Lufax Holding Ltd Q3 FY2022 Earnings Call

Thank you very much. Hello, everyone, and welcome to our third quarter 2022 earnings conference call. Our quarterly financial and operating results were released by our newswire services earlier today and are currently available online. Today, you will hear from our Chairman and CEO, Mr. Y.S. Cho, who will provide an update on the macroeconomic and COVID impact, our latest business strategies, and the recent regulatory developments. Our co-CEO, Mr. Greg Gibb, will then go through our third quarter results and provide more details on our business priorities. Afterwards, our CFO, Mr. David Choy, will offer a closer look into our financials before we open up the call for questions. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the International Financial Reporting Standards in our earnings release and the filings with the SEC.

Thank you for joining. The third quarter has been challenging. Our core small business owner segment, which makes up 87% of our new loans facilitated excluding customer finance loans, has been significantly impacted by the deteriorating macro environment in the third quarter. In periods of macroeconomic change, small businesses are typically the hardest to be impacted ahead of customer finance and other lending. As a result, our profitability has been negatively impacted due to rising credit impairment losses and credit enhancement costs. Ongoing pandemic controls and strong economic growth impacted credit quality in the third quarter. Our lead indicator for credit quality, the C-M3 ratio, which estimates the percentage of loans that will be called nonperforming at the end of three months, increased by 0.1% quarter-on-quarter to 0.8% this quarter. Our C-M3 ratio stood at 0.4% in the third quarter of 2021, indicating that credit quality has worsened considerably versus a year ago. In the third quarter of 2022, data from market analysts suggest that the GDP share of cities with high- and medium-risk pandemic controls increased versus the second quarter, which we believe is having a broader impact on small businesses, given a backdrop of declining business and customer confidence. While the credit quality situation advanced across the third quarter, we retained growing differences in economic resilience in various regions, which led to significant divergence in credit performance by region. Taking Shanghai for example, the C-M3 ratio for general unsecured loans spiked to 2.3% in the second quarter of this year. But after a short period of time, after reopening, it clearly returned to pre-lockdown level of 0.5% in the third quarter of 2022, demonstrating strong resilience. In comparison, the C-M3 ratio for some other regions, in particular, lower-tier cities were worse and probably will take much longer to recover. Let me provide a sense of this by comparing credit quality for unsecured loans. On average, the C-M3 ratio for top-performing regions, which mainly consist of cities and regions with strong economic foundations, such as Beijing and Shanghai, improved by 1 basis point in the third quarter compared to the second quarter. While the C-M3 ratio for average performing regions and less desirable performing regions deteriorated by 13 and 20 basis points, respectively, during the same period. This geographic divergence is fundamentally reshaping the map for where sustainable lending can be enabled midterm. Today, about two-thirds of our existing business is in cities and regions where we believe the economic foundations are stronger and likely to be more resilient in recovery. Small businesses contribute to 60% of GDP and 80% of job creation, while receiving only 26% of financing as of 2021 year-end. We believe long-term demand will remain substantial. As small business owners are expected to be agile and responsive when the macro environment improves, we are confident that we are well positioned to react when the time is appropriate, leveraging our existing strengths, including extensive channels and institutional partnerships and a strong capital position. However, medium term, we must adjust our business strategies by keeping our focus on well-rated small business owners in more resilient cities with increased reliance on our direct sales force channel. The increased focus will result in reduced gross revenue in midterm, but will improve profitability and sustainability. We must go through a period of digesting credit losses on the existing vintages as they run down, while building up a more sustainable and profitable new portfolio. This process will likely result in a U-shaped recovery pattern for our business. In the near term, we expect this adjusted strategy will generate new loan facilitation volumes at approximately two-thirds of the volumes we have generated in recent years. If the volumes are determined by the overall timing of macroeconomic recovery, which remains uncertain at this moment. While we hope that recovery will come sooner, our immediate plans assume a status quo in the current operating environment. Our optimization of resources, including further cost restructuring, will be completed over the next several quarters. During this time, we assume that our credit impairment losses and credit enhancement costs will remain at elevated levels, while the underperforming portion of existing vintages run down, clearly impacting profits. Taking uncertainties into account, we believe the timing for a notable improvement in our bottom line performance is more likely in 2024 than in 2023. This is clearly a challenge for us, but we are confident in our ability to execute. We prioritize this business to continue to upgrade our technology, operations, and risk management with the objective of strengthening our long-term market leadership in the small business owner segment. Given our resources, customer access, strong balance sheets, and long-term partnerships with financial institutions, we have the necessary advantages to navigate through this difficult period. While the operating environment demands change, the regulatory environment is now stabilizing. The rectification process led by PBOC and CBIC has now transitioned to normalized regulation oversight without substantial outstanding issues for the company. Our bank guarantee model, under which we bear 22.5% credit risk on the outstanding balance of loans we facilitated as of the end of September is distinct from a lending facilitation platform and in line with prevailing requirements. Looking forward, we expect our portion of risk-sharing with financial partners to increase to at least 30% over the next several quarters. As I stated before, the use of our guarantee company also allows us to share required data directly with funding partners. The CBIC released guidance regarding the industry, where credit guarantee insurance or core components of our business model is playing a positive role in helping small businesses increase their funding availability. Finally, I have an update on changes to our Board. In consideration of potential Hong Kong listing requirements and to improve our ESG standing, we have added two new female directors, namely Ms. Cai Fangfang and Ms. Fu Xin to the Board. In addition, we are pleased to welcome Mr. (indiscernible) to join our Board as a director again. All three new directors are Ping An executives. We are forming the ongoing support from our largest shareholder. The new Board remains made up of nine members with four current independent directors, two current company directors, myself and Greg, and the three new directors who are Ping An executives. Under the new structure, we are reducing one independent director and adding an additional director nominated by Ping An. I will now turn the call over to Greg for more details on our operating results and business priorities.

Thank you, Y.S. I will now provide more detail on results and our operational focus. Please note all figures are in RMB, and all comparisons for the third quarter are on a year-over-year basis, unless otherwise stated. Third quarter results were negatively impacted by deterioration in credit quality. As a result, third quarter profit was CNY 1.4 billion, declining 67% versus a year ago. As a result of progressively tightened credit standards, new loan volumes were CNY 123 billion, declining 27% versus a year ago. Credit impairment losses totaled CNY 4 billion, increasing 137% year-over-year. Overall profitability has also been negatively impacted by higher insurance premiums. Total expenses, including credit impairment losses, asset impairment losses, finance costs, and other losses decreased by 12.7% as a result of tighter cost control. Third quarter revenues declined by 17.2% versus a year earlier to CNY 13.2 billion, and our outstanding balance of loans facilitated declined by 1.3% versus a year earlier to CNY 636 billion as of September 30, 2022. We've entered what we expect to be a U-shaped profitability pattern driven by the credit quality issues that Y.S. detailed. Our historical loan businesses are now experiencing higher credit losses given the macro environment. As a result of progressive credit tightening, new business initiated in the last couple of quarters has demonstrated better performance. But we must now follow a path of continuing to strengthen our collection on existing businesses while building up a more sustainable and profitable new portfolio. While at the same time, we continue to refine our channel management to optimize our direct sales force so we can be more nimble and efficient in selecting and targeting a higher quality customer base with the most productive workforce. This will mean reduced new business volumes and gross revenues in the medium term, but new business should be able to generate better results as compared to the historical loan vintages as a whole. We believe bottom line profit recovery will be driven by three factors: evolving credit performance of the historical vintages, runoff speed of the historical vintages, and growth rate of the prioritized new business. At this stage, we can't accurately predict how long the historical businesses will see elevated credit impairment as the drivers are fundamentally macro in nature. But as Y.S. stated, timing for a notable improvement in our bottom line performance is more likely in 2024 than 2023 as new business volumes replace vintage volumes and policy changes potentially lead to improvement in the macro environment. Recently, we have witnessed signals around commitment by the banking system to support some key indices, including real estate. We believe these developments could potentially bring a positive impact to the macro environment and our business, although the exact timing impact is yet difficult to predict. As we navigate through the current downturn, we will continue to strengthen our operating capabilities and financial institution partnerships. We have recently launched our new small business owner ecosystem. Its intent is to engage potential customers at an earlier stage, deepen our interaction with existing customers, and create both new cross-selling opportunities and a new source of customer referrals. As the first step, we launched the testing version of our new and improved LuDianTong app in October 2022. LuDianTong has an open platform design and is being populated with digital operating tools and industry-focused content for small business owners to operate their businesses more effectively. LuDianTong builds a recap moment like a social network, connecting our direct sales force with existing and prospective small business owners, and helping these small business owners better serve their existing and prospective customers to deliver more impactful marketing, more frequent engagement, and more direct feedback with their customers. Compared with other players, we believe that our extensive offline direct sales network would allow us to acquire users more efficiently and offer more differentiated value to users. We are also continuing to develop LuDianTong, which helps banks with strong risk capabilities acquire borrowers directly through dispersed sourcing agents nationwide. Under this model, the company does not provide or participate in credit risk sharing. Year-to-date, LuDianTong provided online services to more than 10,000 active agents in their efforts to facilitate loans to partner finance institutions. For funding partners under our risk-sharing model, we have increased 16 new bank partners compared to the same period last year. We continue to explore the development of new data and technology solutions to share with our partner institutions in the areas of fitted customer matching, risk analytics, portfolio management, and collection services. Our risk-sharing reached 22.5% of the total portfolio as of September 30, 2022. The guarantee company's net capital stood at CNY 47.8 billion at the end of the third quarter, operating with a leverage ratio of 2.1x. More broadly, our net assets stood at CNY 95 billion with CNY 46 billion cash on hand, figures which provide confidence to our financial partners in this otherwise challenging environment. Our current guidance for the full year 2022 is total income CNY 57 billion to CNY 58 billion, with net profits ranging CNY 8.5 billion to CNY 8.9 billion. New loan sales for the full year are expected to reach CNY 490 billion to CNY 495 billion. Wealth Management client assets are expected to end the year between CNY 390 billion and CNY 430 billion. These projections are below our previous estimates and reflect both the macroeconomic environment and our strategy to be more selective in credit selection. These forecasts reflect our current views of the market and operational conditions, which are subject to change. Finally, we would like to thank our shareholders for their continued support of our business. In October, we distributed our first half 2022 dividend of CNY 0.17 per ADS, and we will continue to deliver value to our shareholders. We also continue to stay close with regulators and remain ready to initiate a Hong Kong listing plan as soon as permissible, subject to regulatory approvals. With that, I would like to hand over to David to elaborate on our financial performance in greater detail.

Thanks, Greg. I will now provide a close look at our financials. Please note, all numbers are in renminbi terms, and all comparisons are on a year-on-year basis, unless otherwise stated. Our total income for the third quarter was CNY 13.2 billion, while net profit was CNY 1.4 billion. Our total expenses for the first quarter grew by 11.5%. The increase in the total expenses was primarily driven by the increase in credit impairment costs, while our operating-related expenses actually decreased by 12.7% due to operating efficiencies and optimizations. Let's take a close look at our revenue. First of all, our revenue was negatively impacted by the economic environment, resulting in a 17.2% decrease in our top line this quarter. As we are dedicated to build up a more sustainable business model, the total income mix of our credit retail business continues to evolve. During this quarter, while technology platform-based income decreased by 30.3% to CNY 6.7 billion, our net interest income grew 21.5% to CNY 4.6 billion, and our guaranteed income grew by 44.1% to CNY 1.9 billion. As a result, our retail credit facilitation platform service fees, as a percentage of the total income, decreased to 47.8% from 57.1% a year ago. And as the Trust funding model provided lower funding costs through the use of asset-backed securities, we continue to utilize them more in our funding mix. As a result, income from consolidated trust is recognized as net interest income. Our net interest income as a percentage of total income actually increased to 35% from 33.9% a year ago. Moreover, we continue to better utilize our guarantee company's abundant capital to bear more credit risk ourselves, instead of through our P&C insurance partners. As a result, we generated more guaranteed income, reaching 14.1% of total income compared with 8.1% a year ago. In terms of wealth management, our platform transactional service fees decreased by 22.1% to CNY 364 million in the first quarter from CNY 467 million in the same period of 2021. This decrease was primarily caused by the decline in fees generated from our current products, partially offset by the increase in fees generated from platform service. Our other income, which mainly includes account management fees, collections and other value-added services charged to our credit enhancement partners as part of the retail facilitation process, was negative CNY 129 million in the third quarter of 2022 compared to CNY 997 million in the same period of 2021. The majority of the decreases were due to a refund of account management fees to our primary credit enhancement partner as a result of worse-than-expected collection performance and narrowing down of service group, along with the change of fee structure that we provided charged for our primary credit policies this quarter. Turning to our expenses. We continue to prudently manage our operational expenses. Our total expenses, excluding credit and asset impairment losses, finance costs, and other losses decreased by 12.7% year-over-year to CNY 6.7 billion in the quarter. In the third quarter, our total expenses grew to CNY 11.1 billion from CNY 9.9 billion a year ago. This was primarily driven by an increase in credit impairment losses of CNY 2.3 billion year-over-year. Our total sales and marketing expenses, which mainly include expenses for borrower and investor acquisition costs as well as general sales and marketing expenses, decreased by 11.7% to CNY 4.1 billion in the third quarter. This decrease was driven by the decrease in the new loan sales and optimization of our commission-based compensation structure. In addition to that, the continued optimization of productivity of our direct sales force also provides us the flexibility in our cost structure. Our general and administrative expenses decreased by 36.8% to CNY 592 million in the third quarter from CNY 937 million in the same period of 2021, thanks to our stringent cost control measures. Our operations and services expenses decreased by 3.6% to CNY 1.6 billion in the first quarter from CNY 1.7 billion a year ago, mainly due to the decrease of transparent management expenses and our effective expense control measures. Our credit impairment losses increased by 137.7% to CNY 4 billion in the third quarter from CNY 1.7 billion a year ago. This was mainly driven by two factors: one, the profound indemnity losses driven by the increased risk exposure as we move towards a more balanced risk pricing model; and second, as a reference, the company will risk 22.5% of its outstanding balance, up from 14.8% as of September of 2021. Secondly, the change in credit performance due to the impact of COVID-19 efforts also contributed to the increase in credit impairment losses. Our asset impairment also decreased to CNY 68 million in the third quarter from CNY 410 million a year ago. The number for the third quarter of 2021 was unusually high mainly due to impairment losses of intangible assets and goodwill. Our finance costs increased by 82.1% to CNY 306 million in the first quarter of 2022 from CNY 168 million in the same period of 2021, mainly due to the increase in interest expense. Other losses were CNY 7 million in the third quarter compared to the other gains of CNY 36 million a year ago, mainly due to the foreign exchange losses. As a result, our net income decreased to CNY 1.4 billion in the third quarter from CNY 4.1 billion in the same quarter of 2021. Meanwhile, our basic and diluted earnings per ADS during the first quarter were both RMB 0.58 or USD 0.08. On the balance sheet side, our balance sheet remains strong and solid as our cash at bank bonuses increased. As of September 30, 2022, we had a cash balance of CNY 45.8 billion in cash bank as compared with CNY 34.7 billion as of December 31, 2021. In addition, liquid assets maturing in 90 days or less amounted to CNY 46.5 billion as of the end of September 2022. As of the end of September 2022, our guarantee company leverage is only at 2.1x, whilst regulatory requirements allowed us to leverage up to 10x. All these provide strong support for the company to remain resilient in the face of economic challenges. That concludes our remarks for today. Operator, we are now ready to take questions.

We now have our first question from Alex Ye of UBS.

I have two. The first one is on your asset quality. So can you give us some color in terms of your C-M3 free growth rate into October and November as well as the outlook for the coming few quarters? I understand that there could be substantial uncertainty around the macro front. Perhaps can you also talk about how it is likely to evolve under different scenarios? For example, assuming the current lockdown, rolling lockdown across different city states as it is today? And second, perhaps assuming we have a material easing on reopening from Q2 of next year. And second question is on your take rate outlook. So I understand arrangements have been tightening credit criteria. So when should we expect the take rate to broaden and start to improve? I guess there are different moving parts to that equation. For example, the CGI premium has increased a lot this quarter. Given there could be some lagging effect on the CGI pricing, should we expect further material uptick in Q4? And in terms of your loan pricing, we have been declining for over one year and has been quite stable lately. So is there any room for us to maybe roll back some of the pricing cuts and perhaps offset the takeaway pressure?

Okay. Let me answer your question. If I miss any, please let me know later. So the first question is about asset quality and our C-M3 net flow trends. Our flow rate increased by 0.1% to 0.8% in the third quarter this year from 0.7% in the second quarter. Considering the resurgence of COVID-19 and regional lockdown recently, we believe the flow rate in the near term and midterm will stay at a relatively high level. Looking at the October and November numbers, it seems stable. It does not change much. We believe the COVID policy and reopening will surely boost consumption and investment, both critical for the economy that is driven by confidence levels. Given we are focused on the small business owners, who are typically the hardest to be impacted ahead of customer finance and other lending in a downturn, we are more sensitive to COVID control measures as shown in our C-M3 net fluctuation risk. But likewise, we believe their rate performance will respond to the relocation of COVID control policy quickly. So once the policy gets loosened, we believe the performance will improve relatively quickly. The third question about our take rate, in relation to the CGI premium. We hope early covenants will come soon. For example, at a time when we experienced almost three months' consecutive lockdown. Our current performance is one of the best among almost 35 branches we have. The regional economy and the environment are hugely different now. Overall, we hope regions like Shanghai can recover quickly with fewer pandemic control measures. However, we assume a status quo in the current operating environment. In the fourth quarter and early 2023, we also expect that our CGI credit enhancement costs will remain at high levels, and it will affect our take rate for sure. To mitigate this impact on take rates, we continue to optimize our funding costs, which is now less than 6%. We also keep reducing our operating costs to offset the impact from rising costs. We believe the timing for multiple usages in our take rate imports will depend on the COVID control policies. If we see actions to ease restrictions, we believe the upsurge will likely occur in 2024 rather than in 2023. Lastly, in terms of loan pricing, our corporate loan balance is well in line with the policy guidelines, and stands at 21% in the third quarter, which reduced from 21.4% in the second quarter. Looking at new laws, it’s already less than 20%. We believe we are in full compliance with the regulations and window guidance given from CBRC regarding APR. We haven’t received any notification on reducing our lending products. The decrease in APR is also driven by our strategy to target higher-quality segments. In the near term, we maintain our overall APR level for new loans while focusing more on high-quality small business owner segments in more economically resilient regions.

Alex, any follow-up question on that?

That's all for me.

We now have our next question from Emma Shu of Bank of America Merrill Lynch.

I have three. So the first one is about your third quarter results and fourth quarter. We noticed that your third quarter result is much weaker than previous guidance. And you also revised out your full-year guidance and now implied losses in the fourth quarter. So could management explain a little more detail about what led to the weak business performance in the third quarter and the weak fourth-quarter guidance? The second question is about the outlook. Management just said that you expect recovery to happen more likely in 2024 than 2023. But could you give us more details? For example, do you still expect this business to continue to decline in 2023? And when do you expect the performance to bottom? Yes. And the third question is about your share buyback. We noticed that your share prices have dropped a lot this year, but it seems that the buyback activity has stopped in recent quarters. So could management tell us why the buyback activity stopped recently? A related question about your dividends. Do you still think that you can maintain a stable dividend per ADS? Or is there still room for you to increase the payout ratio and maintain a relatively stable dividend? Yes. So this is my three questions.

Thanks, Emma. Regarding your first question on our third quarter results, as you see, this is weaker than expected. Our main change is really macro challenges on our small business owner sector due to pandemic control and macro uncertainties. The operating environment has been fundamentally reshaped for our small business owner segments, and this is also expected to continue in the near and midterm. COVID resurgence in various key cities really affected our operations in sales and collection at branches or centers. Customer confidence remains low, indicating overall weak market demand. So basically, we got a quite immediate hit from the macro environment change. Given those factors, we just adjusted our risk policy and growth plan, focusing more on quality segments. That, as a result, decreased our new sales volume recently. As for the COVID measures, to deal with the situation, we will continue to prioritize quality over volume in the meantime and focus on sustainable profitability, meaning less scale, but we aim for profitable and sustainable segments. We tighten our credit standards policy and focus on customers with higher-risk ratings, and particularly customers in more developed regions to see less low (indiscernible) growth and better charge ratios. Lastly, channel-wise, we will develop more direct sales channels and leadership panels for other channels because we see higher customer quality from our own U.S. channels. Do you have some questions about the outlook?

So on the outlook, as we put forward this morning, we do think it is a U-shaped pattern. So let me explain a little bit more how this plays out. The existing portfolio, which was acquired as early as 2020, is still in force. Over the last three quarters, we've progressively tightened our credit standards, but part of the portfolio was brought in pre-tightening. That part of the portfolio is experiencing elevated levels of impairment and credit costs, which will continue to play through in the next couple of quarters. The business we acquired in the last couple of quarters, as Y.S. outlined, has been done at a much higher credit standard, right? So what you have to visualize is that we have the legacy book gradually running off over the next 12 to 18 months, and the new book will be built with new credit standards increasing profitability. However, as we have tightened our credit standards, the absolute volume in the near term will be less. You can envision the legacy running off; that's one line; and the building of the new business with new credit standards increasing, that's another line. When these two cross, it will determine the turning point in our U-shaped bottom line profit recovery. The exact timing for that really depends on real progress on policy change, including COVID, because we believe that as soon as you have any policy change, the small business owners will respond quickly. Two things will happen: the quality of the legacy business will show improvement, and our willingness to accelerate new business growth at the higher standard will also increase. It's very hard to call right now which quarter is going to be the bottom, but it's somewhere in the next year to 18 months. What is most important is to assume the worst-case scenario, which is nothing changes for the next 12 months. We are in a good position in terms of our capital base, our funding partners, and how we're prioritizing our channels. As soon as it does change, we can step on the gas pedal again and be strong financially and fundamentally in our footprint and chosen segments. We believe that if we look around the industry, at that time, our competition will most likely be less, our relative leadership in the market will be intact, and our ability to extend it should come at that time. It’s very hard to call the market at the bottom, but we are relatively clear that it should be within the course of 2023. Therefore, 2024 is really where you could see the billable improvement. I want to emphasize that, when we face this kind of environment, the first thing to do is prioritize who we're selecting to serve now, how we're managing costs, and where we're putting resources.

Yes, that is very helpful. Just one quick follow-up. You mentioned that the U-shaped recovery depends on the running of your legacy portfolio, which was extended before the tightening of credit policy. Could you tell us the percentage of this legacy portfolio in your existing portfolio?

We haven't disclosed those specifics, but I think Y.S. gave a pretty good indication of a broader concept, which is even within our legacy portfolio, we have seen a greater regional differentiation in credit performance. When we look across the existing book, even within our legacy book, approximately two-thirds of it is placed in geographies which are reasonably economically resilient. This means that of the existing book brought in back in 2020, 2021, it's going to be in regions which are performing poorly. So that doesn't give you the exact number because we haven't disclosed it, but it gives you a sense of magnitude. We're not saying the entire legacy book is performing poorly; a lot of it is actually quite well positioned. As we build the new book, it is prioritized in those stronger geographies as well. If we've done our strategy right with the way we tuned our credit policy and new business, that should help us on the upside of the U as soon as the environment improves.

We now have our next question from Yada Li of CICC.

I am Yada from CICC. So I have two questions for today. The first one is regarding the cost side. I saw the growth of the lower origination volume has been slowing down and how are you able to control the operational cost of the large direct sales team in the future? Additionally, looking forward, what is the trend of our credit insurance costs specifically? The second one is about can you give us more color on the updates or any potential timeline on the HK secondary listing?

Well, thank you, Yada, for the questions. You mentioned cost control and operating costs as well as the CGI. So, simply put, for cost control, I think the key is to keep focused, nimble, and efficient. We have placed an increasing focus on optimizing and improving the quality of our direct sales team and observed significant improvements in regions where we have successfully hired high-quality direct sales teams. We will keep decision as we are now getting more selective in taking on a higher-quality customer base. In terms of the CGI percentage and cost, we hope recovery will come sooner. As of today, we announced a scenario of sales growth, which in the medium term means our credit enhancement costs will remain at high levels, and our spending will be around the same level we have right now.

On the question of potential Hong Kong listing, we still see it as a very important thing to be ready for. Getting ourselves ready is something we've been focusing on. In terms of earliest timing, we would have to do it upon the back of our 2022 financial results. We're staying very close to regulators to understand whether or not any other communications are required for actually initiating the process. As Y.S. talked about, the rectification completion has created greater certainty. You've seen some other movement in the industry on this front. As soon as this is viable from both our financials being ready, it's something we would obviously prioritize.

This concludes our Q&A session for today. I will now hand the call over to our management for the closing remarks.

Thank you. This concludes today's call. Thank you for joining the conference call. If you have more questions, please do not hesitate to contact the company's team offline. Thanks again.

Thank you.

Thank you. This concludes today's call. Thank you, everyone, for joining, and you may disconnect your line now.