Q4 2021 CNFinance Holdings Ltd Earnings Call
Okay.
Good day, and welcome to the Cm finance fourth quarter and fiscal year 2021, unaudited financial results Conference call.
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Please note today's event is being recorded.
Now I'd like to turn the conference over to Matthew Li. Please go ahead.
Thank you.
Good morning, and evening and welcome to the.
Fourth quarter and fiscal year up 90% July fanatical results conference call in.
Today's call our CEO , Mr. Guy will walk us through the operating results followed by the financial results from our acting CFO Ms <unk> Li.
After that we really Havent G&A section.
Before I start I would like to remind you that this conference call contains forward looking statements within the meaning of section 21 E.
The Securities Exchange Act of 1934 as amended and that's defined in the U S. Private Securities Litigation Reform Act of 90 95.
Forward looking statements can be identified by terminology such as Lille.
That anticipates future intends plans believes estimates targets going forward outlook.
And similar statements.
These statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict and many of breach up beyond the company's control.
May cause the company's actual results performance or achievements to differ materially from those in the forward looking statements.
Or is there any information regarding these and other risks uncertainties or factors is included in the company's filings with the U S Securities and Exchange Commission.
The company does not undertake any obligation to update any forward looking statement as a result of new information, you'll tell you Ben or otherwise.
That does require underlying now could you spell come off you start guidance.
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Forget nice coking properties.
Well I'm getting like yourself.
Who are you know our year.
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In college.
Yeah.
Well, what I'll call back Kansas.
Yeah.
Thanks. Thank.
Thank you everyone for joining us in this conference call. After this call we will introduce the company.
No results in the fourth quarter and fiscal year of 'twenty, One and then my colleagues will answer your questions.
Again, most of that time frame.
All right.
Cool.
Yeah.
Okay, you got opinions on pump.
How about you bye bye.
Certainly <unk> seen yet.
And on the back.
Pat.
Good afternoon.
So you go through time.
Washington.
Don't forget east Turkey can.
Thank you and if I can't tell her phone.
Yeah.
He was he didn't buy.
I read all the one times in the boardroom.
In fact in Florida.
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B, you called up but I'm holding.
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Colorado next Gen tool that can go.
Tommy.
I got kicked off.
Alright.
Yeah.
You got it already here yet.
Yeah, neither child.
But haven't we.
Wow.
Our loan facilitation business maintained fast growth in the fourth quarter.
Facilitate alone got slipped by one building RMB during the quarter and $12 8 billion for the ear.
Presenting a year on year growth of 15% and 45% respectively.
The results were another proof of how the market has recognized all product and business model.
Revenue for the fourth quarter and the fiscal year was $450 million and 1919 8 million respectively.
You can buy the actuation economy and local outbreak of COVID-19, where did we disposed off a bulk of delinquent loans in the fourth quarter and we're more conservative you're evaluating potential often yes.
Yes, they were still able to report a net income of 65 million for the year.
To deliver operational results that exceeded our estimation at the beginning of the year now I'm going to review our work.
You can't do one and forgive.
The challenges that they.
They may face in 2022, as well as our business clients.
Or do you are you in your Cogs the yield.
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Hello, Michael.
So we cancel them so yeah they'll go on chemo.
Most of that thing.
Yeah Yeah.
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Well thank you John .
Peaceful simple things.
On the balance sheets or that the Yankees.
Hey, Bob.
Shingles.
Hum.
Got it okay.
Yeah Josh.
Hum each year and done.
Yeah, Yeah, that's right.
In 'twenty or 'twenty, one the impact of external you why I'm in our business pursue so why are we integrate.
They experienced the funding pressure as our major funding partner at Trust company under tightened regulation.
And the government imposed strict regulations on the demand side of housing market.
<unk> introduced introducing restrictive measure a housing mortgages and purchasing houses.
And the implementation the government guidance by.
Regulations have caused the downward pressure on the housing market.
Third our business operation was interrupted by local outbreak of COVID-19 during the year.
Okay power button.
Okay Alright.
So to Jon Yoder.
So with alcoholic chance we get.
On the restocking environment the company focused on business expansion and risk control our main working 2021 what that follows.
He also truly toward that.
Oh goodness.
Okay.
Sure.
So those are the most of that <unk>.
Sure.
Ooh.
<unk> seen them tomorrow.
U E Commerce, you can put up Kimball.
Kimball Yeah, let's put that one thing in cohort three of them.
Well many of the key.
Could one of them often.
First we worked on spending funding sources to ensure volume supply.
Other than the current funding model. We also work with latest Trust company partners to establish new body models that are within the scope of regulation, but not constrained by the tape out last under trust products.
Our partnership with National Trust was one of the examples since.
Since the third quarter, we have partnered with the National Trust and facilitated loans off over 900 million.
700 million and we expect the long scale under such funding model to grow continuously.
All right already our union.
Turning to the right so apologies.
Okay.
Yeah.
Okay.
In North Gila Bummed out.
I don't know who.
Do you want.
Ernie Oregon humble.
Downturn.
Okay.
Michael.
Okay.
Since the third quarter, we have different collaboration with commercial banks.
They expanded the scale of our partnership with Blue Ocean Bank and also finalized terms with our black watch out back.
Based on our estimation.
Under the bank for the new model will kind of relatively large share in the overall outstanding alone by the end of 'twenty two.
All right.
All of them instead of febrile neutropenia.
Here's a look here on the bond bulking up.
Okay, you mean pelican.
We can solve it and good luck.
Sundar.
Right right.
Sure no problem.
So shimon that you'll be targeting.
Our negotiations with insurance companies have also entered into the final stage.
As of the date the deal, but its been Jose insurance has been fine and we are close to finalize the term TICC.
We believe the partnership with insurance companies will be very helpful for a potential avs close out of our own.
Yeah.
So even though it's true.
Yeah, most of the kind of thing.
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Send me an extended geely.
They need more so I'm not sure my intention for the U N Creme wants it.
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And most of all the time.
So that's how we got to believe.
Please proceed toward that.
Eagles couldn't believe how critical input right.
But you probably have some kind of puts at each level.
Thank you Ethan we pulled the soils and mulch.
But he forgivable teaching triangular chemotherapy, sometimes even single b in that total.
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And so it feels like I'm kind of pointing to a colleague.
So Greg it's Ricky.
Oh, yes.
Would that you haven't looked at that.
EG right.
Alright already hiring into China.
Okay.
Second religious post all the bulk of legacy loans under the traditional facilitation model.
We started our model transformation in 2019, and stopping facilitating alone under the traditional model.
The transformation as the current loans under the traditional model being serviced in fall gradually.
The traditional model are not delinquent.
It has to be negatively affecting the company's financial performance.
Negotiation with potential funding partners as well as our valuation in the capital markets.
In the third quarter facing the fluctuation in the housing market.
Management evaluated.
Relative expense of holding and disposing of legacy loan.
And made the decision to dispose them.
The fourth quarter with higher.
A professional appraisal firm and comparative quotations broadly empty.
And made a bulk sale of loans with the book value of $1 billion.
The average discount of 65%.
If they all such legacy loan what's the main driver of the losses in the fourth quarter.
We plan to sell the remaining legacy loan of $300 million in the first half of 'twenty.
In fact all of them already.
Already our union, John kind of a year and a phone chamber.
Cynthia.
Clean more full on.
Well then he you know critical times and tells it.
Oh sure.
Well part of it.
Woman she's on a couple of them altogether 40, I'm kind of unfolding.
Third.
A little more prudent.
The risks related to the sales partners.
Consolidated the business scale and operational record of each sales partner and adjusted you Repurpose policy, but theres still time.
We have also taken a more conservative approach in evaluating the potential credit losses under the collaboration model.
Keith you already are in yen.
Okay.
We told you you got it.
Well I'm a stamp of approval then we can come back pretty long sometime or shall I forgotten.
The people that you know, we're thinking about attacking for their peaceful.
Orientation, so hot shot.
Yeah.
In 2800 to economic fluctuation and local outbreak of COVID-19 are likely to continue.
We will focus on promoting the collaboration model. So it's two point out working as they believe this will lay a strong foundation for future growth.
Clients are as follows.
Well I'm going to tell you if you start with palm Central Digital T.
Yeah.
Well minimal delta right there.
<unk> Street.
Our phone Schenkel Scott.
Let's hear Tobi vehicles will do then we can collect those working closely became more seamless so you'll give a boiling it down channel cardboard packaging.
First of all.
Ill cooperate with venture investors.
Our goal is to bring a third party investor.
Quite to the subordinated units of new loans.
It sucks client.
<unk> Central our Trust company partners and has already entered the stage of admission.
We're also working closely with the insurance company to finalize the terms.
Yeah, well on the job for.
Yeah.
Core basketball Hoop forget family.
Right.
Bob on platform.
We do see as you put out like you know how much will go through them all that well.
Hi, guys.
Okay. That's helpful.
Johnny.
Got it.
The Martin Luther King Covid changing its equal in coal.
Couldn't come back.
Second.
But it'll diversify our loan products to cover more customers.
But it'll continue to facilitate the current class B trust products and expand our partnership with commercial banks going forward.
The combination will consist of differentiated products.
<unk> B two class a plus.
The need the borrower with different risk recommended and reduce our funding costs.
Well I'm going to need some kind of so you couldn't walk.
Young mindset for the long term.
But I suppose the product okay.
Hello, James you want to watch.
I'll Miss you want you can go back and they sell them.
You can call for tender.
Great.
You said Holdco or me a job well done.
Oh boy workforce intact.
She told the jacket.
Third.
Little adopt digital and smart technology platform.
But they will refine the automatic evaluation and approval of loan applications by increasing the capacity update the storage and the efficiency of data analysis.
We expect two bedroom manage our process and make it more efficient.
We also expect to better coordinate applications really cheap and defaulting to obtain.
Well also continue to maintain and upgrade the sales partners service platform.
Emily to users.
Yes of course.
Accounting policy could be chairman Glen General opinion that Jody Cain.
Shang Guang Bonnie properly cable you most of the region.
But it'll keep communicating with regulators at all levels in.
And make sure duration and business model are in full compliance.
Yeah.
Oh, Yeah, Oh, yeah.
And the one gig type of thinking and going to cancel.
Cancel the science and the Central Bank.
She's going to push out.
For Orange.
You probably saw the money right.
We eat away from brokered salvage vehicles. So you can do it seems again Colin.
In terms of Russo wasn't paying attention.
It's free.
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What kind of books again helpful.
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And most of it.
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Let me go she thing Jim can not ourselves so again.
Couldn't border itself and she has single gene room.
So how many patents at all.
Yeah.
Oh total corridor.
Yeah.
The ear of 'twenty or 'twenty, one what's very important.
Our history.
Let's face many challenges and scored many achievements.
In 2801, our service system.
Our management with more efficient.
We stayed true to our mission of providing affordable accessible and efficient financial services, So MSE owners and.
And we are now more confident in the meaning of all of our work.
And I have introduced Emmanuel patient.
CNS and many other enterprises like us have form an important part in China inclusive financial system.
I just wanted to.
It'll keep refining our model and growing our business.
So the more responsibilities.
What MSA I'm at the owner.
There are some services that are more convenient and with solid pickup.
And then well jump back again, so I'll give him the time to sample the genes.
Hum.
They're not going to get a who's who already are yet.
Hanging in there.
Uh huh.
Say it again.
Now I would like to hand, the call over to MS. Jean Li the acting CFO of the company and she's going to walk you through the fourth quarter and fiscal year of 'twenty, a bunch of our financials. Thank you.
Thanks Nathan.
And to everyone for joining us today.
Welcome to our fourth quarter and I'm, just like the one financial follow that all fiscal year 'twenty. One we believe year over year comparison is the best way to review our performance.
Otherwise.
Oh percentage changes I'm going to guess it would be on <unk>.
I think it also.
Also unless otherwise stated all numbers I'm going to kick it would be in R&D.
In the fourth quarter off time by 'twenty one.
Automation volume, one 3 billion during the fourth quarter of time, because we want.
Was there something unusual you saw 15 coupon.
$2 7 billion.
Okay. So on financing service fee on alone increased by 7% to 400 airports, Amy as compared to RMB 471.
Due to the increase in the balance of average daily on Formula One principle.
Total interest and fee income.
We buy something might be saying Q2 hundred plus a year, that's compared to 150 miles.
Primarily due to the increase in the principal on the ball.
And the funding cost from truck coming up.
Collaboration cost plus that's published let's say something is anticipated to sell commerce and cool to increase to 120 million as compared to 100 and forming it what that one day rate due to the increase in average daily outstanding loan principal.
Cooperation model as compared to the same period of 20 countries.
That makes sense, Paul cracking love it they called it a reversal of 300 and Amy as compared to a reversal of RMB 71, more primarily due to the combined cycle, but higher loss given default LGD under the common expected credit loss model.
All right.
Your account the company's historical data or actual loss in the past few years.
Second in fact that the company has been long and their traditional presentation model to a third party in bulk.
During the fourth quarter off topic on tier one and the allowance of such along with it but.
Net losses on sales of loans of 400.
And mind, you that compared with a net gain of 44 million at Sudbury and people to the fact that the company transfer loans and their traditional participation model.
There are pockets in bulk.
During the fourth quarter of country country, one such as well, but also going to take quite a bit you can see my team and the majority of them were long past few and therefore, so as of last count.
Total operating expenses decreased by.
Q1 hundred 50 million compared with 115.
Income tax expense was 15 million as compared to an income tax expense of three 4 million primarily due to the fact that the company recorded a loss before income tax for the fourth quarter are hungry country. One such allows them a seamless to the loss associated with the south a floor under chapter should help us.
Technician model in bulk during the fourth quarter of country to country.
Net loss was 105 compared to a market income of 105 million now lets move onto the financial uptime, because you want as a whole.
Automation Bollywood 13 million, representing an increase of 46% from Nike.
Interest and financing service fee puzzle.
Green pie.
3% to 1000 and 117 million.
Impact your RMB 1800 intention my need primarily due to the lower interest rate on those particular painting in an effort to comply with rules and regulations issued by rather than see honestly like the later.
Like later.
Including the decision of the Supreme People's Court.
Amanda position on several issues concerning the application of law in the trial.
Pending cases issue in August 20 countries.
Interest expense increased by 2.2 step of hunger and 76 million.
Compared to 700 and that you wanted to move it.
Primarily due to the increase in the principles are the following as well as the pumping cost some chop companies.
Collaboration cost for polymers inquiry to 4000 on countries 6 million as compared.
Compared to RMB 401 booking.
Primarily due to the increase in average outstanding loan principal I'm, sorry, the calculation model as compared to the same period a hungry country.
Vision for quite a lot this quarter reversal.
Hungary, and 17 9 million as compared to RMB 278 million, mainly due to the combined cycle right. The fact that a company transfer long I'm very traditional.
It's an adhesion molecule to threep quantity to third party in.
In bulk during the fourth quarter of time, because you won and to allow ourselves such loans, where we were.
Second the higher loss, given default and does it kind of expected credit loss model, which takes into account the company's historical data at too long in the past few years, possibly Oh that's fine.
A lower.
Probability off to start and go to a common expected credit loss model.
To account the outlook for more consequent economy growth of China in the fiscal year, all the time, because we want as compared to it that's off the 10 P. M. At 20 countries under the impact of COVID-19 pandemic.
I'll make things worse, 15 meeting compared to hunting yet.
When the loan default and there's no truth to the Countrys sexual installment.
The company would charge that's been presented at the lung it's just some concessions.
The increase in other games for fiscal year of kind of a country. One was mainly due to the fact that it was a larger number of cases that delinquencies linked.
Link clinical loan repurchase myself.
In Germany.
This led to an increase in pump with FMC, which means quite a company.
Total operating expenses decreased by 15% to 300, and if you want to lead it.
As compared to 449.
Tax expense decreased by four 2% to 17 9 million as compared to the AE brand.
Due to the increase in the amounts of textbook income.
Net income decreased by 43% to 65 million as compared to RMB 100.
Yeah.
So I'll go I'll stand alone trained the poll with Pantheon and December 31st plenty of time to one as compared to can be it.
December 31st 2020.
As of December 31st how does he kind of one the company had cash and cash cash equivalent of $22 2 billion.
Parents.
2 billion as of December what is the kind of turnkey, including 1 billion and $1 5 billion and RMB, one 5 billion some structures.
Which could only be used to grant new law and other places.
The actual delinquency rates for loan originated by the company increased to 24, 1% and December 31st from 22, 6%.
I'm sorry, the cooperation model the actual delinquency rates for the first land alone increased to 29 29, 1% of December 31st pass it onto one from 18%.
And the actual delinquency rates or circumvent long inquiry to my T plus five percentage and so December 31st time, he talked to one as compared to 15, 6%.
The actual NPL rates, followed by the company's degree to my point for people with them and so December 31st.
801 from.
11, 47%.
Third the collaboration model the actual N P. L. A for the first lingo increased two.
Four 5% and soft December the study for us.
Tom do you want from pinpoint San Francisco, So actual M. P. L rates for second men will increase to six people as of December 31st sometimes one from four point that coupon.
That he would like to open up to the Q&A section operator, please begin.
Thank you we want I'll begin the question and answer session to ask a question you May Press Star then one on your.
Some of them.
If you're using a speaker phone we ask you. Please pickup your handset before pressing the cheese.
To withdraw your question. Please press Star then two.
Once again, ladies and gentlemen, the Starwood one of your other question.
Yeah.
Okay.
So the first question comes from with.
So she was green roofs capital. Please go ahead.
Hi can you with regards to the commercial bank lending.
What can.
Can you disclose the amount you went from commercial banks in the fourth quarter and in regards to your target for the year end of this year is that incremental to the trust lending or.
Replacing debt amount of trust funding.
Okay.
Yeah.
Uh huh.
What's the range I'll blame unions that you're almost there is out there.
No John .
So are they are in India.
I'll definitely do that.
All of the things you and you know what I mean.
For the T mobile getting ships linearly.
Sure sure.
Towards that for most of those.
Here's what I've dealt with more challenging whatever moshe.
Okay.
Yeah, I'm not sure.
Yes, that's true yes.
In food.
Yes.
So that should give us pause.
Uranium that Gee I'm.
I'm going to call it.
If I'm gonna pull them off.
For the June .
Hum.
Yeah, you can go from Canada.
Three more yard jamar.
Well both at home.
Hobby.
Yeah.
Can you go over it.
Uh huh.
Thank you.
Actually it started negotiating with your commercial bank.
Beginning with the country's central one.
And the main reasons are football first of all our main from.
Political that is which is the they try to be first companies well under tightened regulations throughout the year and we think we like to think what exactly had and tend to expand our funding sources.
Erik calling in for quite a while a man I'm seeing that okay.
Okay.
And I called it out.
I don't see new Hooper.
Hmm.
The.
One could come back.
Women.
Cook Atlanta.
Sounds good.
I'm not sure, but I wouldnt see couldn't cope with it.
<unk> for the month.
And or a second thought was to just kawa more customer they are different and the risk references as you know the our funding cost with the trust companies are.
Our high that's comparable to the commercial bank and this has limited our ability to reduce our interest rate card.
In our lung product.
That's also limited a dollar.
Richard.
Hum.
Uh huh.
Oh man.
Okay.
Hello.
Uh huh.
Two of them.
And internally now did you was we were mainly in negotiating with the commercial banks and enter into the stage of our nation.
The main work in day one.
Thanks.
Yeah Yeah.
So the overall loan facilitation under the basket in your motto wasn't as high.
Or are you hiring.
You already heard any of that.
Okay.
Oh.
Please go ahead.
Our purchase of default to the chairman.
Yes in the first two months of 2022 we have maintained.
But the location under the new model of over 10 million.
Each month.
Okay.
American Sun Goodnight.
Uh huh.
Hello.
Well the bulk of healing.
Where are you.
So one thing to that question.
Uh huh.
Our return.
The woman.
No.
To answer your second question, we don't think the back with the new model is going to replace the current cost of lending model.
Were thinking 'twenty to 'twenty two.
The partnership with <unk>.
Companies will still.
Made up the majority of our loan facilitation.
Hi, John .
Yeah.
Let's see what happens.
What kind of level.
Uh huh.
Okay.
Okay.
So our most updated escalation.
To make the loans under the bank lending model to a.
And up to a 10% to 15%.
Total.
Look I could hold at the end of June .
Yeah.
That's the answer to your question.
Thank you.
Okay. Thanks. My next question is about the.
Our investment in technology, and the platform and you talked about on the call. How much are you looking to spend and is that investment going to change at all depending on how much you do on a on a share repurchase.
Oh, well the Dr. Lindsey issue why even in golf.
We had all of those junctions tighten.
Could you walk wholesale energy what else you're laying it out and you suddenly look real hard to get out of that.
And all that.
It goes all the way and it goes on and when will the next.
Oh, Hello, Jim off with what you're telling me.
So if I'm in the boardroom.
So again DNA.
And then could you touch a little elementary I'm good.
Or is it for me you have to be done.
Okay. So first of all we have to admit that the investment in technology is aldi.
So it's a very small proportion of our expenses.
Moment seem to agree Jamie could you parse out sort of vanguard.
Actually the two benches.
Gotcha.
And I think one of the reason is that the development of the technology has.
Drags down the overall cost.
Uh huh.
Information technologies, and no matter in hardware or software aromatic content.
Yeah.
Looking at <unk>.
And then getting out of them that could get back.
Back here for a minute.
Hello Hello.
Both of them.
And.
I think what the pressures and are.
Of course, it's ex currency ex.
At this moment.
Our technological tell us.
Our plan is to cooperate with them in the filter.
Okay.
Any change in government.
Hi.
For example, Yahoo.
So I'm going to go down.
So I don't expect us to take out a whole lot of our cash and I don't think the repurchase program, it's going to interfere with our investment in technology.
Yeah. Thank you.
Yes.
Okay, Great and last question is about the property market has the uncertainty with that affected your ability to assess borrower risk or facilitate loans I know loans are obviously up but is it impacting what you guys are able to do going this year based on how the market is right now.
Oh, well, there's the whole Ebola and here's your plans sure.
Sure Tom shedding ashamed.
What don't you laid out.
On top of both all your mail you called out in here.
Woke up on me Alberto if you won't get any move on here.
Oh sure sure.
Yes.
D E F 'twenty.
Jim the drilling yet.
So isn't it.
Actually it all women sheehan easily either to go with it.
Hi.
I'm gonna changing.
Tell me Peep language in it.
To answer your questions. So starting from the fourth quarter of 'twenty to 'twenty, two we have being rather conservative when it comes to the estimation.
Of the housing market in China.
One man show really cheap.
Or she called old man.
Yeah no.
Okay I'm holding.
So as I.
As I have introduced we disposed off certain legacy loans and bulk during the fourth quarter often different one and also to pay more consultative approach to in the evaluation of a potential credit losses.
That's a lumpy kind of a cool chow whom that.
The movie all E G.
19 teams either.
Partnering to do that either.
Well my hassle free com.
Uh huh.
Right.
We are.
Positive.
Yeah.
Government.
We are positive and confident in the governments ability and our anticipation to stabilize the economy and its still going to grow the economy.
We don't care I don't know yet.
Right.
Shotgun right.
So based on my estimation I think the.
Class a properties and hot and houses will stop.
Downward turn and remained rather stable in 2032.
Yeah.
So you get a delta.
<unk> is a.
Some cheetah eligible women who are affected.
Uh huh.
Well then so data.
<unk>.
Oh, yes.
Cool.
Okay.
Switching.
So in terms of no applications that risk assessment and evaluation of the borrowers.
Our Thunder didn't really change a whole lot in the AR in this year.
And.
One of our our intention is to.
Blowout cheaper.
Should be a high quality borrower who has.
Collaterals are also with the high quality.
They will then throw other territory.
G Copel reiteration.
I can go.
Pedro with Honda.
Countries.
So I think reduce our run up our goal is to get very customized loan products to each customer depending on the condition of their.
Our collateral as well as their credit record.
Okay. Good.
Yes.
Okay, great. Thank you congratulations on a good quarter.
Gentlemen, as a reminder to ask a question. Please press Star then one.
Ladies and gentlemen, this concludes our question and answer session, where it wasn't turn the conference back over to management for any final remarks.
Thank you and again, thank you for joining us in today's conference call. If you have any further questions. Please feel free to reach us at anytime.
At Katz, China, that's yet.
Thank you Becky and thank.
Thank you.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.