Vipshop Holdings Limited

Ladies and gentlemen, good day everyone and welcome to VIP Shop Holdings, Limited's fourth quarter and full year 2023 earnings conference call. At this time, I would like to turn the call to Ms. Jessie Zheng, VIP Shops

Head

of Investor Relations. Please proceed.

Thank you, operator. Hello everyone and thank you

for joining VIP Shop's quarter and full year 2023 earnings conference call. With us today are Eric Shen, our co-founder, chairman and CEO and Mark Wong, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today 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 are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our Safe Harbor statements in our earnings series and the public filings with the Securities and Exchange Commission, which also applies to this call to extend any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the recommendations of our non-GAAP measures to GAAP

measures. With that, I would now like to turn the call over to Ms. Eric Shen.

Good morning and good evening, everyone. Welcome and

thank you for joining our first quarter and full year 2023 earnings conference call. We delivered a strong finish to the year of 2023 with a set of results well ahead of expectations. This has been achieved with the successful execution of our merchandising strategy to see the opportunities in value spending and made strong seasonal demand. In the fourth quarter, appellate categories were once again the bigger driver with a 29% growth in GNV year over year. For the full year, appellate categories have been consistently outperforming the industry average up 24% from a year ago. That helped us close RMB 200 billion in total annual sales for the first time in our history. We also gained strong momentum with high value customers. In the fourth quarter, active super VIP members increased by 14% from a year ago and accounted for 46% of our online spending. On an annual basis, we had 7.6 million active super VIP members who purchased 45% on our platform. Our strategy is simple. It's to be laser focused on discounted retail for brands. We embrace change and focus on retail fundamentals. We are consistently adapt so that customers can find desired brands, seek great value and enjoy value free service with us. That's how we try to gain further mindshare when customers feel like shopping for clothing, they would come to us first. On merchandising expansion, we did well to enrich and diversify our brand portfolio. Our team brought in over 1,500 new brands last year, covering more trendy and high-end brands. A majority of appellate related sales came from the several hundred core brands who took advantage of our further channel like Super Brand Day, Super Category Day and today's Top Brands, which all hit record highs in sales last year. New brands also ramped up sales quickly, leveraging our target support from traffic allocations, custom engagement to promotional campaigns. Our merchandising team is more skilled through our internal certificate program. They demonstrate the expertise to identify, select and the negotiation for quality brand goods at a deep discount across the wider range of categories. They build strong relationships as they work closely with brand partners to address their business needs and challenges. We now have a talent pipeline ready for more opportunities to differentiate our product offering. On Made for VIP Shop, brand partners are happy to deepen their collaboration with us after they see meaningful sales contribution. Currently, we have over 150 brand partners in this program. They provide a unique supplement to our value offering within trending category and a certain price range. Giving value is top of mind with most everyone right now. Being able to deliver an affordable experience every day differentiates us in the market. The key is to better leverage merchandising capability to provide efficient and cost effective inventory solutions for brand partners. This has been and will continue to be the foundation for us to secure increased supply at competitive pricing, especially in unique and the customized products. Lastly, we stay true to being customer centric. We are making shopping easy for customers, taking a simple, clear and direct way to interact with them. Also leveraging the party model, we are gaining trust from customers who rely on us to bring them great brands and the real value. We continue to enhance product authentic city through upgrades supply chain management from all aspects. This also differentiates us in an environment where everyone is talking lower pricing. We are happy to see customers coming back and spend more because of trust, value and ease. They will enjoy it here. There is still a lot of potential in growing customer wallet share and the loyalty program has been at the heart of it. Last year, super VIP members renewed at high rent and they spend a lot more with us, with average spending over eight times as much as non-SVIP members. When we look at our business today, we now have a more comparing foundation. We believe our business model is a dear low one that allows us to reinforce value proposition that is most relevant to our brand partners and customers. We will continue to be pragmatic, efficient and flexible to fill the long-term growth. At this point, let me hand over the call to our CFO Mark Wang to go over our financial results.

Thank you Eric and hello everyone. We delivered another quarter of solid financial performance, ending 2023 as the most profitable year in our history. We are very pleased with the progress we have made over the past years in upgrading our platform from all aspects. We are acting faster, pushing forward company priorities and building greater synergies. This has been the foundation for us to regain growth momentum while achieving impressive profitability. Benefiting from a number of efficiency improvement initiatives, growth margin improved quarter by quarter and on an annual basis reached the highest level since 2017. Operating a net profit margin on a non-GAAP basis is all-time high both quarterly and annually. With such healthy financial conditions, in addition to the existing buy back program, we are pleased to announce the annual cash dividend policy and approximately 250 million US dollar cash dividend for the physical year of 2023. This reflects our confidence in future growth and earnings as well as our long-term commitment to delivering returns to shareholders. Looking ahead, we are clear about strategic initiatives while investing in areas that can better engage with brand partners and customers. We will continue to maintain operating discipline to drive organic and profitable growth. Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers present below are in and all the percentage change are year over year change, unlike otherwise noted. Total net revenues for the fourth quarter of 2023 increased by .2% year over year to RMB 34.7 billion from RMB 31.8 billion in the prior period, mainly attributable to the growth in active customers and spending driven by the recovery in consumption of discretionary categories. Gross profit increased by 93% year over year to RMB 8.2 billion from RMB 6.9 billion in the prior period. Gross margin increased to .7% from .7% in the prior period. Total operating sense increased by .8% year over year to RMB 4.9 billion from RMB 4.6 billion in the prior period. As a percentage of total net revenues, total operating expenses decreased to .0% from .6% in the prior period. Fulfillment expenses increased by .0% year over year to RMB 2.5 billion from RMB 2.2 billion in the prior period. As a percentage of total net revenues, fulfillment expenses were .3% as compared with .8% in the prior period. Marketing expenses decreased by .7% year over year to RMB 843.2 million from RMB 944.1 million in the prior period. As a percentage of total net revenues, marketing expenses decreased to .4% from .0% in the prior period. Technology and accounting expenses increased by .5% year over year to RMB 496.4 million from RMB 408.5 million in the prior period. As a percentage of total net revenues, technology and accounting expenses was .4% as compared with .3% in the prior period. General and administrative expenses decreased by .7% year over year to RMB 1.0 billion from RMB 1.1 billion in the prior period. As a percentage of total net revenues, general and administrative expenses decreased to .9% from .6% in the prior period. Income from operations increased by .2% year over year to RMB 3.7 billion from RMB 2.5 billion in the prior period. Operating margin increased to .6% from .9% in the prior period. Non-GAAP income from operations increased by .5% year over year to RMB 4.0 billion from RMB 2.8 billion in the prior period. Non-GAAP operating margin increased to .4% from .7% in the prior period. Net income attributable to VIP shops shareholders increased by .2% year over year to RMB 3.0 billion from RMB 2.2 billion in the prior period. Net margin attributable to VIP shops shareholders increased to .5% from .0% in the prior period. Net income attributable to VIP shops shareholders per diluted ADS increased to RMB 5.35 from RMB 3.66 in the prior period. Non-GAAP net income attributable to VIP shops shareholders increased by .4% year over year to RMB 3.2 billion from RMB 2.2 billion in the prior period. Non-GAAP net margin attributable to VIP shops shareholders increased to .2% from .0% in the prior period. As of December 31, 2023, we had cash and cash equivalents and a respective cash RMB 26.3 billion and short term investment of RMB 2.0 billion. Now I will briefly walk through the highlights of our full year results. Total net revenues for the full year of 2023 increased by .4% year over year to RMB 112.9 from RMB 103.2 billion in the prior year. Gross profit increased by .0% year over year to RMB 25.7 billion from RMB 21.6 billion in the prior year. Gross margin increased to .8% from .0% in the prior year. Income from operations increased by .9% year over year to RMB 9.1 billion from RMB 6.2 billion in the prior year. Operating margin increased to .1% from .0% in the prior year. Non-GAAP income from operations increased by .3% year over year to RMB 10.6 billion from RMB 7.4 billion in the prior year. Non-GAAP operating margin increased to .4% from .2% in the prior year. Net income attributable to VIP shop shareholders increased by .9% year over year to RMB 8.1 billion from RMB 6.3 billion in the prior year. Net margin attributable to VIP shop shareholders increased to .2% from .1% in the prior year. Net income attributable to VIP shop shareholders per downloaded ADS increased to RMB 14.42 from RMB 9.83 in the prior year. Non-GAAP net income attributable to VIP shop shareholders increased by .1% year over year to RMB 9.5 billion from RMB 6.8 billion in the prior year. Non-GAAP net margin attributable to VIP shop shareholders increased to .4% from .6% in the prior year. Non-GAAP net income attributable to VIP shop shareholders per downloaded ADS increased to RMB 16.90 from RMB 10.67 in the prior year. Looking forward to the first quarter of 2024, we expect our total net revenues to be between the RMB 27.5 billion and RMB 28.9 billion, representing a year over year increase of approximately 0% to 5%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

Thank you. If you wish to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We ask analysts to repeat their questions in Mandarin after asking in English. Please stand by while we compile the Q&A roster.

This will take a few moments. We will take our first question. Your first question comes from the line of the city group. Please go ahead. Your line is open. Hi,

can you hear me?

Hello?

Yes, we can.

Can you hear me?

Okay.

All right. Thank you. Good evening, management. Thanks for taking my questions. Congrats on the really strong results. I have a couple of questions. First is, do you anticipate most of the future growth will come from the higher frequency and higher wallet spend on the assisting lawyer customer? Given there is some cautiousness on consumer spending in China, are you worried of any new user acquisition strategy and so forth? I would like to ask the management team about this. Because in this kind of background, we don't know if the management team is worried that our loyal users will be more cautious in spending. If they are, will it affect our subsequent growth? Also, this year, we have been talking about new users, and what are our thoughts on how to improve them. Thank you.

I will answer this question. Our loyal users are relatively stable. We have seen that the sales of SVIP has increased from the recent trend to the current trend. We expect that the overall sales of SVIP will increase In addition, we will continue to increase We will also continue to convert many non-VIPs into SVIPs. In addition, we think that there is still room for customers. In fact, we think that the overall growth of our customers in the second and third years has not reached our ideal expectations. So this year we continue to discuss how to better adhere to our brand's special sales positioning and make our users realize our value. We continue to expand our users. Including some ordinary media that we used to cooperate with, we think there will still be a lot of space. Including the precise customers we are talking about, including many mobile phones, we will continue to use various methods to continue to get customers. Including the promotion of brands, etc. We will continue to work hard to get customers in 2024. In addition, we are not too worried about the current purchase of users and the overall economic environment. After all, our customer base is not very high. It's about 200 or 300. We don't think that in 2024, the purchase of customers, the frequency of customers, and their price will be affected.

We are very confident in terms of spending. From the trend we have observed in the last couple of years, especially for our high-value customers, that is Super VIP members, their contribution to our total spending has been increasing to 45% in 2023. And for 2024, we continue to expect that the VIP contribution will continue to grow very nicely. In addition to driving the contribution of spending, we have also noticed that their output trend has been going quite well. Our output is driven mostly by frequency, and we still think there is a lot of potential in driving the frequency of S VIP members. We only have 7.6 million annual active S VIP members, and we have a lot more with high potential in terms of spending to be converted into S VIP members. Actually, non-S VIP members, especially those high potential customers, have become the most productive channel for us to acquire Super VIP members. And in terms of new customer acquisition, we think we still have a lot of potential. Actually, if you look at our annual active customer base in 2023, it hasn't lived up to our expectations. We think we can do better this year. We are tapping the potential on many fronts to see how to better leverage our value proposition in branded discount retail to increase customer mindshare of VIP shop. We will take a number of initiatives in driving new customer growth. For example, in addition to the traditional channels, we will look at some emerging and new channels that we haven't been working closely with, and we will continue to focus on targeted marketing, mobile pre-installation, and we will also do some branded advertising. We will just take as many initiatives as possible to see whether we can better drive customer growth. And for general consumption environment, we are actually not very concerned, especially for our customer base, for those high value and Super VIP members, because customers come to VIP shop, the average order size is not that high. It ranges from 200 to 300 RMB. We think that's an affordable range of price, so we are not too much concerned on that front. We think as long as we focus on the branded discount retail, we can do better in terms of driving customer growth and also customer

value share. Thank you. We will take our next question. Please stand by. Your next question comes from the line of Eddie Wang

from Morgan Stanley. Please go ahead. Your line is open.

Mr. Shen, Mr. Mark, Jesse, thank you for your question. Congratulations on your very good performance. I will use Chinese first, and then I will translate it in English. I have a few questions here. First, I have calculated that if you look at the product sales, I see that the trend is the same as the previous three seasons, and the situation is the same as the previous three seasons. So I don't know if there are any deeper changes in the trend behind this, including whether the AFT or Kodan users on our platform will see a better or more expensive product in the next four seasons. Because I think there was a question before about the overall consumption of the environment, but did we see a different trend on our platform? This is the first question. The second question is, if you look at the sales and marketing costs of this quarter, I looked at the previous five to six years, and it is rare to see that the sales and marketing in the fourth quarter is still lower than in the second quarter. I don't know if we have seen a good growth in the sales and marketing costs. In fact, our growth is also very good. In 2024, I don't know if we can understand the cost of sales and marketing as not having to be very big, but the growth can also be maintained. As for Mr. Chen, the growth of the user, although we still have relatively large demands this year, sales and marketing may not grow very much. This is the second question. The third small question I would like to ask is that the GMP quarter and the revenue growth gap may have grown a bit. From the perspective of return rate, is there a very obvious difference in this quarter? Yes, I will reflect on it myself. Thank you, management, for taking my question. I have three questions. The first one is that if you look at product sales per order, we find that in the fourth quarter last year, actually, we see a -over-year increase. This trend actually is a little bit different from the first three quarters in last year, which we see a decline in the trend. What's the reason behind that, especially given the overall consumption background is more focused on the consumption downgrade? My second question is if you look at the sales and marketing expense in the fourth quarter last year, actually, the absolute dollar turn is lower than that in the second quarter of last year. This is quite sudden if you look at the historical of the company. I'm wondering what's the expectation for sales and marketing spending in 2024? The last question is if you look at the growth gap between GMV and the revenue in fourth quarter, actually, the gap is widening if you compare with the first three quarters. I just wonder if there is a significant change in terms of the return rates or is there any other reason behind that? Thank you.

I will answer each question. The first question is about the return rates. Overall, the return rates are relatively stable. The return rates in the fourth quarter this year are higher than last year. The return rates in the fourth quarter last year are higher than last year. We are thinking about winter. If the weather is colder, we can buy more expensive and more valuable raincoats. Many people have asked us if our users have similar consumption downgrade. We can see that the return rates and up rates have not changed. We can see that the return rates have not changed. We can see that the return rates have not changed. The second question is about the market costs. The market costs are relatively small compared to the Q4 sales. The market costs in the company are relatively stable. We have strict LTV controls. For example, how much is a new customer? How much is the old customer? How long is the return? The overall cost is relatively stable. In 2024, we will increase the market costs a little bit. We hope to continue to receive customers. However, the overall proportion is very limited. So don't worry about the overall cost of the market. If we meet a good channel, we can spend more money. Including LTV, return, and other aspects. The third question is about the return rate. The return rate in 2023 is much higher than in 2022. We can see the proportion of G&V and income. We have increased the return rate by 3 to 4 points. Although it does not affect our effort, because our expenses have been run away, including the return and sales costs. But we see several reasons. One is that the proportion of our clothes continues to increase. Because the return rate of our clothes is quite high. This is especially true for the cold weather of Q4 last year. The clothes sold are better. We see the proportion of our clothes continues to increase. This is one reason. The second reason is that the consumers think that they can buy clothes and try them on. They think of it as a clothes store or a clothing store. The Chinese consumers think that this is a normal behavior. So they think it is OK. If the platform can provide this service, they will continue to try on clothes, or try on clothes, or try on clothes. So we think this will also increase the whole consumer. The third reason is that we do not have accurate information. The consumers may think that they should save money. If it is not appropriate, they should not force themselves. But we have not yet verified this. We just guess that there may be a little bit of this reason.

The second reason is that the clothes are stable. In Q4, we did see a slight increase on a -over-year basis, primarily because we sold more winter clothing, which had a higher ticket size, especially when a lot of people in cold weather, they would buy a higher ticket size down jacket, et cetera. So that is the primary reason behind the increase in average order size. And this also reflects that actually on our platform, there is not very significant signs that we have so-called consumption downgrade. At least the loyal and highly engaged customers with our platform we have seen their average ticket size are actually stable or quite resilient, and Apple has been growing very nicely. So that is how we benefit from the very resilient consumption trend among our customer cohorts. In terms of sales and marketing expense, in Q4, because we did much better than expected in terms of sales, that brought the sales and marketing expense ratio down a little bit. Actually, for this line, sales and marketing spend will continue to be relatively stable. Of course, we want to spend prudently, especially to acquire more high-quality customers in 2024, but we will continue to look at the effectiveness and efficiency of customer acquisition from a number of perspectives, including LTV, ROI, payback period, et cetera. So sales and marketing expense ratio will continue to be very manageable, and we will continue to spend in a rational way to spend on those channels who can provide the best ROI. So basically, we don't worry too much about sales and marketing expense, and it's going to be very limited as a percentage of total revenue. On return rates, for the last year, return rates have been growing on an -over-year basis. We think we did see a 3 to 4 percentage point growth in return rates, but we had mentioned this before, return and exchange services is a part of our value proposition. We are in a position to provide the -in-class services to our customers, and it's building in our profitability model. It hasn't been impacting our profitability levels for the past several quarters. And the return rates are trending a little bit higher because of a number of factors. One is apparel contribution. In the last couple of years, we have seen apparel contribution growing on our platform, and apparel, as you know, they naturally have higher return rates. And second, return and exchange has become a standardized practice within the industry, and a lot of customers are taking VIP shops as a fitting room, and the more they try, actually the more likely they will buy. So it's not only us, as far as we know, the return rate within the industry is actually growing. That's the reality. And lastly, although we don't have accurate information about that, it's just our guess. We think that consumers are becoming more cautious and selective in terms of their spending. They want to spend money only on those essential pieces that they need. So that might be one of the reasons that return rate is

going higher. Thank you. We will take our next question. Your next question comes from the line of Ronald Keang from Goldman

Sachs. Please go ahead. Your line is open.

Thank you, Shendong, Mark and Tim. I have two questions. Thank you, Shendong. I have two questions. First, I want to know what is the trend of revenue guidance in the first quarter of the year? And what is the current situation of consumers in the spring and summer? I want to know the gap between GMV and revenue in the second quarter of the year. I want to know what we should do to find out the gap between GMV and revenue. Second, I want to ask about the return rate for the shareholders. We see that in the second quarter of the year, there is a $11 free cash flow. That's very good. We didn't do much buyback in the past two seasons. We have now announced a $215 regular dividend. I want to know what we can do to improve the free cash flow, other than the regular dividend we mentioned earlier. I will translate it for you. Thank you, management. I have two questions. First, I want to hear how our trends have been for the first quarter so far, January and February as a whole, and how do we see demand tracking since Chinese New Year? And how do we think about the gap between GMV and revenue for 2024, compared with the big gap in 2023? Second, a shareholder return. I've seen a $1 billion US dollar free cash flow. We haven't done too much buyback in the past two quarters. Now we have a $250 million US dollars of regular dividend. What is the plan for the remaining free cash flow? Is there any room for further shareholder return? Thank you.

My first question is about Q1's business so far. In January, Q1's business was pretty good due to the weather. We said that we would return after the Spring Festival. The weather is relatively dry now, and it's cold again. So we haven't really talked about the Spring Festival. So the business is still in the middle of a gap. So we think that Q1's business is relatively stable. The second question is about the return rate. We estimate that the return rate will still increase, but the overall increase in 2024 is limited. We think that the return rate will increase by 1 to 1.5 points in 2023. That's the estimate. So we don't think that there will be any unusual events in the 2024 sales. Next, our CFO will answer your second big question.

So we think that Q1's business has a decent business momentum. In January, it was benefiting from a very favorable weather, because at that time it was still quite cold. So our business performance was really quite good. We continue to see recovery following the Spring Festival. Until recently, we've seen that our sales had been ramping up relatively slower than expected because of the unexpected weather conditions, sometimes very cold, which actually delayed to some extent the seasonal shift to spring apparel. But overall, we think Q1 will continue to be another quarter of relatively stable growth. And in terms of the revenue and GMV growth gap, for this year we continue to expect a slightly higher return rate because of the still higher apparel contribution as well as the IP contribution. But return rate is not going to be significantly higher as we saw for 2023. We expect at most it's going to be 1 to 1.5 percentage points higher, which means that there is a chance that we can narrow the revenue and the GMV growth gap to some extent.

Okay, for the second question, let me answer a question. And thanks for your question regarding the cash dividends and also the share buy back programs. And actually we have been focusing on long term capital policy and the combination of the annual dividend and buy back reflects our confidence in long term growth and profitability, as well as our long term commitment to create value to our shareholders. Regarding the total amount of the dividends, we considered multiple factors such as working capital for business development, HEPAX profitability and cash flow. The dividend amount will be reviewed and determined annually. Well, as to buy back, we have repurchased a total of nearly 2 billion US dollars from April 2021 to the end of 2023. The existing US dollar 1 billion buy back program, which is effective through March 2025, has been utilized 452 million US dollars as of December 31, 2023. And the remaining parts will be executed from time to time, taking into account factors such as price valuation and the marketing fluctuations. So therefore the cash dividends and the share buy back, I think that's the two ways we would like to provide return to our shareholders. And these two ways or two regimes will implement parallel.

Thank you. Thank you.

We will take our next question. Your next question comes from the line of Andre Chang from JP Morgan. Please go ahead. Your line is open.

Thank you. And the last question is about the shareholder return. I would like to ask, since our cash is very strong, the cash balance from last year continues to improve. If our buy back, according to what Mark said, is based on the market valuation, then we may not be able to execute it. Then do we not necessarily have to return the excess cash to the shareholders? I have three questions for the management. First is we talk about the note. We will focus more on the user growth this year. Can you elaborate more about where are the areas that we can find new users to acquire? Second, we also talk about further improvement on the output. With the rebounding spending from our loyal user last year, which was easy, what are the drivers for our user to spend more on our platform into 2024? And lastly, we talk about the share buy back hinges on the market condition, valuation. It seems that we saw cash flow continue to be strong, cash balance increased by the end of last year versus the end of 2022. Does that mean that it's not necessary we will use our strong cash flow to return to the shareholder? How do we think about that? Thank you.

My first question is about the new users. The new users are basically old users in the second or third year. For example, we are talking about some natural new users. We will put them on the Tiktok, TikTok, Tencent and other media. We also have the idea of installing mobile phones directly. We will strengthen our platform this year, and we will continue to expand our brand image and positioning. Some users knew about the VIP event, but it was useless. Or the original impression was different, so we will strengthen the promotion. We also talked about the users who didn't cooperate or didn't cooperate much. We think there is room for the new users on the VIP event. We will continue to expand our brand image this year. We also think that the new users, including the overall flow of the new users, are OK. The overall quality is relatively healthy, so we think that there is no problem to invest money here. The second question is about the new users on the VIP event. We think that the new users are more likely to accept us. We think that there is room for improvement this year. We hope that we can make more and more special clothes. For example, women can buy clothes for their husbands, children, parents, and other brands. We also want to make more and more expensive brands. We want to make our customers buy our products. We also want to make our customers buy our products. We think that there is still room for improvement. The third question is about

the new customer acquisition. Mark can answer it. We have a number of platforms like Doi, Intel, Tencent, as well as mobile pre-installation. This year, we would like to do better in terms of adding new channels, especially to elevate the company brand image through more brand advertising, especially targeting those customers who are not familiar with VIP shops or who have heard of VIP shops but have never used. Basically, we want to leverage branding to increase customer mindshare of VIP shops as the best place to shop for apparel, including emerging and younger channels like Little Red Book, Billy Billy, etc. We think there is still quite a lot of potential there. For the new customers we have acquired to our platform, we have actually seen the retention is pretty good, which means that the customers we acquired are relatively higher quality. So we think our current customer acquisition strategy doesn't work relatively well. In terms of apple growth, last year we did benefit from several weather conditions in some of the seasons, but we also think that customers have become increasingly recognized the value proposition of VIP shops as a discount platform for branded products. And especially through our -in-class services, we find this is a great place to shop for apparel, especially for women. They tend to not only shop for themselves, but also shop for the whole family, including children, parents, etc. They also shop not only apparel, but also other categories like standardized items. We have seen increasing cross-category purchases among our customers. And this year, in addition to driving the growth of apparel categories, we also want to build a stronger platform for standardized items, so that we can increase the cross-value opportunities for our high-value customers, especially Super VIP members.

Regarding the third question, for ShareBackBack, I think the track record has already shown our insistence to return value to our shareholders. And for the BackBack program, we will definitely evaluate the share price and also whether the market is in fluctuations. For example, if in the future the share price is lower than our expectation, lower than our normal value, we will definitely do the ShareBackBack continuously from time to time. But that depends on the price and also depends on the other factors. So I think the cash dividends regime is a way to give you a more predictable value back to the shareholders. So in the future, we will have the annual cash dividends policy. And of course, we will evaluate our cash position and also our profitability and also our capex, etc. To make sure to determine how much money we will distribute to our shareholders. So I think the cash dividends policy is a way to complement our return to our shareholders policy. Thank you.

Thank you. Thank

you. Due to time risk constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Jessie for any closing remarks.

Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our RR team. We look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.

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was kept in this bottle, ever since scanner ate it. Why诚 wake. Tablepping exams on dinners on top sake. Ladies and gentlemen, good day everyone and welcome to the Welcome to VIP Shop Holdings, Limited's fourth quarter and full year 2023 earnings conference call. At this time, I would like to turn the call to Ms. Jessie Zheng, VIP Shop's Head of Investor Relations. Please proceed.

Thank you, operator. Hello everyone and thank you for joining

VIP Shop's fourth quarter and full year 2023 earnings conference call. With us today are Eric Shen, our co-founder, chairman and CEO, and Mark Wong, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today 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 are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our Safe Harbor statements in our earnings series and public filings with the Securities and Exchange Commission, which also applies to this call to extend any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the recommendations of our non-GAAP measures to GAAP measures.

With that, I would now like to turn the call over to Mr. Eric Shen.

Good morning and good evening, everyone.

Welcome and thank you for joining our first quarter and full year 2023 earnings conference call. We delivered a strong finish to the year of 2023 with a set of results well ahead of expectations. This has been achieved with the successful execution of our merchandising strategy to see the opportunities in value spending made strong seasonal demand. In the fourth quarter, appellate categories were once again the bigger driver with 29% growth in GNV year over year. For the full year, appellate categories have been consistently outperforming the industry average up 24% from a year ago. That helped us close RMB 200 billion in total annual sales for the first time in our history. We also gained strong momentum with high value customers. In the fourth quarter, active super VIP members increased by 14% from a year ago and accounted for 46% of our online spending. On an annual basis, we had 7.6 million active super VIP members who purchased 45% on our platform. Our strategy is simple. It's to be laser focused on discount retail for brands. We embrace change and focus on retail fundamentals. We are consistently adapt so that customers can find desired brand, seek great value and enjoy worry free service with us. That's how we try to gain further mind share. When customers feel like shopping for clothing, they would come to us first. On merchandising expansion, we did well to enrich and diversify our brand portfolio. Our team brought in over 1,500 new brands last year, covering more trendy and high-end brands. A majority of apparel related sales came from the several hundred core brands who took advantage of our further channel like Super Brand Day, Super Category Day and today's top brands, which all hit record highs in sales last year. New brands also ramped up sales quickly, leveraging our target support from traffic allocations, custom engagement to promotional campaigns. Our merchandising team is more skilled through our internal certificate program. They demonstrate the expertise to identify, select and the negotiation for quality brand goods at a deep discount across the wider range of categories. They built strong relationships as they work closely with brand partners to address their business needs and challenges. We now have a talent pipeline ready for more opportunities to differentiate our product offering. On Made for VIP Shop, brand partners are happy to deepen their collaboration with us after they see meaningful sales contribution. Currently, we have over 150 brand partners in this program. They provide a unique supplement to our value offering within trending category and a certain price range. Giving value is top of mind with most everyone right now. Being able to deliver an affordable experience every day differentiates us in the market. The key is to better leverage merchandising capability to provide efficient and cost effective inventory solution for brand partners. This has been and will continue to be the foundation for us to secure increased supply at competitive pricing, especially in unique and customized products. Lastly, we stay true to being customer centric. We are making shopping easy for customers, taking a simple, clear and direct way to interact with them. Also leveraging the first party model, we are gaining trust from customers who rely on us to bring them great brands and the real value. We continue to enhance product authenticity through upgrades supply chain management from all aspects. This also differentiates us in an environment where everyone is touting lower pricing. We are happy to see customers coming back and spending more because of trust, value and ease. They will enjoy it here. There is still a lot of potential in growing customer wallet share and the loyalty program has been at the heart of it. Last year, super VIP members renewed at high rent and they spend a lot more with us, with average spending over eight times as much as non-SVIP members. When we look at our business today, we now have a more compelling foundation. We believe our business model is a dear low one that allows us to reinforce the value proposition that is most relevant to our brand partners and customers. We will continue to be pragmatic, efficient and flexible to fill the long-term growth. At this point, let me hand over the call to our CFO Mark Wang to go over our financial results.

Thank you Eric and hello everyone. We delivered another quarter of solid financial performance, ending 2023 as the most profitable year in our history. We are very pleased with the progress we have made over the past years in upgrading our platform from all aspects. We are acting faster, pushing forward company priorities and building greater synergies. This has been the foundation for us to regain growth momentum while achieving impressive profitability. Benefiting from a number of efficiency improvement initiatives, growth margin improved quarter by quarter and on an annual basis reached the highest level since 2017. Operating a net profit margin on a non-GAAP basis is at all time high both quarterly and annually. With such healthy financial conditions, in addition to the existing buy back program, we are pleased to announce the annual cash dividend policy. We are also pleased to announce the annual cash dividend policy for the year 2021. We are also pleased to announce the annual cash dividend policy for the year 2021. We are also pleased to announce the annual cash dividend policy for the year 2021. While investing in areas that can better engage with brand partners and customers, we will continue to maintain operating discipline to drive organic and profitable growth. Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers present below are in M&B and all the percentage change are year over year change, unlike otherwise noted. Total net revenues for the fourth quarter of 2023 increased by .2% year over year to RMB 34.7 billion from RMB 31.8 billion in the prior period. Mainly attributable to the growth in active customers and spending driven by the recovery in consumption of discretionary categories. Gross profit increased by 93% year over year to RMB 8.2 billion from RMB 6.9 billion in the prior period. Gross margin increased to .7% from .7% in the prior period. Total operating expenses increased by .8% year over year to RMB 4.9 billion from RMB 4.6 billion in the prior period. As a percentage of total net revenues, total operating expenses decreased to .0% from .6% in the prior period. Fulfillment expenses increased by .0% year over year to RMB 2.5 billion from RMB 2.2 billion in the prior period. As a percentage of total net revenues, fulfillment expenses was .3% as compared with .8% in the prior period. Marking expenses decreased by .7% year over year to RMB 843.2 million from RMB 944.1 million in the prior period. As a percentage of total net revenues, marking expenses decreased to .4% from .0% in the prior period. Technology and accounting expenses increased by .5% year over year to RMB 496.4 million from RMB 408.5 million in the prior period. As a percentage of total net revenues, technology and accounting expenses was .4% as compared with .3% in the prior period. General and administrative expenses decreased by .7% year over year to RMB 1.0 billion from RMB 1.1 billion in the prior period. As a percentage of total net revenues, general and administrative expenses decreased to .9% from .6% in the prior period. Income from operations increased by .2% year over year to RMB 3.7 billion from RMB 2.5 billion in the prior period. Operating margin increased to .6% from .9% in the prior period. Non-GAAP income from operations increased by .5% year over year to RMB 4.0 billion from RMB 2.8 billion in the prior period. Non-GAAP operating margin increased to .4% from .7% in the prior period. Net income attributable to VIP shops shareholders increased by .2% year over year to RMB 3.0 billion from RMB 2.2 billion in the prior period. Net margin attributable to VIP shops shareholders increased to .5% from .0% in the prior period. Net income attributable to VIP shops shareholders per diluted ADS increased to RMB 5.35 from RMB 3.66 in the prior period. Non-GAAP net income attributable to VIP shops shareholders increased by .4% year over year to RMB 3.2 billion from RMB 2.2 billion in the prior period. Non-GAAP net margin attributable to VIP shops shareholders increased to .2% from .0% in the prior period. Non-GAAP net income attributable to VIP shops shareholders per diluted ADS increased to RMB 5.79 from RMB 3.65 in the prior period. As of December 31, 2023, we had cash and cash equivalents in the restricted cash of RMB 26.3 billion and short-term investment of RMB 2.0 billion. Now, I will briefly walk through the highlights of our full year results. Total net revenues for the full year of 2023 increased by .4% year over year to RMB 112.9 billion from RMB 103.2 billion in the prior year. Gross profit increased by .0% year over year to RMB 25.7 billion from RMB 21.6 billion in the prior year. Gross margin increased to .8% from .0% in the prior year. Income from operations increased by .9% year over year to RMB 9.1 billion from RMB 6.2 billion in the prior year. Operating margin increased to .1% from .0% in the prior year. Non-GAAP income from operations increased by .3% year over year to RMB 10.6 billion from RMB 7.4 billion in the prior year. Non-GAAP operating margin increased to .4% from .2% in the prior year. Net income attributable to VIP shop shareholders increased by .9% year over year to RMB 8.1 billion from RMB 6.3 billion in the prior year. Net margin attributable to VIP shop shareholders increased to .2% from .1% in the prior year. Net income attributable to VIP shop shareholders per diluted ADS increased to RMB 14.42 from RMB 9.83 in the prior year. Non-GAAP net income attributable to VIP shop shareholders increased by .1% year over year to RMB 9.5 billion from RMB 6.8 billion in the prior year. Non-GAAP net margin attributable to VIP shop shareholders increased to .4% from .6% in the prior year. Non-GAAP net income attributable to VIP shop shareholders per diluted ADS increased to RMB 16.90 from RMB 10.67 in the prior year. Looking forward to the first quarter of 2024, we expect our total net revenues to be between the RMB 27.5 billion and RMB 28.9 billion, representing a year over year increase of approximately 0% to 5%. Please note that these forecasts reflect our current and preliminary review of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

If you have any questions for your question, please press star 1 and 1 again. We ask analysts to repeat their questions in Mandarin after asking in English. Please stand by while we compile the Q&A roster.

This will take a few moments. We will take our first question. Your first question comes from the line of Alicia Yap from Citigroup. Please go ahead. Your line is open. Hi, can you hear

me?

Hello?

Yes, we can. Can

you hear

me?

Okay. Okay. All right. Thank you. Good evening, management. Thanks for taking my questions. Congrats on the really strong results. I have a couple of questions. First is, do you anticipate most of the future growth will come from the higher frequency and higher wallet spend on the assisting lawyer customer? Given there is some cautiousness on consumer spending in China, are you worried about any potential slowdown of the growth if your lawyer customer base started to shop less frequently and spend at a smaller amount? I'm just wondering if you have any plans or targets for new user acquisition strategy. I'm just wondering if you are worried about the user spending on the

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Our lawyer customer group has been quite resilient in terms of spending from the trend that we have observed in the last couple of years, especially for high value customers, that is super VIP members, their contribution in turn to our total spending has been increasing to 45% in 2023. And for 2024, we continue to expect that as VIP contribution will continue to grow very nicely. In addition to driving the contribution of spending, we have also noticed that their output trend has been going quite well. Our output are driven mostly by frequency and we still think there is a lot of potential in driving the frequency of the VIP members. And, you know, we only have 7.6 million annual active as VIP members and we have a lot more with high potential in terms of spending to be converted into VIP members. Actually, along as VIP members, especially those high potential customers have become the most productive channel for us to acquire super VIP members. And in terms of new customer acquisition, we think we still have a lot of potential. Actually, if you look at our annual active customer base in 2023, it hasn't lived up to our expectations. We think we can do better this year. We are tapping the potential in many fronts to see whether we have to better leverage our value proposition in branded discount retail to increase customer mindshare of VIP shop. We will take a number of initiatives in driving new customer growth. For example, in addition to the traditional channels, we will look at some emerging and new channels that we haven't been working closely with and we will continue to focus on target marketing, mobile pre-installation, and we will also do some branded advertising. We will just take as many initiatives as possible to see whether we can better drive customer growth. And for general consumption environment, we are actually not very concerned, especially for our customer base, for those high value and super VIP members. Because customers come to VIP shop, the average order size is not that high. It ranges from 200 to 300 RMB. We think that's an affordable range of price. So we are not too much concerned on that front. We think as long as we focus on the branded discount retail, we can do better in terms of driving customer growth and also customer value share.

Your next question comes from the line of Eddie Wang from Morgan Stanley. Please go ahead. Your line is open.

Thank you for your question, Mr. Shen, Mr. Mark, and Jesse. Congratulations on your performance. I will use Chinese first, and then I will translate it in English. I have a few questions here. First, I have calculated that if you look at the product sales per order, I see that the trend is the same as the previous three seasons. So I don't know if there are any deeper changes in the trend behind this, including whether the user on our platform is buying a single product, or whether the AFT or the Kedan will see a longer-term trend and see that the consumption will be better and more expensive. I think there were questions about the overall consumption decline in the environment, but do we see a different trend on our platform? This is the first question. The second question is that if you look at the sales and marketing costs of this quarter, I looked at the previous five to six years, and it is rare to see that the sales and marketing in the fourth quarter is still lower than the absolute number in the second quarter. I don't know if we can understand that the sales and marketing costs are not particularly high, but the growth can be maintained. As Mr. Chen said, the overall user growth is relatively high this year, but the sales and marketing costs may not be very high. This is the second question. The third question is that the GME and revenue growth gap may have grown a bit. From the perspective of return rate, is there a very obvious difference in this quarter? I will reflect on this myself. The second question is that if you look at the sales and marketing expense in the fourth quarter last year, the absolute dollar turn is lower than that in the second quarter of last year. This is quite sudden if you look at the historical of the company. I wonder what is the expectation for sales and marketing spending in 2024. The last question is that if you look at the growth gap between GMV and revenue, in the fourth quarter, the gap is widening compared with the first three quarters. I just wonder if there is a significant change in terms of the return rate or if there is any other reason behind that. Thank you.

The return rate is higher than the previous year. We are thinking that it may be a winter problem. If the weather is colder, we can buy more expensive and more valuable raincoats. Many people have asked us if our customers have similar sales and marketing spending. We have seen that our customer base and our app have not changed much and there has been an increase. We have not seen any significant sales and marketing spending. The second question is about the market.

We

have seen that the Q4 sales are higher and the market is lower. The market is more stable. We have strict LTV to control the return rate of customers. In 2024, we will increase the market price a little bit. We hope to continue to receive customers, but the proportion is very limited. So we don't have to worry about the overall market spending. If we meet a good channel, we can spend more money, including LTV and return. The third question is about the return rate. The return rate has increased a lot in 2023 compared to 2022. We can see the proportion of G&V and revenue. We have seen that the return rate has increased by 3 to 4 points. Although it does not affect our effort, we have already run out of expenses, including the return and sales. We have seen that the proportion of our clothes has been increasing. The return rate of our clothes is very high. The Q4 sales are better in the cold weather. We have seen that the proportion of our clothes has been increasing. The second question is about the possibility of consumers thinking that they can buy clothes and try them on. We think that the Chinese consumers think that the service is normal. If the platform can provide such services, they will try on different clothes. The third question is about the possibility of consumers thinking that they can save money. If it is not suitable, do not force it. But we have not yet determined the possibility of consumers thinking that there is a possibility of this.

We have seen that the Chinese consumers think that the service is normal. But we have not yet determined the possibility of this. We have seen that the Chinese consumers think that there is a possibility of this. But we have not yet determined the possibility of this. But we have not yet determined the possibility of this. That is how we benefit from the very resilient consumption trend among our customer cohorts. In terms of sales and marketing expense, in Q4, because we did much better than expected in terms of sales, that brought the sales and marketing expense ratio down a little bit. Actually, for this line, sales and marketing spend will continue to be relatively stable. Of course, we want to spend prudently, especially to acquire more high quality customers in 2024. But we will continue to look at the effectiveness and efficiency of customer acquisition from a number of perspectives, including LTV, ROI, payback period, etc. So sales and marketing expense ratio will continue to be very manageable. And we will continue to spend in a rational way to spend on those channels who can provide the best ROI. So basically, we don't worry too much about sales and marketing expense. And it's going to be very limited as a percentage of total revenue. On return rates, for the last year, return rates have been growing on a -over-year basis. We think we did see a 3 to 4 percentage point growth in return rates. But we had mentioned this before, return and exchange services is a part of our value proposition to provide the -in-class services to our customers. And it's building in our profitability model. It hasn't been impacting our profitability levels for the past several quarters. And the return rates are trending a little bit higher because of a number of factors. One is apparel contribution. In the last couple of years, we have seen apparel contribution growing on our platform. And apparel, as you know, they naturally have higher return rates. And second, our return and exchange has become a standardized practice within the industry. And a lot of customers are taking VIP shops as a fitting room. And the more they try, actually, the more likely they will buy. So it's not only us. As far as we know, the return rate within the industry is actually growing. That's the reality. And lastly, although we don't have accurate information about that, it's just our guess. We think that consumers are becoming more cautious and selective in terms of their spending. They want to spend money only on those essential pieces that they need. So that might be one of the reasons that return rate

is going higher. Thank you. We will take our next question. Your next question comes from the line of Ronald King from

Goldman Sachs. Please go ahead. Your line is open.

Thank you, Shendong, Mark and Tim. I have two questions. I think the gap between revenue and GMB will be narrowed down in 2024. I would like to know what we should do to deal with the gap between revenue and GMB. I think the gap between revenue and GMB will be narrowed down in 2024. I would like to know what we should do to deal with the gap between revenue and GMB. I would like to know what we

should do to deal with the gap between revenue and GMB. I think the gap between revenue and GMB is narrowed down in 2024. I would like to know what we should do to deal with the gap between revenue and GMB. I think the gap between revenue and GMB. I think the gap between revenue and GMB. I think the gap between revenue and GMB. I think the gap between revenue and GMB. I think the gap between revenue and GMB. ficus43 Next, let's have our CF answer your second big question.

The performance was really quite well, quite good. And we continue to see recovery following the spring festival. Until recently, we've seen that our sales had been ramping up relatively slower than expected because of the unexpected weather conditions. And we see that the weather conditions are sometimes very cold, which actually delays to some extent the seasonal shift to spring apparel. But overall, we think Q1 will continue to be another quarter of relatively stable growth. And in terms of the revenue and GMV growth gap, for this year, we continue to expect a slightly higher return rate because of the still higher apparel contribution as well as the IP contribution. But return rate is not going to be significantly higher as we saw for 2023. We expect at most it's going to be 1 to 1.5 percentage points higher, which means that there is a chance that we can narrow the revenue and GMV growth gap to some extent.

Okay, for the second question, let me answer a question. And thanks for your question regarding the cash dividends and also the share buy back programs. And actually, we have been focusing on long term capital policy and the combination of the annual dividend and buy back reflects our confidence in long term growth and profitability. As well as our long term commitment to create value to our shareholders. Regarding the total amount of the dividends, we considered multiple factors, such as working capital for business development, HEPAX profitability and cash flow. The dividend amount will be reviewed and determined annually. Well, as to buy back, we have repurchased a total of nearly 2 billion US dollars from April 2021 to the end of 2023. The existing US dollar 1 billion buy back program, which is effective through March 2025, has been utilized 452 million US dollars as of December 31, 2023. And the remaining parts will be executed from time to time, taking into account factors such as price valuation and the marketing fluctuations. So therefore, the cash dividends and the share buy back, I think that's the two ways we would like to provide return to our shareholders. And these two ways or two regimes will implement parallel. Yeah, thank you.

Thank you. We will

take our next question. Your next question comes from the line of Andre Chang from JP Morgan. Please go ahead. Your line is open.

And the last question is about the shareholder return. I would like to ask, since our cash is very strong, the cash balance from last year continues to improve. If our buy back is based on the market situation, then the excess cash will not necessarily return to the shareholders. Hi, I have three questions for the management. First is we talk about the note. We will focus more on the user growth this year. Can you elaborate more about where are the areas that we can find new users to acquire? Second, we also talk about further improvement on the output. So with the rebounding spending from our loyal user last year, which was easy, what are the drivers for our user to spend more on our platform into 2024? And lastly, we talk about the share buy back will hinges on the market condition, valuation. It seems that we saw cash flow continue to be strong, cash balance increased by the end of last year versus the end of 2022. Does that mean that it's not necessary we will use our strong cash flow to return to the shareholder? How do we think about that? Thank you.

I will try to explain the different types of revenue. We also talk about the new users. The overall flow of the new users is still okay. The overall quality is still healthy, so we think that spending money here is not a problem. The second question is about the up. We think that the up last year has the reason for the up. But we also think that the consumers recognize us more. We think that there is room for improvement this year. We hope that the clothing industry will be more and more unique. For example, women can buy clothes for their husbands, children, parents, and all kinds of brands. We can buy clothes, shoes, bags, etc. In addition, we will also expand our brand in 2024. We want to make some valuable brands that our customers can buy. Including our SVIP, which thinks that our brands are still doing better. We think that there is still a chance to improve the up of our users. Mark can answer the third question. On

your first question on new customer acquisition, last year we invested a lot of channels to acquire new customers, to drive the organic growth in new customers, such as telecom marketing, a number of platforms like Doi, Intel, Tencent, as well as mobile pre-installation. This year we would like to do better in terms of adding new channels, especially to elevate the company brand image through more brand advertising, especially targeting those customers who are not familiar with the shop or who have heard of the shop but have never used. Basically, we want to leverage branding to increase customer mindshare of the shop as the best place to shop for apparel, including emerging and younger channels like Little Red Book, Billy Billy, etc. We think there is still quite a lot of potential there. For the new customers we have acquired to our platform, we have actually seen the retention is pretty good, which means that the customers we acquired are relatively higher quality. So we think our current customer acquisition strategy doesn't work relatively well. In terms of apple growth, last year we did benefit from several weather conditions in some of the seasons, but we also think that customers have become increasingly recognized the value proposition of VIP shop as a discount platform for branded products. And especially through our -in-class services, we find this is a great place to shop for apparel, especially for women. They tend to not only shop for themselves, but also shop for the whole family, including children, parents, etc. They also shop not only apparel, but also other categories like standardized items. We have seen increasing cross-category purchases among our customers. This year, in addition to driving the growth of apparel categories, we also want to build a stronger platform for standardized items, so that we can increase the cross-value opportunities for our high-value customers, especially Super VIP members.

Regarding the third question, for ShareBackBack, I think the track record has already shown our insistence to return value to our shareholders. For the BackBack program, we will definitely evaluate the share price and also whether the market is in fluctuations. For example, if in the future the share price is lower than our expectation, lower than our normal value, we will definitely do the ShareBackBack continuously from time to time. But that depends on the price and also depends on the other factors. So I think the cash dividends regime is a way to give you a more predictable value back to the shareholders. So in the future, we will have the annual cash dividends policy, and of course we will evaluate our cash position and also our profitability and also our capex, etc. to make sure to determine how much money we will distribute to our shareholders. So I think the cash dividends policy is a way to complement our return to our shareholders policy. Thank you.

Thank you. Thank

you. Due to time risk constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Jessie for any closing remarks.

Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our RR team. We look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.