn't affluent shouldn't trends aren't in the so called Commvault Chin to the show human dosing Chi going to Jim So don't yet in school, putting D food.
Pipe. However, she is all that matters.
How about you mentioned, the jumbo and get you see it youll see and you're also putting the tools they need so comorbidities on the social Amit so.
So she had a soil pool, you're not quite sure children.
Georgia and Colorado.
Visit synergy we aim to realize all local scenarios recycling through leading online orders to offline Asia sport and empower existing retailers within each city, we provide quality inspection and grading services through city level operation stations.
By leveraging <unk> highest consignment model and franchise retail stores, we prioritized the distribution of our premium food to consumers.
In addition, P J T marketplace backstop and guarantees go faster distribution through such synergize Mccann of them. We further increase the efficiency of transaction center over.
Well, let him go towards the soldiers to be Internet social motion the Sogou, which are now almost entirely on letters of support from you. So hopefully the lung phone call took them up a little.
So now I'm going to also cheetos reopened to go to the gym, we don't want to switch them to call you trimmed without Congress will do.
Tusa level couldn't Buddhism buckets hoon Chi casado the tofu.
So can you give us some Washington is a good summary.
Oh, the audience or material part that was cool Toyota tools transportation, Germany gets angry.
One was on one way or the other central Sydney and you watch this emotion chocolate assortment than you go into the toilet seat.
That trend will a combo that's consistent between two people you know without so she's she said.
So we printed they've been really verify the city level service integration model through testing from July to October the sequential increases in January of one fine who show our two pilot cities outperformed the national level, we plan to roll out this strategy in more cities in the fourthquarter, such as Chongqing and Fuzhou.
We plan to gradually setup that's runs in 50 cities in 'twenty or 'twenty two.
Three to four years to see the level of service integration will be our fourth growth strategy, we plan to roll it out in hundreds of cities in China, So as to drive our business growth to the next level.
Okay tissue.
Yeah.
But you're quite a soda wasn't teed up all women.
Oh, and then pass over to take part of.
You'll use quite soda to go.
So does that go to big Covid I'm, just getting thrown up you don't go to.
It's opened up we sold that you would have to go to the little co is that Houston is in la.
That's a quite a E vehicles out of your wallet digital.
But you know women took a social upon the show to go Tinder, so conductor and ship it.
So bush also you're quite so your hurdle in wastewater Bush also so tinder John mentioned the margin on that.
So some of them are you going to say it didn't.
So I wanted to tell him that yugo leasehold or social yeah.
So as there have been some personnel changes at quite short recently, Oh, we have gradually roll out the exclusive cooperation one.
While implementation is that the exclusive cooperation portal with long shot quite quite sharp in July.
And we are also actively enrolling.
Promoting the recycling business.
Currently I'm quite sure through live streaming distributions from consumers there could be approximately 20 million RMB in in terms of G&A per month.
Okay.
Thank you.
Thank you. Our next question today comes from Sam Reed of China Renaissance. Please go ahead.
Thank you Glen and telehealth.
Well I think its EBITDA 70 enable jaguar.
Thank you Linda.
Oh, no I don't know, but one piece of it to Joe but anytime that you go through.
Some people just I was hoping you'll see.
Some will be south, Florida, So I wanted to dig in to that somebody can you talk to that.
Rousselot to both of you.
Some dialogue with all of the Peru, So loyal ruble Appeals OMD due to these anti the woman sunbelt it'd be good if a.
A young fulfillment cost, yes, it sounds on the Peninsula woman you conductivity to IV, so the month to.
Hum.
<unk> seen tightened as you've got the whole thing Google.
We like to do.
So usually within Cogs in some of them did.
So we believe that's all the time.
So you're probably going to come up with.
Yeah.
That's my first question is what are.
The main reasons behind the increase in the sales and marketing cost in the third quarter.
The increase in spending on new sales channels, how is new without channel performing Hooper.
And also in terms of the fulfillment costs also increased during this quarter and we noticed that you would have open more offline stores and also city level distribution centers can you discuss the performance of these newly opened facilities. So far what's your opening pocket for the coming quarters. Thank you. Thank you.
Okay. Thanks, Sir.
Selling and marketing expenses, mainly included a personal experiences squabble between sales team channel fee and commission fees paid to J D.
As a promotion of vaccines piece for each different spice and yes you.
Correct, so year over year gross after the study ended marketing expense was mainly due to the expansion of our.
Perpetual seat business.
<unk> is a consignment of fitness and a new channel sales.
Our new channel sales and cause I'm. This is Dennis.
<unk> contributed a higher take rate since it can come at a higher <unk> expenses compared to the pop up in your space.
As you can see the sequential.
And the marketing.
This decrease compared with Q2 tend to do it which was due to the reasons I think we begin to take more control over the distribution of the coupons and reduce certain marketing promotional activities as we leverage our multiple marketing approaches could even make up operating profit across the rift.
<unk> pro forma socs for the business once we can meet our internal target of.
Operating margin rate, we will invest more certain expenses and resources.
Two two.
Two to expand our business and there's a script.
For the fourth.
Pushing quick question related to the fulfillment expenses.
The increase was primarily due to the expansion of new self operated stores and instituted a operating stations. Several 56 newly opened so far perdue stuffs and 11, new city level stations. So the quota which were not fully utilized the parts of the end of Q3, so soft tissue no Costa totaled eight 2 million a heartbeat.
So labor costs also increased due to more stores into operation centers opened in this quarter.
This is expected to decreasing the foreign caught us with new stores and are pushing stations become a true and if we look at are you you're off the <unk>.
<unk> and <unk>.
Operating centers, so you eat.
Yeah.
It is stable for us.
Install level, we also aim to further Qatar fulfillment expenses.
By leveraging automation technology, and advanced our systems use of coming quarters.
Okay.
Okay. Thank you.
Ladies and gentlemen, this concludes our question and answer session.
The conference back over to management for closing remarks.
Thank you. Thank you again for joining the call a replay of today's call will be available on our website. If you have any additional questions. Please feel free to contact us or request through the pillbox.
Our I T G Richard Dot com.
Look forward to speaking with you next earnings call have a nice day.
Thank you.
Thank you. This concludes today's conference call. Thank.
Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Okay.