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spk08: Hello, ladies and gentlemen. Thank you for standing by for Valmy Technology Co-Limited Earnings Conference Call for the second quarter of 2021. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Cecilia Lee, the IR Director of the company. Please go ahead, Cecilia.
spk02: Thank you, operator. Hello, everyone, and welcome to Valmy Technology Co-Limited Earnings Conference Call for the second quarter of 2021. As a reminder, this conference is being recorded. The county's financial and operating results were issued in a press release earlier today and are posted online. You can download the earnings press release and sign up for the county's email distribution list by visiting the IAS section of the county's website at ias.wellman.com. Participating in today's call is Mr. Xiaoping Chen, the Founder Chairman of the Board of Directors and Chief Executive Officer, and Mr. Weiqiang Pai, the Head of our Finance Department. Chemist management will begin with prepared remarks and a call will conclude with a Q&A session. Before we continue, please note, today's discussion will contain forward-looking statements made under the safe harbor provisions of U.S. Public Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Chemist Act results may be materially different from the views expressed today. For the information regarding these and other risks and uncertainties, is included in the Committee's annual report on Form 20-F and other filings as followed with the U.S. SEC. The Committee doesn't assume any obligation to update any forward-looking statements except as required by law. Please also note, wellness earnings press release and the conference call also include discussions of inaudited gap financial information as well as inaudited non-gap financial measures. Wellness press release contains a reconciliation At the end, audited non-GAAP measures to the end-audited most directly comparable GAAP measures. I will now turn the call over to our founder and CEO, Mr. Xiaoping Chen. Mr. Chen will deliver his remarks in Chinese, followed immediately by English translation. Mr. Chen, please go ahead.
spk04: In the second quarter, the sales income of 16.6 billion RMB increased by 21.2%. In the context of non-GAAP, it is 45% of the net profit growth of ordinary shareholders, and the profit-loss level has improved significantly. After several years of hard work and exploration, we have built a set of 5G LTE chip modules, including technical architecture, AI algorithms, and 5G LTE integrated 5G LTE family intelligent technical architecture that integrates 5G LTE. It promotes the landing of our one-stop all-in-one intelligent solution. Our one-stop all-in-one intelligent solution provides users with intelligent home, intelligent home and software services that cover all scenarios, from single-use intelligence to all-in-one scenarios. and form a whole set of ecosystem systems that cover the needs of life, to build a complete, fully intelligent experience for users. Then we combine the tone of our products with a younger user group. In the second quarter, we officially confirmed the launch of a brand positioning of a new technology brand. For this positioning, to optimize our hardware products and enhance brand sales, deepen and deepen our diversified sales channels. First of all, in the product part, We surrounded the AI HelpForce product strategy to strengthen the product's intelligent innovation by expanding the application, cross-border and cross-product technology fusion. In April, we launched a series of AI products at the strategic product conference, including the mineral-based water purifier ERX, the full wind air conditioner SPAX, the high-end sweeper unit Alpha 2 Plus, and the iBoard intelligent toilet that can monitor the human health index, etc. We recently launched the SuperPort series of 1,200 gallons of large-capacity water purifiers, X2, X1's AI oil and gas-based new products are being used in technology and AI applications to facilitate and optimize the consumer trend of the industry. During the 618 period, many of our new products, including Alpha 2 Pro, such as a vacuum cleaner, UV-resistant air conditioner Navi, as well as the new product of the vacuum cleaner NEO, have become the backbone of the industry when it comes to platform sales. In terms of sales channels, we have also proposed a channel strategy for large business and large electricity in the year. in each city to build a large-scale experience store, and to upgrade the design of the store, to carry the brand image of technology and brand. At the same time, these big stores also provide users with better results and scenario experience services. We have set up more than 200 to 300 CS and VS experience stores in more than 20 provinces across the country to provide users with experience, sales, If we calculate, the whole country will have more than 10 million sets in a year. So if we follow the trend of the whole thing, Then we also signed a national top-notch celebrity endorsement to endorse our brand and product. Then expand the impact of the brand in young people's minds. Then we recently also with We are also working with three major aviation companies to accurately target our high-end consumer groups. In the second half of the year, we are also planning to hold appropriate advertising activities on TV media. In addition, we are also working with a number of companies such as Douyin, Xiaowongshu, etc. India, Thailand, and Northern Europe. As I shared with you in the last press conference, our products were officially on the market in Amazon in the U.S. last week. It marked the official entry into the U.S. market and the North American market. In the second half of the year, we will continue to expand the market in the North American and other regions to enrich our sales channels and gradually develop the self-sufficiency model. We also have a series of new small businesses that are gradually emerging in the overseas market, and the function of moving the self-sufficiency UV filter is differentiated. We believe that in the future, the entire industry will benefit from the intelligent transformation and development of the intelligent furniture industry. The first is that the younger consumer groups in China, especially those after the 90s, will become the mainstream consumer groups in society. Their income is growing rapidly. According to the results of the third stage of research, the people after the 90s are more inclined to technology and intelligent products. The ratio of using all-house intelligent products will be higher. The second is that new energy vehicles have achieved rapid development in the past two or three years. It will gradually bring intelligentization into the minds of consumers. At the same time, multi-industrial industries will quickly enter the era of intelligentization, which will drive the development of intelligent furniture and improve the acceptance of consumers. The third is that China's 5G infrastructure has been developing at a high speed in the past two years. According to a plan issued by the Ministry of Industry, by 2023, the number of personal users of 5G will exceed 40% and the number of users of 5G's logistics network will be We will continue to carry out AI innovation, big business, big electricity, many strategies, technology brand positioning, development of hard technology industry, and strive to become the pioneer of a full-fledged smart solution. As China's smart home Thank you, Mr. Chen. I will quickly translate a few remarks before discussing financial performance for the second quarter of this year. Hello, everyone. Thanks for joining our second quarter 2021 earnings conference call. During the second quarter, we optimized the product portfolio for certain categories.
spk02: and increased sales of new products with higher growth margins, further enhancing our business operations and improving the overall growth margin and profitability. Our second quarter net revenues reached 1.66 billion RMB, with growth margin once again delivering both year-over-year and quarter-over-quarter increases, reaching 21.2%. At the same time, non-gamma income attributable to ordinary shareholders of the company increased by 45% year-over-year, significantly improving the profitability. After years of hard working and intense exploration, we have developed a 5G IoT home structure, which integrates the technology framework, AI algorithms, 5G IoT team modules, sensors, smart hardware, and cloud storage. This structure encourages further implementation of our one-stop IoT home solution, providing our users with smart home accounts, smart home devices, and software services across home scenarios. It enables intelligent interconnection from single products to the entire house, forming an intelligent ecosystem for daily living and creating a complete smart home experience for users. To increase our product strategies appeal among younger users, we officially announced our trending technology branding strategy, which is underscored by our products, our channel operations, and the marketing. First, with respect to our product offerings, we continue to focus on AI applications and innovation to support our AI helpful product strategy. Following the successful April, we brought up a series of new products, including the EROX mineral water supplier, the Space All Direction Air Conditioner, the Alpha 2 Plus Premium Sweeper Robo, and iBall AI Smart Twilight, which can monitor the human health data. We recently launched our Super Pro 1,200-gallon water purifier. I recall two X1 AI-enabled rentals and other new AI products with technology upgrades. Many of these cutting-edge products are leading industry consumption trends. During China's 618 e-commerce shopping festival, many of our products became the very hits and ranked among the top 10 bestsellers, including the Alpha 2 Pro Premium Sweepable, the Navi 2 UV Serialization Air Conditioner, and the new Smart Washer Dryer. In terms of self-channel, we implemented our larger store better merchant channel strategy. We have collaborated with high-quality merchants with strong store operation experience to open larger experience stores and improve store image. These larger stores provide users with more comprehensive, immersive, scenario-based experiences and services, enhancing our trending technology brand image. We have established 4S and 5S flagship experience stores, encompassing over 200 square meters and 300 square meters, respectively, in Henan, Hubei, Gansu, Liaoning, and other provinces to offer sales, installation, and after-sales services. Furthermore, this channel strategy promotes bundle sales, decreases customer acquisition costs, and drives our overall offline market growth. According to the National Residential Market Research Report 2020, the total new development of apartment transactions nationwide exceeded 150,000 square meters in 2020, which equals more than 10 million units based on our estimation, creating huge potential source of growth for the smart home appliances market. We also increased our investment in branding and marketing, thereby reaching more diverse consumer groups with our omni-channel marketing tools and branding efforts. We invited one of China's top celebrities to become our product spokesperson enhancing our brand recognition among younger generations. To target more consumers in cities, we collaborated with Focus Media and Xinchang Media to advertise in around 100 major cities across the nation, as well as three top domestic airline magazines to increase our exposure to high-end consumers. Furthermore, we plan to advertise on television and other channels in the following months. We also strengthen our new channel marketing on social media, including Douyin and the later Redbook through short form videos and the KOL live streaming. We expect to strengthen our trending technology brand positioning as well as grow our customer base. We are also expanding our global market as planned. The overseas expansion of our sweeper robot business is progressing in line with our predictions. In addition to our previous coverage in more than 10 countries in Europe, Asia, and Australia, we began selling units in India, Saudi Arabia, Thailand, and North European countries in the second quarter. As we shared in our previous earnings poll, our products were launched on U.S. Amazon in August, marking our official entry into the North American market We will continue to expand globally and begin development of the self-operating mode in the second half of this year. Furthermore, our product pipeline includes a series of new sweep available products for both domestic and overseas markets. In addition to our automated dust collection and UV disinfection technology, we are making great strides with later and optical avoidance technology upgrades. We believe that there are three major drivers that will benefit intelligent transformation and development of the smart home industry. The main consumer groups in China are undergoing structural transformation. The income of the post-90s generation has increased, and the younger generation has become a major consumption driver in China. According to the research conducted by our third-party consultants, The post-90s generation prefers smart technology products and are more likely to demand and purchase smart home appliances. Secondly, the development of new energy vehicles over the past two years has created an emotional connection between customers and the smart products. And many other industries have also entered the intelligent era. Demands for smart products will drive the advancement of the smart home industry and lead to an increase in consumer acceptance. Thirdly, China's 5G infrastructure has improved greatly over the past year. According to a report issued by the Ministry of Industry and Information Technology of the Chinese government, the personal user penetration rate at 5G will exceed 40%, and the average annual growth rate at 5G users will by 200% by 2023. The ministry mentioned that smart life and smart home will be key parts in promoting IoT applications. National policy support will also benefit the development of the IoT smart home industry. We are committed to becoming the leading WhatsApp IoT home solutions provider while developing our hardcore technology. Looking to the second half of this year, we will continue to improve our products through AI innovation, execute our larger store-better merchant channel enhancement strategy, and strengthen our trending technology branding. With the ongoing development of home smartification in China, we remain confident in our ability to capitalize on opportunities and deliver long-term growth, as well as contribute positively to our consumers' quality of life and industry-wide intelligent transformation. So this concludes our founders' remarks. Let's now turn to the detailed financial review of the second quarter of this year, as well as the outlook for the third quarter. The net revenues decreased slightly by 1.5% to 1.66 billion RMB from 1.68 billion RMB for the second quarter last year, and increased by 43% compared to the same period of 2019. The slight year-over-year decrease was primarily due to, first, sales decreases in vertical fires and small plants, resulting from the product portfolio adjustment for margin expansion. And second, a high base effect during the same period of last year due to promotional activities after COVID-19 pandemic's peak. Revenues from IoT at home portfolio increased by 7.9% to 1.15 billion RMBs from 1.06 billion RMB for the second quarter of last year. The growth was primarily driven by self-increases in certain product series, particularly the well-needle-branded rubber robots in the washing machine. Seventy from our home water solutions decreased by 18% to 218.9 million RMB from 266.8 million RMB for the second quarter of last year. The decline was primarily due to a decrease in sales of Xiaomi branded water purifiers resulting from a product portfolio adjustment, though partially mitigated by the sales increases in Xiaomi branded water purifiers. Due to the product portfolio adjustment in Xiaomi branded water purifiers, we achieved year-over-year and quarter-over-quarter increases in the overall gross margin of the home water solutions category. Revenues from consumer books increased by 18.2% to 102.2 million RMB from 86.5 million RMB for the second quarter of 2020, primarily due to the increased demand for our water purifier filter products. Revenues from small appliances and others decreased by 28.8% to 191.5 million RMB from 268.8 million RMB for the second quarter of 2020. primarily due to continued product value optimization for higher growth margin in this category. Growth profit increased by 46% to 351.8 mini RMB, and growth margin was 21.2%, compared to 14.3% for the second quarter last year. The year-over-year increase in growth margin was primarily driven by our efforts to shift the business and product mix toward higher growth margin products. At this includes the increased revenue contribution from sales of new Valmy-branded water purifiers and slipper bubbles, as well as cost control measures and the margin optimization across product lines. Total operating expenses increased by 29.4% to 309.7 million RMB, primarily due to the increase in selling market expenses. In more detail, R&D expenses increased by 9.1% to 56.2 million RMB from 16.7 million RMB for the same quarter of last year, primarily due to the increase in RMB experts and related salaries and expenses. Selling and marketing expenses increased by 32.5% to 214.8 million RMB from 162.1 million RMB a year ago. primarily attributable to the increase of advertising and marketing activities in order to enhance economic branding and market recognition. G&A expenses increased by 72.6% to 28.8 million RMB, compared to 16.7 million RMB for the second quarter of last year, primarily due to an increase of the estimated allowance for accounting notes receivables, together with the low basis set of lease expenses, attributable to the lease expense exemption policies, in fact, during the same period of that year due to the COVID-19. Net income attributable to ordinary shareholders of the company increased by 367.4% to 46.1 million RMB, and then young net income attributable to ordinary shareholders of the company increased by 44.9%. to 59.5 million RMB. Additionally, our balance sheet remains healthy. As of June 30, 2021, we had cash and cash equivalents of 667.6 million RMB, restricted cash of 21.5 million RMB, short-term deposits of 66.5 million RMB, and short-term investments of 393.8 million RMB. I'll now like to turn to our Alex. For the third quarter of 2021, we currently expect net revenues to be between 1 billion RMB and 1.1 billion RMB. We expect the sales of Xiaomi branded super robot to decrease from the third quarter and the own branded super robot business to achieve faster growth, which will become one of our main categories. A developed outlook. It's based on the current market conditions and reflects the current and preliminary estimates of the market and operating conditions and customer demand, which are all subject to change. Well, this concludes our prepared remarks, and we will now open the call for the Q&A session. The head of our finance department, Mr. Wei-Tang Tai, will join the session and ask a question. Operator, please go ahead.
spk08: Thank you. If you wish to ask a question, please signal by pressing star one on the telephone keypad. If you're using your speakerphone, please ensure that your mute function is turned off. Again, press star one for a question.
spk10: We will now pause for just one moment.
spk09: So our first question comes from Lillian Liu from Morgan Stanley. Please go ahead.
spk00: Thank you. I have three questions. First of all, can you give us a breakdown of the IoT at home product portfolio? In particular, how much the contribution came from the robot sweeper products in second quarter? And also, what kind of sales momentum are we seeing in July, August in the near term? That's first one. Maybe I just pause and I will ask the rest of two questions later. Okay, thanks for Lillian's question. About the IoT at home portfolio, we have more than 10 small categories.
spk07: including refrigerators, washing machines, water heaters, syruping robots, and the such. A lot of these Xiaomi branded refrigerators contributed around 20% revenues of IoT at home. Xiaomi branded washing machines contributed around 10%, and Xiaomi branded syruping robots contributed around 10%. Raumi branded Shredder robot was still the biggest driver for IoT at home GED3 due to its low base effect and fast flow and revenue contribution. And the revenues from Raumi Shredder robot increased by multiple folds compared to the second quarter of last year.
spk10: Thank you.
spk00: And any color on the near-term trend in terms of the the growth momentum, including water solutions as well?
spk09: Can we have a little bit of time?
spk07: Yeah. As we mentioned, we continue to ask for quality and product optimization strategies in the second quarter. So we roll out additional new products with higher margin and high ASQs, in particular, some key categories including, say, the water purifiers. In addition to introducing more high-end, well, new water purifiers, we also shift the focus a bit more on supplying more large, fast, young water purifiers with better growth margin, and thus to improve the overall ASP and gross margin, and together, the revenue contribution in the coming quarters.
spk00: Okay, thank you. My second question is on the ASP and the margin trend. Do you have any plan for any price changes, i.e., given the rising raw material costs? That's one. And I think the implication to margin, because in second quarter we have a very good margin improvement with all this mixed shift and adjustment on the portfolio. Are we going to see a similar pattern of margin expansion in the second half?
spk07: Yes, we observed the aerobatic cost still increasing in the second quarter in a relatively mild way compared to the previous month. This also contributes to the increase of ASPs across the industry as well as for some of our products. About the margin, we have started some advertising and marketing activities since the second quarter to enhance our branding, positioning, and recognition. We will invest in more selling and marketing expenses compared to last year, but in a prudent and reasonable way. We expect such expenses will increase thus lower margin well we have as we have taken product optimization strategy and the overall gross margin has been improving and we're looking forward to continue improving we think this will mitigate certain impact of the increased operating expenses on net profit margin we don't see the material cost increase will impact on the margin and for to the first quarter, and we have taken serious cost control measures. We don't see any material impact from such kind of cost impact, right?
spk00: Okay, thanks a lot. My last question is on the new product strategy. I think Mr. Chen, in the opening remark, mentioned quite a few new product being innovated and put in market in second quarter and the first half. So what kind of... strategy in terms of how we actually make all these new SQs a more meaningful contribution to the revenue. What are some of the big items that will be a significant contribution to sales revenue in the future? Thank you.
spk04: There are some innovative products in all categories launched this year. There are several functions in these innovative products. The first function is to significantly improve our sales structure. In other words, these high-end differentiated products should be significantly improved in terms of sales structure. The data of Q1 and Q2 has already been presented. This is the first one. The second one is that we are in some new categories, such as vacuum cleaners, and some free brand water purifiers, and some innovative products such as washing machines, including the air conditioner we have developed. I think the sales of these products will have some changes in the sales and sales of each category. So we have this productive product this year.
spk02: So first, this series of inactive products can help us to make the margin expansion, which you can see from the first quarter and second quarter, and make our product portfolio more diverse. And second, some SQUs of these inactive products, such as the silver bubbles and the ROX water purifier, as well as the all-direction air conditioners, can also help increase the revenue contributions in the categories, respectively. So we think this new FKU and the margin expansion can also help us to improve the overall growth margin of our business as well as to help drive our overall growth. Thank you.
spk00: Thanks. That's all my questions.
spk09: Next question comes from Rude Wei from CICC.
spk08: Please go ahead.
spk01: Hi, thank you for the presentation. And I have two questions here. The first is that we noticed the company has done a lot of promotion recently, like cooperating with folks' media. And we can also see the trend from the financial report. So do we expect a higher selling and marketing expense ratio this year? And would it be even higher in the second half of this year? And can you share with us the promotion plans or strategy with more details? and some of our marketing strategies, can you introduce them in detail? This is my first question. Thank you. Okay, let me.
spk04: Because I was in the process of running the market, I found that from last year to the first half of this year, the attention and acceptance of young people to autonomous furniture is very, very obvious. That is to say, now the young people are basically They will go to understand if there are any such things. This is basically a very, very high proportion. In this kind of one line, two line, three line city, basically 100% will go to understand what kind of things. This is a very significant change for users. So in order to grasp this trend, we also started to hire ambassadors this year. Hire top stars to do brand endorsement, endorse the technology brand. At the same time, we have increased the investment of these advertisements and brands. On the other hand, after the promotion of this brand, we will, through the improvement of the sales structure, partially digest such a sales cost increase. At the same time, we will also take some discounts, some savings of internal costs to control this matter. Then in terms of the brand, in addition to the spokesperson I just mentioned, This is a very important move this year.
spk02: So since last year and the first half of this year, we can see among the younger generations, they are more likely to get to know and use the smart home products. And smart home is like a hot topic among them. So recently, we invited one of China's very popular celebrities as our product spokesperson. And we also do a lot of advertising, as you can see, in Fenzhou and Xinchao media. and to help us to increase the brand recognition. Okay, then you mentioned the increase on the selling market expenses, and we see that such investment in advertising and marketing will indeed increase such expenses, but this will be partially mitigated by some of our self-structure optimization as well as some customer control measures. And in the second half of this year, we will also continue to invest in some related expenses on advertising, and we will do the advertising on television and some other channels. And from the internal data, we can see that our brand recognition has increased due to all of these marketing and advertising tools. So we hope this will also help us to increase our branding image. Thank you.
spk01: Thank you. My second question is about the overseas market. Can you give us a more detailed update about overseas distribution channel development, both online and offline? Also, are there any negative impacts due to the shortage of shipping containers? Okay, I will answer the question. So in the first quarter of 2020, the first quarter of this year, as we mentioned that we already entered into more than 10 countries in Europe, Asia, Middle East, and Australia.
spk02: And the past few months, we also expanded into additional eight countries, including India, Thailand, Saudi Arabia, European countries, and the United States. So our exported products are sold on both online and offline channels, and most through our franchises. So we sold our products to those franchises, and they sold on their offline as well as online channels. In the North American market, we just launched the U.S. Amazon store, and we are also seeking cooperation opportunities for offline channels that we can have this year by depending on the further selling conditions on Amazon. As for the question about the shortage of the shipping containers, Yes, it did some impacts for some delayed orders, but we optimize the manufacturing and delivering timing as well as we plan to get out some like locally the warehouses to mitigate the impact. So generally, it doesn't cause any material impacts on our overseas market.
spk01: Okay, thank you for answering. That's all my questions.
spk10: Thank you.
spk09: Next question comes from Vincent Yu from Needham & Company.
spk08: Please go ahead.
spk05: Thank you, Captain. This is my question. Actually, I think the previous speakers have already asked a lot of questions. I actually want to ask these two questions more clearly. First, we missed our I would like to know if the management can talk about whether the second and third quarter guidance is not particularly strong. Where do we think the main reason comes from? Is the optimization of our entire product line limiting our current income? And then actually the second question is also about the question of the interest rate. In fact, I would like to ask about how you see the trend of the cost of raw materials now. Especially in August, compared to the second quarter, what kind of development trend do we see? Now that we are discussing this with the supplier, do you feel that the cost of raw materials has reached a, how to say, so I have two questions and the analyst actually has already mentioned so but I would like to discuss a little bit more the first one is that looks like we missed our guidance range this quarter so can management talk more about like which segments didn't perform as well as we previously expected? And did our portfolio optimization contribute to the top line miss as well? And the second question is also about the margins. So in terms of the understanding, can management show us how did the raw material trend in August compared to second quarter? And do we think that we have seen the peak? in terms of raw material prices. Thank you.
spk04: 我先回答一下第二个问题, 就是原材料的这个趋势。 那么7、8月份开始的话, 大宗材料基本上都处于一个相对, 是一个比较稳定的状态吧。 我觉得我们判断在接下来的Q4, Q4甚至后面的时间里面, 可能原材料也不会再出现大规模的这种上涨。 and maintain a relatively high-end state. In other words, the material belongs to a stable trend. This is the second question. The first question is about our product structure optimization and the impact on sales. In Q2, Q1, Q2 to Q3, our main strategy is to adjust our sales structure. Adjusting our sales structure will have a certain impact on income and will be a little bit conservative. So I think we will continue to adjust our adjustment structure in Q3. These structures will be a good basis for future growth. Because after these products are launched, their market access is still very good. So I think it is a good aspect in the long term. In addition, we have some new products, such as vacuum cleaners and some home-made products. Okay, so I'll translate the comments for your second question first about...
spk02: raw material cost. We already observed the fluctuations of raw material costs like demonstrating more stable when entering in August. So as the industry expects, we also think the raw material cost has been a relatively high position and will not likely to increase a lot. So for your first question about the guideline, second quarter revenue and third quarter guidance. So we are shifting our focus on the product portfolio adjustment for the second quarter and third quarter. And we have like two main points. So first, we will increase the sales of some new products with potential growth. And it will take some time to increase the revenue contributions of these new products and FKEs. And second, we will invest in more R&D resources in our own branded products, in particular, like SIPL robots, waterproof fire and home devices. And we can see that in long term, these categories and products can help us to drive the overall growth in long term. So, overall, in the third quarter, we will be also conservative about our selling and the guidance and still remain the focus on the product portfolio Japanese. I hope that helps. Thanks.
spk05: There will also be a new spokesperson. I would like to ask if most of the marketing costs have already occurred in Algeciras. In the next half of the year, we will see that the entire marketing cost compared to the income, or compared to last year, there will be some slightly faster growth. Let me translate it in English. Thanks, management. Let me follow one more question. So we mentioned that we are investing in new stores, hiring new spokesperson. Have these expenses already incurred in second quarter 2021? And will we see sales and marketing expenses on a year-over-year basis grow faster than the total revenue growth? Thank you.
spk04: Uh, uh, uh, Then in the second half of the year, the marketing cost is slightly increased, but we will find a way to do a smooth, smooth impact, and support this kind of impact. This is one. The second is to look at it from a long-term perspective, its expansion of the channel, the growth of the brand, and the user's understanding of our full-fledged system, this site, this brand direction, I think it is still a very obvious improvement.
spk02: Okay, so for the selling and marketing expenses and the impact on the operating expenses and the margin, so for the investment in the operating channels, as you know, we cooperate with the merchants to open the offline stores and the merchants themselves to take care of the store operation and they won't regret it in our operating expenses. So it's one on this part. And for selling marketing, we have been conducting the advertising and inviting the spokesperson since the second quarter. So we already put some of the selling marketing expenses in the second quarter. And in the second half of this year, we will have some ongoing expenses on this part. So compared to the first half of this year, the expenses will increase. But we also see the effect from our internal data, like the all of these advertising activities also help our sales online and offline. So we think this is in effect, and we will continue to do such advertising activities in the senior house. Okay, thank you.
spk05: Thank you very much. Very clear. Thank you.
spk09: Thank you. Next question comes from Sue Goldform from Blue Lotus. Please go ahead.
spk06: We have international sales playing an increasing role. Does the management see international growth continuing, or with the easing of pandemic measures, has international growth slowed a bit? Thank you.
spk04: Our overseas market this year performed well in Q1 and Q2. Among them, it was mainly the export of small machines. Its growth in unit price, horsepower, and scale also performed well. It also performed well in the first half of the year. Next, due to the pandemic, Because in the first half of the year, China's entire export was still affected by the pandemic. Because there were some problems with foreign supply chains, so there were more and more exports from China. Then in the second half of the year, because of the global epidemic, there were still some repetitions. So in the second half of the year, we still keep a tight control. I think it's still quite uncertain. Because this kind of international relationship, this kind of epidemic development, it's actually quite uncertain. But from the point of view of our current customers, it's actually relatively good. From online and offline sales, Okay, so for the first half of the year, we can see there are robust results in the overseas market. That's due to the post-pandemic situation in some of the overseas countries.
spk02: about entering into the sixth half of the year. We also see the pandemic situation take some changes over time, and we remain conservative, and we see there are indeed some uncertainties in the global market. But so far, from the sales data we see internally, the sales performance is good and in our expectation, but we still are conservative about the selling of this market. But we will also take very good measures and prudent ways
spk11: to make any promotion and marketing activities available to you.
spk09: Thank you.
spk06: I have another question. You mentioned that in August, you will start sales in North America. I have a question for you. I want to ask if there is a specific marketing strategy in the U.S. to get you out of the U.S. market? I mean, Is there any particular strategy for marketing in the U.S. market? Thank you.
spk02: Thank you. So in terms of the U.S. market, as you know that our products were just officially launched last week on Amazon Store. So on one part, we will cooperate with some local third-party operators to operate our Amazon Store together so they know better about the operation guidelines on Amazon, as well as the American customer's culture. And on the other hand, we also will start to do some marketing and PR activities on the U.S. market, such as the KOL recommendations. So we already have a series of networks on the pipeline to do that, to help us promote ourselves in the U.S.
spk11: market.
spk10: All right, CJ. Thank you.
spk09: So as there are no further questions now, I will turn the call back over to Cecilia Li for closing remarks.
spk11: Thank you once again for joining us today.
spk02: If you have further questions, please feel free to contact us with the contact information on our website or the PS&E Group, our investor relations consultant.
spk11: Thank you all. Have a good one.
spk09: This concludes the conference call. You may disconnect your line. Thank you.
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