Earnings Call: Q3 2015

Nov 16, 2015

Earnings release

And thank you for standing by for jd.com's 3rd Quarter 2015 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, Ru Yu Li. Thank you, operator, and welcome to our Q3 2015 earnings call. Joining me today on the call are Richard Liu, Founder, Chairman and CEO and Sidney Huang, our CFO. For today's agenda, management will discuss highlights for the Q3 2015. Following the prepared remarks, Hao Yu Xian, CEO of GDMO, will join Mr. Liu and Mr. Huang for the Q and A session of the call. Before we continue, I refer you to our Safe Harbor statement in the earnings press release, which apply to this call as we will make forward looking statements. Also, this call, including 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 the figures mentioned during this conference call are in RMB. Now, I would like to turn the call over to our Founder, Chairman and CEO, Richard Liu. Thank you, Rui, and welcome, everyone. We are pleased to announce another strong quarter of growth and progress. Jd.com has always been the leader in bringing Chinese consumers the best brand with the fastest, most convenient and value free shopping experience. And with our world class nationwide logistics coverage, I'm proud to say that over the last 2 months, nearly 90% of jingdong.com direct sales orders were delivered on the same or next day. And jd.com mobile shopping experience continues to be the envy of the industry. On November 11, more than 70% of orders were placed through our mobile platforms. As you may have read, we recently made the decision to close our C2C platform, taphare.com, as of December 31. We have worked very hard to develop paipay.com, but at the end of the day, we have found that it is impossible to control counterfeit on our C2Cecommerce platform in China. The simple fact is that only a pure B2C direct sales and a marketplace platform can deliver a reliably high quality customer experience that is up to gg.com standard. Thank you for dialing in today. I will now turn the call over to Sidney. Thank you, Richard, and hello, everyone. We're very encouraged by our top line growth in the Q3 despite of intensified competition in the industry. Excluding piperi.com, our year over year core GMV growth was 76%, a very strong showing in light of the relatively slow consumption growth during the Q3. This quarter also represents a more apples to apples comparison than the previous quarter as we launched our mobile access on WeChat in late May of 2014 and our mobile QQ in early August last year. Our net revenue growth was 52% in Q3, above the midpoint of our guidance. As we cautioned on our last earnings call, the slowing macroeconomic condition could impact our business, although the extent of such impact has been relatively small in the 3rd quarter. We continue to be confident that with our differentiated value proposition and a better customer experience, jd.com is in a better position than our competition to weather any macro headwind. During the Q3, our active customer accounts and average orders per customer have both seen healthy sequential growth over the seasonally strong second quarter. Our GMV composition was largely consistent with the prior quarters. Since we are discontinuing our In the Q3, our core GMV from general merchandise categories grew 98% and accounted for nearly 49% of total core GMV during the quarter. Apparel and footwear continued to be the largest general merchandise category with triple digit year over year growth over a very strong prior year quarter. Other fast growing key categories included home furnishing, food and beverage, cosmetics and sporting goods, all growing at triple digit rates. Core GMV from our marketplace business grew 121% in Q3 and accounted for nearly 45% of our core GMV during the period. Sequentially, it grew 13% over the seasonally strong Q2. A couple of highlights on our specialty business lines. First, our flash sales business. Launched in early 2014, saw its GMV growing over 300% on a year over year basis and contributed more than 1% of our total GMV in the 3rd quarter. Apparel, cosmetics and accessories contributed the bulk of the business. 2nd, our cross border business launched in Q1 this year also saw significant momentum with a sequential growth rate of over 100% compared to the seasonally strong second quarter. Key categories included baby products, packaged food and cosmetics. Our direct sales revenues grew 48.5 percent year over year, led by food and beverage, cosmetics, mobile and home appliance categories. Services and other revenue grew 111% year over year, an acceleration from the 2nd quarter growth. This triple digit growth rate demonstrated the strong momentum of our marketplace business and healthy monetization of the platform. Our non GAAP gross margin improved to 13.4%, up from 12.2% a year ago. As a result of higher GMV contribution from the marketplace. Non GAAP gross margin on direct sales revenue declined slightly on a year over year basis, mainly due to short term brand driven competition in the mobile device industry, where several brands are selling their products at near cost prices, which in turn temporarily affected the retail margin in the Q3. We believe such a brand driven competition is short term in nature, and we expect the mobile device gross margin to stay low in the Q4, but will recover in 2016. Non GAAP fulfillment expense ratio was 7.7% in Q3 compared to 7.2% in the same quarter last year. The higher fulfillment expense ratio was mainly driven by our investment in the O2O initiative and the lower average order value as a result of higher revenue contribution from general merchandise categories. The non GAAP marketing expense ratio was 3% in Q3 compared to 3.6 percent in Q2 and 1.9% in the same quarter last year. The year over year increase was mainly driven by increased spending for the new business initiatives in Internet Finance and O2O. Our non GAAP R and D and G and A expense ratios increased 22 basis points and 15 basis points, respectively, compared to the prior year levels, reflecting incremental investments in our new business lines. Altogether, our non GAAP net margin was 0.1% in the 3rd quarter compared to 1.3% in the same quarter last year. However, if we look at our core JD Mall business, the non GAAP operating margin was similar to the prior year level. So the decline in group level operating margin was mainly driven by the investments in various new business initiatives. Now let's discuss our cash flow. Our Q3 adjusted free cash flow was slightly negative. This is largely due to timing difference in our payable schedule and higher CapEx during the quarter. The accounts payable balances The accounts payable balances stayed relatively flat as of September 30 as compared to June 30. Recall we had a very large cash inflow in Q2, partly driven by a higher payable balance versus the previous quarter end. As the turnover days are calculated using the simple averages of the beginning and ending balances in the quarter, there is a delayed effect of the higher Q2 ending balance. As a result, the accounts payable turnover increased to 52 days in Q3, even though the actual payable balance was flat. To minimize the impact of these operational timing differences, we could look at the cash flow for the last 12 months, which would have less volatilities. We continue to expect our LTM free cash flow to be positive, excluding impact from Internet Finance. As disclosed in our Internet Finance business continued to grow during the Q3. Cash outflow totaled approximately RMB 3,600,000,000, including RMB1.6 billion to consumer financing and RMB2 billion to suppliers and merchants. As mentioned on our last call, given the increasing cash outflow from this business, we started securitizing the loan portfolios. In October November, we have completed 2 tranches of the consumer credit asset securitization, totaling over RMB2.1 billion in proceeds. Our first supplier credit securitization is also underway and expected to close in the near future. Looking into 2016, we expect the Internet Finance business to be self funded without any further outflow from the group. Now let's discuss our financial outlook. We expect our Q4 net revenue growth between 47% 51% on a year over year basis. This guidance reflects the solid growth momentum in our e commerce core business, while incorporating some level of conservatism given the competitive dynamic and uncertain macroeconomic condition. For the non GAAP bottom line, we maintain our previous guidance of between breakeven to negative 0.5% for the full year 2015. This concludes my prepared remarks, and we can now move to the Q and A session. Operator? The question and answer session of this conference call will start in a moment. In order to refer to all callers who wish to ask questions, we will take one question at a time from each caller. Your first question comes from Alicia Yap from Barclays. Your line is open. Please go ahead. Hi, good morning and good evening, Richard, Cindy and Howie. Thanks for taking my questions. I have a quick question regarding I think JD So can you give us some colors on the progress of these? Any meaningful contributions to GMV in the future that you would expect? And then related to that is that I wanted to get a sense, did the Almeno, the weather has any impact to JD merchandise sales in general and then particularly apparel got impacted? Thank you. Hi, Alicia. This is Haoyu. As far as JD Worldwide, I think so far we've opened 7 country malls on JD Worldwide. And we're seeing pretty good growth momentum. As Cindy just mentioned in his prepared remarks. If you look at Q3 versus Q2, we're seeing 100% growth, albeit on a small scale. It's not a very material part of our GMV yet, but we expect to grow into a bigger portion of the business. As far as weather, we haven't seen any meaningful impact on our apparel sales. I've talked to my team recently, and we've just had a pretty successful 11eleven sales event and the apparel category grew very healthily. So far, we can't tell any meaningful impact of the weather. And just add a comment on just overall global brands growth rate. We actually looked at during November 11 shopping promotion during the 12 day period, out of the top 300 brands, the international brands actually grew faster than the domestic brands. So it's we have seen very, very encouraging results from our global brand expansion. Your next question comes from Eddie Leung from Merrill Lynch. Your line is open. Please go ahead. Hi, good evening. Thank you for taking my question. My question is more about your logistics services. I remember last quarter you mentioned that because the demand for cash on delivery started to reduce, So that affected the proportion of merchants using your logistic services. So wondering if you could give us an update on that front. And just a follow-up question. Could you also give us an update on your logistic coverage in the rural areas? I want to get a sense of the progress. Thank you. The percentage of cash on delivery is still declining. In a sense, it's a very good news for our business because that will reduce our cost and also increase the improved efficiency of our last delivery employees. But it does impact the percentage of parcels, 3rd party parcels handled by us. So that continues to be the case. And we are still working with our merchants of different categories to prove to them that our logistics services not only help them to improve efficiency, reduce cost, but also help them to improve revenue to drive more sales on JD, but this continues to be a long term effort. And second question is coverage of rural, right? Yes, coverage yes, we continue to penetrate lower tier cities. Now, the latest number shows we are already with our own employees, we are already covering over 2,200 districts and counties in China. And we now cover now 90 I think 90% of the parcels delivered by us are actually delivered on the same day or next day. And we have a few other programs going on. One is to penetrate lower tier cities, major appliances category, because that's a pretty special category that needs special handling. And we have a partnership program called Jingdongbang. Now it's already in over, I think, 1200 counties. That's where we have these partnership programs and it's driving a lot of our major appliances sales. And Richard mentioned in previous calls that we have the program, where we hire these agents, representatives in villages to help us drive sales. And we passed the 100,000 mark as of Q3, I think, and they're helping us. It's still in the early stages. We're still training them. They're still learning how to promote JD neighbors and the villagers. But it's we're still putting a lot of effort behind penetration to low tier cities. Your next question comes from Erica Poon Werkven from UBS. Your line is open. Please go ahead. I do apologize. Your next question comes 1st of all, I was hoping you could give us maybe some more explicit update on JD Daojia. Maybe you can talk to us about scale and what the impact of margins might be this year and going forward? And then secondly, I'm not sure if our calculations are correct, but have we sent a pretty significant increase in return rates on the business in the Q3? And if so, could you give us little color? Thank you. So we started our Baoxiao business this April. We have a dedicated team working on this. And up to now, we have over 10,000 stores on our platform. And we already have over 300,000 registered crowdsourcing delivery employees non employee delivery personnel. And on Double 11, they delivered over 500,000 parcels for JD. And we're growing the business by over 30% month by month. It's still a in terms of GMV, it's still small compared with JD Mall. We're still operating at loss as all the players, OTOO players in China do, but the loss is at manageable level and lower than industry level. Yes. And then let me answer on the return rate. The return rate has been fairly consistent with prior quarters. And if you were asking about the difference between GMV and revenue. And on a year over year basis, there was a decline, as we explained before. But on a sequential so the year over year decline was partly due to the mobile expansion and partly due to payment success rate. But I think both have seen improvement on a sequential basis over the last couple of quarters. Your next question comes from Erica Poon Werkhun from UBS. Your line is open. Great. Thank you. Can you share some additional color on Singles Day such as categories and basket and how much traffic was coming from WeChat, etcetera? And what's that implication on your Q4 gross margin of the mix shift between 1P and 3P and also the product mix? And also wanted to check whether you've seen any meaningful changes in the competitive landscape for large home appliances? Thank you. We have disclosed a lot of information post November 11. We mentioned a few categories, such as 3C category, home appliance, both growing at triple digit on a year over year basis and also for food and beverage, growing at an even faster growth rate. So overall, we saw growth rate across all categories, very actually very exciting for the period. So but on the other hand, it's a short period of time out of the Q3 Q4 overall volume. So it doesn't really it's not necessarily indicative of the full quarter performance. Just to add some qualitative color. DASQ side tend to be bigger on Double 11 or doing sales because other sales are actually has a certain amount, research amount, we give you some cash back. So basket size tends to be higher. And I think we in our press release, we did talk about just about half of the new customers, new buying customers on that day actually came from WeChat and Mobile QQ. So it's increasingly becoming a major source of new customer position for us. And also in Q2 in Q4, because it's a big season for Atero, so you tend to see faster growth of 3rd party versus 1st party in Q4. And you also mentioned major appliances. I think we've mentioned that major appliances also had growth during the 11 day sales event. And I think we our leadership position in e commerce in this category, major clients category is probably unrivaled at this point. So Richard wants to talk more about So JD has long established its leadership position in electronics category overall, and we also are now very strong in general merchandise, especially after this round of sales. Our sales in general merchandise is probably one of the biggest in China among the all the offline and online retailers. And apparel is probably one of the last categories we will establish leadership position eventually. And although competitors have this strategy versus brands and merchants, what I can tell you is very few, maybe a handful of brands didn't participate in our sales event, this Double 11. Even these handful of merchants, they told us that they will stay on our platform after Double 11. So the management is fully confident that we will be a leader in the apparel category. Yes. In fact, the same apparel brands mentioned that post November 11, they will come back with more resources on our platform. So it's a great validation that jd.com is providing great value to these brands. Your next question comes from Cynthia Meng from Jefferies. Your line is open. Please go ahead. Thank you, management. My question is in the logistics advantage you have. We see that basically last year, I remember Richard and Shendong, you talked about using 3C as the category to attract traffic and JD also has the advantage of delivering to end users with the last mile access. Now in November 11, particularly in the 3C consumer electronics and home appliance category, Alibaba also advertise their alliance with Suning in delivering. So just wondering if management can give us your perspective. What do you see as the advantage in logistics? Will this be high enough entry barrier or do you see your competitive edge being having new competitor from Suning and Alibaba, so that your competitive address is being threatened? Thank you. Yes. There are a lot of numbers flowing around regarding the logistics network. So but I think one key data point that Richard mentioned in his remarks, I think that's really the key. We look at over the past 2 months, nearly 90% of all of our direct sales orders are being delivered within the same day or next day. I think that's a figure, if you ask any competition, it will be luckily half of that, if not less. So I think that's one very important data point for investors to keep in mind because sometimes competition will refer to the areas they cover, but it doesn't really tell you whether all the customers in that city, for example, are getting delivery within the same day. They will say, okay, we cover so many cities with one day delivery, but the actual coverage is far less just as on average. It just says that maybe somebody in that particular region will get same day delivery. So I think that's a very, very important distinction. Clearly, if you also if you do any consumer survey through 3rd party independent research firms, firms, the result will also speak for themselves. So one thing Richard that's Richard, Richard encouraged you all to do is to place a few orders with us and place a few orders with our competitors and see what kind of delivery speed you will get. And we've been working on this network in the past 8 years and we believe that we are probably at least 5 years ahead of anybody. Your next question comes from Tian Hou from TH Capital. I have a question related to your warehouse. And in the press release, you mentioned you newly added 2 Asian number 1 warehouses in Wuhan and Guangzhou. So along with the previous one, so you have 3 now. So I wonder what kind of capacity does this increasing bring you up to? And how far has this capacity relative to your needs? And are you going to build up more in the near future? That's the warehouse issue. Yes. So the one in Guangzhou officially went online last quarter. And I think in the Double 11 press release, we mentioned that the Asia number 1 in Guangzhou fulfilled 500,000 orders on that day. The design capacity is not that high, but at peak, you can put that much capacity. And these more modern warehouses do help us to increase fulfillment capacity, especially in large cities where the land is scarce. So we're continuing to we have in all of our hub cities and plus a few more central cities, we are going to build Asia number 1 and we'll have more come online in the next year or 2. Your next question comes from George Meng from Goldman Sachs. Your line is open. Please go ahead. Hey, good evening, management. Thank you very much for taking my question. My question is on your marketplace. This is becoming increasingly more important, I mean the marketplace business. Do you have plans to better help your brand partners to do more like omni channel? Since many brands already have offline presence, do you how do you think about this? How do you help them not only achieve success on your platform, but also do well in the overall omni channel distribution or you don't really have plans to do that and just focus more on your platform. Because from their standpoint, a lot of them are actually worrying about the conflicts between different channels, in particular online and offline channels. Thank you very much. We do have some efforts going on already, helping some of our merchants increase their sales of their offline stores. For example, we're working with a couple of apparel brands who have extensive offline storefronts and we're helping them to share inventory between their physical stores and their warehouses for their online sales. So a customer if a customer plays order online, if the e commerce warehouse doesn't have the inventory, but a nearby store has that particular SKU, that order can be fulfilled by that store. A customer can either pick up that piece of merchandise in a store or the store can use courier to send that piece of merchandise to the customer. So we're definitely aligned with our merchants as far as driving their online sales and offline sales. We will now move to our next question from Sean Zhang from 86 Research. Your line is open. Please go ahead. Sorry, your next question I have three questions. The first question about the fresh sales. Can management talk a bit about your expectation in terms of the GMV contribution going down the road? And how many brands are you cooperating right now? And my second question is about the headcount. Given the headcounts right now is already over 90,000, what's the headcount expansion pack in 2016? And my last question is about the pricing of the App Store. Can management also talk about the trend in the Q4 and going forward? Thanks. The first question is about flash sales. Cindy mentioned in his prepared remarks that we had tremendous growth in Q2 and now accounts for more than 1% of our GMV. It's mostly apparel, cosmetics and accessories and hopefully I don't have the exact count of how many brands we work with, but we work with a lot of brands on their overstock inventory and also we work a lot we work with a lot of the same brands for their in season merchandise in our apparel business. So we have a full range of solutions for these brands and we also offer logistics services. And do have pretty good progress in handling logistics for this business for flat sales business. We've had this business for about 2 years, over 1 year now, and we've I think we've established a meaningful market position in this category. And more importantly, our fulfillment capability provided by dozens of warehouses all over China will ensure the customer experience of flat sales will be superior to what customers can get from some other platform. Yes. We're gaining the confidence from many brands, many merchants, and we're very comfortable we're very optimistic that in the next few years, this business will continue to grow very rapidly. Yes, from apparel brands, in particular. And then I just let me quickly address your second question on headcounts. We did actually announce that our plan for the next year's we expect to reach 150,000 people by the end of next year, the end of next year. Okay. Sorry. So let me refresh that. So it's we announced that we will add at least 40,000 headcounts. There was a third question. Your next question comes from Sean Zhang from 86 Research. Your line is open. Please go ahead. Thank you, management. Congratulations on the healthy quarter. My question is in light with the core user growth about 6 percent and in light of the increasing mobile migration, how do you view your partnership with Tencent? Would you share with us some color on that, like percentage of traffic, percentage of GMV from Weixin and Mobile QQ? And also very interesting in your JinKong Jihua, the Tencent JD plan. Would you share with us so far how many through this plan, how many brands have done advertisement on Weixin and QQ? And what kind of like new ad formats we will see in the future apart from the daily moment as we're seeing right now? Thank you. We've started the partnership with Tencent very much and that partnership adds a lot of value to JD. So the entry point on WeChat has been around for a year and a half and the entry point on mobile QQ has been around for over a year now. And in the past year and a half just about year and a half, we're seeing steady growth of number of orders and GMV in absolute numbers and also in percentage terms. And we're very happy to see that growth. And I think one reason is the growth the MAU growth or DAU growth of these two apps, but also I think that's a testament to the effort of the team to work closely working closely with Tencent's team in exploring e commerce in a social context. And as I mentioned earlier, on November 11, over half of the first time customers are actually from Mobile QQ and WeChat. And as far as the Jingtang Jihua, for the November campaign, I think we had about to spend money on moment ad. And I think the integration of social data and our transaction data to enable the brand to marketing, to branding with Tencent and eventually lead transaction and sales to JD's shopping entry points on WeChat and QQ so far proved to be very effective and we'll continue to work together and to give the merchants better ROI and give the customers better experience. Traditionally, there are 2 types of advertising. 1 is branding, brand oriented, the other is performance based and they were never integrated. And Jingten Juhai is the first time that Tencent and JD give the brands and merchants opportunity to integrate their brand oriented advertising and the performance advertising together, meaning they do branding on Tencent and direct transaction on JD. So they very much like it and we'll keep improving on Your next question comes from Jin Yoon from Mizuho Securities. Your line is open. Please go ahead. Hey, good evening guys. Are you guys actively pursuing sales campaigns for Black Friday and Double 12? If so, what's do you have a sense of what percent of GMV these 3 sales days represent in the quarter? Thanks guys. So Black Friday, yes, especially from the K DY standpoint, we are going to have campaign then. And December 12, yes, we'll have some campaign around that and we're still thinking about what category we'll be focusing on, but we can't predict how much GMV that's going to generate. Your next question comes from Chi Seung from HSBC. Your line is open. Please go ahead. Great. Thank you very much for taking my question. I was wondering if you could give us some commentary regarding how the economic slowdown is impacting your business in the Tier 1, Tier 2 cities versus some of the lower tier cities? And secondly, I'm wondering if you're seeing any signs of stability or maybe improvement in the overall sort of consumption environment? Thanks so much. Yes. As I mentioned earlier, we suspect the macro economic headwind may have some impact on our business. But at this point, the extent of this impact, if any, should be very small because clearly, we have not seen much an impact given the growth we had in Q3 and our expected growth in Q4. So the impact on Tier 1, Tier 2 or Tier Cities would probably have a similar will have a similar response to that. If you look at our Q3 lower tier city growth rate, it's clearly growing faster than the Tier 1, Tier 2 cities, but the Tier 1, Tier 2 remain very healthy in their own growth rates. So yes, we still see very robust growth rate. In fact, if you look at October consumption growth released by the government, it actually improved and reached 11%, which was the highest in this year on a monthly basis. So there's good reason to believe that the overall consumption rate is not much affected by the slowing macro. So Richard just said a few words of his opinion on the overall economy. He believes that when the economy is doing well, it's actually a great opportunity for the competitive players to do well to consolidate the industry. Yes. As I actually mentioned in the past, top 20 brands in the U. S. Contributed over 40% of the overall retail volume, while in China, top 20 contributed only about 13% last year. So any economic slowdown would actually facilitate or accelerate industry consolidation. And JD is one of the most competitive player and also already the largest retailer in the industry should actually enjoy the benefit of this accelerated industry consolidation. So in addition to paying attention to our year over year growth rate, we encourage investors also look at a relative growth rate compared to the industry competition, both online and offline. And we continue to be confident that we'll gain market share in the future. Your next question comes from Natalie Wu from CICC. Your line is open. Please go ahead. Hi, thank you for taking my question. I have two quick questions. The first one is related to, I'm just wondering how have you noticed any difference on retention rate and maybe cohort data between new users attracted to WeChat, Mobile QQ and your own JD app? And the second question is, can you update us your supplier finance balance this quarter? And how much does it contribute to your online direct sales GPN currently? Thank you. The overall retention rate across different categories have been pretty stable. And whether it's on WeChat or our own mobile app and PC. So it's been pretty stable and generally in an upward trend. But relatively speaking, the retention rate on WeChat and Mobile QQ would be a little lower than our mobile app. This is fairly natural given that some of the returning customers would probably download JD App and become app user. So that's really the reason. But otherwise, we see pretty stable retention rates. On Internet finance, we mentioned I think you were asking about contribution to GMV. So that must be consumer credit. The amount that we disclosed in the earnings release actually, the ending balance is about 5,300,000,000. The transaction volume in the 3rd quarter contributed about 6% of our overall GMV. So it's it did have healthy growth, but it's still a very small portion of our overall GMV volume. Your next question comes from Wendy Huang from Macquarie. Your line is open. Please go ahead. Thanks, management, and congratulations on solid I have some housekeeping questions. First, you mentioned your headcount target by the end of next year. I understand it's probably a little bit early to talk about next year's margin outlook, but since that you already provided color on the headcount, can you maybe also comment on the marketing expenditure, fulfillment cost, etcetera, which actually may affect the margin next year? And then secondly, the take rate actually declined in the Q3. Could you provide some color as to the reasons behind the decline in Q3 and whether we should actually expect further decline going forward and the reason behind that? Lastly, I think you have done some very good investment recently such as investment in Yonghui. Can you comment on your recent integration with Yonghui? And also, is there any more like MA you are eyeing on, especially given recent alliance between Baobao and Suni, where you consider to invest in Guomei, why or why not? So okay, so as for next year, I think the only guidance we could give is for the core margin on JD Mall business, we believe the margin will trend up next year comparing to this year. However, at a group level, because we are committed to investing in new innovative areas to secure growth over the medium to long term. So we will also reserve the flexibility to invest in these new initiatives. So we will give more definitive guidance at the Moore business should be more profitable next year. And on the take rate, there's a slight if you look at service revenue versus core GMV on marketplace, there's a slight decrease. The reason was we looked at is really on the blended commission. So because we have for some of our businesses with lower margin, the sales business, we did move some of the long tail items to marketplace. So because these categories are having lower margins in general, So the take rates on those categories are also relatively lower. So it's really a mix a slight mix shift. But as far as the take rate on the same category, it's been quite stable. And point. JD, over time, has established supply chain management expertise on many categories. The fresh produce supply chain is very special and we invested in of this category. Yunghui is well recognized as the leader in fresh produce supply chain management. Yes. It's an important partnership for us. And from both sides, we have a dedicated team working on it and our you'll see some actions at the beginning of the December. So one more comment about Daojia in the annual conference of retailers, which was just held a few weeks ago. The CEO of Shenjiang Supermarket in Ningbo had a conversation or had a speech about his experience working with Jingdong Daoyia. Certainly, one of his physical stores are now working with Jindong Daojia and the sales of these 31 stores increased by 20 percent since he started working with Jinng Daoyang. Yes. We believe that next year, when we officially start working with Yonghui in fresh produce e commerce, it will bring a lot of value to both companies. Your next question comes from Robert Lin from Morgan Stanley. Your line is open. Please go ahead. Thanks for taking the question. So I guess I have a few questions. So the flash sales, I think Cindy mentioned it's about 1% GMV. But on an absolute basis, that's quite a meaningful number. It's about $1,200,000,000 That's almost 12% of VIP shop. Can you kind of comment on percentage of your buyers that are actually buying these flash sales events products? Do you see impulse purchase slowing because of the slowing macro? And maybe 3 years out, what do you think this flash event business should contribute to your overall GMV? So that's the one. 2nd question is your essentially Tencent cooperation on the data sharing and brand advertising. Will there be changes in the economics? I see that you guys are data sharing, but we only get 25% of the advertising cut. But this is very valuable data we're sharing here. Do you think that we should get bigger cut of the overall advertising that we're providing to Tencent? And 3rd, it's about Suning, essentially the 1P gross margin. If Suning were to be very aggressive on pricing the next couple of quarters, will we follow? Or should we be more rational? So that's my questions. So Richard answered the 3rd question about Suning. He said that we've been in press war with Suning for over 3 years now and you all have seen the results and have no further comments. So first two questions. So the Sled sales just had a 300% growth. So it's very, very fast. It's to the it's almost the growth rate that JD more overall had in the 1st 7 years. But we should be able to maintain 100% year over year growth. Over 100% year over year growth next 2 years? 2, 3 years. 2, 3 years. All right. The second question is about the partnership with Tencent. I think that both companies are focusing on delivering value for our mutual. We see these customers and merchants brands as our mutual customers. And it's very hard to quantify who delivers what percentage of value to our customers. We are now approaching the end of the conference call. I will now turn the call over to JD dotcom's Ruyu Li for her closing remarks. Thank you, operator. Once again, thank you for joining us today. Thank you for your continued support, and we look forward to talking with you in the coming months.