Earnings Call: Q4 2019

Mar 2, 2020

Hello and thank you for standing by for jd.com's 4th Quarter and Full Year 2019 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 conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Jia Dong. Thank you, and welcome to our Q4 and full year 2019 earnings conference call. Joining me on the call today are Mr. Richard Liu, JD dotcom Group CEO Mr. Lei Xu, CEO of JD Retail Mr. Zheng Hui Wang, CEO of JD Logistics Cindy Guang, our CFO and Zhong Liao, our Chief Strategy Officer. For today's agenda, jd.comgroup CEO, Richard Liu, will discuss highlights for the Q4 and full year 2019, followed by Simeon Huang, our CFO, and other management will join the Q and A session. Before we continue, I refer you to our safe harbor statement 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 non GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I would now like to turn the call over to our CEO, Richard Liu. Hello, everyone. This is Richard. Since day 1 of the coronavirus outbreak, we have done our utmost to help people in Wuhan and throughout China. Contributing as much aid as possible, we are in a unique position with our supervised supply chain, logistics and technology, and we feel a strong sense of responsibility to provide robust support. Let me make a few moments to introduce specifically what we have been doing and its significance. Just before the Chinese New Year, we put together a team to vertically tasked with leading our efforts in addressing the epidemic. This team had a 4 fold vision: to note protective equipment and medical supplies, establish a dedicated express route to transport relief supplies to assist Hubei province provide support to people in heavily affected areas and offer supportive policies to merchants on our platform. JD took immediate action in donating critically needed medical supplies for hospitals and charity organizations in Wuhan, including a large amount of face masks and protective medical materials that were in urgent demand have shot in supply. In addition to ensuring timely supply and delivery of daily necessary for our maintenance, city logistics opened a dedicated channel for relief materials across the country to assist Wuhan. As of now, we have transported over 50,000,000 items of medical emergency materials. To respond to the urgent needs for prevention and controls request by Hubei Government. JD Logistics applied our advanced supply chain technology and experience and built the supply chain management platform to help manage emergency supplies and ensure their delivery to the front lines in Hubei. At the same time, Geely's next generation technologies such as AI, deep data and IoT have been quickly deployed into a dozen emergency and epidemic prevention solutions to support the work of Hubei, local governments and policies, Ensuring the health and safety of our employees is always our top priority. All OG's frontline employees were provided with masks. Instructions and other protective equipment immediately after the outbreak. Beyond employee care, City Health, for operating with over 30,000 doctors, launched free 247 online medical consultations and psychological consulting services to people across China. Regarding our merchants, we have offered a series of supportive policies, including subsidies, fare reductions, our waivers and other benefits to have them at the time. When SARS occurred 17 years ago, JD was a very small company, but we personally experienced then just how devastating epidemic situations can lead to both businesses and people's lives. That's why today we will do everything we can within our power to serve our customers and our solid society. We sincerely hope the epidemic will be over soon, but regardless of circumstances, we will always seek to improve the service experience for our customers and create value for our customers. This is a brief summary of how we are doing our part to provide aid during the academic. There's one more thing that I'd like to draw our attention to. Today, we have announced that our CFO, Sidney Huang, will retire this coming September. Though this will come as news to you, it's something we'll be planning carefully and are in a good position to action this year. Just a few words about Sidney. His professional expertise, integrity, humility and fairness have all earned great respect. From myself and from others throughout the company, since joining us in 2013. Along the way, we have overcome countless challenges and with this many of JD's most important milestones, including our successful IPO in the U. S. And the remarkable expansion of our business. On behalf of JD, I would like to sincerely thank Sidney for his hard work for the past 6.5 years and wish him and his family all the best. Sandy Xu, who some of you may have met already, is appointed to be a senior successor. Sandy is a seasoned leader with impressive credentials combined with her broad international perspective, I am confident that she will be a great effort for JD going forward. Thank you. Now I'd like to turn it over to Sidney. Thank you very much, Richard, for the kind words. Hello, everyone. Thank you for joining us today. I'll go through the quarterly updates and financial outlook before giving a few words on the succession plan. We are pleased to deliver another strong set of results for the Q4 of 2019. Our net revenue growth exceeded the high end of our guidance, reaching 26.6%, driven by a highly successful single stay promotion season and our previously announced reinvestment strategies focusing on everyday low prices, enhanced user engagement and logistics services in lower tier regions. The strong top line growth was accompanied by robust user growth and strong traffic momentum. In particular, we saw 28,000,000 net additional customers since September 2019, reaching a total of 362,000,000 active customers in the past 12 months. This is our biggest quarterly net addition for the past 3 years. In the meantime, our mobile DAU grew 38% in Q4, the fastest in 8 quarters. We continued to make progress in lower tier regions across China through innovative marketing activities, more diverse product offerings and improved logistics services. Similar to Q3, over 70% of new customers in Q4 came from lower tier cities. Category wise, general merchandise achieved accelerated growth of 37%, the highest growth rate for the past 4 quarters, led by food and beverage, fresh produce, cosmetics, healthcare and home products. Net service revenues grew by 44% year over year and contributed 12.3% to our overall revenues, driven by strong momentum from 3rd party logistics and advertising revenues. For the full year of 2019, our net revenues increased by 24.9 percent to RMB577 1,000,000,000 or $83,000,000,000 and continued to outgrow the industry across most major categories, thanks to the continuously improving and differentiated customer experience. In particular, gross margin gross merchandise excuse me, general merchandise revenues grew by 34% during the year, as we successfully cultivated customer shopping behavior in traditionally offline focused categories, such as FMCG. Net service revenues grew over 44% and contributed 11.5% to our total revenues in 2019, up from 9.9% in 2018, as we leveraged our supply chain and technology capabilities to better serve our business partners. Fulfilled gross margin, defined as revenue minus cost and fulfillment expenses and divided by revenue, remained relatively stable at 7.6% in the 4th quarter compared to the same quarter last year. Despite heavy reinvestments in everyday low prices and logistics service level in lower tier regions. On a full year basis, fulfilled gross margin expanded 88 basis points in 2019, which we believe was a better measure of the improving fundamentals across varying categories, driven by economies of scale and technology based efficiency. Specifically, the fulfillment expense ratio in the 4th quarter was 6.4%, down from 6.6% in the same quarter of 2018. For the full year of 2019, the fulfillment expense ratio improved 52 basis points to 6.4%, the best level in 6 years since our IPO. Even though we have been providing the most competitive compensation benefits to our logistics staff, who have now become the hallmark of JD dotcom's premium service to consumers nationwide. Our marketing expense ratio was 4.8% in the Q4 of 2019, comparable to the same quarter last year. And the full year marketing expense ratio in 2019 was 3.9%, down from 4.2% in 2018, reflecting our more refined marketing strategy with improving ROI. Our R and D and G and A expenses in the 4th quarter were relatively stable compared to the prior year quarter. On a full year basis, R and D and G and A expense ratios improved 9 basis points 17 basis points, respectively, compared to 2018. As a result, our non GAAP operating income increased 125% to RMB704 1,000,000 in Q4. On a full year basis, our non GAAP operating income jumped 3.64 percent to RMB8.9 billion and our GAAP operating income reached RMB9 1,000,000,000, slightly higher than the non GAAP measure as we conservatively excluded the RMB3.9 billion gain on sale of development properties during 2019. This is nevertheless a core income for our logistics asset management business, so it is part of our new business operating income. From the group level, we continue to exclude it from our non GAAP operating income and non GAAP net income due to its relatively non recurring nature at this time. On a segment basis, non GAAP operating income of JD Retail Group increased by 95% to RMB 13,800,000,000 in 2019, with an operating margin of 2.5%, up 92 basis points from the 2018 level. The non GAAP expense ratio dropped to 12.3%, the lowest level in 4 years. Moving to the bottom line, Our full year non GAAP net income attributable to ordinary shareholders increased by 2 11% to RMB10.7 billion in 2019, mainly supported by our expanding fulfilled gross margin and improving operating efficiency, both driven by economies of scale. On the GAAP basis, net income attributable to ordinary shareholders reached a record RMB 12,200,000,000, which included RMB 3,500,000,000 of fair value change in long term investments. Our free cash flow for the trailing 12 months also set a new record of RMB 19,500,000,000, driven by over RMB 20,000,000,000 of operating cash flow and over RMB 2,000,000,000 of net cash flow from our logistics property management business. Our trading 12 months free cash flow was 86% higher than our non GAAP net income in the same period. In summary, gd.com finished a remarkable year with robust revenue growth, solid profitability and free cash flow and most importantly, accelerating user growth. This is supported by our customer centric focus, evidenced by the continuously improving net promotion scores, our number one internal KPI, as well as our persistent investments in tech based infrastructure and in our people. This long term approach to running our business has also proven its unique advantage as we provide aid and support in the battle against the coronavirus during recent weeks. Thanks to our use of investments in our self operated proprietary supply chain and logistics network, jd.com was able to resume full operations very quickly after the Chinese New Year and has been in a unique position to provide broad product selection and uninterrupted timely service to our customers in most parts of the country as people turned to e commerce for daily groceries and other necessities. We are very privileged to have been a unique force in fighting this challenging battle. As a result, while large ticket durable goods and discretionary products have been negatively affected by the outbreak, the consumer stable categories, such as groceries, fresh produce, healthcare and household products are in greater online demand during the past 5 weeks. And JD dotcom was among the few companies and, in many cases, the only major platform that could fulfill the orders. Although these are not the most profitable categories and we also implemented strict policies to prohibit any price increases during this time, We are happy to be in a position to support people's livelihood in this difficult time and become a lifeline for millions of our existing and new customers. Now on the financial outlook. It is obviously difficult to assess given the uncertain nature of the coronavirus situation. However, based on the past 2 months preliminary results, we do expect our net revenues to continue growing in double digits in the Q1, thanks to the resilience of our unique business model. In fact, the level of user activities on our platform has accelerated in recent weeks. Daily active customers and the number of fulfilled orders have both been growing at a faster pace than the level in the prior year. So we hope after the COVID-nineteen is over, we can quickly resume the robust growth momentum as well as the improving margin trend. With the greater consumer mind share we have earned during this turbulent time with our existing and new engaged customers, we are more confident about our market position and our mid to long term growth prospects. Lastly, regarding the CFO succession plan, I would like to point out this is a preplanned and a well prepared transition. Many of you have met with Sandy in the 3 international NDRs we conducted together last year. She is a highly seasoned financial executive and has also earned tremendous respect internally through her outstanding contribution to JD Retail's financial and operational improvement in 2019 as JD Retail's CFO. So I feel fortunate to have been able to pass my role into good hands before I reach 55, the ideal retirement age I had planned for myself. It's been truly an honor to have served kd.com over the past six and a half years and work with so many talented colleagues who have grown the company by over 700% in 6 years. And I want to thank Richard for giving me this invaluable opportunity and for the friendship and trust we have built along the way. This concludes my prepared remarks, and we can now move to the Q and A session. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish Your first question comes from the line of Eddie Leung of Bank of America. Please ask your questions. Thank you for taking my questions. Best wishes to everyone and thank you Cindy for all the help in the past. Just a follow-up question on what you guys mentioned in the past about your strategy in Q4 and perhaps near term before the outbreak. I remember you guys mentioned that in the near term, you would plan to invest your one time gains in the first half of twenty nineteen in sales and marketing in the 4th quarter. So just wondering how much in the 4th quarter was specific because of these initiatives and how much was on an ongoing basis? And then our 2nd year, I also remember one strategy you mentioned that would be to drive the value added services such as advertising revenues and logistic revenues and would not be aggressively pushing for commission raise or the supplier volume rebates and hence potentially the so called commission raise or first party gross margins might not be growing very fast. So just wondering, could you give us an update on the 3P commission rates as well as the gross margin trends of your 1P business given your strategy mentioned that before? Thank you. Okay. Thank you, Eddie. Let me try to answer your question. This is Sidney. Yes, we have mentioned in the prior earnings call that we had a one time gain in the first half. We also had mentioned in our last earnings call that we have spent part of it in Q3, and basically, we have spent the remaining balance in the Q4. So that's why you see that our fulfillment gross margin didn't really expand much as we reinvested, but our operating margin for Q4 still improved from the same quarter last year, because Q4 was a seasonal quarter that we'll be basically giving priority to promotions and giving back to customers. So it's not a quarter to pursue profitability to begin with. On your second question, I don't know if I get your question right, but yes, if you're asking about our strategy between commission and advertising, so we are giving certain merchants on volume based discounts and we are not at a stage to provide or pursue commissions, but rather encouraging merchants to be more active by spending more on advertising, whereby driving traffic and growth. So that strategy has not changed. Could you also talk about the gross margin trend of your 1P business? Similarly, I think you guys mentioned that probably it would not be appropriate to push for higher supplier rebates in the near term as you want them to spend more marketing dollars? Thanks. Sure. Yes. So if it's on gross margin, we are planning this on a full year basis. So if you look at our full year gross margin, it was definitely showed improving trend. But as I mentioned in prior call as well as on this call, we would like investors to pay more attention to fulfilled gross margin, which is gross margin minus fulfillment expense ratio. This is because different categories have different gross margin and fulfillment cost characteristics. Some categories may have higher gross margin, but also higher fulfillment expense ratio. So if you want to understand and also analyze the different products categories or analyze the company's overall margin, gross margin trend, it would be better to look at fulfilled gross margin, which as I mentioned earlier, improved 88 basis points for full year 2019. Thank you. Your next question comes from the line of Ronald Keung of Goldman Sachs. Please ask your question. Thank you for taking my question management and congratulations on the strong results for Richard, Xu Lei, Wang Zhang, Sydney and Naozhong. So my question would be on the virus impact and kind of the longer term implications of that. So we've heard some of the near term strength in user growth. And just thinking on a longer term perspective, what's our strategy in retaining these users, particularly maybe for some first time users that came to your platform over the past month buying JD Supermarket and buying groceries? What's our strategy in retaining those customers for long term growth? And would management aim to provide maybe a full year profit guidance? I'm thinking, is it management plan to maybe guide this only after settling of the virus outbreak? Or any color on the full year profit guidance would also be appreciated. Thank you, management. Sure. Yes. So let me take a first shot and then see if other management will have anything to add. So on the long term outlook for how we can leverage this increasing user base, our strategy has always been the same, is to provide differentiated customer experience through our everyday low prices, through our best in class service level, through expanding product categories and better interactive user engagement. So that strategy has never changed and we do hope through this latest event, through this coronavirus outlook, some of our advantages becoming more recognized by our consumer base. So, this is you will never exactly know what will happen, but on the other hand, we do become definitely more confident in our ability to attract and retain our customers. And then on the margin, as I mentioned earlier, we do hope once the coronavirus situation stabilize, we will resume our increasing margin trend. So yes, we will be giving the margin full year margin outlook once we have better clarity on the corona situation. And the trend will be consistent for the periods post the coronavirus. Let me share with you some observations we have seen during this coronavirus period on the performance of our businesses and our future prospects. And indeed, this coronavirus has the market has taken a hard hit. There is a lot of challenges. For example, the consumers' demand has been approximately limited for the short period of time. However, we also see some good signs, such as we see more owned customers are returning to our platform and some inactive users on our platform are becoming more and more active. We are weakening them up. And from the current traffic structure, we can see that there are more and more new e commerce. New users are being more active and doing repeated purchases on our platform. And in the future, by leveraging our refined operating with these existing and new users to improve their users' experience and increase their stickiness with our platform. And also, because of the epidemic situation, we have fully demonstrated the competitive advantage of our business model. More and more merchants have realized the significance through a strengthened collaboration with us. We have been working more deepened in terms of stocking their products in our warehouses and working to develop the omni channel collaboration. And all this effort has been accelerating after the epidemic. And in terms of the categories, we see a very fast growth in the categories of consumer goods, fresh produce, and health related products. And through this epidemic of fight, we believe that more and more people, including the customers, industries, even the government, will pay more attention on the significance of the Internet and e commerce can play into stabilizing this market, especially for the fresh produce and health related categories And through our services to provide high quality and low cost services, we will provide more value to the society. Your next question comes from the line of Jerry Liu of UBS. Please ask your question. Hi, thank you. And it's Sidney. I wish you all the best on your upcoming retirement. My question is still on margins. First is in the Q1, just given the virus outbreak and some of the relief programs we have, where should we expect margins? I know this is a bit of a one off situation. And then if we look longer term at a more normalized margins, can we talk about what will drive JD Retail fulfilled margins higher and also an outlook on logistics margins? Thank you. Okay. So maybe I'll talk about the short term and long term margins on retail and then maybe Zheng Hui will talk a bit on the logistics side. So yes, Q1 is very difficult to assess given during the epidemic. Obviously, we were we spared no cost, no effort to support the local people in Hubei, for example, donated a lot of materials, provided logistics services for free. So various initiatives clearly will impact the bottom line. But on the other hand, based on the current situation, actually, we do believe our margin situation, while not as good as obviously in the prior year quarter, but we should perform relatively on a relative basis compared to other companies in general that we should do relatively better. That's all I can say at this point. So I don't think you need to worry about dramatic losses. You don't need to worry about too big volatility, but there is clearly some negative impact, but we are holding up relatively just relatively well. On the long term, we continue to drive growth, drive at the same time, drive our scale. And as we communicated in the past that with the scale and customer base that we can have more creative ways to enhance margin, most likely from our better relationship with the suppliers, with customized products, as Xu Lei mentioned in the past quarters. We can do more of those direct from factory to consumers, actually in our mature categories. And we have done a lot of that, made a lot of progress in 2019 and we expect to make more progress this year. So that will be 1. And then 2 will be on the logistics side with the scale economies, we can also have better and better unit economics on the fulfillment side, so we can drive fulfilled gross margin. And as Oki just already mentioned, the epidemic situation is still ongoing. As all of you have already seen that JD Logistics has done tremendous job in fighting against this epidemic. No matter if from our CSR responsibility or our fulfillment commitment, we are doing our best. It seems that tens of thousands of our JD Logistics staff has been working relentlessly and stay in their position to fulfill all the orders to our consumers, including those preventative medical supplies and emergency supplies to the epicenter of Hubei province. And at the same time, the health and safety of our employees is always our top priority. Since the outbreak of the epidemic, we have immediately supplied all kinds of preventative equipment to our frontline employees. As we leave, as the epidemic situation is getting better, more and more customers will be our brands and reputation will be widely recognized by more and more customers, and this will ensure our longer term sustainable value and growth. As we have done compared with 2018, for 2019, we have been made a lot of improvements in our margin. And for this coming year, we will do the same to improve our margin. Thank you. Your next question comes from the line of Thomas Chong of Jefferies. Please ask your question. Hi, good evening. Thanks, management, for taking my questions. I have a question about JD Logistics. Can management comment about our future strategies in expanding our competitive strength compared to peers? And my second question is relating to social e commerce D and C. Can management talk about our target for this year And how we should think about MAU and the annual customer growth for this year? Thank you. And in terms of the JT Logistics market positioning, we have positioned ourselves as a comprehensive logistics solution provider with the supply chain at our core, and this has been based on our nationwide 6 major logistics networks. And all these make us very different from other logistic players on the market. And we have 3 purposes and identifiers for our business models. And for the first, we strive to provide the premier and the best usage experience for our customers. And secondly, by leveraging our integrated logistics solution with our warehousing and our deliveries and together with our transaction flows, we will provide we will shorten the link between the products to reach our customers and improve the link the distance of the link as much as possible. By Q4 in 2019, we are managing over 16,900,000 square meters of warehouse across the country. And thirdly, which take us apart from other competitors is that our logistics and business growth is driven by our technology based on supply chain technology. And based on the three points I just mentioned, that enables us to provide whole year very sustainable and good quality services to our customers and our clients even in during these epidemic turbulent times. In the future, we'll continue our competitiveness in all these areas, especially to enhance user experience and bring more value to our clients. Thank you. This is Zhu Lei. I will answer your question about the social e commerce. And on the racing platform, we have the 1st tier and the 2nd tier access. For the 2nd tier access, it's reflected the Qindong Shopping tab, which is extension actually extension of our main site model. And for the 1st tier entrance point, which we have already revamped in the last quarter and rebranded as Jinxi platform, which is a channel we targeted mainly to the lower tier markets. And through a few years of development on Jinxi platform, before the epidemic outbreak, the sales the orders on Jinxi platform has exceeded 1,000,000 every day daily. Daily orders have exceeded 1,000,000 orders. And we have seen that most of the new customers coming to Jinxi platform are from lower tier cities. Their shopping behavior is more like social interactions being more positive in shopping decisions and have a very high conversion rate. And however, compared with the other main site users, Jinqi platform's new users in terms of the stickiness and their repeated shopping tendencies are still relatively low. And in the future, in addition to the new customers' acquisition efforts we will do on Jitsi platform, we will also pay more attention on the whole life cycle of usage experience on this platform. And besides the users' differentiation, there are some other differences compared with our main site because all these shopping behaviors are based on social and e commerce engagement through those more interactive marketing tools. This will help us to reach further to those new customers in the 3rd to 6 tier cities. And the second difference is the Jinxi platform will be helpful for us to extend our products in the long tail and helped us to find new supply chains. And so far, we have collaborated closely with the manufacturers from over 100 industrial valves. And in the future, we will develop this number to 1,000 industrial valves. And different from our existing supply chains for the main site region, most of the suppliers are from the selling locations. The Tianqi platform supply chain will be mainly supplied by those industrial belt, which is the manufacturer and the producers. So because of this difference, in the future, we will work more closely with JG Logistics to fulfill the whole process of supply chain. And also, we have observed a very explosive growth of the mini apps on the Weixin platform. So, in addition to developing our own mini apps on the Weixin platform, we will also leverage the advantages of our technology and our products to be more interactive with other mini apps on WeChat. Thank you. Thank you. Your next question comes from the line of Tina Long of Credit Suisse. Please ask your question. Thank you, management, for taking my question and best wishes to Sydney. I have two quick questions. The first one is on the Q1 guidance. So we guided for at least 10% revenue growth. Can we get a little bit more details splitting like categories as well as 1P versus 3P because it seems that because of the logistic constraints, probably some merchants are having difficulty selling products. So are we also giving them some support? And also would that impact the revenue growth from the 3P part? And second question is on the logistics as well. So can you probably give us update on the order the percentage of order from external orders as of 2019 as well as probably our target for 2020? And in terms of the Logistics segment margin, because in Q3 2019, we have already achieved OP margin level breakeven for that particular quarter. So probably can you give us some update on the full year margin level or the margin level for logistics part and as well as 2020 targets? Thank you. Okay. Thank you, Tina. So for Q1 guidance, at this point, it's we sort of mentioned some of the FMCG categories, fresh produce, home products, healthcare products, these are the categories growing much, much faster than usual and we are actually very strong in all of these categories from online platform perspective. So we have seen a lot of growth, a lot of new users coming into these categories. So this is what we have seen so far. Now, the coronavirus situation in March is still unknown. So we have tried to take into consideration the potential downside, but so far, we've been doing relatively well, again, just on a relative basis. And we guided double digit revenue growth, so that's mainly on our 1P business. 3P, depending on the type of merchants, obviously, if the merchants relying on 3rd party logistics, then it would be very difficult at this point for them to fulfill. And if they have used JD Logistics, then their operation is much less impacted. So that's basically on the Q1 guidance. On the logistics, we have not disclosed the order numbers in 2019 and also outlook for 2020, because the number of orders have become very depending on the type of products and also now we have 2 platforms of both our main app and also our Jinxi. So the characteristics of the order volume are very different. So when you look at the number of orders, it actually doesn't help providing useful information unless you actually dig a lot deeper into different types of the orders. So I think especially with the social commerce, what I can tell you is for on Jingqi, for example, the number of orders are very large, but average ticket size is very low. So you really have to I think, in the end, you look at the revenue, look at the GMV contribution. And on logistics margin, we also look at on a full year basis. So in Q4, we also made some extra investments in customer experience, especially in the lower tier markets. And we also enhanced the service level across the country. So Q4 was on a relative basis. We did make some extra investments, but on a full year basis, as Zheng Hui mentioned earlier, we saw very meaningful improvement on logistics margin, and he also expects the margin will further improve in 2020. Okay. Thank you. Your next question comes from the line of Alicia Yap of Citigroup. Please ask your question. Hi. Good evening, management. Thanks for taking my questions. Congratulations on the solid results. And Cinnie, congrats on your planned retirement and also congrats, Sandy, for taking on the new role. My questions is some follow-up questions on the Q1 top line guidance. So Simeon, just wanted to make sure your 10% at least, 10% growth is only based on 2 months of the indication that you could see until yesterday and you have not factored in the growth potential in March? And then just on roughly given advertising, will advertising be negatively impacted in the Q1? And should we assume is it fair to assume electronics will be the only category? So the electronics and appliance will be the only category that experience a year over year decline. The rest of other categories will actually still have the year over year growth and maybe some category will exceed the growth rate that we experienced in the Q4? And just lastly, similar on the top line is that, I understand you won't give guidance beyond 1Q, but given the demands and the softness in the big ticket item likely to be temporary, do you expect a strong pickup in the second quarter, especially with your June 2018 promotional campaign, especially for those big ticket item that is delay purchasing? Thank you. And overall, we have seen during this epidemic period of time, thanks to our 1P business, the advertising business actually see a quite strong growth. Secondly, since last year, we have been working more closely with some of our merchants and to support their warehousing and stocking collaboration with us. And this has already been done in early 2020. And this has also enabled us to enabled the 1P business and products to have an amazing performance during this epidemic time. And for most of our suppliers and merchants, most of them are midsized or large companies. So relatively speaking, their immunity, their ability to increase epidemics, especially their supply chain, it's more resilient than those SMEs. And on the advertising industry, we have seen overall across the country, this industry has taken a hard hit and this loss has already been reflected. However, thanks to JD's business models and our advertising business is very closely related to our sales, and we also leverage our advantages of our sales operated model with our merchants. We have seen a strong advertising demand from our 1P merchants during this period of time. And in the specifically the category of home appliances, as many of you have seen that their performance has been quite negative in this special time. However, there are 2 good sites we can see in this category. First of all, we believe the consumers' demand for home appliances are still there. This has already improved by some of our surveys and interviews with our customers. And we believe as the epidemic situation gets under control, the demand from consumers will come around. And indeed, there are bigger challenges for those home appliances that need to have the home delivery services and installations. But according to our statistics, as the epidemic situation is getting better, for some regions, the need for these home appliances has been coming back and this will be on a better track as the situation gets under control. And in 2019, we do see the growth performance of the home appliances across the industry is not satisfying. However, the growth in this category on Geely's platform is much higher than the whole industry. Though this category has been suffering from the more challenges and difficulties during this epidemic time, we will make some adjustments. However, we are confident that there will not be negative growth for the year. Let me also add a couple of data points. So because Alicia, you actually were referring to electronics categories and the concern whether it would be a negative growth for the in Q1. While Xu Lei mentioned the large appliances were negatively affected, but there are actually some of the small appliances, such as those used in kitchens, we're actually doing quite well as people now all stay home and cook their own food. And also, another bright spot is the computers and laptops because now students are all staying home and studying remotely and we actually saw pretty healthy demand for the computers and the laptops. So I do not see the electronics as a whole category would be negative in Q1. In fact, we should see we should still see positive growth even for electronics during the Q1. All right. We are now approaching the end of the conference call. I will now turn the call over to JD dotcom's Jiadong for closing remarks. Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.