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spk03: Ladies and gentlemen, thank you for standing by for Viomi Technology Company LTD's earnings conference call for the third quarter of 2021. At this time, all participants are in a 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.
spk01: Thank you, Aubrey. Hello everyone and welcome to Valmet Technology Call Limited earnings conference call for the third quarter of 2021. As a reminder, this conference is being recorded. The company'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 company's email distribution list by visiting the IR section of the company's website at ir.valmet.com. Participating in today's call are Mr. Xiaoping Chen, the Founder Chairman of the Board of Directors and the Chief Executive Officer, and Mr. Weiqiang Cai, the Head of our Finance Department. The Cabinet Management will begin with prepared remarks and the CAO 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 the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. All the information regarding these and other risks and uncertainties is included in the company's annual reports on Film 20F and other filings as filed with the U.S. Secret and Exchange Commission. The company doesn't assume any obligation to update any forward-looking statements, except as required by law. Please also note today's earnings press release and this conference call include discussions of inaudited gap financial information as well as inaudited non-gap financial measures. Valmy's press release contains a reconciliation of the inaudited non-gap measures to the inaudited most directly comparable gap 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 an English translation. Mr. Chen, please go ahead.
spk00: other businesses to maintain a relatively stable growth. We are further optimizing in the direction of a full-fledged smart solution. The layout is full of AI and IoT smart family scenarios. Currently, we have set up more than 60 large-scale all-class categories. It is the only smart family industry to provide a full set of smart home appliances, smart homes, and software services. A full-fledged solution of smart solutions. In the third quarter, we will continue to carry out product structure adjustments, positioning the marketing and business channels of a technology brand and a big business. For this, we have increased our investment in product development, especially expanding the AI algorithm and hardware development team, and have accumulated talent and development reserves for our future product AI intelligent innovation and technology. The cost of development is 56% higher than the large-scale growth. In order to enhance the brand's popularity, we invested a large amount of advertising and marketing costs in the third quarter. Due to the large growth of research and marketing costs, there was a short-term loss in the third quarter. But we also saw a special adjustment and resource investment that brought step-by-step results. The main performance is in three aspects. The first is that the level of毛利率 continues to improve. The third quarter's毛利率 from毛利率22.7 to the same ratio and return ratio has shown a double increase. The second is that the brand's popularity continues to rise. Since the second half of this year, the brand's popularity and the active search of these users has been in a relatively good state. The third is that the channel structure needs to be diversified and balanced, and it carries the experience and service capabilities that we all need. Our overall business quality is developing rapidly in the direction of higher quality and healthier. Then look at the smart home industry and the consumer market. Combined with the data of the industry, we believe that the industry is experiencing four major trends. The other is the consumer's demand for home appliances is getting more and more detailed, especially the purification and cleaning of electrical appliances and the production of quality improvement products. The second is that the demand for high-end markets is constantly increasing. The third is that the purchase of customized products has become the trend of the market, especially in the long-term supply chain. Since 2021, users have been actively looking for smart home appliances. This is also a very important direction for consumer technology and consumer upgrade. Smartness has become the main trend for consumer upgrade. It is expected that in the next two to three years, smart home appliances and smart homes will become the mainstream market choice. Combining consumer demand, market opportunity, and company strategy, we have a brand positioning around the technology trend. In terms of product development, brand and channel improvement, we have adjusted and optimized. First, on the product side, we focus on the product strategy in three aspects. First, to expand the application of technology innovation and AI, through the improvement of product power, to improve the development of the brand. Second, from selling products in the past to selling solutions now, to provide customers with personalized and customized purchase solutions. The third is to focus on scenario-oriented innovation, improve the furniture category, and provide users with a more complete intelligent furniture experience. For this reason, in the third quarter, we have invested more research and financial resources into AI software, algorithms, and intelligent modules. We have seen a good market growth after the release of new products. For example, the AI air conditioner launched in the first half of the year, the high-end Sawtooth EDG 282 Plus, the high-end series of high-end detergents with a large capacity of 800 and 1,000 plus 1,200 gallons of Super series of high-end detergents, and the new Cyber series of washing machine products launched in September, performed very well in the sales of the third quarter. and help the company to improve the level of Maldives. We also carried out product delivery in the smart home version, and launched iLink 2T with AI face recognition. We are accelerating the development of high-end new products in the smart home category, and the new category will gradually appear in the next few months. Next year, we will also launch high-end AI smart new products in the category of smart kitchens, water purifiers, cleaners, and so on. Secondly, in terms of brand, We can see that the search engine and the search volume of e-commerce platforms have been greatly improved. Especially in this year's Double 11, we have a search volume of several times that of natural search, and there are more and more people buying from the mid- and high-end users. Our big data on the back shows that the number of users in the post-90s and the number of users in the new 1st and 2nd line cities Thank you very much. Fourth, We will continue to promote the channel strategy of large businesses and large stores in the line-up, open-source wholesale sales, experience-oriented shopping, and installation and sales of political service issues. The first-generation full-fledged intelligent new experience carries the brand positioning of the technology brand. For this reason, we will accelerate the expansion of the 4S and 5S flagship chain in the second half of the year. CS and 5S flagship stores will open continuously. In September, a 460 square meter Yunmi flagship store will open in Zhengzhou. In October, a 760 square meter super large 5S store will open in Shenyang core shopping district. Next, we will open our CS and 5S large experiential flagship stores in more cities. Then, these experiential stores will carry out the promotion, service and experience of the brand. Fifth, continue to develop overseas channels. Our overseas business is expanding from channel optimization, diversification of business models, and expansion of product range in three aspects. In the second half of the year, our channels will shift from the previously scattered distribution model to a more superior international agent. We have already reached a cooperation with large-scale famous agents in countries such as Germany, Russia, Malaysia, and Northern Europe, relying on their local channel advantages, reputation, and cross-border sales experience to improve our products' business quality overseas. At the same time, we are also trying more self-sufficiency models in the region. In August, we will set up a European Amazon branch in North America. Soon, we will launch products such as vacuum cleaners. In terms of product types, we will launch washing machine products and vacuum cleaner products with new functions overseas. In addition, we are also setting up new countries and regions to catch clean products for global growth opportunities. We have so far completed a very important step in the solution of the all-in-one solution, improving our product line and product layout. We are currently the only provider of all-in-one solution in the entire industry. We will continue to adjust the product structure of some products in the next stage. Stabilize the recovery of horsepower, increase the AI application of the product, consolidate the brand positioning of the tech brand, improve the sales and service of the package, optimize the operating quality of our channel, and bring long-term value and return to users and shareholders. Thank you.
spk01: Thank you, Mr. Chen. I will quickly translate our founders' remarks before discussing the financial performance for the third quarter of this year. Hello, everyone. Thanks for joining our third quarter 2021 earnings conference call. Our third quarter net revenues reached 1.06 billion RMB, which was in line with our previous guidance. As we discussed in the previous quarter's earnings conference call, there was a year-over-year decline in revenues during the third quarter, mainly due to the significant decrease in sales of Xiaomi-branded sweeper robots. We maintained stable growth in most of our other product categories. During the third quarter, we enhanced our one-stop IoT home solutions platform to realize AI-driven IoT home scenarios. Currently, we have laid out a full product line of more than 60 categories. As a result, we are the only company in the smart home industry that provides a complete one-stop IoT home solution. integrating smart home appliances, smart home devices, and software services. We also continue to optimize our product portfolio and execute our trending technology brand marketing and a larger store better merchant channel strategy. Moreover, we increased our investment in R&D and expanded our AI algorithms in hardware research and development teams to accelerate AI product innovation and technology accumulation, resulting in a 56% year-over-year increase in R&D expenses. To enhance brand awareness, we also invested in additional advertising and marketing resources in the third quarter. Due to the substantial increase in R&D and marketing expenses, our bottom line declined temporarily. But our strategic adjustments and investments generated positive results, including First, the ongoing growth margin improvement. Our third quarter's growth margin was 22.7%, representing both year-over-year and quarter-over-quarter increases. Second, brand awareness continues to rise. And third, more diversified and balanced sales channels equipped to handle sales and services of our smart home products. Our overall business is developing in a high-quality and healthy direction. Based on industry data, as well as our observations of the smart home appliance industry and the market, we have identified four important industry trends. So first, consumers prefer to buy home appliances with more elaborate and advanced functions in more diversified product categories, especially those which can improve the quality of life, such as air and water purifiers, household cleaning devices, and integrated stuff. Second, the demand for high-end products is growing rapidly. Third, bundle purchases have become popular, especially among the post-90s generation. And fourth, we observe the users start to proactively to get to know and to reach the smart home products. And the smartification has become a benchmark for the industry and the market, driven by technology progress and the consumption upgrading. To capitalize on these trends and taking into consideration market opportunities and corporate strategies, we have adjusted and refined our product research and development, enhanced our branding, and improved our sales channel. First, with respect to product development, we have developed our product strategy from three perspectives. First, we increased our investment in R&D as well as technology innovation and AI application. enhancing our brand influence through product optimization. Second, we provide users with customized and bundled purchase solutions, rather than solely selling individual products, which reduces customer acquisition costs and increases sales growth. In the past few months, the proportion of bundled sales has increased, and orders over totaling RMB 10,000 to 200,000 have grown rapidly. And third, we are currently focused on scenario innovation and will soon complete our smart home category to provide a more comprehensive smart home experience. To this end, this quarter we devoted more resources in AI, algorithms, software, as well as hardware. We introduced a series of new AI products in the first half of this year, including the all-direction space air conditioner, premium sweeper robot Alpha 2 Plus, eyeball wrench hood, and 800-gallon to 1,200-gallon super series with large flux water providers. We also launched a cyber series of our smart wide-end drive vacuums in September. All of these products demonstrated strong sales performance in the third quarter, driving continued gross margin recovery. Furthermore, we introduced a new app to use in the smart home categories, such as the iLink 2T Smart Lock with AI-based recognition technology. We continually increase our efforts in R&D, and we will unveil high-end new smart home products in new product categories in the coming months. In addition, we will roll out exciting new AI product lines in the next year, including the smart home, smart kitchen, water-proof fire, and cleanliness products, among others. Second, to enhance our brand influence, we invited one of China's top celebrities, Deng Lun, to become our global brand spokesperson and established our trending technology brand position in the first half of this year. In collaboration with Focus Media and Xinchao Culture Media, we broaden our omnichannel marketing and advertising activities, including editorial advertisements, print media, television, and social media, to enhance our brand awareness and exposure. We also generate high-quality content marketing on content platforms, such as Douyin Kuaishou and Little Red Book. Our brand search frequency on major search engines has climbed, and our internal data shows that post-90s users and users from new Tier 1 and Tier 2 cities have increased over the past few months. Third, we increased our exposure and sales on new channels such as Pinduoduo, Douyin, and Kuaishou. We have built an exclusive team for these new sales channels to boost traffic and attract more young consumers. And our short-form video marketing and KOL live streaming has enhanced brand awareness and contributed to an increase in sales. The revenue contribution from these new channels has increased in the past few months as well. First, with respect to our offline channels, we continue to execute our larger store better merchant strategy to provide our users with one-stop IoT home solutions. integrity purchases, a scenario-based shopping experience, and installation and after-sales services. These efforts have also stressed on our trending technology brand positioning. In the second half, we accelerated our nationwide 4F and 5F store portfolio expansion, including a new 460-square-meter volume flagship store opening in Zhengzhou in September. A new 760-square-meter 5S experience store opened in Shenyang CBD area in October, becoming the largest development experience store in China. We will open more large-scale 4S and 5S development experience stores across the nation. Finally, we are also developing our overseas business by upgrading channels, diversifying our opposition models, and expanding product categories. We recently cooperated with renowned agents in Germany, Russia, Malaysia, and Northern Europe to transform our overseas channels from small distributors into high-quality international sales agents. We plan to optimize our overseas business operations by leveraging their local resources, reputation, and import sales experience. We are also planning to explore self-operating model in more regions. Following the successful opening of our first self-operated store on U.S. Amazon in August, we are preparing to launch our online store on European Amazon, and we will introduce sweeper robot products in the near future. Also, we will provide our overseas customers with smart white and dry vacuums and sweeper robots with new functions. Going forward, we will expand our global business into additional countries and regions to capture the cleanliness product sector's tremendous growth opportunities. We have completed the first step in establishing our one-stop IoT home solutions platform by building comprehensive product lines across home scenarios, and we will now turn our focus to product modification upgrades and scenario application innovation. Looking ahead, we will continue to refine our product portfolio and further stabilize our growth margin recovery. We will also increase our investment in AI applications, enhance our training technology branding, grow bond itself in the services, and improve our overall business operation quality, creating long-term value and returns for our users and shareholders. That concludes our founders' remarks Let's now turn to our detailed third quarter financial reviews as well as our fourth quarter outlook. Net revenues were 1.06 billion RMB compared to 1.49 billion RMB for the third quarter of last year. Net revenues were in line with the Academy's previous guidance and the decrease was mainly due to the significant decrease in sales of Xiaomi branded swivel robots as well as product portfolio adjustments for margin expansion in other categories. Revenues from IoT at home portfolio decreased by 39.3% to 643.5 million RMB from 1.06 billion RMB for the third quarter of last year. The decline was primarily due to the first, the decrease in sales of Xiaomi brand new server robots, and second, the product portfolio adjustments for margin expansion in some categories. Revenues from our home water solutions increased by 7.9%. to 157 million RMB from 145.4 million RMB for the third quarter of last year. The growth was primarily driven by the company's product portfolio adjustment in this category, which contributed to increase the sales of and the demand for new and larger flux water purifiers, as well as the growth margin expansion. Revenues from consumer boats increased by 11.7% to 79.6 million RMB from 71.3 million RMB for the third quarter of last year, primarily due to increased demand for the company's water purifier filter products. Revenues from small towns and others decreased by 15.9% to 176.5 million RMB, from 209.9 million RMB for the third quarter of last year, primarily due to the company's continued product portfolio optimization to obtain a higher gross margin in this category. Gross profit was 239.7 million RMB compared to 254.3 million RMB for the third quarter of last year. Growth margin increased to 22.7% from 17.1% for the third quarter of last year, primarily driven by the company's continued efforts to shift the business and product mix towards higher growth margin products. Total operating expenses increased by 28.2% to 290.3 million RMB year-over-year, primarily due to the increase in R&D expenses and the selling and marketing expenses. In more details, R&D expenses increased by 56.1% to 82.2 million RMB from 52.7 million RMB for the third quarter of last year, mainly due to the increase in R&D experts and the related salaries and expenses, as well as increased investment in research and development of new products. Self-marketing expenses increased by 20.4% to 183.4 million RMB from 152.2 million RMB a year ago, primarily attributable to an increase in advertising and marketing activities to enhance the company's branding and market recognition. General administrative expenses increased by 15.2% to 24.7 million RMB compared to 21.4 million RMB for the third quarter of last year, primarily due to an increase in the estimated allowance for county mills receivables, together with increased lease expenses due to the workplace expansion. Net loss attributable to ordinary shareholders of the company was 29.3 million RMB, and non-GAAP net loss attributable to ordinary shareholders of the company was 22.2 billion RMB. Additionally, our balance sheet remained healthy. As of September 30, 2021, we had cash and cash equivalents of $771.7 million RMB, restricted cash of $25.6 million RMB, short-term deposits of $67 million RMB, and short-term investments of $463.5 million RMB. Now let's turn to our outlook. For the fourth quarter of this year, we currently expect net revenues to be between 1.2 billion RMB and 1.3 billion RMB. We expect the sales of Xiaomi branded swivel robots continue to decrease in the fourth quarter and the own branded swivel robot business to achieve faster growth, which will become one of the main categories. The above outlook is based on current market conditions and reflects our current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change. This concludes our prepared remarks. We will now open the call for the Q&A session. The head of our finance department, Mr. Weiqiang Cai, will join the session and answer questions. Operator, please go ahead.
spk03: Thank you. We will now begin the question and answer session. To ask the question, you may press star then 1 on your touchstone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw from the question queue, please press star then 2. For the benefit of all participants on today's call, if you wish to ask your question to the company's management in Chinese, please immediately repeat your question in English. At this time, we'll pause momentarily to assemble our roster. The first question today comes from Lillian Lu with Morgan Stanley. Please go ahead.
spk02: Thank you, Mr. Chen, for the introduction. I have two questions. The first is about how to interpret our strategy in the third quarter. Mr. Chen also explained it just now. I would like to understand why we need to significantly increase the investment in marketing and research in the third quarter of our sales revenue. How do we consider this balance? And then this led to an unexpected loss in the third quarter. What is the logic behind this? And then how do we look at the future? Especially in the fourth quarter, according to the guidance, our sales revenue still has a 30-year annual drop. Then, is the cost of the third quarter has been greatly reduced? Then, in the fourth quarter, can our cost be reduced? Or will we continue to have some investment in marketing ads and research? Then the second question is about overseas I have two questions. First one is on third quarter. Result, under a nearly 30% decline in revenue, what's the rationale behind a big increase in R&D and marketing expense? And how do we think about fourth quarter, the balance between revenue versus the margin control? And the second question is overseas sweet robot business outlook, how much it could be? um in the fourth quarter and onwards and any bottleneck we've been seeing from overseas transportation and also related cost thank you uh this is
spk00: consumers are actively looking for smart home and smart home appliances. This trend is very, very clear. So we are thinking about how to catch up with such a consumer upgrade, such a turning point in the industry, because the home appliance industry itself is a multi-billion-dollar industry. So next, intelligent transformation is a very important trend. So on this, we will basically make more investments in the development, investment, brand and channel. So this is our This is to seize the opportunity of this track. This is doing such a thing. So we are more determined on this investment. On the channel, the brand and the development, the investment is more determined. So in this regard, we have to take this as the future. This is the first point. The second point is that we are in the growth of Q3 and Q4 of this kind of business. Actually, we also have some proactive behavior. It's our past kind of This is especially the business of Xiaomi's sweeper machine itself is low in horsepower, so we are actively reducing it to make the whole business relatively healthier, including the improvement of horsepower, which also makes our company's business healthier and more sustainable. This is the second point. The third point is the cost of research and development and the cost of marketing, especially the cost of research and development. which is about 56% of the total cost. The current cost will be higher, but the development cost will go back to a relatively normal state, not so much higher. The next will be a little bit more normal. In terms of sales, we will use a relatively smooth growth, but we will continue to invest. Of course, we will not focus on doing it, we will do it relatively smoothly. I will quickly translate the comments from Mr. Chen. So as we observed from the market since the
spk01: The second half of last year to this year, we see the users start to proactively to get to know and to approach the smart home products. So we think that's the time to capture the market opportunities. And we also see this modification is a trend for the whole industry in the market. So we wanted to invest in more R&D and selling marketing expenses. So for the top slide side, we proactively decreased the sales of Xiaomi sweeper robots. You know that the gross margin of such business is relatively lower than the others. So we decreased the sales of Xiaomi sweeper robots to have more healthy gross margin and margin recovery. And in terms of expenses, The year-over-year increase of R&D expenses is around like 56%, and we also gained some increase in the selling and marketing expenses. But we think in the near future, the R&D expenses will back to a relatively normal level, and we will still invest in selling and marketing, but in a stable and softer extent to enhance our brand awareness. And so what all we do is to capture the opportunities in the future and to enhance our IoT smart home solution. That's the feedback from the Gama founder.
spk05: I will introduce the Overseas Sales Progress Lillian just mentioned. For the past few months, we saw the overall overseas market demonstrating a relatively softer growth compared to the robust growth in the first quarter. This is due to several factors. First, due to the strong consumer demand during the post-COVID-19, the distributors purchased a large volume of cleanliness products, resulting in high stocking levels since the second quarter. Secondly, the shortage of containers and labor resources in the overseas ports did impact on the uploading of products and caused some order delays. We expect such a situation will continue in the second half of this year while we were taking some measures to mitigate impacts and drive the growth increase. On one side, from our acknowledgement of overseas markets, the price of these containers won't continue to go up to a larger extent. And on the other side, we will enter cooperation with more renowned international sales agents, which will help us to increase sales by leveraging their local resources and reputation. Thirdly, as the overseas consumer net towards cleanliness product more diversified, We will increase the new categories and SKUs to cater the additional demands and drive the overall overseas sales. We will continue to expand additional countries and regions where we expect to have potential market growth. Thank you.
spk00: Okay. Thank you, Mr. Chen. Okay.
spk03: The next question comes from Rudy Wei with CICC. Please go ahead.
spk04: Thank you for the management presentation. This is Rudy Wei from CICC. And I have a question for the promotion strategy. And we have had Dong Lun as our brand spokesperson and how it works. Also, can you introduce briefly about the sales during this year's And what's your outlook for next year's consumption and sales trend? Is there a certain outlook for the trend of consumption next year and the situation of consumption?
spk00: Please consider several aspects of being a spokesperson for Deng Lun. The first is that the company is positioning a technology brand. So we have to find a celebrity who fits this technology brand to read and endorse the brand. So Deng Lun is... In the mind of the post-90s, it represents a very hot and well-known star. So we asked him to be a brand spokesperson to do such a thing. On the first hand, the second hand is that we asked Deng Lun to add a series of advertisements on our Facebook page. After the investment of the brand, including some of the content on our Tiktok page. Based on the content of the brand, after this, then the brand interest is It should be said that the changes have been very, very big in the past six months. I ran the mayor. That is, the changes from offline to online are very big. From the user's hundred-digit index search, to the flow of this double 11, that is, we show this kind of growth of several times. Natural flow of several times. So this is a very significant improvement for the brand. This is the second thing. The third aspect is that we should say that there are a lot of The quality of the products should be good. The more important change is that the sales of our high-end products are very good. The sales of various products, such as refrigerator washing machine and other products, and the sales of our high-end products are very good. The sales of high-end products are very good. So I think this is very helpful for the change in the sales structure. So if Deng Lun can be a representative of the company's technology brand, I think it can help the company to bring a better direction of a war-like all-round intelligence to the consumer. I think the company will have a very good change and progress on this. I would like to thank Mr. Chen for his comments.
spk01: So we invited Dylan as our spokesperson because we think that's in line with our brand positioning of changing technology. And Dylan is very popular among young people, especially the post-90s generation. So he can support our brand as well as to help us to increase the brand awareness. And except that we invited them only as a subperson, we also are investing a lot of the advertisement in Xinchao and the central media. And we also do a lot of advertisement on some social media. And we also do the content marketing on some, like, relative book. And you can see that brand awareness on these social media and platforms. And we also see the brand awareness increase in offline channels. And we can also see the searching frequency of our brand increased in some search engines, such as Baidu. And from the performance of the Double 11 Shopping Festival, we can see the sales contributions of our new made-to-high-end products increased a lot, especially the bundle sales, such as the refrigerators and the smart kitchen products. So overall, we think it's very good direction for us to invite them as our spokesperson, and we also see the effects of that, can see from that, from our self-performance. So we hope all of these marketing and selling activities can still continue to help to drive our brand awareness. That's it. Thank you.
spk05: Yeah, we will share the growth outlook for 2022. We estimate to deliver a stable growth for next year due to several factors. First, as we see the sales contribution of new product has increased in the past few months and we have new series of AI products on the pipeline. We expect the new products to drive long-term and healthier business growth and enhance our brand influence. Second, we expect the expanded offline store portfolio as well as diversified online sales channel to help increase the overall sales as well. Third, we invested more advertising and marketing resources in the second half of this year and observed a soft increase in brand awareness and expect to improve brand recognition will help to drive the sales growth. We see some uncertainties of market and macro economy, in particular the impact from real estate industry, which may result in the decreased need of decorating homes for the next year. Thank you.
spk04: Thank you. That's all from me.
spk03: The next question comes from Vincent Yu with Needham and Company. Please go ahead.
spk06: Thank you, Ms. Guan. Thank you, Ms. Guan, for accepting my question. I have two questions. The first question is about this. We mentioned many times about packaging sales. I would like to ask Ms. Guan, in the three seasons, what kind of products How much is a one-time purchase of multi-product packaging sales? We feel that this packaging sales is related to our sales strategy. On the other hand, it may have something to do with Hongguan's real estate sales. We see that the real estate data of Hongguan seems to have slowed down in the past. I would like to ask about the future. How do you see the future growth of relatively large orders or the proportion of packaging sales? The second question is about the future trend of interest rates and our corresponding product strategy. We see that on the one hand, we have an increase in interest rates. On the other hand, as mentioned just now, a part of our sales revenue decline is related to the choice of our initiative to give up some products with relatively low interest rates. Hi, Benjamin. Thanks for taking my question. I have two questions. The first question is about the bundled sale, as we mentioned multiple times in our prepared remarks. Can management share what percentage the bundled sale is in our third quarter revenue or order, like the percentage of our total orders And for these bundled service, we are seeing some weakness in the macro real estate market. What will we think about the trend of these bundled sales going forward? And my second question is about our growth margin and our sales associated sales strategy as we are like have healthy margin while at the same time we are like giving up some product items which have less gross margin so considering that we might encounter more pressure from the raw material side are we going to adopt the same strategy going forward or what we think about like the overall margin trend for us and the ASP trend. Thank you.
spk00: Let me answer the first question, which is about the sales of this set meal or the sales of this set meal. So when we are pushing this one-stop all-you-can-eat, in fact, it is from the past home shop selling products to selling solutions. So this is a big change, which is our set meal to sell all-you-can-eat solution. In this process, our online products are mostly sold as single items or small items. In the offline experience stores, most of them are full-size sales. Our offline store sales It's almost half of the sales of Zhangjing branch stores It's all sold in sets This ratio is still very, very high Of course, this set is big and small We made a deal a while ago To 250,000 a unit Just one customer to 250,000 This is in our consumer electronic industry It should be very, very rare Because it's like a car Like a car, isn't it? In fact, a new car costs 220,000 such a price So the proportion of sets is gradually rising Then we are now pushing this This kind of large-scale expatriate stores, expatriate stores, actually need to promote the transformation of this kind of sales plan. This is one aspect. The second aspect is real estate. The overall situation of real estate this year, I think your data may be more than mine. I think the overall situation of this aspect is not very optimistic. This year, in July and August, the form of the home decoration industry should be called short-term. For example, you can pay attention to it as an industry research. In this regard, it should be a turning point. So I think it will have some impact on the industry related to home. So what is our plan? Our plan is to use high-end products to sell high-end products in this way to improve our I will quickly translate first. So as we are developing our one-stop-home solutions,
spk01: So we are changing or say transforming the traditional mode of selling individual products to selling solutions. So for the online channels, so most of our sales are due through the individual product selling. But for the offline channels, we can see that over 50% of the sales are from the bundle sales, which are like over three products. And not long ago, one of our customers just purchased the bundle that produced over 250,000 RMB. So in terms of the real estate impact on our industry, we can see the overall home decorating industry decreases recently. And we think that's also caused some impacts on the overall home appliance industry. But as we roll out more medium high-end products as well as promote more bundled sales, we think this can mitigate impacts and can improve the purchase amount per customer.
spk05: Thank you. Regarding the price of raw materials, as the overall price of raw materials is already at a relatively high point and not going up for a much higher chance, We don't expect the raw material costs will cause significant impacts on our operating results, and we will continue to take cost control measures to mitigate the influence. In terms of ASP, actually we have managed to develop the pricing strategies for the next year. We expect the overall trend will go up in a limited extent. as we expect an increase of the sales contribution of our new products with higher ASPs and higher margins. Thank you. Thank you.
spk03: This concludes our question and answer session. Now I'd like to turn the call back over to the company for any closing remarks.
spk01: Thank you once again for joining us today. If you have further questions, please feel free to contact us through the contact information on our website or the PS&A group, our investor relations consultant. Thank you all. Have a good night.
spk03: This concludes this conference call. You may now disconnect your lines.
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