Kingsoft Corp Ltd Adr

Good day and thank you for standing by. Welcome to the Q3 2023 Kingsoft Corporation's Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, IR Director Francylou. Please go ahead.

Thank you, operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2023 third quarter results earnings call. I'm Francylou, the IR Director of Kingsoft. I would like to start by reminding you that some information provided during the earnings call may include forward-looking statements which may not be relied upon in the future for various reasons. These forward-looking statements are based on our own information and information from other sources which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors which may affect our business and operations. Having said that, please allow me to introduce our management team who joined us today. Mr. Zou Tao, our Executive Director and CEO, and Ms. Li Yi, our Acting CFO. Now I'm turning the call to Mr. Zou.

大家好,第三季度,我们的核心业务稳定发展。 金山办公集团围绕AI和协作战略重点, 进一步提升产品在AI领域的服务能力。 The online game business continues to support and upgrade the self-proclaimed premium game. In the third quarter, the financial performance of the group remained stable. The total profit was RMB 20.6 billion, which increased by 12% in the same ratio. Mainly due to the steady growth of the network 3 and the continuous growth of the personal and institutional subscription business of the Jinshan Office Group. Okay, I'll translate for Mr. Zhou.

In the third quarter, our core businesses have made steady progress, focusing on the priority strategies of AI and collaboration. Kings of Office Group continuously optimized the AI performance of products. Online game business continued to iterate and upgrade self-developed premium games. In the third quarter, the group maintained stable financial performance. The total revenue was RMB 2,060 million, representing a year-on-year increase of 12%, mainly due to the steady growth of JX Online 3 and the sustainable growth in subscription businesses of both individuals and institutions from Kingsoft Office Group. The operating profit was RMB 376 million, representing a year-on-year increase of 13%. Now I will turn the call to Ms. Li Yi, our Acting CFO.

Thank you, Francine. Good evening, everyone. In the third quarter, for individual office subscription business, Key Thought Office Group optimized its membership system, improved user experience across its products, and achieved steady increases in both the paying ratio and average revenue per paying user. To enhance the AI performance of our products, we invested in independent development of small and medium-sized models. We have reached strategic cooperation with Alibaba Group and iFlightTech to jointly build a digital and intelligent service ecosystem. Regarding institutional subscription business, we actively promoted cloud integration and collaborative office programs. for government and enterprises, and developed high-quality digital office solutions to assist them in the digital transformation. Through WPS 365, we continued to facilitate customers' adoption of cloud and collaborative applications, and made significant progress in expanding our user base in macro-, small-, and medium-sized enterprises. In all these recent regional service construction, we organized a series of digital office activities in cities in China, such as Suzhou, Guangzhou, and Harbin, and continuously expanded our penetration in multiple industries, including energy, education, and finance. In the third quarter, GX3 Online updated constantly and sustained a good atmosphere in the player community. In August, GH3 Online celebrated its 14th anniversary with players. In October, it launched the beta test with ultimate graphics quality and a new expansion pack, ensuring the ongoing success of the IP. World of Sword Origin was released in China in September and received recognition from players. This mobile game was transformed from PC games through optimizing and upgrading the graphics and gameplay details while maintaining traditional 2D graphics and classical gameplay. We also optimized the anime game Snowbreak Containment Zone on an ongoing basis. Looking forward, the mobile version of GX3 Ultimate has received the license approval and is expected to be launched in the first half of next year to achieve accessibility through all platforms I'll now discuss the Q3, operational and financial results used RMB as currency. Revenue increased 12% year-on-year and decreased 6% quarter-on-quarter to $2,060 million. The revenue split was 53% for office software and services and 47% for online games and others. Revenue from office software and services business increased 9% year-on-year and decreased 2% quarter-on-quarter to $198 million. The year-on-year increase was mainly due to the growth of both domestic and individual office subscription business and institutional subscription business of Kingsford Office Group, partially offset by the decrease in revenue from domestic and institutional licensing business. The steady growth of domestic individual office subscription business was primarily driven by the upgraded membership system and better user experience. The rapid growth of domestic institutional subscription business was mainly driven by continuously upgrades of digital office solutions and service quality. along with our ongoing efforts to promote cloud integration and collaborative office in government and end prices. The decrease in domestic institutional licensed business was largely due to the reduction in new purchase orders on localization solutions. The slight quarter-on-quarter decrease was mainly due to the decline in institutional licensing business, partially offset by the sustainable growth of institutional solution business. Revenue from the online games and other business increased 50% year-on-year and decreased 10% quarter-on-quarter to $961 million. The year-on-year increase was mainly due to revenue growth from GX3 Online and revenue contribution from Snowbreak Containment Zone, launched in June. partially offset by decreased revenue from existing gains. The quarter-on-quarter decrease was primarily attributed to the decline in revenue from ZX Online, which had a relatively high base in the second quarter. Quarter revenue increased 3% year-on-year and 6% quarter-on-quarter to $383 million. The increases were mainly due to the increased personal related expenses, as well as higher service and benefit costs. Gross profit increased 40% year-on-year and decreased 8% port-on-courter to $1,677 million. Gross profit margin decreased by 1 percentage point year-on-year and decreased by 3 percentage point port-on-courter to 81%. Research and development costs increased 5% year-on-year and 1% quarter-on-quarter to $672 million. Selling and distribution expenses increased 24% year-on-year and 47% quarter-on-quarter to $441 million. The increases were largely due to the marketing campaign for newly launched games. Administrative expenses increased 20% year-on-year and 22% quote-on-quote to $187 million. The increases were mainly due to increased personal related expenses. Share-based compensation costs increased 50% year-on-year and decreased 20% quote-on-quote to $73 million. Operating profit before share-based compensation costs increased 40% year-on-year and decreased 41% quarter-on-quarter to $449 million. Major other gains for the third quarter of 2023 were $18 million, combined with losses of $6,487 million and $103 million for the third quarter of 2022 and the second quarter of 2023, respectively. The losses in the third quarter of 2022 primarily resulted from the provision for impairment on the investment in CleanSoft Cloud. Share of losses of associates of $307 million were recorded for the third quarter of 2023, compared with losses of $440 million and $323 million for the third quarter of 2022 and the second quarter of 2023, respectively. Income tax expense for the third quarter of 2023 was $44 million, compared with income tax credit of $589 million for the third quarter of 2022, and income tax expenses of $78 million for the second quarter of 2023, respectively. The income tax credit for the third quarter of 2022 was mainly attributable to the deferred tax effect of the impairment provision recognized for Kingsoft Cloud. As a result of the reasons discussed above, profit attributable to owners or the parent was $28 million for the third quarter of 2023, compared with loss of $6,055 million for the third quarter of 2022, and profit of $57 million for the second quarter of 2023, respectively. Profit attributable to owners with a parent excluding special-based compensation costs was $69 million for the third quarter of 2023, compared with loss of $6.7 million for the third quarter of 2022, and profit of $123 million for the second quarter of 2023, respectively. The later profit or loss gain excluding the share-based compensation costs was 3%, minus 327% and 6% for this quarter, the third quarter of 2022, and the second quarter of 2023, respectively. The group had a strong cash position towards the end of the reporting period, as at 30 September 2023, the group had cash resources of $23 billion. Needed cash used in operating activities was $552 million for this quarter and later cash generated from operating activities was $288 million and $1,945 million for the third quarter of 2022 and the second quarter of 2023 respectively. Later cash flows used in operating activities in the third quarter of 2023 was mainly attributable to the payment of cash collected in the second quarter of 2023. Excluding this impact, net cash flow generated from operating activities was $447 million. Capital expenditure was $160 million, $106 million, and $104 million for this quarter, the second quarter of 2023, and the same quarter of 2023 respectively. In the third quarter, we committed to refine and optimize our core products and services. Going forward, Kingsoft Office Group will continue to focus on AI and collaboration. We can structure office software to provide users with intelligent product experience. Meanwhile, online games business will continue to develop premium games and maintain long-term operations to better serve players. We will remain our focus on investing in the research and development of our core business to enhance our core competencies and achieve high quality and sustainable growth. Thank you. With that, I'll turn it over to Francie.

Thanks, Ms. Lee and Sandra. We're ready for the Q&A session. Thank you.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. We will now take the first question. One moment, please. From the lane of Xiaodan Zhang from CICC, please go ahead.

Good evening, Mr. Guan. Thank you for accepting my question. I have two questions for you. The first one is about the gaming industry. We saw that the performance of the first three seasons of this year was very good. We also released a beta version of the flagship version in October. After the release of the flagship version next year, I would like to ask the players around the company what plans they have for the monetary aspect. Does the management level have a preliminary outlook for the overall growth of the game business next year? The second is in the office business. We noticed that WPSAI has officially launched a project. How does the management level look forward to the subsequent commercialization of WPSAI? Let me quickly translate my question. So thanks, management, for taking my questions. And first of all, the flagship JX Online 3 has delivered strong performance year to date with quarterly gross billings which record high. As the upgrade version is planned to launch officially in next April, so what are the commercialization plans we can think of at this time, especially targeting your existing players? Also, could you please share your preliminary views on next year's gaming business outlook? And secondly, WPS AI has released its public beta recently. So what do you think of the subsequent commercialization plans? Thank you.

Thank you, Xiaotan. Let me answer the first question. The first question is about the game. Since the release of the game in 2009, including the re-upgrade of the graphics, We will not change the overall revenue model of this game. Basically, this still maintains an overall fair game environment. So we will not increase the other tools that affect balance. We still take This kind of political service So from the game itself For old players, we are more Through continuous enrichment Continuous improvement of product quality Rich core experience and play style of the game Yes, and then through this The basic cost of collecting the card Plus the appearance and other political service This is the core income So this is not going to change Of course, there will be a major change next year. In fact, you may have noticed that we have already obtained the number of the mobile end of Internet 3. So we expect it to be officially launched in the first half of next year. This is connected to our PC version. So in fact, from the player's side, it means that uh, uh, uh, uh, uh, Our own estimate is that due to the increase in the social year itself, the activity of users is increased. In fact, to some extent, it will, in our experience, will pull some of our outsourcing and other political services' consumption. Yes, but how much impact will it have? Maybe we have to wait for the specific online results next year to be able to fully evaluate it after it comes out. So in general, this is a description of it. Uh, we still use improved product quality and rich game play as the core. Uh, on the income structure, this should be said that there will be no change in the payment method, okay? Then I look forward to the whole year, the whole game, the whole year itself. Uh, in addition to this, uh, this three, uh, In addition to the mobile version, we still have... Of course, we may not be able to officially announce its name. We will have new works in the classic series. And the first-hand code break of the global face-to-face game, that is, the mecha project, will also be officially released next year. Okay. And for the financial schedule for next year's full-year game, we are still in the planning and planning process. Uh, the fastest way is to go to mid-December. We can only publish the first draft. So for the time being, there is no way to give everyone a job. OK. The second question is about the commercialization path in the later period of the party. Uh, this one, uh, because of the office's this, this Q3 report, I believe half of the office also said that we will basically start the pay test in December. This is my own judgment. Of course, there are also many people who pay attention to how we set the price. At today's meeting, we also had a communication with the office. The final price is not yet clear. Yes, in general, it is more or less the same as what I said in the previous few questions. Yes, we will still be different. Depending on the user, we will still We will divide the fees into different periods. In general, starting from December, we will continue to do the payment testing. Then next year, the entire QEQR will be fully open according to the construction of the entire return zone and the adjustment plan that we have finished the payment testing ourselves. And then from the content of the opening, we will first open the IGC part, which is already open, and then we will continue to follow up with the part of the competition. We will also continue to go online. Yes, it will continue from the beginning of December, and then it will also be with the gradual maturity of these three blocks and the actual feedback of users after pushing them into the market. We will also focus on this kind of I'll translate for Mr. Zhou.

So for the first question regarding our game business, we have not changed our monetization model for the JX Online 3. since its launch in 2009, and including the newly launched flagship all-platform testing version and its upgrade. So we still maintain our strategy to provide a fair gameplay for our users, our game players. And so our monetization model is unchanged. We will keep the point cards model plus the value-added services. we will continue to upgrade the game by providing better quality of the game to keep optimizing the game experience for our existing players. But the modernization model will keep unchanged with the point cards and value-added services. A new thing that will happen next year is the JX3 Ultimate version. This one, we already got the license, so we are planning to release the game in the first half of next year. This mobile version of the GX3 game is connected with our PC version. So we will have more users that will be able to enjoy the game. So we expect the total timing of the gameplay will increase next year. And we will have improved and increased interaction thickness for the game. So through our experience, we expect that the value added services will also improve with the increase in the interaction thickness. But we will eventually evaluate the improvement after the launch of the game next year. And also for the next year outlook for the game business, other than the GX3 mobile version, we also have another game that will be launched next year under the GX series. But we're not ready to announce the exact name yet. But there will be a new game in the GX series. and also we have the new game Code Break, which will also be launched next year. The financial forecast for next year of the game business is still under review. We will have our first version ready not until the mid-December, so the financial forecast is still under review for the game business. The second question is regarding the WPS business and also its commercialization schedule, we will start the monetization testing for the WPS AI products in December. And a lot of people asked about the pricing strategy for the new products. We have communicated with the WPS team in the board meeting today, but the pricing strategy is not confirmed yet. In my point of view, we will use the differentiated pricing strategy for the products, which we will start the testing in December, and we'll continue to optimize in the first quarter and second quarter next year. And we will gradually open all the functions for the products to our users. The AIGC is already released, and we will continue to open the other copy lot and inside functions to our users. And we will eventually set the pricing strategy through our testing in December and also our user feedback in the first quarter and second quarter next year. Thank you. Sandra, we're ready for the next question. Thank you.

One moment, please. We will now take the next question from the line of Daily Li from Bank of America Securities. Please go ahead.

Good evening, everyone. Thank you for accepting my question. I would like to ask two questions. The first one is about our game. This year, the game industry has seen more boards coming out. There may be more competition in the market. I would like to ask you In the future, will the company make any updates on the future strategies of PC, mobile games, and online games? The second question I would like to ask is that this year, the company has also made a repurchase of stocks. I would like to ask if there is a follow-up plan regarding the scale, or under what circumstances we will make more repurchases. These are the two questions. I got two questions. First question is regarding the gaming business. It seems this year the gaming business is becoming more competitive, giving more license for the games. Management, could you share more color about our new strategy for business growth for the gaming? And same question about the share with purchase. Could you update us on any targeted value amount for the share with purchase plan in future? Thank you.

Let me answer. As you said, indeed, the first one is that the whole game license plate number is gradually opening up. Compared to the previous two years, it's much easier to get the license plate number. I think this is a very good phenomenon for the entire industry. Although to some extent, there will be more products on the line at the same time, but I think the entire industry is good. I think this is the premise. So from this point of view, we are a kind of I think this is a good thing for the entire industry. For us, we also enjoyed the popularity of this policy, so we are now observing that the time cycle of the delivery of the license plate is also shortened, and the pass rate has also been greatly increased. Basically, if you submit according to this requirement, you can get the corresponding license plate. So I think this is also a good phenomenon. So our own side, Jinshan Games' side, next year, I have already talked about the first question just now. In fact, first of all, we will launch the mobile phone version of this network 3. It should be said that it is a version that communicates with the PC and communicates with the account. In fact, it is quite enough to supplement this It is a pity that there is no version in the mobile version. This should be the core of our next year. In addition, we will also plan to launch the follow-up version of the series. We have been developing this mobile version for many years. like the Colt Break. From now on, we plan to launch it next year. We have a plan. We are relatively sure that some products will be launched next year. However, there are still some uncertainties or endorsements that I will not talk about now. Overall, the strategy of the game is what I talked about before, which is called the first point, which is called the series of life and death. This point is that our foundation will not waver. The second is still to continue to try and challenge some new categories. Although we have been doing this for some years, especially in some key areas, we have not yet achieved a particularly good breakthrough, but our game development strategy has not changed. The third one is to take a global and international route. We did some attempts, but we will continue to follow this path. I will update the game. The overall development strategy of the game is these three. The future may not change for a long time. This is the first question. Liu, please translate it first.

Okay, President Zhou. I'll translate for Mr. Zhou on the first question. So just like you said, compared with the previous two years, it is a lot easier to get, a lot more easier to get the licenses for the games. So this, we believe, is a positive news for the entire gaming business, even though the competition also increased as the number of licenses increased. But we, in general, we welcome this change as we also benefit from this change So we think that it is beneficial for the entire gaming business. We also have a number of new games that will be launched next year. For example, the first one will be the JX3 mobile version, which will be launched next year. This game is, like I said in the first question, is connected with the PC version. So this will be a core game strategy for next year. Also, we have another game in the JX series, which will be launched next year. And there will be a third game. It's a mechanic game. It's called Code Break. It will be targeting to the global market. This game has been developed for many years, and we're also ready to launch this game next year. So these three games have relatively certainty to be launched next year. And we also have a number of other games which are under development that I will not mention at this moment. And also for the long-term gaming strategy, we think that we will keep our strategy unchanged for relatively long-term. The first one will be that we will continue to develop the JX series. The second one is that we will continue to expand to other game genres and other game IPs, which we have been trying for the past few years, and we will keep certain to continue in this strategy direction. And thirdly, we are going to focus on the global strategy. This we have also made a few tries in the past, and we will continue to keep our strategy in the global market going forward. Thank you. Chairman Zhou, I'm done.

Okay, the second question is about repurchase. In fact, since this year's stock market meeting in May, After opening, it actually gives us an authorization. In fact, it is a repurchase of less than 11 Hong Kong dollars. In fact, we are in this year. Everyone should also be able to see that we are doing this step by step. Basically, we generally think that the stock price is already relatively low. At least from our point of view, we think that in the case of a relatively low price, we will take the action of repurchasing. So before we get a new collection, I think we will still execute under this framework. That is to say, within the range of 1 billion Hong Kong dollars, the stock price is relatively at a relatively low stage. We will basically treat it as a kind of daily operation. Of course, if it requires a larger scale of this, this, this, this, this repurchase, or the entire repurchase policy requires a relatively large adjustment, then I still need to get the authorization of the board of directors and even the shareholders to do this adjustment. In other words, in the general situation, we will follow the one just mentioned to execute it. OK, I'll translate it later.

I'll translate for Mr. Zhou. So regarding the second question on stock repurchase, as you notice that in the board meeting, which took place in this May this year, we have already got a budget of $1 billion, Hong Kong dollars, for the stock repurchase plan. And we have made a number of stock repurchase in the past when we believe that the stock price is at a relatively low point. So before we get a new budget, we will continue with this budget and continue our repurchase on a daily basis if we believe that the stock price is at a relatively low point. And if we need a larger scale of stock repurchase or if we need an adjustment on the stock repurchase budget, I will still need to have a new board approval. So under normal circumstances, we'll continue to to have our stock repurchased within this budget and within the one billion Hong Kong dollar budget. Thank you. Hi, Sandra. We're ready for the next question.

Thank you. One moment, please. We will now take the next question from the line of Linlin Yang from GF Securities. Please go ahead. Hello, President.

I have two questions to ask. One is about the game. Because the game performed very well in the past two seasons, how do we look at the fourth season? Is there a general direction? The second question is about WPS. Because in the first half of the year, we upgraded the entire member system. From the feedback of the users, we can see if we have met our previous expectations. When can we see that in this business, there is a more obvious reflection in terms of income. There is an obvious reflection on the increase in income. My first question is about on the game business, considering the strong performance of Qianwang. Any outlook about game business in the fourth quarter this year? Next question is about WPS. WPS upgraded membership system in the first half year. How about the user's feedback? And when will see more positive impact on this business revenue? And one more question about the expense. We saw expense rate grow this quarter. So what's the reason for the growth? and how should we expect it to change in the next year?

Thank you. Okay, I'll answer the first two questions. The first one is about CQ's game exhibition. From what we've seen so far, Sword and Shield 3 is still very strong, especially in the quarterfinals every year. Based on our past experience, Q4 should be a peak in case of any unexpected situation. Yes. So, the third quarter of this year, the third quarter of this year is definitely... It should be called the 10th of August. There shouldn't be too much deviation. Overall, it maintains a relatively good growth throughout the year. Yes. But everyone knows that last year, the third quarter of this year, In general, it exceeded our expectations, so it contributed a lot of income last year. But this year, due to the impact of the payment model of the game itself, it still has a relatively large decline. So, in addition to our this year, Chen Bai certainly did not meet our previous expectations. So it means that the growth of Internet 3, plus the decline of World 3, So in general, in the end, from what we've seen so far, the overall game will still keep growing. But in terms of the number of games, from our current estimate, we still think it will keep growing in terms of the number of players. Do you want to translate the second question?

Okay. This is from Mr. Zhou. Regarding the first question on the fourth quarter game forecast, we are expecting a strong performance from JX Online 3. Through our past year's experience, the fourth quarter is usually the best quarter for JX3 game itself. So we think that the annual growth for JX3 is still very strong, very good. But as you know, last year, we launched the game GX World 3. Its performance actually exceeded our expectation last year. And this year, due to its subscription model, it actually had a natural decline. And also, the new game that we launched this year, Chen Bai, did not meet our expectations. So the increase in GX Online 3 and also the decrease in GX World 3, this will offset each other. So the overall gaming is still increasing. but we still give single-digit increased guidance for the annual guidance for the gaming business.

周总,翻译好了第一个问题。 第二个呢,就是WSE会员体系的升级, 确实这是我们今年, 今天办公除AI之外的第二件大事吧, 我们从四月份开始做调整。 我记得我在上个Q的也谈了过, 其实在Q2的时候, Actually, there are still some fluctuations. And then we also made some adjustments. And then from the current results. From our observation, it should be said that it has reached our previous expectations. What does that mean? Basically, The acceptance of the user, the improvement of the ARP value, and the growth of the membership, have all reached our expectations. It's just that there's a slight variable here. Because what you just asked is when the adjustment of this membership system, the increase in membership, will eventually have a better reflection on the income. Where is the variable here? It's actually the AI. At the board meeting of the JinShan Group today, the CEO and members of the office also discussed this issue with us. We think that this wave of AEI should be said to be more confident or confident. It should be said that the entire member or the payment rate is actually that our overall payment rate is likely to have a very large improvement. This final transformation is actually the number of members of this payment. It may be a bigger improvement than we thought. So, this is the core of the third half of the year. The key point is actually to put it in. I hope that through this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, Because we did not predict the arrival of AI last year. But after the arrival of AI last year, we believe that the increase in the payback rate is very, very desirable. So if you look back at my two years, I also said that the strategy of my office is that the first one is to increase the total number of users, the second one is to increase the pay-to-sufficiency rate, and the third one is to increase the turnover value. So after AI came, it may make our previous strategies go back to these three. I will make an explanation based on this question. Liu, please answer.

Okay, President Zhou. I'll translate for Mr. Zhou. So regarding the question on the WPS membership system that we had an upgrade in April, and other than the AI strategy, the membership system upgrade is actually the second largest core strategy for the WPS, for the Kings of Office business this year. We already said that in our previous quarter earnings call that we have faced some challenges in the second quarter. But based on the data, based on the performance today, we believe that both the number of paying users improvement and also the improvement in ARPU have met our expectations currently. Regarding the timing on this impact on the revenue and on the monetization model, we think that the key change here is actually the AI. From the board meeting today, the Kingsoft office CEO also reported that he thinks that the opportunity of the AI strategy will further improve the ARPU and also the number of paying users. So next year, we are going to continue to focus on the AI strategy, and we want to catch the AI opportunity to keep improving the penetration of the paying users, and in turn, we will increase the number of paying users. So right now, we are not only looking at the membership system, but instead we are going to combine it with the AI opportunity. We want to capture the AI opportunity to have a breakthrough in the monetization model for the Kingsoft office business. So we have said that we will improve the R pool from the new membership upgrade, but this is based on the the budget that we had from two years ago. But with the upcoming, with the current AI opportunity, we think that the upcoming strategy will be focusing on both the AI and also the membership upgrade. So for the WPS business, we are going to continue with the three strategy that is, number one, we will increase the number of users. Number two is that we were going to improve the penetration of the paying users. And number three is that we are going to improve the ARPU for the membership system.

Thank you. There are seven points of growth, and there are two points of growth in the same area. It is mainly due to the market cost issue that we introduced in Q3. From the perspective of the whole year, Q3's net profit should be the lowest point in the whole year. If we predict Q4, there will still be a rebound. So overall, our net profit level this year is still able to maintain a level compared to last year. In the foreseeable future, the overall interest rate level will remain at a reasonable and healthy level. So in general, you are worried about the future cost structure. From Q3, it is still a short-term market-friendly situation. In the future, it will still maintain a reasonable level, including the overall interest rate, which will basically remain at the same level as last year.

Okay, I'll translate for Ms. Lee. So regarding the third question on our expenses, we noticed that in this quarter the expenses increase is mainly due to the marketing increase that we had an increase year-on-year with seven percentage points and quarter-on-quarter with two percentage points. But we believe that this increase is only a short-term increase. So Q3 will be the quarter with the lowest percentage expenses level. And on the fourth quarter, this level will come back to a reasonable level. So in terms of the annual expenses, we will keep our expenses at a reasonable and healthy level. Thank you.

Hi, Sandra. We're ready for the next question. Thank you. There are no further questions at this time. I would like to turn the conference back to Francilou for closing remarks.

Okay.

Thank you for joining us today.

And this will conclude our presentation for the 2023 third quarter earnings call. Thank you.

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