Earnings Call: H1 2021

Aug 16, 2021

Good evening, ladies and gentlemen. Welcome to Weimarc Inc. Twenty twenty one Interim Presentation. A copy of the interim results announcement can be found and downloaded from the company's Investor Relations website. This call will be conducted in Mandarin, and English simultaneous interpretation will be provided. Please note that this conference call may cover non IFRS metrics and refer to the company's interim results announcement. Joining us today on the call are: Mr. Sun Tao Yong, Chairman of the Board and Chief Executive Officer Mr. Tao Yi, Chief Financial Officer Mr. Yin Shi Ming, Chief Operational Officer and Mr. Huang Junwei, Chief Technology Officer. I will now turn the call over to Mr. Sun. Investors, analysts, Chief Ming. Thank you very much for spending time with us at Weimar's interim results announcement. We believe that this year, given the macro environment, there are a lot of challenges and uncertainties. This year, we know that there are many regulatory policies coming out. And so there are issues and uncertainties that investors are more concerned about. And through today's meeting, we hope that you will have clearer understanding of our company's future strategy and future policies and implications on our company. And after our presentation, there will be a Q and A session. So let me do a review of our company's results. I believe you can see our figures and data on the PPT. So we performed quite well in relation to our revenue growth. So total revenue JPY 1,380,000,000.00, up 44.5% year on year. Adjusted year on year growth, 31.7%. Gross profit margin up 24%. So GP margin went up. Today, in terms of overall loss, the adjusted loss was $7.20 odd million. This is because of expenses in R and D, operations and also some marketing and promotion expenses. Later on, I will go through the details. This year, our digital commerce as well, it grew fast. For digital commerce, there are two areas of revenue. One, subscription solutions and the other, merchant solutions. So revenue from subscription solutions, up 159.2% adjusted year on year growth, 80.3% number of paying merchants, up 56 up 15.2% year on year ARPU, up 56.5% and if you look at Merchant Solutions revenue or gross billing up 38.7%. Revenue from Merchant Solutions up 63.8%. I think advertising environment is very optimistic. So I think we can see quite good growth. So let's do a brief review of our product system. We offer to merchants smart solutions. So we have Marketing Cloud, Commerce Cloud and Sales Cloud. For Commerce Cloud, this is for different industries. It is a complete solution from easy, smart retail, smart hotel, smart beauty, local lifestyle and so on. And for merchants, we offer some tools for self operation. We also offer some tools to salespeople within the sales cloud. We offer two other value added services, targeted marketing and TSO. And then here you can see what we offer. For TSO, I think it can be reflected from our merchant solutions. At the same time, we also do targeted marketing. Now I would like to focus more on our core strategies, our three core strategies. At the end of twenty nineteen, we introduced moving up market ecosystem buildup and globalization strategies. And in 2020, for these three strategies, they have been basically formulated. In first half twenty twenty one, we can take a look at these three major strategies. First, moving up market. From our financial statements, you can see that Smart Retail maintains very high speed growth. So in terms of smart retail or fashion retail, our share is rising. So we are among top 100 fashion brands and 44% are using our smart retail solution. And we cover, for example, home construction materials, department stores and so on. So our market share is rising this year. Our revenue was 183,000,000, accounting for 33% subscription service revenue subscription revenue. And then ABC rose from 220,000 to 230,000. We have eight thirty brand merchants that we serve. So in the retail area, I think our progress is very good. Our market share keeps on rising. And then let's take a look at shopping malls and department stores or supermarkets. Last year, we acquired Helling and Helling in commercial properties operate convenience stores and supermarkets. They have big market share and Waymo helps heading to grab more business. At marketing end, we offer a complete solution to them. So the management end, they can maintain their strong competitive advantage. And we offer the marketing and service, so together, we form a very complete platform. Now in terms of commercial properties, Helly's market share is 62%. And then among top 100 convenience store chains, 35% was Heading's share. So by integration with Heading, we hope that in shopping malls, convenience stores, supermarkets, we can grab bigger market share. I mentioned shopping malls, supermarkets and convenience stores. And in terms of dining or catering, our progress is fast as well. So among top 100 restaurants, we have a few profitable clients. And through our integration last year with Harding, we are able to serve more catering customers. Because of the overall environment, revenue growth was not very impressive. Overall speaking, number of customers did not grow a lot. So overall speaking, the Dining segment is such that we are moving from small to medium sized customers to medium to large customers. So we are covering those customers with five to 30 outlets. So in the future, very small customers will not be our target. We focus more on larger customers. In the future, for the dining market, it will gradually recover. And at that time, I think Smart Dining or Smart Cleaning business will enjoy better performance. TSO segment. Last year, we introduced this segment. So in terms of traffic tools and operation, we offer a very complete chain. So it is a smart solution to help merchants apart from SaaS in the past. We also offer traffic and operation growth solutions to customers. In first half this year, we served 30 of brands and some of them enjoyed a good growth. For example, food and beverage like Chunjin under Mengmu and then 3C digital customers. So through TSO service, we have achieved a good performance. In the future for TSO, we hope to serve 100 top brands, helping them to achieve business growth. So in the business growth, we will then be able to get our revenue and profit. Now let me turn to our ecosystem strategy. So we have traffic ecosystem and application ecosystem. Now for traffic ecosystem, we continue to expand traffic channels. So with Douyin Kuaishou and Eituan, we are deliberating on some collaboration. In the future, we hope that we can take over profit domain business and growth for merchants. And if I need a back office, then I will they will be able to open stores on our platform. Then regarding ecosystem, well, that is going to be our most important strategy in the future. So we would like to build our ecosystem. We have five fifty odd developers and thirteen forty four applications and more than 1,000 interfaces. We work with many working partners right now. In the future, when it comes to ecosystem build up in the coming two to three years, this is going to be our most important strategy. So later on in the business outlook, I will elaborate more. For investment ecosystem, we continue to make investment in M and A. Overall speaking, we are trying our best to expand business boundaries and enhance product depth. So we have direct investment and also M and A. And we have also set up industrial funds with Meridian Capital and V Capital. And I think performance of the funds have been good so far. And then globalization. As I said, basically, there are three steps under globalization. The first step is we serve overseas Chinese. Now through the overseas agents, we are offering around 12 countries and regions. And we are serving 1,700 overseas merchants with 51 overseas channel partners. And through these partners, we are serving overseas Chinese merchants. That is our first step of globalization. The second step is that we face the Chinese merchants and then we go abroad. We help the Chinese merchants to build express website so that the products and services can be sold to The US and Europe. In July, we already launched the services. Now there are 100 odd comprehensive cross border e commerce pilot zones. And in the future, I think this is going to be one very important step of globalization. With the pandemic, more Chinese companies are trying to go abroad with the Shop Express tool. So for this tool, well, it serves Chinese local merchants and in many product lines and user experience, we think that there used to be a lot of issues. And when we serve Chinese local merchants, we think we have a more competitive advantage. So the above is our results for the first half of last year. Now I would like to turn to industry landscape and business outlook. In the second half of the year and also in the coming one to two years to our company, we think that these are the most important points as shown here. First, two company ecosystem two, increase proportion of Ka business three, upgrade full chain operational capabilities four, accelerate globalization and five, explore strategic partnership opportunities. So I will go through all these points one by one. First, industry ecosystem, as such just now, this year, there were a number of new regulatory policies coming out. So when it comes to these new policies, what are their impact on our company? So I will explain now. This year, so antitrust regulations, Internet antitrust regulations, they are targeted at platform economy in China. So in relation to platform companies, think the policy is to protect them so that merchants can do business in better shape. So I think this is favorable to companies like us. The second thing is interconnection of Tencent and Alibaba platforms. Some time ago, I think this is something many people are concerned about. Overall speaking, to Weimov, I think this is a favorable factor because it doesn't matter whether Tencent and Alibaba will be interconnected or sometime ago there was already JD and PCD in the ecosystem. And it doesn't stop our company offering or serving merchants because our business models are totally different. Second, there are more and more merchants on Audi who are also on Tencent. And in this way, users on WeChat can build a shopping habit and awareness. In The US, the Internet ecosystem is very open. So that's why Shopify has been so successful. In The US, when consumers shop, for brands that they know they will visit the brand's official websites, but then in China, consumers may just go to Alibaba to shop or they will just do a search on Taobao JD. So in the past, over a long period of time, during the PC era, well, consumers or users do not have too much do not have a strong habit of shopping online or searching online. So now they have already formed a habit to shop on Alibaba. And in the future, with further change in consumer's habits, I think for private domain or B2C, there is going to be a faster or acceleration impact. And merchants are more willing to go for private domain because cost can come down and things are more controllable. And with consumers' awareness, I think this is also very favorable to private domain. So overall speaking, let's say, if Tencent and Alibaba platforms are interconnected, I think this is not unfavorable to merchants. In the long run, I think this is a plus. And then enhanced user data and privacy protection. We believe that this is a favorable factor to our company. In the past, we realized that when merchants entered private domain, so on Dobao and Douyin, they would place advertisement and then they got people's mobile numbers and then mobile numbers will be added to the personal WeChat and then marketing can be done. While we did not promote this approach. What we advocate is that the best way of connection is to do it by means of public account of WeChat. So merchants can go by means of WeChat public account, and I think this is going to be a big favorable factor. Will that be impact on advertising? No, we don't think so. Because when it comes to user privacy protection, well, of course, sensitive information like mobile phone number will be protected. And though in another advertising platform, the phone number is not the only way of identifying the customer or users, There are other ID that can be identifiers of users. So in the future, if merchants can't see users' phone number, then in the advertisement, there would be more a closed loop for merchants. And I think marketing effect will be better. So from front end to back end investments, they may have to make use of pocket account on mini programs instead of just taking consumers' mobile number. I think this is better for privacy protection. No matter whether we look at advertising or other areas, there won't be much impact. So these are some big regulatory policies. I think the overall trend is that I think the state is against monopoly. So they hope merchants can better run their business. In the long run, Merchants IP can be enhanced and then monetization of EC, e commerce is getting higher and higher. And I think all these will form a new paradigm for business digitalization. There is a bold estimate in the future retail enterprises can achieve the following figures: 40% of sales from offline shops 30% of sales from e commerce platform and 30% of sales from private domain of enterprises. So there are some good brands which are taking this route already. And many brands are already making these attempts. So this going to be a trend for the future. So with changes in the ecosystem and environment we are thinking of one matter. In the past merchants are concerned about traffic especially during platform e commerce stage. So there was JD and other platforms. So the systems or actually with the mobile, stage, window, iOS, Android, the quarantine the operating systems mainly. And we are going to have a new commercial operating system that can connect various scenarios of merchants and solve problems. So when merchants want to go for digitalization, there are many problems to solve. For example, they have to go on different systems and each system is supplied by different developers, data of different systems are not interoperable. And the developers of various systems will work on repeat the problems. For example, interface with internal system, interface with external traffic, interface with PC, e commerce and so on. So they are doing a lot of repetitive things. So we are talking about cross scenario, cross platform, or cross ecosystem. And we offer a commercial operating system, which is Android. So when merchants are on this system, then based on the business scenarios and needs that they have, they can develop the relevant applications. So there is no more the need for repetitive work. So can we introduce a new commercial operating system to satisfy merchants' need for digitalization so that we can help them deal with their data and so on? Starting last year till this year, we introduced or we said that we would like to introduce a way more new commercial operating system. When merchants are on this operating system, then there are a lot of functions available to them. So internally, they may have omnichannel capability and internal management. And for example, they have stores and channels. There's a need for a system to manage all these data and so on. So if we are able to consolidate all these functionalities in our system, then we can help merchants develop some systematic applications. For example, merchants may need to drive traffic, they may need information or service about customers and also some data products. Then there are ERP and so on. For example, third party users, we can handle these by means of our ecosystem. So in the future, merchants only need to go on to this commercial operating system. And then subsequent applications that they need may have already been developed by third party developers. In this way, cost can come down. And then on the bottom layer, the data can be acceptable and interoperable. So that in this way, cost can be saved and future use of data can be optimized. There's not a need to repeat a lot of work, and they can focus more on the core business operation. So this is our hope. With our new commercial operating system, we can solve all the problems. So I would like to go into greater detail. Actually this year, we have invested a lot in R and D. Last year, we have only 900 odd people. And this year in the first half, there are 1,500 R and D people. And then for the whole year this year, there may be 2,000 R and D people. So we have invested a lot in R and D. So perhaps our CTO can talk more about the system. Please, analysts, investors, good evening. Now I'm going to briefly introduce our new commercial operating system design. As Mr. Ping just said, we'd like to offer one stop service, full chain SaaS application and service to merchants. There are four main parts. First, at the bottom, a platform. So after long, when we developed our system, well, these are some of our past achievements. It is a tool which can enhance development efficiency. So in this way, we can encourage our internal developers and third party developers to innovate. Later on, I will talk more about this PaaS platform. And then in the middle, new commercial platform for PaaS solutions, full contact synergy. As said by Mr. Sun, so we have an inner shell. So we include a lot of things, BPM, data BI, shopping guides, CMS, CRM and so on. So this system can benefit from all these conveniences. We can offer very rich commercial applications to merchants, for example, shopping mall, food ordering, food delivery, marketing and so on, payments and so on. Some of these applications were developed by Weimob ourselves, some were by our working partners. Apart from the core applications, we hope that we can offer more ecosystem users, not only about ERP payment and so on. We hope that external developers can offer such service as well. Now many of our products will be connected together so that there will be industry solution. And we encourage third party working partners to create with us together. And there is one important point of innovation. We have strengthened the use at the end. For example, A offers a mall and then B offers membership arrangement, but then there is the need for redirection. And this is a very bad user experience. Here, we can solve this problem gracefully. For the new commercial operating system, it will be linked to different media like WeChat, Alipay, Douyin, Taisho, Baidu and so on. So apart from tools, we also offer different services to merchants. For example, shop building, profit domain operation, live streaming, advertising placements and so on. So basically, our system is an open ecosystem. This ecosystem strengthens our commercialization capability. We can have ourselves and third party developers to offer very good applications and services. For example, PaaS capability and customers can enjoy personalized customized developments. In this way, we can we can satisfy KA's need for personalization, and this is low cost. Third party vendors can also offer some standardized use. And through our commercialization, things can be sold very quickly to way more customers. Third party service providers can offer content, traffic service, module service, and so on. Now let's take a look at the POS platform. So it includes six main parts, TPaaS, P technology. This includes multi tenant architecture component platform, gateway platform, framework and tools, one stop development platform. So developers don't need to be concerned about the architectural structure. They can focus on innovation. Keypath, it is the capabilities accumulated over the years, transaction, order, merchandise, merchants, marketing membership, payment, logistics capabilities are all combined here. So we believe that we are able to save 60% to 80% of workload. APAS It's zero code, low code application innovation platform. We need a lot of mini programs. And with this, we can create a lot of new mini applications. And this can be effectively integrated with many of our way more applications, and we can encourage the prosperous development of the whole ecosystem. For A Pass, the zero code, low code capability is used in many of our areas, for example, games, home furnishing and so on. So these show the application of ePaaS. And then we also offer iPaaS special, which is used to link different SaaS users or applications together. And then data capability is given a lot of importance to our customers. So in part, this includes search, statistical analysis and so on. And that means we can offer these capabilities to our customers. So we have compared our platform with Salesforce. And if you consider like licensing Newsoft, for and so on, we are comfortable. So we are confident that we have actually built our own product competitive advantage. Thank Thank you very much. Because of time, I will go faster in the latter part of the presentation. So we have the new commercial operating system and then we have an open ecosystem as a result. As such as now, that's through smart retail and also convenience stores, supermarkets and business, we are able to increase our market share, and we are going to enhance penetration in various industries. So our KaE revenue should account for 50%. We believe that we are able to achieve this goal one to two years earlier than targeted. Upgrade full chain operation capability. Some time ago, we issued an announcement about e commerce retail segment. So first, there is IBU. It is an industrial business unit. There are different industrial clusters. And then it is divided into delivery merchant operation TSO. Basically, it lays the foundation for our operation. And then here, can see IBU, CGU, CPU, and there are two lines, customer sales and customer operation. So here you can see an horizontal line for customer sales center and for customer operation center, it is also well connected Globalization, I already explained our layout. I won't go into the detail. Next year in 2022, that should be quite good income figure to be released. Now I will pass the floor to our CFO, Mr. Cao. Thank you. First of all, investors in the past few hours should have the chance to read our announcement our results announcement on our website. So you should have some understanding about our performance. Now in the first half of this year, I will go through some financial highlights. I think these are very related to your point of concern to many investors. When you look at VMOP, you will focus on revenue growth. And as a growth company, high revenue growth is one significant characteristic of us. In the first half of the year, our revenue was up 44.5% year on year. Last year in the first half, it was at a low point because of some payment of expenses. And after adjustment, here you can see we still grew 31.7%. Digital commerce, up 72.8% for subscription revenue. In the past, we called it SaaS revenue, now subscription revenue. After adjustment, it's up 80.3% year on year comparing with past years. This is faster growth. Merchant Solutions revenue up 63.8% year on year. Now I would like to give a breakdown of our revenue. So here you can see distribution of different segments are rather even. For merchant solutions and subscription solutions, each account for about 30% odd, 40%. For digital media, around 30% share. Then for digital commerce, if you look at subscription and merchants around six to four as ratio. For number of paying merchants, subscription solutions 77%, merchant solutions 21%. This year, if you want to understand our financial statements, you need to look at our increased investment. When Mr. Sun made his presentation, he talked about our strategy upgrade and there are important things that we expect to achieve in the future. In order to drive the future high speed growth in the coming three to five years, we need to start investment now. So basically, we have our three main strategies moving our market ecosystem build up, globalization. We also need to build a new commercial operating system in the first half in order to enhance our industry and operation and we made high investments. After considering our investment, here you can see our operating expenses as a percentage of revenue was higher than in the past. But if you disregard the investment for the future, our operating efficiency went up. Now in 2019, '20 '19, '20, '80 '9 percent. First half of this year, around 80%. In the past few years, our financial position is solid. As of June 30, we have cash on hand, billion, So it can support our future development. Now let's take a look at some critical figures on the income band. Apart from the growth rates in the first half this year, number of paying merchants grew steadily. As of thirtieth June, we have 101,000. So 11% roughly is the attrition rate, more or less the same as last year. But last year in the first half, there was the pandemic impact. So in the first half of last year, 15% attrition rate. But then if you look at the half on half basis, it has much improved this year. So ARPU is one highlight in the first half this year. Last year in the first half it's 3,400. This year in the first half it rose to 5,400 up 56% year on year. This is a high growth. Of course, we increased the price and there was also some one off impact of our consolidation into financial statements, but ARPU growth is a long term sustainable process to us. For gross billing, growth was around 40%. And then GP margin, our overall GP margin comparing with last year improved. Overall gross margin last year was 49%. It rose to 55% this year. The main reason is that for digital commerce, the revenue accounted for a higher share. For subscription solutions, revenue share increased from 25% to 40%. For Merchant Solutions, it increased from 24% to 30% in terms of share of revenue. So these are high GP business. And as a result, their increase had led to an overall increase in GP margin. Gross margin of Subscription Solutions was slightly down from 76% to 74%. This is mainly because we acquired Hengdong. So overall, GP margin was a bit different. Our own gross margin comparing with last year actually improved. For Merchant Solutions, gross margin decreased because this year, apart from TSO service revenue, we increased some fee in relation to operation service. And for that, GP margin is slightly lower for this particular service. And because of a change in portfolio, Merchant Solutions gross margin came down. This is not because of a change in rebate and so on. It's because of change in portfolio or structure. Gross margin of Digital Media decreased primarily because of change of strategic focus. As such as now, in the coming three to five years, we are going to go for strategic upgrades and business growth, so we made big investments. We are building our new commercial operating system and past platform and SaaS application platform. Just now our CEO and CTO already gave detailed explanation. For our operation structure, we have made some adjustments. So COC line was being made separate. And we have made investment in operation platform in the first half concerning traffic ecosystem and brand recognition. We have also made some investments. So this year, the high investment has led to an increase in R and D investment offer revenue, so from sixteen percent to 32% this year. In the first half, total R and D expenses was RMB300 million. And then for operating efficiency, it is improving year after year. In the first half this year, we made investment for future around million. Million was mainly selling and administrative expenses. So if you deduct or exclude this RMB290 million, you can see that our selling and administrative expenses account for a lower percentage of revenue. So this shows our operating leveraging. In the future, In the coming three to five years, we hope that we can achieve quite good return on our investment. Finally, our earnings from the financial statements comparing with first half last year, 50 odd million adjusted net profit and we became we now incur a loss of $210,000,000. That's because we have made investment of JPY $290,000,000 and we also consolidated trading with 30,000,000 to 40,000,000 loss. So if you look at our own core businesses, we have achieved good growth in revenue and profit. So that's our financial performance. So now we can proceed to Q and A. Thank you, management. We will now start Q and A. First question is from Brenda Xiao of CICC. First question. Actually, online, we have got this CRM tool already. So how does WeChat cooperates with your company? So how does existing customers, are they willing to pay? How much are they willing to pay? Second, about investment in first half this year, you invested more into R and D and selling expenses. Under the moving up market strategy, how do you strike a balance between service customization and standardization of products? And when do you think you will achieve a breakeven? Third question. Last year, you introduced the TSM strategy. What is the progress now? When do you think there will be meaningful revenue contribution? So three questions from me for the time being. Let me take your first question on the WeChat. So I think in our product matrix, you can see Remod Assistant. So it is based on SaaS product. So it can be grouped together to sell. So when merchants buy our WeMall or Smart Dining, they can continue to buy our Wicom Assistant. Now Wicom Assistant is a product where actually all solutions can be combined with this piece. So if you look at the overall progress, perhaps later on our colleague can supplement. Second question is about R and D investment and also customization process stabilization. Now we want to implement our moving up market strategy and customers will have more and more customization demand. So we want to do ecosystem build up and also the new commercial operating system. By nature, the new operating system helped us solve a lot of personalization issues of key accounts. In the past, when we did not bring in developers, there are many key customers used, which have been standardized into our SaaS. As a result, there the products will become more and more overly excessive and then iteration will be slower as a result. But then when we have third party developers, we can do it by means of application. We can soften KA's customization and personalization needs. And in the future, it will be very rare that we need to do customization for KA. Now some merchants may have some sort of needs and through Weimar, we can then connect to our developers. Developers can develop third party applications. And then, we can just buy directly the third party application to solve their problems. Overall, speed will be faster. So in the future, Weimar Cloud can solve customization problem. At the same time, other application issues can be resolved. Our speed will be faster in the future and we can satisfy merchants' needs, we can be more diversified. And then concerning profitability, this year, we made a lot of R and D investments. And for the new commercial operating system, we still have development work from last year to this year. At first, we are still in the process of migration. So there are still a lot of things operating on the old system. Next year for R and D investment, well this year is the peak next year. That would be within 10% growth in the number of R and D people increase. And in the future, I think we will see more stability and we can achieve breakeven more easily. Third question, progressive TSO. I will pass the floor to Watson to talk about it. And can you supplement also on cooperation with WeChat, please? Thank you for the questions. We found I think that it is very important to us. It is a new trend, ecom. So at a very early stage in the market, we started to offer Wicom related services and the effects are very good because it is based on private domain. And in July, products are being upgraded systematically. There are three versions of Wicom solutions. The first, general Wicom users. So it's more or less the same as what you can normally see in the market. The second version is the next thing we come at the mall. So it is an upgraded version. The third version is that we have connected the mall as well as advertising business. So there are three versions that we are selling. In July, for we increased price, and it seems that the result has been very good. For Wicom, there's the need for bundling some services. And there are already number of bundled service providers in between of 1,000 or in thousands. And we think that it is going to be a new source of profit. Customers' feedback has been very good. So that's what we've come for TSO. As Mr. Sun said, in the first half, we had already got 30 odd customers. The situation, the development has been good. And then when it comes to contract signing around 30 odd million, so progress has been quite satisfactory. We hope that in the future, in the TSO segment, we can do a better job. So we will be selective in doing TSO. Second, with this TSO model, we hope that for each industry, we can iron up the timetable and through our operating system, we can do standardization and then we can export products. So far progress has been smooth and satisfactory. Thank you. Thank you, Brenda, for the questions. Next question from Thomas Chong of Jefferies. Please, Thomas. Good evening management. I have two questions. First, when Ka's revenue contribution increased, so what will be the impact on the selling and marketing expenses as share of revenue? Right now in the advertising industry, it is subject to impact of, for example, education and tourism industries. So in the second half, what do you think will be the development trend of the advertising industry? Thank you. Let me take this question. First, I think when key accounts contribute more to our revenue and profitability, I think marketing expenses can come down. We will it's a moving up market strategy. Now if you look at absolute value of cost per customer, it will be higher. But the AVC is very high. So I think marketing expenses account for a lower share of revenue. For KA, the retention as well as AVC and also value per customer developed will be bigger. So for our whole company, I think it is very helpful to our revenue growth. And in the future, our marketing expenses can come down. If you look at our salespeople, most are selling small- to medium sized products and to small- to medium sized customers. And in the future, when we face more and more Ka, I think our marketing expenses can come down. Second question, about the whole advertising industry. This year, there are full of challenges in the advertising industry because of the macro economy and also regulation over some industries like education. So impact of course for the whole company, I think there is some impact over our company. I think around five to 6%, not a very big impact. Second, overall speaking, in the second half of the year, we will be able to achieve our target. If we are able to do that, there won't be a problem. I think we are able to maintain 40% of growth. For the overall macro environment, it is not very positive. Tencent advertising business growth in the first half less than 30% and the second half maybe even lower. So for the whole year around 10%. So we need to beat Tencent advertising as a whole and there must be new channels Douyin, Kuaishou for instance. So there is a need for other additional channels. This year, there are, for example, home furnishings, wedding gowns and also become new e commerce, they will generate some growth and increase. So they can supplement to our business outcome. So if you look at gross income growth like 30% to 40%, I believe, In terms of gross billing, I think we will focus more on Merchant Solutions. I think that is something that we are more concerned about. In terms of gross billing. Okay. Thank you. Next question, Brian Gong from Citigroup. Brian, please. Thank you, management for taking my questions. For Waymo, in the first half, what is the growth in Q3 if you separate these quarters, what is the growth trend? Sometimes for Waymo on WeChat end? In the first half, it seems that growth rate was slower. But then your data looks strong. So what are the reasons behind? And then in the second half of the year, for e commerce, smart retail and catering or dining, I think the base figures have already been quite high. So what will the development be like in the second half? I will defer to CFO, Mr. Tao. Overall speaking, for Weimar in the first half, revenue growth was almost 40%. All along, we are of the view that WeMore as a solution serving merchants, well, 3040% growth rate is comparable with the competitive landscape in the industry. We will not comment on other peers' performance because we just want to do our job well than for Waymo, thirty percent to 40% growth. So when our business is good 40%, if there are headwinds in the industry than 30%, I think this range is reasonable. This year in Q1 and Q2, I cannot really disclose the exact figures, but then in Q1, it is slightly better than Q2 on a quarter on quarter basis because the base is not the same. In Q1 of last year, the pandemic impact was more severe. So in Q1 last year, we were also subject to some impact. So overall speaking, some time ago, we issued an announcement on Q1 growth. So in Q1, growth was faster than Q2 on a year on year basis. And if you look at quarter on quarter, Q2 of this year is better than Q1 of this year. Last year, because of the pandemic impact, the quarterly allocation of distribution was affected. Next question, Yang Lin Lin from GF. Mr. Sun, leaders greetings. I have a few questions. First, in e commerce business, competition is very keen apart from traditional companies or e commerce platforms. Various platforms are exerting a lot of efforts in development. And so in the future, what would be the overall layout like? Various platforms want to go for a private domain, so they may have their own private domain ecosystems. If you look at Kuaishou, will there be possibility of more in-depth collaboration? Second question, just now you talked about the new commercial operating system. So far, how is its progress? When will it be launched? How much will be the investment in the future for product pricing? Will that be changed from now? Third question, your cash on hand, you have quite adequate cash on hand. How are you going to use the money? Let me take these questions. First question about various platforms, efforts to develop private domain business. Well, Xizie announced that they will go for private domain. There is some background about related to the protection of users' data. As a result, platform would like to go for private domain in the past for Douyin. Well, they operated mainly on public domain. They also do live streaming, but traffic is mainly from the public domain. And we know that Douyin has also introduced the corporate accounts, and they are laying foundation for private domain. We think that when platforms or ecosystems want to do profit domain, this is good to us. And in their ecosystem, we can offer relevant solution. We think that in the future, in the private domain area, if they have a clearer view, well perhaps they can cope with third party. And in the long run, this is not something that I think that WeChat is the best private domain carrier in the future for Taobao private domain, what will be the strategy and development type or depth. I think at that time, but we can continue to keep a close eye. If they embrace profit domain, then definitely not by means of platform, but ecosystem. I think this represents an opportunity to us. When we talk about the stability of in-depth cooperation in the past Douyin and Kuaishou operated mainly on public domain. We offer mini programs in private domain to them. They don't have too much incentive to introduce mini program. They would rather do live streaming. And I think when it comes to private domain, if they attach a lot of importance to private domain, then there may be a chance of more in-depth collaboration. That's my judgment. But so far, the situation is not very clear yet. So we don't know whether they are treating developing private slogan private domain as a slogan or real strategy. So we hope that we are able to complete the migration of the first customer within the end of this year. And then at the end of this year, our overall new commercial operating system will be online. Future product pricing, I don't think there will be much change, but that would be a clear change. When it comes to products that we are selling, they will be more diversified. They won't be single, homogeneous products. So we will offer a system, CRT or CDP. So there will be many, many products. In the future, it is going to be a product mix. So we may be selling ecosystem products. So for example, smart retail solutions and also our weigh station and so on. I think the average price will even be higher because we are talking about ecosystem products. The pricing of original products won't change, But I think value from individual customer will be bigger. And after the new system is online in the future through our ecosystem, there will be the sale of third party application. But still, we are in nurturing stage. We still need one to two years to nurture our ecosystem. In the future, that would be more contribution from this segment. And then starting from last year to this year, we are making plan and arrangement in relation to or M and A, and this is about inorganic growth. So in the future, there may be some M and A. We are deliberating on some projects. In the future, there may be such possibility. So basically, that's it. You. Thank you. Our next question is from Yao Yuan from Citec Securities. Mr. Sun, thank you management for your time tonight. I have two main questions. First, Mr. Sun, for key accounts, if their revenue contribution or share is preferred, then what would be the short term change in gross margin from 35% to 50%? That is the increase in share. What will be the change in gross margin? What will be the long term stable range? The second question is about TSO. Just now it is said that for TSO, you will select some large benchmark customers to work with. What are the criteria for choice or selection criteria for TSO? So in which industries or sectors do you think that there would be better growth? Let me comment first and then Mr. Tao can supplement. For key accounts, the share of revenue will go up. And in the future, marketing expenses will come down. But for key accounts, we will invest more in R and D. So the reason may not be seen in gross margin. But in the future, there would be some improvement in our marketing expenses. Mr. Sung can supplement. Then about TSO benchmarks, Wasson can comment. As Mr. Sun said, for key accounts, usually for full life cycle, we communicated in the past with investors, LTV, CSP, multiples is much better than small to medium customers. I think investors should look over the long term full life cycle. You should not only look at the prevailing gross margin or profitability. For key accounts, if you look at SaaS and R and D, it's more complicated than medium sized customer. For R and D, effort will be more. But for key accounts, the stickiness and attrition rate will be such that the return on the whole life cycle from key accounts is better than small to medium customers. So please look at the overall situation. For TSO, as such just now, we will be selective in the industry. Well, we have talked about a few cases, for example, home furnishing, catering, fashion, apparel and so on. There are some specific case studies in each industry that can help us generate benchmarks. So apart from some of the customers which are already cooperating with us, I think the benchmark cases will be very obvious. We will look at whether the customers have benchmark effect, fashion, clothing, F and P, home furnishing, materials and so on. These are our main areas of focus. Thank you. Mini supplement. Well, our selection criteria, when we work on TSO, we want to offer a comprehensive service to customer and we have to look at its brand influence, total volume and investment into private domain. So if we can have 100 benchmark companies working with us and they can generate a demonstration effect, so we will operate private domain and then in the future, we will be able to conclude more methods of operation and then there will be automation of operation. And then the solution can be offered to more and more merchants. In the future, we hope that our merchants can be offered a very comprehensive operating system. So through building the bench for customers, we can accumulate more experience then things can be generalized or transferred to many other merchants and customers. Okay. Thank you, management. Thank you. Next question, Credit Suisse, Kinna Wang. Kinna, please. Mr. Sun, Mr. Cao, greetings. I have one question. In fact, I have two questions regarding hedging. Strategy about hedging, how can you expand the operation? The company wants to enter different verticals including like shopping mall management and other types of management. In the future, do you think competition will be more intense? You may be getting into more different products. So in the future, how are you going to deal with the subsequent competition? My second question is, your first half results exceeded our original expectation in the second half. Or what do you think will be your full year growth in Subscription Solutions and also comparing with the original target, is there any So in the first half, your results were good. Are you going to adjust your targets or revise your target? First question, heading, we want to develop more industries. We want to go for different industries. We want to deepen our penetration into each industry in supermarkets, convenience stores and so on in the past, having mainly offer ERP products And in business and marketing, they did not have much advantage. For us, I think we also faced some competitors. They also offer relevant service to them. With the integration of Hedging and Waymo, I think it is very helpful to our future product creation because when it comes to mall department stores, convenience stores and supermarkets, On the marketing end, well of course our partner capability is a lot stronger than other competitors in those areas. So our products can connect to ERP, the mid to back office. And then with our marketing and sales capabilities, data, transaction capabilities, so all these can be seamlessly integrated with the products. So in the future, I think hedging is going to be very competitive in products. And this will help us in developing the industry. Of course, when we enter each industry, there will be some potential competitors, but we will use our ecosystem advantage and our brand and our existing product capabilities and customers that we are serving to enhance our own competitiveness. In the future for each industry, I think we'll be facing similar problems. So our new commercial operating system and parts after being built will strengthen our product competitiveness. In the second half, if you talk about our estimates, we have the moving up market strategy. I think it is going to be very effective for advertising. This year, because of the macro environment, advertising did not do very well. I think growth will not exceed 20%. We cannot come up to very optimistic estimates, so we will maintain our original estimates. EBITDA can supplement, right. We will not revise the full year estimate even though our first half results exceeded expectation. However, we anticipate that because of the macro situation and pandemic and some industry impact, I think some of our actions will be subject to impact. So in August, we are now in August, and I think the whole year target given three years ago should be achievable. We will not revise the estimate. At the end of the year, we will have further communication with investors. Thank you. Due to time constraints, we will now conclude today's call. On behalf of the Weimar management team, I would like to thank you for your participation in today's conference call. If you have further questions about Weimar, please feel free to contact the IR team. Thank you.