Q1 2022 MINISO Group Holding Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to many so group holding limited earnings conference call for the first quarter of fiscal year 2022 without ending September 13, 2021 and at this time all participants are in a listen only mode. After the management prepared remarks, we will come.
Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to Miniso group holding limited earning conference call for the first quarter of fiscal year 2022 that ended September 13, 2021.
Speaker 1: At this time, all participants are in a listen-only mode. After the management prepared remarks, we will conduct a question and answer session. Please note this event is being recorded. Now I'd like to hand the conference over to your host speaker today, Mr. Ethan Zhang, Director of Capital Markets. Please go ahead, Ethan.
A question and answer session. Please note that this England is being recorded now I'd like to hand, the conference over to your host speaker today meet the eastern Zhang Director of capital markets. Please go ahead it Ethan.
Thank you.
Hello, everyone and thank you or joining us on today's call.
Speaker 2: Hello everyone, and thank you all for joining us on today's call.
Speaker 2: The company has announced its quarterly financial results earlier today, and the earliest release is now available on our investor relations website, ir.minshawe.com. Today, you will hear from our
Company has no quarterly financial results earlier today.
Earnings release is now available on our Investor Relations website, IR <unk> com.
Today, you will hear from our chairman and CEO, Mr. Jack well, Yeah, who will start the call with an overview of our business.
Speaker 2: Jack Guof Ye, who will start the call with an overview of our
He will be followed by our CFO, Mr. Steven St. John who will address financial results in more detail before we take your questions.
Speaker 2: He will be followed by our CFO , Mr. Steven Tsai Ing-Chang, who will address our financial results in more detail.
It will continue I like to refer you to the Safe Harbor statement in our earnings release.
Speaker 2: Before we continue, I'd like to refer you to the Safe Harbour Statement in our earnings release, which also applies to this call, as we will be making forward-looking statements
Applies to this call as we will be making forward looking statements.
Speaker 2: Please also note that we will discuss non-IFRS measures today, which we have explained and reconciled to the most comparable measures reported under the International Financial Reporting Standards in the company's
Please also note that we will discuss non <unk> measures today, which.
Which we have explained and reconciled to the most comparable measures reported under the international financial reporting standards in the company's earnings release and filings with the SEC.
Speaker 2: With that, I will now turn the call over to Jack. Please go ahead, sir.
With that I will now turn the call over to Jack. Please go ahead Sir.
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Hello, everyone and welcome to Miss our September quarter, 'twenty to 'twenty, One earnings conference call.
During this quarter, we added 161 stores to our global store network, including 122 minutes on stores in 39 top toy stores.
Revenue reached Renminbi 2.654 billion up 28% year over year exceeding the high end of our guidance range.
Operating profit was renminbi to Hungary hurting them.
5 million operating margin of eight persons was the highest in recent seven quarters.
Adjusted net profit was renminbi, $184 2 million up 80% year over year.
Adjusted net margin of six 9% was the highest in recent six quarters since the pandemic broke out.
And spike in spite of the headwinds from the resurgence is N damage ran storm disaster and weak consumption data in the mass market in this quarter reefer.
We focused on the elements of our business that are within our control drives.
Driving product innovation, enhancing inventory management, improving operating efficiency and executing our omni channel strategy.
These efforts yielded positive results as we kicked off fiscal year 2020.
2022.
Okay.
With a solid performance demonstrating the resilience of our business model and coal capacity strengths on today's call are shell major divestments, we have made in Minnesota brands.
<unk> operation International operations, and top toy and this quarter.
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First let's start with the operations of our flagship brand meaningful in China.
Offline originators and consumer confidence for challenged by the continued spread of the Delta of Orange nationwide since late July.
Regional outbreak was recorded as the most widely spread way since the first quarter of 2020 <unk>.
Despite the shelter in place during this quarter domestic operations of meaningful brands recorded a revenue renminbi 187 billion up 13% year over year, driven by a 16% year over year increase in average store count and a 58 person.
Year over year increase in our E Commerce business.
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Meaningful added 96 stores on a net basis during this quarter and ended September with more than 3000 stores in China, marking a new milestone in our eight year history as we continue to penetrate into more and more Q3 and below cities and unlock this new market.
Approximately 80% of newly added stores in this quarter from there.
By the end of September the geographic rich municipal stores spend across about 330 cities in China and crude including for tier one cities.
Six tier two cities and about 280 cities tier three and below according to governments that they stick.
There are about 2200 cities in China, including 300 Prefecture level cities and the only 178 or 900 countries.
In addition, there are 91 citizen China was populations more than 5 million and 18 serious this population with more than 10 million as China's urbanization continues there will be a large number of new shopping malls suitable for new missiles dose every year.
Although resurgence of the pandemic in China could bring short term pressure long term addressable market in China remains huge.
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Moving to our online business revenue from E Commerce was around RMB 186 million.
Our 58% year over year revenue from ultra business around <unk>.
$19 million up 126 persons during the year in total analog business, including E Commerce, and <unk> contributed 10% of our revenue.
<unk> is committed to depending consumer engagement and driving omnichannel experience firmly believe that the success of our omnichannel strategy with how improve unisource brand awareness user retention and repurchase.
Starting this year, we have enhanced all omnichannel strategy to become a key focus and the growth engine of the company.
Supported by our three southern Pos offline stores nationwide, we have established stable cooperation with ultra fast forwards and.
A significant amount of private traffic.
Let me give you some examples.
Monthly active user <unk> official reach out program surpassed 6 million in late September.
And private traffic of ministers.
Some brands surpassed Kaufman and by the end of September.
In fiscal year 2021.
Total of about 300 million in orders.
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With that figure in mind.
Many of those private traffic as a huge potential for future growth.
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Moving to Minnesota overseas operations overall.
Overall Soc of munis source overseas stores move further along the path of recovery in this quarter.
With overall G. M V recorded to about 70% of the same period in 2019, <unk> distributor markets recovered to about 75 of the same period in 2019, and Jimmy of subsidiary markets recover to about 50% over the same period in 2019.
Revenue generated from international operations with spending the 600 to just $3 million up 78% year over year and 18% quarter over quarter.
Thanks to the improved service recovery in important markets, such as Mexico, and the restocking by distributors for the upcoming holiday season.
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Our total number of overseas stores really 1806 by the end of September with net opening.
And to six new stores during the quarter compared to a net opening of eight stores in same period of 2% to 20 <unk>.
More than 60% of these new stores located in Europe, Middle East and North Africa, well service recovery stabilized during the past several quarters at a level sufficient to support moderate expansion.
157 suspended stores overseas markets by end of September down from 205, a quarter ago.
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Moving to top toy.
During the quarter, we added 39 top toy stores on net basis, bringing total top toy stores to 72 by the end of September including nine Dreamworks doors.
63 collection stores more than 90% of top four stores are open our retail partners with.
With its rapid expansion this border top tourist revenues increased by 64% sequentially and exceeded renminbi 100 million bulbs plus time.
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Top toy has been committed to multi category strategy since day, one because we firmly believe that art tours should not be limited to buying boxes and that there should be many other potential categories to meet diversified needs of generation Z.
One such category as toy breaks.
After years consumer education, the toy breed category has become one of the most popular categories in China's point market.
Meanwhile, certain promise and domestic brands have emerged but the challenge for these young brands is that they are facing a fragmented market in terms of channels data and productivity top toy solution for this problem is the lunch <unk>.
Ever toy breed faster in China.
A major campaign launched by top toy together with several domestic brands.
By leveraging top tourist unmatched omnichannel capabilities. This activity combined online and offline channels to increase exposure of tog rigs with Chinese elements and boost sales.
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Going forward, we plan to allocate more top toy shows while domestic brands to help them introduce Dell flagship products, especially our Dreamworks stores.
We also plan to encourage our consumers to engage more res toy breed products embedded with Chinese adamant. So they can learn more about the value of Chinese toy bricks.
This campaign is imbued attempt for top point to use its omnichannel capabilities to empower traditional toy brands going forward, we'll continue to focus on integrating online and offline channels to improve top towards omnichannel experience and explore multiple potential trendy toy.
<unk> to effectively meet customer demands.
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Recently, we held our first top tour show PBS in Guangzhou and ask Toy company, we're featuring approximately 200 brands and over 1000 artists.
This two and half days fast or fall off toy fence attracted more than.
100000, FY visits and accumulated 200 million clicks and doing and LIBOR respectively.
EPS was one of the largest toy exhibitions in China. During the second half of 'twenty, one in terms of the scale and number of participating brands.
Through this very successful exhibition top toy dependent as customer insights.
<unk> consumer retention and extended.
Influence of the top four brands.
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In terms of top tourist proprietary products, we have been continuously discovering talented designers and work with them.
Take a lead dropped a mall of co branding Ips an example sells off.
New buying boxes stabilized with a top three FTE yourself top toy during this quarter.
Top toy is still in an early stage building core capabilities and establish and brand awareness.
This lease is merchandize gross margins huge room for improvement.
Going forward, we are confident that gross margin will improve ads as its operating leverage is gradually release driven by the expansion of its scale and the mature hilton's proprietary Ips and products.
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We will send you to the TV.
This concludes my prepared remarks, I'll now turn the call over to draw a circle Stewart Zhang for financial review.
Thank you.
Hello, everyone I will start my remarks, with a review of the September quarter as a financial result, and the ZIP provide additional color regarding December quarter. Please note that I will be referring to non <unk> measures.
Have exclude share based compensation expense and certain nonrecurring items.
Revenue in September quarter was coupon of six five.
Billing M b increased by 28% year over year, and 7% quarter over quarter above the high end of the Companys guidance range of two point of fall five beating RMB 222.
<unk> six 5 billion RMB.
The year over year increase was primarily driven by the growth of our domestic operations and.
And the recovery of our international operations.
Revenue generated from our domestic operations was 2103, feeling RMB increased by 18% year over year.
The revenue generated from domestic operations, a meaningful brand was 1.87 billion I'm be increased by 13% year over year, mainly driven by a year over year increase of 16% in average store count and a year over year growth.
A P <unk> <unk>.
T 8% in our e-commerce business.
Revenue generated from top toy was 100, and the nine meaning M B com.
Compare compared to nil in the same area over 'twenty 'twenty.
Revenue generated from our international operations was 600, and the <unk> III, meaning RMB increased by 78% year over year, reflecting a.
Improve the recovery of our sales in 13, Mark Hayes and the restocking by distributors for the upcoming holiday season.
From a quarter over quarter perspective.
Revenue from our domestic operations increased by 4% as of you may know that our business is subject to seasonality typically with a stronger performance in September quarter that in June quarter.
For example.
Our domestic revenue increased by 16% sequentially in September quarter of $10, 90, which represented a normalized seasonality default pandemic.
Apparently the weak seasonality in this year was primarily due to the new wave of pandemic from late July.
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All those influences stores in China, the only disease called her was north of two Henry the meeting M. B.
Revenue from international operation increased by 18% sequentially.
According to National Bureau, or pay fixed in China.
In the first three quarter of 2021.
Retail sales overall supermarket convenience stores.
Bottom in stores and the specials specialty stores.
Increased by an average of over 16% compared to the same period over 'twenty 'twenty.
All are apple to Apple basis, meaning those groups domestic sales increased by 40% during the same period.
Demonstrating the resilience in our business model and our core capabilities.
Gross profit was 700, and the 28 and <unk> increased by 39% year over year and 14% quarter over quarter.
Gross margin was 27 point, a full percent as compared to 25 point to 2% a year ago.
And 25 points to 80% of Quadro.
Both our year over year and quarter over quarter increase.
In gross margin was primarily related to change.
<unk> revenue will makes our more profitable international operations accounted for 24% of our revenue in this quarter the highest percentage in recent six quarters compared to 17% a year ago and 21% of quadrant.
No.
Selling and distribution expense.
Well 300 end of 'twenty, three many M b increase by 40% year over year, and 22% quarter over quarter.
The year over year increase was primarily attributable to increased personnel related expense.
Autistic expanse and the marketing expense as we.
The year over year revenue growth and the brand awareness improvement, while both Minnesota and the top toy.
And to our laser extent increased.
Things that you can pass as we the.
Increase in revenue contribution from IP products.
The quarter over quarter increase was primarily attributed to logistics expense and personnel related expenses.
G&A expense well too hungry the many M b increased by 29% at year over year, and 6% quarter over quarter.
The year over year increase was primarily due to increased personnel related because the paas and the I T expense for our new initiatives such as a top toy.
Partly offset by a decrease the potential of somebody it's a fee related to our IPO in the same period of 2020.
The quarter over quarter increase was primarily due to increased personnel related expense.
Turning to our profitability operating profit was 200 and a full team meeting be compared to a loss of <unk>.
Two meeting I'm be a year ago, and a profit of 100 and the H eight meaning M b a quarter ago.
Operating margin of 8% was the highest in the recent the saving orders.
Adjusted net profit was 100 and a T full meaning M b increased by 8% year over year and 27% quarter over quarter.
Adjusted net margin was 6.9% the high taste in recent six quarters compared to four point to 9% a year ago and 5.9% of quarter ago.
Adjusted basic and diluted earning per ads were <unk> 60 cents I'm be in this quarter compared to 40 cents M. B, a year ago, and a 48 cents a quarter ago.
Turning to our balance sheet.
As over September 32021.
Combined balance of our cash cash equivalents restricted cash and other investments was six point of one 4 billion RMB compared to 6.88 billion RMB as all with June 30, 2021.
Turning to our working capital.
No. It was the old inventory and the trade receivable remained flat sequentially.
Looking ahead into December quarter over 2021 we expect our total revenue to be between two point to five billing M. B two 2.7 billing M. B each represent an increase of 9% to 18% year over year.
Here.
Looking ahead, we remain confident in our ability to continue delivering shareholder value attracting like amend our stakeholders and to enable our consumers to better enjoy lives little surprise.
This conclude our prepared remarks for today.
Later, we are now ready to take questions.
Thank you well now begin the question and answer session. Your first question today comes from the line of Michelle Cheng from Goldman Sachs Lyse Open. Please go ahead Michelle.
Thank you.
Yes, Steve and he said I can't always Shanghai.
Intangible Michelle.
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Passion to win.
Yeah, No I guess, you said that many times at the end hopefully kind of Ips happened to be strong with I think cat's not how can we take quite flattish. If you will IP. How you can go home without having the fact that Oh sure yeah.
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So I have two questions for the management.
So the first one is Uh huh.
The company has been at any more aggressive expanding U S and our European market and U S. We're also seeing a new concept like campillo. So.
Can management share the cost than our strategies regarding the overseas expansion and my second question is about the IP development. So.
We are seeing that for many health branch.
There are some.
Tom price adjustment for that IP products and tremendous Michelle whenever we are aggressively expanding the IP part of our contribution for many health brand and for our top toy I'm not going to ask you mentioned that the proprietary IP development has been quite successful.
Can you share with us what's the.
Oh look at development stage. Thank you.
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Okay, Hi, Michelle this is Jack CEO of.
So group and thank you very much Bob questions and for your first questions about all of them.
<unk> strategies.
In the U S market, specifically on the <unk>.
Under new concept.
Here's my answer.
We are open for 10 and on your concepts meaningful stores in the U S. In October.
Three in California, and one in Virginia.
And the company now has some risks.
Recent business development plan.
U S markets that is based on or no observation that the U S market has rallied to googe recovery in terms of sales.
The last you know consecutive three months.
Our same stores in the U S market in this quarter, our reach and newly around 90%.
Compared with the same here in 2019.
And in terms of this concept.
Concept of 10 and under a REIT that according to our customer.
Customer insights.
Local consumers in the United States market.
Have a great demands or household products under $10.
But.
The demand is not well, Matt at the moment, so, whereas many source supply chain strains, we decided to keep the concepts of trial. So this tenant under concept is still in its early stages and we will definitely show.
More.
In vehicles. Thank you.
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Okay for the second of the questions on the company's IP strategy Michelle.
We will introduce.
The IV strategies separately for a while.
Maybe for Brent and top toy brand first for men. So brand now the company has.
Recently, a gradual a gradual gradually.
Adjusted our pricing strategy of the newly launched RV products.
And the gross profit margin of these newly launched products.
It's higher than that of the non <unk> products.
After a period of observation, we have farmed ads minutes source.
Conversion rates and our cross.
Cross selling win rates remain stable at these new IP pricing strategy was adopted several months ago.
And the sales contribution of IP products now is at about 20% to 25%.
And for.
Min sold the majority of our products says staring now occupy dark so.
We are definitely committed to already.
That at points.
At this moment.
And in terms of top toy.
By the end of September top toy has launched.
Total eight.
I'd ask you for.
Pro Patria Prada.
Products and two more than that in the.
Quarter of June.
So this includes the <unk>.
The blind box as we mentioned in your prepared remarks daily Chowtime mall buying box and the second as you know the the batch blind box, all 10 coal and among which the dial the jaws hi.
Buying bulks areas, it's so small it sells.
Were quite encouraging and ranks in the top three skus in the whole categories off top point.
And for the Twinkle badge blind boxes. It was introduced until September.
September 30, <unk> and the gross margin.
Gross gross margin of our top horse for poetry, our products now has stabilized.
60% above 60%.
And in September quarter, our proprietary has contributed 5% of total sales a top toy.
50%.
The one of them is from our proprietary IP and co branded IP in another.
Yes.
Yes, respectively and Hmm.
No.
We will we also launched our E Sun shop function in our top toy mini program.
In the last quarter and it was a huge success and was warmly welcomed by the tests for example.
This mini program, it's lunch lunch just reached four skus at every months with each of the sales tripled the average so as our top horse grid.
Our average.
Though products of these ghansham have relatively lower gross margin than ours, but its turned over.
March <unk>, so faster than that that it can be.
That's every time if it can be nearly sold out within 10 minutes after lunch. Thank you.
Thank you. The next question is from the line of Lucy Yu from Bank of America Merrill Lynch Nice open. Please go ahead Lucie.
It actually hit by any sense you wanted to look at Washington Nielsen has.
No what you been alkali Keisha class is supposed to go into a theater show women share. Thank you.
I think I can talk about why that I've been involved with right now.
Now how do you want a parting shot but can't do that.
He called out Usher without I could see downtown la.
Really are tied to each I'd say, that's a more hot wax.
How long can they go and it shouldnt take us into the Ping Pong.
So my question is regarding the fourth quarter.
To date sales momentum in both China, and the OLED market and the second question regarding the guidance for the next quarter of two five to $2 7 billion and Doug could you. Please give some quick breakdown by China overseas as well.
Thank you.
Yeah.
Okay, well I'll call it all.
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Jim.
Fisher coordinated Jamal.
Okay.
Hi, Thank you for your question. This is Steven therefore itself.
I will answer about <unk>.
Just the opposite.
October operations.
You know as you you got me.
No doubt.
The latest resurgence of the pandemic.
<unk>.
Most.
Most widely spread things.
As of March.
Okay.
No.
Cold weather has definitely.
The difficulties.
Yes.
Yeah.
Yes.
Paul Minnesota.
Okay.
The influence will be more of a bad debt.
Uh huh.
Imagine that.
Late July.
So considering that as a strategy about.
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Yes.
That will be something well.
Yeah.
The vast majority you go somewhere else.
Yeah.
15 million.
Guangzhou.
While in Europe come down.
May and I really do.
$200 million.
Got it.
July.
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So you don't tell me what are you equipped with our eastern Europe on <unk>.
Well know how or the dream going off of the RNA Union, Portugal Baton Rouge.
And in terms of.
Overseas.
And in terms of overseas markets.
October.
The number of Suspenders force or the end of October worse 118 compelled to.
As we mentioned earlier that 157.
And in terms of sales recovery.
No. It has absolutely are sequential improvements compared to battle, a September and the overall <unk> market has recovered to 70 to 75 persons at in the same period of two July team.
Including eight persons recovered in our distributor markets and 60 persons recovered all of the subsidiary markets. Thank you.
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<unk> <unk>, you say, you're getting towards that towards Asia P. J.
Somehow it useful in their social repeat the shallow cheaply you wish over the guidance.
Uh huh.
So elusive all your second question on the revenue guidance so.
So let me just give you a single breakdown.
Actually we have made this estimation.
Orange recovery.
The completions and overseas to recover operations.
In terms of December quarter revenue.
Absolutely.
Our current estimate that it will.
Will be pressured by these.
Uh huh.
And then a recovery, especially.
Market.
In terms of Oleds is domestic in terms of overseas operation. Additionally, due to you know the harvest season, especially the Ah.
Christmas So.
For the overseas market.
Stronger sequentially.
And.
Our business.
Yeah.
Yes.
Sure.
Our numbers with the store numbers.
It's up to us.
In Brisbane and.
You know this all these taxes for ethane.
Sure.
While that is.
We estimate that the revenue for it.
We will also improve sequentially.
But here I want to stress that due.
Due to the and then.
That residuals.
And.
And at some level.
So.
Hum.
Vectors.
You bet it is.
Revenue guidance.
Paul.
Thank you. The next question is from the line of one way someone from CIC Nice Oh. Please go ahead ma'am.
Hello, gentlemen.
Yes.
Thanks Ross.
Hey, Jonathan.
Oh sure.
I will now go on I want to be sure, but I cannot hear that Joe that's fine.
Sure.
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How are you all watch and all you got hold of homeless without English liana trunk or without claims that I'll highlight chunky, yeah, whether you call. It somehow like I shall I can't meet Thiago.
Now I'll go into your initial thought was that once you're able to go anywhere on the highlights and kind of just kept them Paul Troiano sure interesting a lot of the P. Lashawn right that won't have that kind of how shall I think justin that that won't shop.
Good evening management I have two question. The first is that Luke asked me that being overseas.
It has improved a modest by mine so what's your thought.
Our opening plan for the last few years, I mean to celadon clientele and to what extent can be elmar said something needs to be breakeven or profitable and the next question is bad.
Nearly all kind of oversee saw small found all franchisees are fantastic.
Yeah.
Although it went up in auto.
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A little boy each inclined tool with a year without hump yard other Felicia specialty Aegean condo bigger hard I'd shoot English our Omega issue when the treasuries you kashered convey chapala to shell's ambition to them. They will go there yet.
Yes.
Sure.
Okay.
I will say this is Steven so Oh I'll answer those questions.
No traditionally.
Minnesota.
No review our whole.
Whole year performance at the edge.
End of calendar year and based on.
That's all a review.
We will make a detailed working plan or budget for the next year or so as of today no. We do not have a specific plan.
Yeah.
Online.
But what I want to stress here that.
Minnesota has.
This is Bob.
As in public companies et cetera.
And.
From a cost performance during the quarter.
Several offers we have shown that our.
No.
Zealand's in our business model.
And our core capabilities and that's <unk>.
The whole matching.
Confidence so we can stick to our our no.
Strategy and.
In both at home and abroad.
Listening to that.
The rollout and the rapid growth.
We are very comfortable.
Of that.
And in terms of the overseas.
Spores.
Here's what we think.
All those areas that.
Oh, it is painful and maybe in the first half of next year.
We will move on now.
At June last have detail and through Q2.
Make.
You make a very rapid.
These areas.
Yes.
Yeah.
And damage.
James.
Very helpful.
That market at all.
Those countries and markets.
Yes.
Oh, it is about well control such as Europe, and the U S.
Ill ask rehashed out earlier that we have.
No.
Against some of our business.
I see.
Okay.
You have markets. Thank you.
Clean neutral the Thiago Lindsay.
You highlight a cardiac rollouts of United She had a <unk> that is all harsher or midstream Guido till sangeeta locals your actual enrollment of Dreamworks Al-qaeda Huggard El Dorado Bureau, Amanda you can do.
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Sean.
<unk>.
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Tree and look what are order for a distributor Laguardia lujan passenger each and every country.
Oh, you got a crystal ball.
Uh huh.
This is Steven for a second question about the.
Store opening of overseas markets.
Hum.
In the September quarter.
Our subsidiary subsidy that countries are they'll work.
There were some of them have no.
Okay, a lot of stores.
I will give you some examples such as India, we opened.
Opened six stores in that and as we mentioned earlier that the U S market forces.
In this quarter.
And.
Indonesia, we opened one store absolutely our distributor countries.
Our distributor partners. They are also.
Opening new stores as they did in the past.
Past several quarters.
Orders for.
For example, our spend.
The distributor of <unk>.
It's been opened three stores this quarter.
Three in Italy, So in general no.
With the.
Right.
Recovery.
Overseas markets, we applaud that.
Coming quarters overseas markets.
Our distributor partners.
Yeah.
Gradually recover too.
A moored assets.
Expansion.
Sure.
Thank you. The next question is from the line of cell phones Shea from Citic mice open. Please go ahead cell phone.
Uh huh.
Uh huh.
Does it matter how can we can maybe she can't find what they need and.
Yeah, I think I mean, I get you can't help me try that coupon teaching them. The name Gwen. Okay. I guess, you can feel when a ship hold I guess.
She does feel hey should children that you see I mean, I'm thinking well don't you fishing sheet anyway. They want cheap enough that I showed you a couple of time until she can't meet.
Uh huh.
Oh, what you see now.
Could you please give us more detailed information about can be expensing of peptides.
Man operating expenses and other expenses.
And when can they make healthy took toy in the coming half a year or.
It may be neither way Oh.
Well, yes. Thank you.
Yeah.
Okay.
Our other seizure what I've laid out.
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Alcohol woman to IP, Blender quadrature, calling again.
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Yeah.
Yeah. Thank you.
Okay, Hi, Chuck on thank.
Thank you. Thank you for your question with this.
Hi, Paul Thank you for cognizant this is Stephen.
Stephen I'll answer your questions about the top choice.
Margin profile.
So if a top toy it's a it is still add seats you know early stage of rapid growth. So we are continuously.
Make some investments of top toy, including its team building, including a its marketing to improve its branding brand around news and including in the Ips sides. So if you look at the operating expense ratio of our top toy.
It's at a relative high level at this moment for example in the past in the past September order the top toys operating expense was about 14 million.
No.
Absolutely top toys.
Loss theaters.
We do believe that with.
The development of scale and it's.
The mature office pro powertrain products our poise.
<unk> gross margin will improve.
We have men showed earlier that.
The early opportunity to hand since it into one.
Of course merchandise gross margin was about less than 40%.
Ah the merchandize gross margin has reached about 5% five end of September and October.
October so we are highly confident that.
By the mid of next year.
Merchandise gross margin Kevin rich.
As high as 50% so if we can do that.
And based on this development in accident year, we do believe that our POI terror reach breakeven.
Amongst our master basis are at.
Some health volumes.
Second half next year.
Yeah.
But it's Leah N T.
Thank you once again for joining us today, if you have any further questions. Please contact me something lasting relations team our contact information can be found on today's press release, we will see you next quarter.
Have a nice day.
Okay.