Ladies and gentlemen, thank you for standing by, and welcome to Fangdd Network Group Limited's Third Quarter 2020 Earnings Call. Please note, this event is being recorded. And I would now like to hand the conference over to your speaker host today, Mr. Warren Wen, Financial Controller of the company. Please go ahead, sir.

Yes. Thank you, operator. Hello, everyone, and thank you all for joining us on today's call. The company has announced its third quarter 2020 results today, and the earnings release is now available on the company's IR website. Today, you will hear from our co-CEO, Mr. Zeng Xi, who will start the call with a review of our progress and the current industry dynamics and the details of our development strategy in this quarter. Afterwards, our CFO, Mr. Pan Jiaorong, will go over our financials before we open up the call for questions. Our management team will deliver their remarks in Chinese, and I will provide the English translations. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which applies to this call as well, as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measurements today, which are more thoroughly explained and reconciled to the most comparable measures reported under the generally accepted accounting principles in our earnings release and filings with the SEC. With that, I will now turn the call over to our co-CEO, Mr. Zeng Xi, and please go ahead.

Thank you for joining our earnings call. As a reminder, we will be making forward-looking statements today, so please refer to our safe harbor statement in the earnings press release. Additionally, we will discuss non-GAAP measurements, which are explained and reconciled to GAAP measures in our earnings release and SEC filings. Now, I will hand the call over to our co-CEO, Mr. Zeng Xi. Please proceed.

Hello, everyone, and welcome to our third quarter 2020 earnings call.

Hello, everyone, and welcome to our third quarter 2020 earnings call.

Before I start reviewing our business highlights, I would like to share an update on the current state of the real estate market in China.

Hello, everyone, and welcome to our third quarter 2020 earnings call. Before I start reviewing our business highlights, I would like to share an update on the current state of the real estate market in China.

The first, the market size of the new construction property transactions, resale property transactions, and the transaction service have maintained their growth trajectories. According to Frost & Sullivan, the total property transaction value in China is projected to grow at a CAGR of 9.3%, reaching RMB 27.6 trillion in 2023, while the total real estate transaction value facilitated through agents in China is expected to grow at a CAGR of 49.4%, reaching RMB 13.6 trillion in 2023. In particular, the transaction service market has been growing steadily, as the total value of the property transaction service is expected to reach RMB 343.6 billion by 2023 at a CAGR of 22.6%. The total value of resale property transaction services is expected to reach RMB 229.8 billion by year 2023, growing at a CAGR of 20.6%.

The total real estate transaction value facilitated through agents in China is expected to grow significantly, reaching RMB 13.6 trillion in 2023. The transaction service market is also experiencing steady growth, with the value of property transaction services projected at RMB 343.6 billion by 2023. Additionally, the value of resale property transaction services is anticipated to hit RMB 229.8 billion by 2023.

And the second, real estate regulators announced the establishment of the three red lines policy for domestic real estate developers in August 2020. This policy has effectively introduced ceilings for the debt-to-cash, debt-to-assets, and the debt-to-equity ratios for real estate developers. As a result of the new policy, the real estate developers are now being forced to place greater emphasis on accelerating their sales, collecting their accounts receivables, and reducing the debt. This shift has encouraged developers to rely on real estate agents for a greater portion of their sales and start utilizing other channels to reduce their inventory. Based on data from the National Bureau of Statistics and our own analysis, the total value of the developers' parking space inventory has reached RMB 1.5 trillion. The total value of the community-centric business property has reached RMB 13.2 trillion as of March 31, 2020. The ability to quickly reduce inventory has become an essential component of the developer's strategy to better manage their business and their cash flows.

The total value of the developers' parking space inventory has reached RMB 1.5 trillion. The total value of the community-centric business property has reached RMB 13.2 trillion as of March 31, 2020. The ability to quickly reduce inventory has become an essential component of the developer's strategy to better manage their business and their cash flows.

Consequently, the third observation is the value agents are able to provide in facilitating real estate transactions has continued to grow and has thus further boosted the attractiveness of those agents who are capable of providing outstanding transaction services. While the penetration rate of agent services has remained stable in terms of resale property transactions, the penetration rate of agent services for new construction transactions has grown rapidly. Meanwhile, within the agencies, we have observed that the majority of highly capable agents continue to deliver the lion's share of quality results. Therefore, we believe that aggregating capable agents will be the key to unlock our future growth potential.

Providing outstanding transaction services. While the penetration rate of agent services has remained stable in terms of resale property transactions, the penetration rate of agent services for new construction transactions has grown rapidly. Meanwhile, within the agencies, we have observed that the majority of highly capable agents continue to deliver the lion's share of quality results. Therefore, we believe that aggregating capable agents will be the key to unlock our future growth potential.

And the fourth point is that as the market expands, the subsidy competition between real estate transaction platforms has become fierce, as the platforms are leveraging their capital funding to offer higher commissions or subsidies to quickly gain market share. Take Guangzhou, for example; we have seen platforms providing advances of commissions in several projects in full with additional incentives for transactions ranging from RMB 1,000 to RMB 2,000 for each closed deal. Other cities, including Shanghai and Chengdu, are also following up on this trend. However, these subsidies and commission advances have been pushing up the developers' commission costs while forcing real estate agencies to rely on sheer quantity of agents to achieve their results.

Take Guangzhou, for example; we have seen platforms providing advances of commissions in several projects in full with additional incentives for transactions ranging from RMB 1,000 to RMB 2,000 for each closed deal. Other cities, including Shanghai and Chengdu, are also following up on this trend. However, these subsidies and commission advances have been pushing up the developers' commission costs while forcing real estate agencies to rely on sheer quantity of agents to achieve their results.

Despite the intensifying market competition, we have still found that the demand for SaaS technology in the real estate services industry remains strong, as technology continues to become essential for agents to conduct their business and provide their services. Our online solutions cover five key elements of the transaction process, including property listings, customer online reactions, real estate agent online services, transaction management online services, and the transaction service fee payment online. As a result, our solution has significantly improved both transaction efficiency and user experience.

The services industry remains strong as technology becomes essential for agents to conduct their business and provide their services. Our online solutions cover five key elements of the transaction process, including property listings, customer online reactions, real estate agent online services, transaction management online services, and online payment of transaction service fees. Consequently, our solution has significantly enhanced both transaction efficiency and user experience.

Based on our accumulation of valuable experience in the past nine years, we have implemented three major strategic optimizations in the third quarter. The first strategic optimization we made was our decision not to offer any subsidies, customer advances, or advances for commissions. Instead, we plan to leverage our SaaS offerings and the technology to empower more small- and medium-sized agencies, which also improved our ability to facilitate closed-loop transactions. From our perspective, the vicious subsidy competition is not a long-term solution for the industry, nor does it help improve the market overall efficiency as such short-term performance in the market is unsustainable. Real estate transactions have a relatively low frequency, and the average annual turnover rate of agents is typically more than 70%. A healthy and sustainable relationship between the platform and its agents cannot be built on subsidies. We believe the future of the real estate industry lies in leveraging technology to improve operating efficiency, standardizing services, and implementing appropriate guidelines.

Overall efficiency is important as short-term performance in the market is not sustainable. Real estate transactions occur infrequently, and the average annual turnover rate of agents is usually over 70%. A strong and lasting relationship between the platform and its agents cannot rely on subsidies. We believe that the future of the real estate industry depends on using technology to enhance operating efficiency, standardize services, and establish suitable guidelines.

In line with our first strategic optimization, we have remained committed to utilizing our SaaS solution to empower our agent partners, which we believe is at the core of our long-term economic moat. As such, we continued to upgrade our DUODUO property sales SaaS solution in the third quarter to help agencies better market their solutions through their agents' private networks. By leveraging official accounts and mini-programs on WeChat, our SaaS solution enables agencies to attract customers through the release of introductory videos for high-quality property listings. Meanwhile, we have also developed new features to help agents refine their operations through the different stages of their careers. For example, during this quarter, we introduced a series of marketing incentives, including new user acquisition awards and a property viewing event to stimulate agent activity. We also introduced platform coupons as a complement to these marketing incentives, as well as an agent development system, which has helped agents to close transactions more effectively while augmenting the efficiency of both agency transactions and agency user acquisition efforts. At the same time, we developed innovative features to help agents refine their operations throughout the different stages of their careers. To help enhance the quality of agents' work, for example, we leveraged our ability to analyze the operating data of agents at the individual level to gain an in-depth understanding of agent needs in relation to workflow procedures, customer management, and other areas at different levels of development. Through this analysis, we have helped agencies to improve their management capabilities in several ways such as enabling agencies to assign tasks to their agents online and set reminders for agents' key responsibilities throughout the agents' work processes. These initiatives have helped new agencies, in particular, empowering those organizations to acquire customers and organize property viewings faster. We have adjusted to meet the needs of most small- and medium-sized agencies for agent training, increased the usage of our products, and higher engagement on our platform. As a result, our technology capabilities have enabled us to continue optimizing our SaaS solutions and service offerings, thus attracting more agents to our platform. In the third quarter of 2020, the number of active agents on our platform exceeded 276,000, representing an increase of 21.98% year-over-year from the same period in 2019. More importantly, in September, the number of active agents on our platform increased by 12.9% year-over-year, while the number of active agents on our platform reached a monthly record high of 185,000.

Our efforts have allowed us to keep refining our SaaS solutions and services, which has drawn more agents to our platform. In the third quarter of 2020, we surpassed 276,000 active agents, marking a 21.98% increase compared to the same time last year. Notably, in September, we saw a 12.9% year-over-year rise in active agents, reaching a new monthly high of 185,000.

The goal of the second strategic optimization is to maximize the number of agents that complete real estate transaction deals exclusively on our platform. For this purpose, we will focus on utilizing our SaaS solution and offline operation services to empower those agents in our preferred agent alliance network. This initiative will enable us to achieve mutual growth with our agents and enhance our transaction service capabilities over the long run.

The goal of the second strategic optimization is to maximize the number of agents that complete real estate transaction deals exclusively on our platform. For this purpose, we will focus on utilizing our SaaS solution and offline operation services to empower those agents in our preferred agent alliance network. This initiative will enable us to achieve mutual growth with our agents and enhance our transaction service capabilities over the long run.

During the third quarter, we established a strategic cooperation with the Centaline Group. Through this partnership, we plan to develop a leading first-grade technology-enabled franchising system in the fourth quarter. We are confident that our ability to empower our agents will help us secure the exclusivity of our Asian partnership over the long run. We announced this overall cooperation with the Centaline Group yesterday.

During the third quarter, we established a strategic cooperation with the Centaline Group. Through this partnership, we plan to develop a leading first-grade technology-enabled franchising system in the fourth quarter. We are confident that our ability to empower our agents will help us secure the exclusivity of our Asian partnership over the long run. We announced this overall cooperation with the Centaline Group yesterday.

In the last nine years, our platform has accumulated over 1 million agents as a result of our technology leadership. Centaline Group is based in Hong Kong and has been active in Mainland China's real estate market since the 1990s. The combination of its extensive experience in offline operations and sophisticated management systems has made Centaline Group one of the best real estate agent service providers in this country. As part of our partnership, we have jointly invested in Shanghai Yuancui Information Technology Co., Ltd., and this joint venture will focus on creating a new technology and service-oriented real estate service model to further empower those agents in our preferred agent alliance network via an innovative and technology-enabled franchising system. Mr. Liu Tianyang, Director of Centaline Group, Vice President of the Centaline China Property Agency Limited and the Chairman of China's real estate agent union will serve as the President of this joint venture, which currently manages over 400 offline real estate agent shops in China.

We are focusing on creating a new technology and service-oriented real estate service model to further empower the agents in our preferred agent alliance network through an innovative and technology-enabled franchising system. Mr. Liu Tianyang, Director of Centaline Group, Vice President of Centaline China Property Agency Limited, and Chairman of China's real estate agent union, will serve as the President of this joint venture, which currently manages over 400 offline real estate agent shops in China.

The third strategic optimization focuses on strengthening our offline resale property service capabilities and expanding the service offerings of our transaction service centers. By utilizing our Duoduo transaction CRM, our transaction service centers can fully digitize the management process of the transactions. During the third quarter, we built an additional 10 self-owned transaction service centers and established 41 offline stores, while expanding our coverage to 11 cities in the Shanghai area through joint operations. In addition, we have provided online solutions for the transaction of commission payments. To date, we have already established partnerships with ICBC and the Bank of Communications and interfaced our system with both banks to enhance the efficiency of the mortgage process.

During the third quarter, we built an additional 10 self-owned transaction service centers and established 41 offline stores, while expanding our coverage to 11 cities in the Shanghai area through joint operations. In addition, we have provided online solutions for the transaction of commission payments. To date, we have already established partnerships with ICBC and the Bank of Communications and interfaced our system with both banks to enhance the efficiency of the mortgage process.

As property listings are essential for agents to conduct their business, we continued to expand our property listing library in the third quarter to better serve the agencies on our platform. We consider this the core supply of production materials for the agents. We further enhanced our products and services to real estate developers to expand our developer collaborations and our library for new construction property listings. By the end of the third quarter, we have forged strategic partnerships with 25 top-tier developers in China. These partnerships have enabled us to expand our coverage of the new property construction projects as well as to grow the number of new projects on our platform with a focus on those projects in key cities. As a result, during this period, the number of new construction property projects on our platform increased to 3,479, representing an increase of 11.26% year-over-year and 19.23% quarter-over-quarter. In terms of our real estate-related asset management business, we continued to expand our parking space pass business during this quarter, executing 12 new projects in seven new cities such as Changsha, Jinan, Chongqing, Luzhou, and Jimo. Since our addition of 9,358 parking spaces in this quarter, the total number of listed parking spaces on our platform reached 23,000 for a total value in excess of RMB 1.8 billion. We also continued to expand our property renovation services through our exclusive access to resale properties. As such, we leverage our foothold in the resale property renovation space to forge partnership with leading providers of renovation services and indoor environmental health enterprises. This partnership enabled us to actively promote technology and health during our home renovation process to help make our customers' homes better, smarter, and safer than before.

We continued to expand our property renovation services through our exclusive access to resale properties. This allowed us to leverage our position in the resale property renovation space to establish partnerships with leading providers of renovation services and indoor environmental health companies. These partnerships enabled us to actively promote technology and health during our home renovation process to improve our customers' homes, making them better, smarter, and safer than before.

Since our establishment nine years ago, our goal has always been to empower real estate agencies by providing them with quality SaaS solutions, digitizing agencies' offline operations and becoming a long-term and reliable ally for our real estate agents. We will continue our conservative approach, manage our risk diligently, and execute those growth strategies that can generate long-term value going forward. And lastly, let me share an update on our current outlook for the fourth quarter. We expect our strategic decision not to offer any subsidies to agents will have a short-term impact on our closed-loop transaction for new construction properties. However, we remain confident in our ability to continuously expand our agent base and the property listing library. We also plan to invest more in empowering those agents in our preferred agent alliance network through the cooperation with Centaline and the establishment of a joint venture, Centaline-Yuancui, which we believe will enable us to establish more long-term and exclusive partnerships with those same agents. As a result, we expect our offline costs to increase in the next quarter. In addition, we will remain committed to upgrading our SaaS offerings, including our platform stickiness for agents, strengthening our real estate developer partnerships, and expanding our property listing library in the fourth quarter of 2020. Based on those expectations and assumptions, we are currently forecasting our revenue to be between RMB 600 million and RMB 700 million in the fourth quarter of 2020. This forecast is based on our current views of the market environment, which are subject to change.

We will remain committed to upgrading our SaaS offerings, including our platform stickiness for agents, strengthening our real estate developer partnerships, and expanding our property listing library in the fourth quarter of 2020. Based on those expectations and assumptions, we are currently forecasting our revenue to be between RMB 600 million and RMB 700 million in the fourth quarter of 2020. This forecast is based on our current views of the market environment, which are subject to change.

With that, I will turn the call over to our CFO, Mr. Pan Jiaorong, to review this quarter's financial results.

Our property listing library in the fourth quarter of 2020. Based on those expectations and assumptions, we are currently forecasting our revenue to be between RMB 600 million and RMB 700 million in the fourth quarter of 2020. This forecast is based on our current views of the market environment, which are subject to change. With that, I will turn the call over to our CFO, Mr. Pan Jiaorong, to review this quarter's financial results.

Thank you, Mr. Zeng. I will now provide a closer look into the third quarter financial results. Before I begin, please note that all numbers are in RMB terms unless otherwise stated. Revenue in the third quarter of 2020 was RMB 819.1 million, which represented a decrease of 13.6% from RMB 948 million in the same period of 2019 and an increase of 11% from RMB 737.7 million in the second quarter of 2020. The cost of revenue in the third quarter of 2020 was RMB 626.8 million, which represented a decrease of 16.3% from RMB 749.1 million in the same period of 2019 and an increase of 1.6% from RMB 616.7 million in the second quarter of 2020. The year-over-year decrease was mainly attributable to a decrease in commission fees payable to agents for the services they rendered, which resulted from the decrease in commissions revenue from our transactions.

In the third quarter of 2020, the cost of revenue was RMB 626.8 million, down 16.3% from RMB 749.1 million in the same period of 2019, but up 1.6% from RMB 616.7 million in the preceding quarter. The year-over-year drop was primarily due to a reduction in commission fees paid to agents for their services, linked to a decline in commission revenue from our transactions.

Gross profit in the third quarter of 2020 was RMB 192.3 million, which represented a decrease of 3.3% from RMB 198.8 million in the same period of 2019 and an increase of 58.9% from RMB 121 million in the second quarter of 2020. Gross margin in the third quarter of 2020 further expanded to 23.5% from 21% in the same period of 2019.

Gross profit in the third quarter of 2020 was RMB 192.3 million, representing a decrease of 3.3% from RMB 198.8 million in the same period of 2019 and an increase of 58.9% from RMB 121 million in the second quarter of 2020. Gross margin in the third quarter of 2020 further expanded to 23.5% from 21% in the same period of 2019.

Operating expenses in the third quarter of 2020, including share-based compensation expenses of RMB 26.1 million were RMB 168.8 million, which represented an increase of 38.4% from RMB 122 million in the same period of 2019 and an increase of 9.7% from RMB 153.9 million in the second quarter of 2020.

Operating expenses in the third quarter of 2020, including share-based compensation expenses of RMB 26.1 million were RMB 168.8 million, which represented an increase of 38.4% from RMB 122 million in the same period of 2019 and an increase of 9.7% from RMB 153.9 million in the second quarter of 2020.

Sales and marketing expenses in the third quarter of 2020 were RMB 1.5 million, which represented a decrease of 60.5% from RMB 3.8 million in the same period of 2019 and a decrease of 48.3% from RMB 2.9 million in the second quarter. The decreases were primarily due to our reduction in expanding our brand promotion and marketing activity to attract property listings from real estate sellers to our marketplace and platform.

Sales and marketing expenses in the third quarter of 2020 were RMB 1.5 million, reflecting a decline of 60.5% compared to RMB 3.8 million in the same period of 2019 and a decrease of 48.3% from RMB 2.9 million in the second quarter. The reductions were mainly due to our decision to cut back on brand promotion and marketing efforts aimed at attracting property listings from real estate sellers to our marketplace and platform.

Product development expenses in the third quarter of 2020 were RMB 65 million as compared to RMB 73.4 million in the same period of 2019 and RMB 70.5 million in the second quarter of 2020. The decrease on a year-over-year basis was primarily attributable to our commitment to the continued optimization of our product development teams' operating efficiency, which led to a decrease in personnel-related expenses in the period.

Product development expenses in the third quarter of 2020 were RMB 65 million, compared to RMB 73.4 million in the same period of 2019 and RMB 70.5 million in the second quarter of 2020. The year-over-year decrease was mainly due to our focus on optimizing the operating efficiency of our product development teams, resulting in lower personnel-related expenses during this period.

General and administrative expenses in the third quarter of 2020 were RMB 102.3 million as compared to RMB 44.8 million in the same period of 2019 and RMB 80.5 million in the second quarter of 2020. The year-over-year increase in general and administrative expenses in the period, including share-based compensation expenses, were RMB 90 million. The remaining increase of RMB 48.5 million was primarily attributable to, first, an increased headcount and various expenditures to both improve our corporate governance and ensure compliance in relation to our status as a U.S.-listed company. Second, an increase in provision for doubtful accounts.

In the second quarter of 2020, general and administrative expenses, which included share-based compensation, totaled RMB 90 million. An additional increase of RMB 48.5 million was mainly due to a higher headcount and various expenses aimed at enhancing our corporate governance and maintaining compliance with our status as a U.S.-listed company, as well as an increase in provisions for doubtful accounts.

Net income in the third quarter of 2020 was RMB 21.9 million as compared to RMB 18.3 million in the same period of 2019 and a net loss of RMB 14 million in the second quarter of 2020. Non-GAAP net income in the third quarter of 2020 was RMB 48 million as compared to RMB 80.3 million in the same period of 2019 and RMB 11.9 million in the second quarter of 2020.

Net income in the third quarter of 2020 was RMB 21.9 million, an increase from RMB 18.3 million in the same period of 2019, and a recovery from a net loss of RMB 14 million in the second quarter of 2020. Non-GAAP net income for the third quarter of 2020 was RMB 48 million, down from RMB 80.3 million in the same quarter of 2019 and up from RMB 11.9 million in the second quarter of 2020.

Basic and diluted net income for ADS in the third quarter of 2020 were RMB 0.28 and RMB 0.26, respectively. In comparison, our basic and diluted net loss per ADS in the second quarter of 2020 were both RMB 0.18, while our basic and diluted net income attributable to ordinary shareholders per ADS in the third quarter of 2020 were $2 and $1, respectively.

In the same period of 2019, we had RMB 11.9 million in the second quarter of 2020. Basic and diluted net income for ADS in the third quarter of 2020 were RMB 0.28 and RMB 0.26, respectively. In comparison, our basic and diluted net loss per ADS in the second quarter of 2020 were both RMB 0.18, while our basic and diluted net income attributable to ordinary shareholders per ADS in the third quarter of 2020 were $2 and $1, respectively.

As of September 30, 2020, we had cash and cash equivalents, restricted cash, and short-term investments of RMB 1,073.7 million, short-term bank borrowing of RMB 447.9 million and unutilized banking facilities of RMB 386 million. For the third quarter of 2020, net cash provided by operating activities was RMB 11.6 million.

Income attributable to ordinary shareholders per ADS in the third quarter of 2020 were $2 and $1, respectively. As of September 30, 2020, we had cash and cash equivalents, restricted cash, and short-term investments of RMB 1,073.7 million, short-term bank borrowing of RMB 447.9 million, and unutilized banking facilities of RMB 386 million. For the third quarter of 2020, net cash provided by operating activities was RMB 11.6 million.

And this concludes our prepared remarks for today. Operator, we are now ready to take questions.

We have the first question from Wei Xiong from UBS.

So as management mentioned just now, we expect the primary distribution business to be impacted in the short term, and we plan to invest more offline in the fourth quarter as well. My question is how long we expect to see the impact on the primary distribution business? Also, what kind of offline investments are we expecting in the fourth quarter, and how will that affect our margins?

Thank you for the question. As management mentioned earlier, we anticipate that our primary distribution business will face short-term impacts. We also plan to increase our offline investments in the fourth quarter. I would like to know how long we can expect these impacts to last and what specific offline investments are planned for the fourth quarter, as well as how these will affect our margins.

Okay. We believe through our continued strengthening of our SaaS solution offerings, we will continue to improve the size of our active agents. For example, we have reached a record high for our active users in September. We are also upgrading our new property listings. By the third quarter, we have reached a record high in the number of new property listings. We endeavor to improve both the activeness of our agencies and agents, as well as our new property listings. However, because of the vicious competition regarding subsidies, we still consider there will be a negative impact on the rate of closed-loop transactions. That is, agents and agencies who close their deals on the platform. We have observed some agencies have obtained information on new property listings on the platform but closed their deals on other platforms. However, we believe this is not going to last long because all competition is based on the property level of gross profit. Therefore, we forecast that competition regarding subsidies will last for one or two quarters. We believe that our competitors and the competition landscape will become more reasonable and stable after that. In respect of the investment in our offline presence with the cooperation with the Centaline Group, particularly the Yuancui Information Technology Company, we will continue to focus on empowering our outstanding agency on our platform. We empower them with our online traffic and maintain working capital in offline operation management. We focused on forming exclusive cooperation with these agents to build a wall of protection against vicious competition like unlimited subsidizing. Therefore, we believe this is our key strategy going forward for the next few quarters to respond to the market competition.

We will continue to focus on empowering our outstanding agency on our platform. We empower them with our online traffic and maintain working capital in offline operation management. We focused on forming exclusive cooperation with these agents to build a wall of protection against vicious competition like unlimited subsidizing. Therefore, we believe this is our key strategy going forward for the next few quarters to respond to the market competition.

Right. We have seen an increase in our gross margin this quarter, while we have seen a decrease in the gross margin of our competitors. That is the result of insisting not to offer excessive subsidies in terms of the competition. In terms of our offline presence and our investment in offline agency shops, we forecast that there will not be a significant increase in the offline presence and its related revenue. So we expect the gross profit will not be positively improved in the short term.

We don't have any further questions on the line. I'll now hand the conference back to the presenters for closing remarks.

Do we have any further questions, operator?

There are no further questions at this time. I'll now hand the conference back to today's presenters for closing remarks. Thank you.

Okay. Thank you, everybody, and thank you for joining this earnings call. This does conclude the earnings call now. Thank you again.

Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may now disconnect.