360 DigiTech, Inc. (QFIN) Q2 2021 Earnings Call Transcript

360 DigiTech, Inc. (NASDAQ: QFIN) Q2 2021 Earnings Call dated Aug. 19, 2021

Corporate Participants:

Mandy Dong — Director, Investor Relations

Haisheng Wu — Chief Executive Officer and Director

Alex Xu — Chief Financial Officer and Director

Analysts:

Richard Xu — Morgan Stanley — Analyst

Alex Ye — UBS — Analyst

Jacky Zuo — China Renaissance — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the 360 DigiTech Second Quarter 2021 Earnings Conference Call. Please also note, today’s event is being recorded.

At this time, I’d like to turn the conference call over to Ms. Mandy Dong [Phonetic], IR Director. Please go ahead Mandy.

Mandy Dong — Director, Investor Relations

Thank you. Hello everyone and welcome to our second quarter 2021 earnings conference call. Our results were issued earlier today and can be found on our IR website. Joining me today are Mr. Wu Haisheng, our CEO and Director; Mr. Alex Xu, our CFO and Director; and Mr. Zheng Yan, our CRO.

Before we begin the prepared remarks, I’d like to remind you of our Safe Harbor statements in our earnings press release, which also applies to this call. We may refer to forward-looking statements based on our current plans, estimates and projections. Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and the GAAP ones. Last, unless otherwise stated, all figures mentioned are in RMB.

I will now turn the call over to our CEO, Mr. Wu Haisheng.

Haisheng Wu — Chief Executive Officer and Director

[Foreign Speech]

Hello, everyone. I’m very happy to report another quarter of record-breaking operational and financial results. During the quarter, financial institutions originated RMB88.5 billion loans through our platform, marking another record high, up 50% Y-o-Y and 19% Q-on-Q. After reaching RMB100 billion milestone in Q1, outstanding loan balance continued to grow to RMB111.6 billion in Q2, up 50% Y-o-Y and 15% Q-on-Q. Total revenue was RMB4 billion in Q2, up 20% Y-o-Y and 11% Q-on-Q. Non-GAAP net income was RMB1.62 billion, up 71% Y-o-Y and 15% Q-on-Q.

[Foreign Speech]

Despite a continuously changing macro and regulatory environment, we have delivered five consecutive quarters of record-breaking results. Over the past few years, we have built a comprehensive operational system, that demonstrates remarkable resilience through the cycles. To be more specific, our diversified users acquisition channels and scenarios, allow us to effectively hit [Phonetic] against any volatility for a particular channel. Our extensive network of diverse financial institution partners, gives us sufficient flexibility, in terms of funding cost, geography coverage and pricing. Our full spectrum of risk management capabilities allow us to target different user segments, with effective pricing based on different market dynamic. Our access to some key financial license, also give us ecosystem capability [Phonetic] to comply with the ever-changing regulatory environment.

[Foreign Speech]

Over the last six weeks or so, QFIN, along with other Chinese ADRs, has experienced extreme volatility in the market. While there are multiple risk factors trigger, such as share price movement, we believe the market is overreacting to the negative elements, and ignoring the solid fundamental and strong growth prospect of QFIN. As such, after careful evaluation, with the approval of our Board, management decided to launch a share buyback program. The company intends to repurchase up to $200 million of its ADS through open market or other form of transaction over the course of next 12 months. We believe as current market condition, share repurchase offers extremely attractive opportunity to deploy our cash and to generate great returns to our shareholders.

[Foreign Speech]

We continue to make progress in multiple strategy initiatives and gradually unlock tremendous growth opportunities. We made significant progress on diversified user acquisition strategy. Customer base continued to grow, and customers quality improved steadily. Our embedded finance model grew significantly. The number of new borrower in Q2, hit the highest level in the past six quarters, up by more than 10% sequentially. The number of SME borrower acquired offline also increased significantly. Our embedded finance model contributes close to 40% of our new customers with approved credit lines in Q2. So far, we have established cooperation with 22 leading traffic platforms, with another eight in the pipeline.

[Foreign Speech]

Our SME finance business also achieved a breakthrough performance in Q2, by strengthening our ties with leading industry partners and optimizing credit approval process and the policies. Total amount of the new approved credit line increased 22% Q-on-Q to RMB7.1 billion and outstanding loan balance increased 45% sequentially, with average ticket size exceeding RMB250,000. Meanwhile, we are rolling out to customers loan products catering to the specific funding needs of different industries. In July, we launched tobacco business loan and have served more than 700 offline tobacco businessowners. In the second half of this year, we plan to launch other industry specific loan products targeting cross border e-commerce, supply chain finance, as well as agriculture and the poultry sectors.

[Foreign Speech]

Loan facilitation under the capital-light model accounted for roughly 56% of total volume in Q2, and for the month of July, capital-light accounted nearly 60%, almost reached our full-year goal for upgrading strategy. For our smart marketing product, I see Intelligence Credit Engine. The number of active user increased 74% Q-on-Q. The transaction volume and outstanding balance both went up by 36%.

[Foreign Speech]

As for the recent regulatory changes, we want to share a few thoughts here. As one of the 13 leading internet platform on the April 29th regulatory meeting, we have maintained regular and close communications with regulators. Currently, the self-assessment and related verification process are moving forward in an orderly manner. We fully understand the regulators requirements and expectations for the industry. [Indecipherable] our business is relatively focused and has a clear path towards full compliance with regulatory requirements. We don’t have online payments, online insurance or online brokerage operation, which are receptive [Phonetic] to more restrictive regulations. For our loan facilitation business, we don’t do joint lending nor have overleveraged ABS issuance. Thus, we are highly confident to satisfy all of the revised regulatory requirements, when everything is set and done.

[Foreign Speech]

As you may already know, the proposed new regulation will not allow loan facilitation platforms, to provide credit assessment related data directly to financial institutions, and such data transfer must go into a license to credit agency. We have preemptively communicated with the regulators, to understand the policy direction and to make necessary preparations. We will take multiple actions to satisfy this new regulation. On one hand, we can cooperate with existing third party credit agency. On the other hand, we can also seek partners to jointly launch a new credit agency.

[Foreign Speech]

Recently some media report indicate that, regulator will require consumer finance companies to implement an all-in interest rate cap of 24% for consumer lending. This is consistent with the regulated long term agenda to support real economy, by lowering financing costs for consumers and SMEs. This is also consistent with our long-term business planning. Our own balance sheet loan and SME loan business are already priced below 24%. Our consumer facilitation business, even under a more restrictive stress test, in which we assume to cut our price to below 24% rather rapidly. We do not expect the price cut to have a minimal impact to our operational and financial results in 2021. As for 2022, it will be a transitional year, when the entire industry will comply with 24% rate cap by [Indecipherable]. In our stress test, we continue to see healthy volume growth in 2022, and net take rate should be around 3%. There are also some third party [Phonetic] factors, that may mitigate negative impact from the 24% rate cap, With lower price, we should be able to develop a partnership with larger national banks that typically offer more stable funding, at lower funding costs.

In addition, with all of our assets at 24% or lower, we should be able to significantly increase the issuance of ABS which typically carries a much lower funding cost around 5% to 5.5% versus around 7% from banks. Furthermore, at lower prices, we can attract more high quality borrower, which will naturally drive down overall credit cost by 1% to 2% point on IRR basis. Finally, based on our experience, lower pricing normally boost the borrower activities, retention rates and lifetime value LTV.

To conclude, we believe more prime customer and the better quality financial institution would come along with lower priced products. This will ultimately enhance our operational efficiency, and make our business more resilient and sustainable. Such change may set up a solid base for us to accelerated growth after 2022. We feel quite optimistic.

[Foreign Speech]

I would now like to address the temporary removal of our 360 Jietiao app from app store. The removal was due to our product engineer, missed out one of the function that was required by the regulators. We have already fixed the issue, and our app has been restored to all major app store to-date. We have conducted a thorough internal review, and improved our operating protocol, to ensure such incident never happen again. Thanks to our diversified customer acquisition channel and balanced product mix, the impact from app removal to our operation has been minimal.

[Foreign Speech]

During the quarter, we continue to diversify our funding source. We accelerated the pace of ABS issuance, with a total off RMB2.1 billion ABS in Q2, at an average coupon rate of 5.3%. This had brought our total ABS issuance to RMB3.1 billion so far this year, ranking us number four in the market. As our risk management system support more business lines, we continue to see further enhanced of our asset quality. The 90-day trust delinquency ratio across our platform was 1.19%. The M1 Platform rate remained stable at 90.8% [Phonetic] and day one delinquency rate at 5%.

[Foreign Speech]

We continue to expand the scale of our collaboration with KCB. Total accumulated loan facilitation volume as of Q2 was RMB33.5 billion. Outstanding balance was RMB20.4 billion at the end of Q2, up 60% from Q1. We expect the scale of the KCB partnership to remain relatively stable for the time being. We have deep rooted trust and great flexibility in our collaboration with KCB. Going forward, we will proactively explore new products and business opportunities through our cooperation with KCB.

[Foreign Speech]

We made some good progress on the ESG front, which draws more and more attention. When deadly floods hit Henan province this July, we took swift action to support by donating RMB20 million through the [Indecipherable] foundation. Meanwhile, we organized a local team to join the rescue efforts.

[Foreign Speech]

Overall, we are quite satisfied with our performance in the first half of 2021. These fruitful result comes along from dedicated efforts of our excellent team. I would like to express my gratitude to their hard work. We are in a time of rapid changes, and great companies are always born in great change. We have successfully demonstrated our capabilities and ambition over the past five years. FinTech is a vast market with huge potential, and FinTech products has profoundly changed financial service landscape and user experience. We will continuously launch innovative products and are dedicated to become the premium player in this market.

[Foreign Speech]

Now let me turn to our CFO, Alex, to run through more detailed info. Thank you.

Alex Xu — Chief Financial Officer and Director

Thank you, Haisheng. Good morning and good evening everyone. Welcome to our quarterly earnings call. For the interest of time, I will not go over all the financial line items on the call, please refer to our earnings release for the details.

As Haisheng mentioned, we delivered robust operating and financial results for the first half of 2021, powered by strong consumer demand for credit and further improvement in asset quality. The strong business momentum appears continuing into current quarter. In fact, we have seen record breaking volumes in recent months, despite some reported softness of macroeconomic activities lately.

Total net revenue for Q2 was RMB4 billion versus RMB3.6 billion in Q1 and RMB3.34 billion a year ago. Revenue from credit driven service capital heavy was RMB2.4 billion compared to RMB2.45 billion in Q1 and RMB3.08 billion a year ago. The year-over-year decline was mainly due to facilitation volume mix change, as capital heavy contribution decreased significantly.

Revenue from credit driven service [Phonetic] capital-light was RMB1.6 billion compared to RMB1.15 billion in Q1 and RMB259 million a year ago. The robust growth was mainly driven by exceptional progress we have made in capital-light and other technology solutions. During the quarter, capital-light and other technology solution contributed roughly 56% of total loan volume, while the underlying take rates were relatively stable. We expect cap-light contribution percentage to continue to increase in the second half, and to reach roughly two-third of our total volume by the year end.

During the quarter, average pricing was 27.2% compared to 26.6% in Q1 and 27.2% a year ago. Assuming the reported 24% rate cap guideline will be implemented across industry, we are expecting overall pricing to gradually trend down through mid-2022, to satisfy the rate cap requirement. In our stress test, even under the more restrictive and steep rate cut scenario, where we assume we cut the rate to below 24% starting from September 1st. In such scenario, we should still be able to maintain healthy growth and profitability in the transitional year of 2022, and resume to a more robust growth afterwards.

As macroeconomic activities picked up in China in the first half, demand for Internet traffic also increased significantly along the way. In addition, we also proactively accelerated the pace of the customer acquisition in recent — in the last couple of quarters, to take advantage of the overall positive business trend. As such, we have experienced some uptick in sales and marketing expenses. Average customer acquisition cost on the consumer lending side for the quarter, was about RMB237 compared to RMB206 in Q1. As we discussed in the past. Average cost per approved credit line is a calculated number, with limited value in our decision making. We will continue to use lifecycle ROI and LTV as key metrics, to determine the pace and scope of our customer acquisition strategy. So far in 2021, healthy ROI trend has encouraged us to take a more proactive approach to accelerate the growth of our customer base.

Non-GAAP net income was RMB1.61 billion in Q2 versus RMB1.41 billion in Q1 and RMB142 million a year ago. We once again set a new record in quarterly profitability, driven by higher facilitation volume, and noticeable improvement in asset quality. Effective tax rate was approximately 18% for the quarter and — sorry for the first half of 2021. We see similar level of ETR for the rest of the year. Longer term, we are expecting our normalized ETR to return to approximately 15%.

As we move towards a more technology driven business model, we continue to see marked improvement in operating margins, as increasing contribution from capital-light and other technology solution will generally lead to higher margin structure. Overall, we expect profitability growth to be more or less keep pace with the facilitation volume growth throughout this year.

With strong operating results and increased contribution from cap-light model in Q2, our leverage ratio, which is defined as risk bearing loan balance divided by shareholders’ equity, further declined to 4.8% — sorry 4.8 times from 5.4 times in Q1 and 8.3 times a year ago. We expect to see continued deleveraging in our business, driven by further movement towards cap-light and solid operating results.

Total cash and cash equivalent was RMB8.8 billion in Q2 compared to RMB9.2 billion in Q1. Non-restricted cash was approximately RMB5.2 billion in Q2 versus RMB6 billion in Q1. The modest decline in cash was mainly due to more proactive deployment of cash in our operations, to support ABS and pre-ABS assets, which generates higher returns.

Meanwhile, a significant portion of our cash also allocated — was also allocated to security deposit with our institutional partners and registered capitals of different entities to support our daily operation. As we continue to generate strong cash flows through operations, we believe our current cash position is more than sufficient to support the expansion of our business, to invest in key technologies, and to satisfy potential regulatory requirements. Therefore, we believe it is a prudent decision to use some of our ‘free cash’ to invest in our own stock, which is priced just around the company’s liquidation value. For a company that is still generating healthy growth for the next few years, we believe it is a great bargain.

Finally, let me give you some update about our outlook for 2021; the operating results for the first half of 2021 were very encouraging, and the momentum doesn’t slow so far in current quarter. Although, we intend to keep our traditional conservative approach in providing forward guidance, the numbers start to speak for themselves. As such, we would like to raise our 2021 total loan volume guidance to be between RMB340 billion and RMB350 billion, compared to previous guidance of RMB310 billion and RMB330 billion. The revised guidance represents year-over-year growth of 38% to 42%. As always, this forecast reflects the company’s current and preliminary view, which is subject to material changes.

With that, I would like to conclude our prepared remarks. Operator, we can now take some questions.

Questions and Answers:

Operator

Thank you, management. [Operator Instructions] Our first question is from Richard at Morgan Stanley. Please go ahead.

Richard Xu — Morgan Stanley — Analyst

[Foreign Speech]

Basically two questions for me, one is on the — basically spending, borrowing information? And two, the credit scoring agencies. Any detailed discussion on the actual process, because it’s been a little while, and you mentioned basically, there has been a further discussion and there is different versions out there, just want to see what is the latest development on that front? Secondly, is obviously very good loan volume. Any discussion with the regulators in terms of any views on [Indecipherable] guidance on the pace at the proper pace. Thank you.

Haisheng Wu — Chief Executive Officer and Director

[Foreign Speech]

Richard Xu — Morgan Stanley — Analyst

[Foreign Speech]

Haisheng Wu — Chief Executive Officer and Director

[Foreign Speech]

Okay. So for the draft version of regulation of the administration of credit assessment business was announced, and we have been communicating with regulators for a long time. But actually in the market, there is no standard solution available so far for now. And also as Mr. Chen has mentioned that, actually there are two or three solutions that we care about. First one is that, we apply for a credit license to launch a new credit agency. And the second one is, we cooperate with existing credit agency to continue our business. Also with our in-depth cooperation with KCB, which offers other us another alternative for this solution, whatever solution we adopt in the end, the process of product might be different. However, it will not affect our results of the risk management and our risk models.

[Foreign Speech]

So for your second question regarding to our growth rate. Actually, we have seen that the growth is not the problem and the regulators focus more on the standardization of the product and our business. Also we have seen that in the requirement by the regulators, they have issue that we — that they want the platforms, [Indecipherable] platforms to sustain the growth and support real economy continuously. Thank you.

Operator

Our next question is from Alex Ye at UBS. Please go ahead.

Alex Ye — UBS — Analyst

[Foreign Speech]

I will briefly translate my question, firstly on the regulatory developments. So they look like the current direction from the regulators, they kind of tightened the very aspect of the data collection by the internet companies. So I’m wondering, does it mean the regulators issue more stringent regulations on consumer data collection and yields in the future? How would that affect our current practice of data collection and use? And how would that affect our credit model? Second question is on your plan toward complying with a 20% interest rate cap. So you mentioned that in your stress test, you are going to comply — fully comply with the 20% cap by September this year. But, so if they stress then what’s your base case or your target trajectory, combined with that new cap? And then third question is also related to the interest rate trend, so there are multiple concerns about 20% cap, it’s only just the beginning of the future regulatory requirement of further pushing down the overall lending rates. So I’m wondering if you had any comment on that. And specifically, given you are also ramping up your SME loans. So it looks like this segment will be subject to further pressure from lower rate, low guidance. Also appreciate your comments. Thanks.

Haisheng Wu — Chief Executive Officer and Director

[Foreign Speech]

Okay. Thank you, Alex for your question. So regarding to your first one, that we actually we see it tightening as well, about the data capture and usage in this industry. So for regulator side, we think there are two basic principles. The first one is the minimum standard data capture. So apart from capturing data from customer side, like forecast in the forms or application, we are working proactively with third party credit agency for industry and external data sources as well as replacement.

And the second principle is that the customer authorization is mandatory before data capture. As you may know that, our removal of our 360 Jietiao applications from app stores was caused by these problems. So we will emphasize more on this principle in the future. We believe that with our relatively standard process and the impact of these tightening principles, will have minimum impact on our business.

[Foreign Speech]

Regarding to your second question, the timeline of the all-in interest rate cap of 24%, actually we see that we have different timelines for different institutions. Some institutions will follow the guideline, that outstanding balance of the loan over 24% will be reduced to zero by end of June next year, and some institutions follow of the guidance, that there will be no rating originations by June next year. So we will follow this accordingly.

[Foreign Speech]

Regarding to your third question that if the 24% interest gap will be lowered more. Actually as all market participants know, 24% interest gap has been the window guidance from the regulators to banks for long time. Recently media reports speculate that base interest cap, whose requirement expands to consumer finance components. Since the 24% cap has existed in the industry for quite some time, we don’t think the rate cap will further go down. Thank you for your question.

[Foreign Speech]

And furthermore regarding to the interest rate of SME loans. Of course regulators want the interest rate will be as lower as possible. But there is no standard. As it is similar to the consumer finance industry, there are different and various needs and supplies of the SME loans. As a platform, as [Indecipherable], we will continue to offer the various services to meet different kinds of needs of the SME loans. Thank you.

Alex Ye — UBS — Analyst

[Foreign Speech]

Thank you.

Operator

Your next question is from Jacky Zuo at China Renaissance. Please go ahead.

Jacky Zuo — China Renaissance — Analyst

[Foreign Speech]

So let me translate. So congrats for the strong results, my first question is related to regulation as well. So for the 24% interest rate cap, management gave a stress test for next year regarding the margin, probably will go down to 3%. So just want to understand what is our assumptions behind this stress test, regarding to APR funding calls and credit costs and other expenses? And any chance we can get an outlook for APR in the third quarter? And second question is regarding to the SME loan. We’ve seen other competitors also move to this new business, so how are we going to differentiate our SME loan products and what is the APR margin and our growth target this year? And is this SME loan included in our new loan volume guidance? Thank you.

Haisheng Wu — Chief Executive Officer and Director

[Foreign Speech]

Thank you, Jacky. Regarding to your first question about the stress test. Actually what we have delivered now, is a relatively static test, with all other factors status quo. Especially, there is no improvement in our efficiency. So we estimate, there is no cost to changes in this version of the stress test. However, as we have known, there is few improvements of our cost. For example, for our funding costs, before, we have a large portion of our funding from consumer finance companies with a relatively higher funding cost. And our ABS volume is also limited. However with lowering cap interest rate, we can have more funding from national banks or larger national banks, and we can increase our ABS volumes. So we expect our funding costs to be lowered by 1%, and we have the credit loss expectation to be lowered by around 1% as well. So another major cost, the customer acquisition cost will be lower as well. So we expect that — actually the take rate of 3% will be improved in the future.

[Foreign Speech]

For the third quarter of this year, we have started a lower APR task. So the APR will be lowered, but there will be no earnings impact on our financial results of next quarter.

[Foreign Speech]

So to your second question, regarding to our competitiveness of SME loans. So there are two aspects. The first one is about risk management. Our SME business is different from the traditional ones, because we focus more on the SME side. Considering the traditional SME loans are over RMB10 million ticket size is not fully data driven. However, we have adopted a dual engine regarding to our risk management about SME loans. That is, we evaluate from the individual side and from the corporate side. With ticket size of RMB250,000 on average, we have leased and fully utilized our accumulated experience on risk management in the past years of consumer finance. And the second advantage of that, is the cooperation with KCB. As the only three platforms in China market that are able to have in-depth cooperation with banks, we believe we have advantage of data and funding cost regarding to the SME business.

[Foreign Speech]

So for our target of SME loans this year, it will account for around 10% to 15% of our total loan origination, and it has been covered in our guidance.

[Foreign Speech]

Alex Xu — Chief Financial Officer and Director

Okay. Jacky just I have a few sort of a clarification and add up to Mr. Wu’s comments there. Number one, the most important clarification, that 3% is not a margin, it’s the take rate, all right. Our net margin this quarter it was 40%, and if anything for the next couple of quarters, we’ll probably see a little bit expansion of net margin than this Q2. So the 3% though is the take rate on loan balance, that we have been saying this in the past.

And then secondly, also regarding the second half pricing trend. Even though we — our stress test was taken a more drastic cut starting from September 1st, basically on that day, everything goes below 24%. But in reality, that’s not going to be the case. Just like Haisheng mentioned, it’s really dependent on the pace of our financial institution partners, and their — kind of the progress there. So most likely it will be a gradual trending down toward that kind of a goal by the end of June next year. So if you do a linear kind of distribution on any given quarter from now to the mid of next year, you’re probably looking at maybe one percentage or a little bit over 1 percentage point change in pricing, if you just average out. So that’s the — regarding the pricing change. And then this kind of a change for 2021 for the remainder of 2021, we don’t see any kind of a meaningful impact in both loan volume or the take rate. That’s why in my prepared remarks, I mentioned that the second half profitability will most likely keep in pace with the loan volume growth. You have our guidance for the full year, you can do the calculation roughly at the calculation — sorry, the profitability number for the second half. So that’s another clarification.

Then the third point is really about how do we get that 4% — sorry 3% take rate, when this whole thing is said and done. I have a kind of back — an element of [Phonetic] calculation and that’s assuming our current mix in terms of capital-light versus cap heavy at 60 versus 40, 60 being the cap-light. And normally the reality is, our cap-light side of business carry a higher pricing versus the cap heavy. So if we, let’s say, cut all the pricing to 22.5%. Then on the cap heavy side, we need to cut roughly about 2%. On the cap-light side we need to cut roughly about a 6.5% to 7%. But keep in mind. that 6.5% to 7% cut is actually the overall cut. Remember we are only taking 30% of that sharing. So 6% to 7% cut to us is only 2% in real impact. Right. So essentially the cap-light and cap-heavy basically, you have a similar 2% impact, just by the pricing alone, that’s a pre-tax impact. If you add the tax rate on it, the net impact on the pricing along will probably be somewhere around the 1.7%, 1.8% maybe. So that’s the pricing alone.

And then forget about the funding cost savings, the operational efficiency and all these and other things. The one clear change will be the risk factor, just simply because, when the pricing coming down, you are naturally targeting a high quality group of users. Okay. For that, by our estimate, the savings from after tax savings from that sort of a credit cost side, will be coming somewhere around 0.6%, to 0.8% range. So if you deduct the pricing impact 1.7%, deduct 0.6% to 0.8% from the 1.7% to 1.8% you’ve got roughly 1%. That’s not even considering anything on the funding cost, on operational efficiency and all the other things we actually mentioned earlier. So that’s the very rough calculation just for your reference.

Jacky Zuo — China Renaissance — Analyst

That’s very clear. Thanks Alex.

Alex Xu — Chief Financial Officer and Director

Thank you.

Operator

Thank you so much. That’s the end of the Q&A session. I would like to hand it back to management for briefing closing remarks.

Alex Xu — Chief Financial Officer and Director

Okay, thank you everyone again to join our conference call. And if you have any additional questions, please feel free to contact us. Thank you.

Haisheng Wu — Chief Executive Officer and Director

Thank you. Operator, can we hang up?

Operator

[Operator Closing Remarks].