Earnings Call: Q2 2020

Aug 17, 2020

Hello, and thank you for standing by for jd.com's 2nd Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. Today's I would now like to turn the meeting over to your host for today's conference, Ruiyu Li. Thanks, operator, and welcome to our Q2 2020 earnings call. Joining me today on the call are Mr. Richard Liu, JD dotcom Group CEO Mr. Lei Xu, CEO of JD Retail Mr. Zhenghui Wang, CEO of JD Logistics Sandy Xu, our CFO and Professor Liang, our CSO. For today's agenda, our CFO, Sandy will discuss highlights for the Q2 2020 and other management will join the QA session. Before we continue, I refer you to our Safe Harbor statements in the earnings press release, which applies to this call as we will make forward looking statements. Also, this call includes discussions of certain non GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non GAAP measures to the most directly comparable GAAP measures. Finally, please note, otherwise stated, all figures mentioned during this conference call are in RMB. Now, I would like to turn the call over to our CFO, Sandy. Thanks, Ziyi. Hello, everyone. Thanks for joining us today to discuss our Q2 results and how we position our business. Stepping into the Q2, we were facing a constantly evolving macro environment with unprecedented complexity and opportunities. We are proud that JD played an important role to help our suppliers and users in this extraordinary time and contribute to the society. Extra domestic consumption from the disruption brought by the pandemic, both the release of pent up demand and a structural shift of consumers purchasing behavior from offline to online have added to our strong performance in the quarter. More importantly, we came out of the quarter stronger than ever before. Our long term strategy of investing in supply chain based technology and logistics capabilities our long term focus on customer experience and care for employees and our persistence to expand product offerings to all categories all have foreign fruits and made our mix different farmers more sustainable and resilient. As a result, we delivered solid financial and operating results in the Q2 and achieved a number of important milestones. 1st, we successfully completed our secondary listing on the main board of Hong Kong's staff team on June 18, on the 17th anniversary, with total post approval proceeds of approximately HKD34.6 billion dollars or $4,500,000,000 We trust that our secondary leasing in Hong Kong marks an important step for us to provide favorable conditions, supporting the execution of our long term strategy and further enhance our shareholders' performance. 2nd, we recorded a record high anniversary promotion with accelerated growth. 3rd, over 80% of our new users added in the quarter came from lower tier cities, the highest level on record. Our net revenue grew by 33.8% in the 2nd quarter, expectations. These were highlighted by our successful June 18th anniversary promotion. Our general merchandise grew by 45% year over year, the highest growth rate for the past 9 quarters, led by our staff categories, such as supermarkets and healthcare. Electronics and Home Appliance recorded an encouraging recovery with 28% year over year growth as continued to gain market share amid the weak industry performance. This was supported by our ability to offer value for many products, build the scale advantage of our Taking a deeper dive into the performance of different categories, We want to highlight the key competitive shift in our product category mix. Our supermarket category, including FMCG and fresh produce, became the single largest product category by revenue in the first half of twenty twenty, surpassing mobile phones, home appliance and computer, our former champion category. We expect the leading position of our Supermarket category to be further enhanced and accompanied by stronger user engagement. Once again, this steady shift demonstrates our strengthened brand recognition and consumer perception as an advertising store with increasingly broader selection. Particularly, consumer demand for fresh produced products continued to be robust in the second half, leading to an over 140% growth in the number of sales orders year over year and strong top line growth following Q1's job. In addition, we are delighted to see that our supermarket category continues to realize their benefits, improved operating efficiency with our in house fulfillment capacity and collaborated effectively with 3rd party partners under our omni channel strategy. Turning to our JD Health business. Not only our online pharmacy sales saw strong top line growth in Q2, but also the online medical competition service volume delivered over 400% growth year over year in the first half twenty twenty. More and more users are getting to know and accustomed to this new service on our platform. Overall, we are encouraged to see customers are converting to our platform for a broader selection of products and services, especially those we use to purchase offline. And we note the customer behavior shift has been largely sustained in the post pandemic period. Our top line growth was backed by sustained improvement in user engagement, especially from the lower tier CC users. Our annual app development in the past 12 months reached a total of RMB417 1,000,000, up 40% from a year ago, the highest growth rate in the past 11 quarters. We also have more than 30,000,000 net additional customers, the largest increase in our history. I'm particularly encouraged to see that we attracted over 80% of the new customers in Q2 from lower tier cities, a step up from the previous quarter. In the meantime, our mobile DAUs grew 30% year over year in June. Our fulfilled gross margin came in from 8.3% for the Q2 of 2020, compared to 8.6% in fiscal last year. Excluding the impact of one time benefit from the the nationwide relief of social security contributions for Quickly, partially offset by the category mix shift. With our effective cost control measures and continuous improvement in operating efficiency, Marketing, R and D and G and A ratio in the 2nd quarter improved by 36 basis points, 69 basis points and 19 basis points, respectively, compared to the same quarter last year. As a result, our non GAAP operating income grew 74% to RMB5.6 billion and non GAAP operating margin was 2.8%, up 64 basis points from the same quarter last year. On a segment basis, non GAAP operating income of JD Retail Group increased by 41% to RMB5.7 billion in Q2 with operating margin further improving to 3%, up 17 basis points from the same quarter last year. We also saw meaningful improvement in profitability from new businesses, especially JD Logistics, which turned profitable on a non GAAP basis in the quarter, driven by higher volume higher order volume in the peak season and our technology driven productivity gains that we are able to continuously generate from our best in class fulfillment capacity. Overall, the margin improvements were recorded in both Q1 and Q2 this year, not only give us a glimpse of what we can deliver as we effectively execute our long term user centric synergy with our scale driven business model, but also provided a solid foundation for us to continuously reinvest in new categories that could become our future winners and a productive user growth. Moving to the bottom line. Our non GAAP net income attributable to ordinary shareholders in Q2 grew to RMB5.9 billion from RMB3.6 billion in the same period last year. The increase was mainly driven by the improvement of operating income of JD Retail and JD Logistics. Given the strong growth of our net profit and financial discipline, our free cash flow for the Q2 improved to RMB26 1,000,000,000 as compared to RMB18 1,000,000,000 in the same quarter last year. CapEx was RMB3.4 billion in the 2nd quarter. The spending was mainly for the development properties by JD Properties, offset by RMB500 1,000,000 proceeds generated from the sale of development properties. As of June 30, 2020, cash and short term investments added up to RMB126 1,000,000,000 in total. Our liquidity position is stronger than ever. As a newly listed company on Hong Kong Stock Exchange, we need to comply with regulations and follow the common practices adopted by public companies in the Hong Kong market. Therefore, we will no longer provide guidance on net revenue growth or net income going forward. That said, we remain committed to deliver sustainable growth with steady improvement in profitability in the long long term and create long term value for our shareholders. Let me close where I began by emphasizing the resilience of our unique business model. We are now better equipped with stronger user mind share and engagement, higher operating efficiency and strengthened financial position. We will build on the momentum and continue to invest in our customers and employees, technology and supply chain capabilities for future growth. This concludes my prepared remarks. And we can now move to the Q and A session. Operator, we can start Q and A. Thank you. Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. Our first question comes from the line of Eddie Leung from Bank of America Merrill Lynch. Please ask your question. Good evening. Thank you for taking my questions. Number 1, could you share more color on the competitive landscape of the industry, especially given the past promotional season and then the upcoming promotional season, how should we position JD again as some of the competitors? And then secondly, just a quick follow-up on your mentioning about improving technologies helping your business. Just wondering if you could talk a little bit more on the momentum of growth you have seen in your advertisingmarketing services for new clients? Thank you. This is Zhilai from JD Retail. To answer your question. And first of all, for the question about our 618 grand promotion we held mid of the year. And for this year, this is the most successful shopping festival we held in the past few years. We have not obviously seen a strong growth in our business side, but also we have improved a lot in terms of users' experiences. This has been summarized since we have done a lot of our researches and interviews with other users. At the same time, during these shopping events, we have further strengthened our relationship with our brand partners and suppliers. And all this has resulted in very successful brand promotion events in June. And together with our brand partners, we have invested a lot of resources in promoting this 6.8 grand promotions and we have done a lot of great marketing activities, not only in other main sites, but also in a lot of decentralized traffic platforms. We invested a lot on these. So the sales result is actually beyond our expectations. At the same time, a number of new methods have been taken to boost our sales through live streaming and our class membership, etcetera. And in terms of the competition, we have seen that the users are growing on all the industry and players in this e commerce industry, which has been shown in some industry reports. And we also noticed that there is a very high overlapping of users across different e commerce platforms and there will be less and less users who only choose use only one platform in the future. So I see this as a very normal situation and in this process we at JD we are very confident that there is still a very large space for us to grow our users and our core abilities and our core competitiveness in growing our users existing our very strong supply chains and our good quality services and our unique business model. And in terms of our advertising strategy, Sanjay, we will see in the longer term, we will continue to maintain a sustainable growth on our advertising side to continuously provide better value to our brands and suppliers to provide them more ROI for our budget based on our advertising technologies and advanced And a closer look at performance of our advertising revenues in Q2 is becoming more active and with a higher growth rate than the last quarter, and we expect that this situation will continue. We will now make a very dramatic sources opening of advertising resources on our main sites. However, we will invest further on the technology and invent new advertising products and the condition now for ensuring the advertising efficiencies to drive the advertising revenues on our main And we also like to share with you that we have also carried out some offline digitalized advertising explorations with our partners and the result is pretty good so far. In the future, we'll continue to build up our digitalized advertising ecosystem with a combination of our online, offline, insights and outside resources. Thank you for your question. This is Sandy. I want to add on one point. Actually, if you look at our Q2 advertising drag from the 3rd party commission revenue, because the 3rd party merchants, their resume of work were a little bit slower than the 1P business in the early April in April early May. Thank you. Our next question comes from the line of Ronald Keung from Goldman Sachs. Please go ahead. Thank you. Thank you, Chile. Thank you, Sandy. Thank you, Ruiyu. So congratulations on the strong results and it's amazing to hear that FMCG and fresh has become the single largest category. Could you just share more on your supermarket kind of growth initiatives, your targets there? And particularly, I want to hear about the margins because the JD Retail margin was 3.0 and I believe a lot of mature categories are mid single digits. Just how are we seeing the margin profile for supermarket? And as we aim to grow the scale further, I believe we're sort of not in a rush to aim for margins. But where do we see kind of ultimate margins could be? And particularly for fulfillment and the logistics side, what are the initiatives to drive further improvement in margins for this segment? Thank you. And indeed, in the category of FMCG and fresh produce, we have seen some major profit improvement. And for the reasons of the improvement of the profits, I think there are mainly three reasons. And first of all, it's our increasing market share in these categories and certain brands. This has been blocked by our strengthened cooperation with our partners. And secondly, I believe the scale effect has been taking effect and we have been working very closely with our we have been also improving our fulfillment expense rates. So the fulfillment expenses continue to going down. And thirdly, thanks to our omni channel development, we have been moving some products that fit for our offline sales channels. We are giving them to our offline partners and all these three factors are contributed to the improvement of SMG categories improvement. And in the future, we will continue to step up our efforts to build our JD Super, the online supermarket@kidu.com. So far, JD Super has become the largest retailer in this category online and offline in China. And we will step up our efforts to beat our supply chain ability to help us to provide better services and at competitive price to our customers. And these will be enable us to have a better performance in various sales scenarios and in different platforms. And also we will join hands with GT Logistics to continue our collaboration and investment in the nationwide warehouse network construction and in terms of the cold chains and in all the assets to bring down our fulfillment cost. And we will also strengthen our work on the construction of over 100 of millions of our partners offline to provide our supply chain ability to create more value to all of our partners. This is also the main reason for more and more brand partners reach to strengthen collaboration with JD. This is Wangzheng Hui from JJ Logistics. Just add on a few words about our omni channel solution with TD Logistics. And for this year, we will put our the JD Supermarket business at the core of our development, especially in building more warehouse networks in the lower tier cities to bring more high quality products to our customers in the lower tier cities and let them to enjoy the superior service experience with tt.com. And besides those of our popular services including the same day and next day deliveries, for this year, JD Logistics will continue to collaborate with different cities to provide more faster delivery services. For example, the business in 1 hour depends on different product categories. Thank you. Thank you. Our next question comes from the line of Elisha Yap from Citigroup. Please ask your question. Hi, thank you. Good evening, management. Thanks for taking my questions and congrats on the strong results. I have a question on the seasonality. So wondering if you could describe any different of the seasonality pattern that you have observed over the past one and a half months, right, into the 3Q in terms of the year's this year situation versus the previous year? So have you seen any abnormal strength of these FMCG or even appliance category into the 3Q despite the strong 618 already or strong first half already? Is this 3Q is a bit different seasonality pattern than the previous year? And then quickly, any colors in terms of the ASP and the category purchase for those that are coming from the lower tier city, especially those that you newly acquire this quarter in terms of the basket size and order frequency? Thank you. And indeed, as you've seen that because of the coronavirus situation, we are facing uncertainty situations in the first half of the year. In the Q1, a lot of the consumption demand has been suppressed because of the pandemic and entering the second quarter, thanks to the mid year grand promotion, the JV618 shopping festival, we have seen consumption demand is coming back. Entering the Q3, we also see that across these industries, some categories are not performing well. For example, the air conditioning, the main reason because of diesel, it's due to the weather as well as the real estate industries development. However, under these circumstances, JD has been taking the leading position and larger market share in categories and industries. And at the same time, we also see some categories have been experiencing some strong growth, especially the consumer goods, fresh produce, healthcare products and household supplies, etcetera. And we have seen that the overall in China's e commerce market, the e commerce shopping penetration rate is going up. This enables more and more customers among them, some of them haven't used Internet or online shopping before. They've only shifted their shopping online. And thanks to Jilu's strong capacities and advantages in our supply chain, our superior services and our commitment to provide trustworthy and straightforward services and products for our customers, we have been acquiring an increasing number of new customers on our platform and at the same time we also see a more active engagement from our existing customers on JD's platform. And by looking at the consumption the categories from the lower tier TV customers, they are buying more consumer goods and fresh produce on our platform. In these categories, their op value are relatively lower than the average op value. So also we have realized that the new customers coming from the lower tier city account for a very big amount and very big percentage in the overall new customers we acquired in this quarter. And we believe that through more precise operation of these users to increase their shopping frequencies on our platform by our superior quality services and products and giving more benefits to these customers, we will gradually improve their retention rate and the market size on JD. Our next question comes from the line of Alex Yao from JPMorgan. Congrats on a fantastic quarter. So I understand that you guys will no longer give financial guidance given the Hong Kong listing, but can you at least qualitatively help us understand your second half, particularly Q3 financial outlook? For example, should we expect revenue to decel meaningfully into second half given the positive benefits from the COVID-nineteen and also a high comp into second half? And then from margin perspective, how should we think about the second half outlook given the things will normalize, but the merchant activity will further recover, so advertising revenue potentially will grow faster than first quarter I mean first half. So any color on the second half, particularly Q3 will be appreciated? Thank you. This is Xu Lei. Let me share with you some key working areas we're going to focus on in the second half of the year. And first of all, we will continue to strengthen our opening up of our supply chain abilities. You have seen a number of collaborations on the opening of our supply chains with partners this year and this will continue. And the second is we will continue to deepen our development in the lower tier cities. This is more customer focused, as well as deepening our collaboration with industrial valves in China. This is more phase 2 finding more suitable products for the customers. And nowadays in China, there are over 200 industrial valves across the country and we're identifying some feasible partners with these industrial belts and to help them with their digital transformation, with the empowerment of our supply chains and to design more useful and value for money products together. And we will further strengthen our construction of our omni channel solutions. We position omni channel as an ability or an ecosystem rather than a mere business. So building up the omni channel solution will be helpful for our customers and to help them to on their shopping, they can shift freely among different platforms, no matter it's online or offline, no matter whenever and wherever they shop, they will enjoy the same quality services from jimmy.com. And for our brand partners, the omni channel will be beneficial for them to increase their sales opportunities. And this will also in the long run be helpful for us to strengthen our collaboration in different fronts. And fourthly, we will continue invest in our technology service businesses and strengthen our cooperation with more business partners, enterprises partners. And these will offer new market opportunities through our close relationship with new enterprise partners to increase our revenues. Of course, before that, these needs are long time investment. And we will continue to strengthen our investments in the new categories such as the healthcare, fresh produce, etcetera. And we will also invest further into our traffic platforms, both online and offline and to perform more disciplined investments to ensure ROI. Thank you. I can add some color on the outlook for the second half. As we mentioned earlier, we had stronger controls over spending in the first half year, given the uncertainty in the macroeconomics. So given the COVID-nineteen situation is now largely stabilized in China, we kind of go back to our original business plan for the second half. So I would say the growth the top line growth and the bottom line margin will be largely in line with our original plan at the beginning of the year. So looking at second half and Q3, I would say we see stronger seasonality this year, and we believe the trend will continue in the second half. And don't forget there were some pending demands released in the Q2, especially for large home appliance. So the average growth for first half reached 28%. I would say it is more comparable when considering the outlook for the second half, subject to the healthy recover of our overall consumption. And there were actually some non recurring sales of the COVID-nineteen related prevention and protection products in the first half, such as the face masks and thermometers. So we truly hope these are non recurring business. So taking all these factors into consideration, you can then model an apple to apple outlook for the second half. Having said that, we see very strong demand and user engagement continue in the supermarket consumable products in July, as Julie just mentioned, even without any sizable promotion activities. So we can clearly see the trend of shifting from offline to online is ongoing, especially for the supermarket category and for T Mobile products. So we entered into Q3 with good momentum for user growth, and we will continue to focus on user engagement and the new user acquisition, particularly in the lower tier market. This will form a good basis for the upcoming Q4 promotion season. So looking at the profitability, I want to emphasize that our commitment to steadily improving margin has not changed, but we will continue to invest in new initiatives for future growth. Thank you. Our next question comes from the line of Thomas Chong from Jefferies. Please go ahead. Hi. Thanks management for taking my questions Congratulations on a very strong result. I have a question relating to lower tier cities penetration. Can management comment about our strategy in the second half? And on that front, understand that we have very strong user growth from our main apps. But can you also comment about Jinsea in our strategy in the second half? And then our quick question is about our M and A strategies. How should we think about our acquisition strategies in the second half given that I think recently we have done some M and A? Thank you. This is Xu Lei. I would like to share a little bit more about our lower tier market strategy. This strategy has been working well in the first half of the year, so we're going to continue. The lower tier market has been contributing a lot in our new customers' acquisitions. These have been achieved in several different approaches. For example, our Xingqiu, the social e commerce platform and also the light version or the 3 d version of our app has been driving the new customers from the lower tier cities to JD. And at the same time, as I just mentioned in the last question, we have a certain kind of categories that have been favored more by the lower tier city new users, such as the consumer goods, fresh produce, etcetera. These are also helpful for gaining our new customers in the lower tier cities. And in addition, the decentralized traffic platform have also played an important role to help us acquire more customers from the lower tier cities. So these are in general in total the strategies we have been carrying out to going deeper into China's lower tier cities. And just a few more words about Jinsea. Qingqing is one of the channel we acquire new customers. Actually, our main site is also performing well in acquiring new customers. So here, I just want to share more about Q3. And in Q1, because of the coronavirus situation, a lot of merchants cannot operate normally. So the Jinsea platform performance has been flat, but coming to Q2, Jinxi has been showing a strength in terms of the growth on the users and the scale has been ticking off and being the main contributor to our overall GMV. And at the time the users are growing on Jinxi, we have also seen their repurchase rate is growing, which is a very important indicator for the performance of Junxi. We will continue to perform more precise users operations on Tianqi users and some of them are making a transition over a period of shopping with JD. They are transitioning to our main sites already. And those overall number of merchants on Qingqi platform is the best and merchants on the main site. However, we've seen merchants on Qingqi are very active And they also play an important role. Xunxi's business has been playing an important role to connect industrial bouts, as I mentioned before. These industrial bouts will bring us more and more merchants in the future to Jinxi and Jinxi platform. We reach industrial resources and product. Our goal is to present more good quality products to the customers in the lower tier cities to cater to their needs. This is Johnny. I would like to make a quick comment on JV's strategic investment and M and A. The focus of JV Investment is to expand and extend JV's growth engine by investing into companies that are strategically complementary to JV in terms of scale, scope, capability and transformative business model. The purpose is to create long term strategic value to both parties financially and strategically. In line with JV signal's strategic direction, we remain strong interest in our continued investment in low tier cities, supply chain, technology and service, as well as retail infrastructure. So you may see there are quite a number of investments or acquisitions announced recently, I guess, simply because a lot of these investment activities were delayed because of the pandemic in Q1. So our trends have not changed in terms of merger and acquisition. All right. Thank you. Our next question comes from the line of Jerry Lear from UBS. Please ask your question. Hey, thank you. I've heard quite a bit of discussion about partnerships and decentralized e commerce just now. I wanted to ask specifically about the kind of partnership JD has with Kuaishou or maybe in the future more in the live streaming area. I just wonder what does management think of the partnership so far And what can we do more of in live streaming? Has this driven good user engagement or GMV or anything like that? Just a few data points on the Quizhou partnership. And then secondarily, on logistics, could we see the profitability to the margin improvement sustain or could we see reinvestments in the next few quarters? Thank you. This is Zhu Lei for the question about cooperation with Kuaishou. And this cooperation with Kuaishou is a typical case for JD's opening supply chain strategy. Actually, we have been working with a number of partners on this opening supply chain. The Kuaishou, it's a very attention grabbing platform in the current situation. So actually, our cooperation with Kuaishou has gained a lot of attention. We have started a collaboration with Kuaishou since a year ago. However, our cooperation on the supply chain was reached within a week's time. We can provide the superior supply chain abilities and high quality products and services, which are very beneficial for their e commerce development. So they see us as very important partner. And also Kuaishou has been a favorite favorite traffic platform for a lot of brands. These brands have already conducted a lot of marketing and sales events on Kuaishou with JD joining. They prefer to work with Kuaishou through JD platform because we can provide our overall properties, our services and after sales services and fulfillment abilities and all of these reduce the difficulties for these brand partners to work on this new live streaming platform. Our corporate agreement was raised just shortly before our 618 grant promotion. So our 618 cooperation with Kuaishou focus on 2 categories. 1 is consumer electronics, another is general merchandises. These categories has been supplementary to what Kuaishou already have and Kuaishou is pleased to have us to strengthen their supply chain in these areas. And we see that the convergence of users, our question JD are quite different. So this is also good platform for us to acquire a lot of users. And in June, our collaboration focused on those our self operated products, We have offered 400 SKUs products on Kuaishou's platform of this cooperation with very favorable prices. And in the future, we'll continue to open our SKU selections and more activities together with And in terms of the system integration between JD and Kuaishou, there is still a lot of work we will continue to do to connect the 2 systems, so as to improve agency and experiences together. In particular, there are 2 modes we will continue our collaboration. 1 is joint promotion, similar to the 6.6 live streaming events we did with Kuaishou. And the second is more a daily sales model. We were leveraging star hosts on the Quexue platform to promote more normalized marketing activities together. This is Wang Junk Hui from G and A Logistics. And I will just emphasize that we will always push the customers' experiences and our operating efficiency at the core of our business development. And we have seen in the past few months, because of our increasing user experience and operating efficiencies and our continued investment in technologies and the number of growth of the users, our revenues and scale continue to rise. And we believe this will all drive the profitability of our business in the long Our next question comes from the line of James Lee from Mizuho. Please ask your question. Here. My question is relating to online pharmacy here. Can you talk about general demand that you see in the market? Is it fair to think that most of the demand is happening in the top tier markets? And maybe can you guys talk about plans to expand into lower tier markets? And is it too early to think about that? And secondly, related to that, any new learnings here in terms of user behavior, Any new product or services you plan to roll out to take advantage of the market? And also lastly, maybe a little bit reminder about your differentiation versus other online peers here? Thank you so much. And this is Julie. I would like to introduce a bit about our JD Health business. And as far as we know, JD Health is the largest pharmaceutical retailers in the healthcare industry in China. And more than that, JD Health is a frontrunner or a first mover in the Internet for our healthcare area. The positioning of JD Health is healthcare management system that is built on our advantage of the client chain and focusing on providing medical services and we provide more tax driven solutions for all the customers in their health care related process in the whole life cycle and all stages and the scenarios when they need health care services. So this exhibition and positioning of CityHealth. After the outbreak of the coronavirus, our JD House is growing rapidly, especially usage penetration and engagement on this platform and this high engagement continues at a high level in Q2. And especially in the first half of the year, the Internet online medical consultation volume has increased over 400% compared year on year and the consumers are becoming more and more active on the Geely Health platform. And in terms of the consumer structure, the JD House consumer structure is similar to our e commerce platforms. However, in terms of the online medical consultation services, we have seen that people from the higher tier cities, 1st and second tier cities and young people have a much higher level of acceptance. And what was mentioned that for this quarter JD Health, the China's Nankai University, University has established the 1st Internet hospital model together and we will provide integrated medical services through Internet platforms, including the online payment of medical insurance. I believe that we will have more and more partners and new models on this healthcare sector to provide better user experience for the customers. Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD Com's Yu Li for closing remarks. Thanks, operator. Thank you for joining us today. Please feel free to contact us if you have any further questions. We are looking forward to talking to you in the coming months. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.