Weimob Inc. (2013) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to Weimob Inc. 2020 Annual Results Conference Call. A copy of the annual results announcement can be found and downloaded from the company's Investor Relations website at http://group.weimob.com/en/pages/relation [Operator Instructions] Joining us today on the call are Mr. Sun Taoyong, Chairman of the Board and Chief Executive Officer; and Mr. Cao Yi, Chief Financial Officer and Joint Company Secretary; and Mr. Watson Yin, COO, who will be joining the Q&A session later. This call will be conducted in Chinese and English. Before we begin, I would also like to remind you that management's comments during the call will include forward-looking statements that are based on the current expectations. All statements other than statements of historical fact during the conference call are forward-looking statements, which are subject to a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of the company. And this presentation also contains some unaudited non-GAAP financial measures that should be considered in addition to but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. So please do take a minute to read the risk factors and non-GAAP measures discussion in Weimob's 2020 annual results earnings release. I will now turn the call over to Mr. Cao.

Thank you. Good evening, investors. Thank you for joining the call. Time flies. As we did every year, it's time for us to review the performance and results of past year and share with the investors the future directions of the company. First, I'll go through the key performance and financials. And our CEO, Mr. Sun, will talk about the strategy and business development. On the financial performance, excluding the impact of compensation due to sabotage event, adjusted revenue has exceeded RMB 2 billion in 2020, representing 44% year-over-year growth. Adjusted EBITDA increased by 78% to RMB 299 million. 2020 is a special year. This year led us to think more deeply on the coming industrial digitization trend and what the customer really want. We firmly believe what the merchant really want is not just a single software tool or an ad to get some traffic or having both but deliver separately. Instead, what the merchant wants is a full-chain omnichannel solutions that connects with multiple traffic ecosystems and enable merchants to digitize not only systems but also marketing management and operation processes. As a result, starting from 2020 annual report, we will reorganize our business segments into 3 segments: Digital Commerce, including Subscription Solutions, and Merchant Solutions, and Digital Media. Digital Commerce is our core business. We help merchants to transform their marketing and commercial processes by digitizing their system, marketing and operation. Subscription Solutions, which correspond to our previous SaaS segment, represent our SaaS and other software solutions, including WeiMall, Smart Retail, Smart Catering, Smart Hotel, Heading ERP and other industrial vertical solutions as well as some software customization in our Weimob Cloud business. In 2020, adjusted Subscription Solutions revenue reached RMB 718 million, which is 42% year-over-year growth. Merchant Solutions represent value-added services as part of the full-chain omnichannel solutions to meet merchant demand, in addition to the software functionalities. Merchant Solutions currently include mainly our target marketing services to connect merchants to multiple top traffic platforms to acquire online traffic with enhanced performance. The scope will be further expanded to include more value-added services in the future. In 2020, revenue from Merchant Solutions totaled RMB 528 million, a 47% increase year-over-year, and gross billing incurred in the Merchant Solutions reached CNY 0.97 billion, more than double the size of 2019. In Digital Media business, we offer advertising services to specific advertisers in which we commit results. The revenue from Digital Media business reached RMB 818 million, representing 43% year-over-year growth. The gross billing of Digital Media business is RMB 916 million. A quick highlight of some key business data. The total number of paying merchants who are using our Subscription Solutions by end of 2020 has reached 98,000, a 23% increase year-over-year. Within the Subscription Solutions, Smart Retail business achieved high growth in 2020. The Smart Retail revenue increased by 224% to RMB 145 million, and the number of paying merchants increased by 234% to over 3,600 merchants. The brand merchants reached 618, with average contract value exceeding RMB 280,000. With Yazuo integration and COVID-19 impact, the catering segment has gone through a tough year. Smart Catering revenue is CNY 44.8 million, and number of merchant -- paying merchants reached nearly 7,000. However, since we launched our integrated solution in the second half of last year, we have seen some changes happening in the way we expected. Average contract value for Smart Catering segment has increased from CNY 130,000 per year in 2019 to CNY 190,000 in 2020. In Merchant Solutions, our paying merchants increased by 41% to 46,000 in 2020. In the second half of 2020, some of the key capital market events include our acquisition of Heading Information and the Weimob stock joining MSCI All China Index. Since we will have our CEO, Mr. Sun, to talk more about the strategy and business development in later pages, I'll leave the business update later and get through the financial performance first. In terms of the financial performance, we have achieved solid growth in 2020. Full year adjusted revenue increased by 43%. And within that, our core business, Digital Commerce, achieved 44% year-over-year growth. Our Digital Commerce business, including Subscription Solutions and Merchant Solutions, is operated under the same core strategy and business model. In 2020, 33% of our total revenue comes from Subscription Solutions and 40% from Merchant Solutions, while 67% of paid merchants are using our Subscription Solutions and 31% are using Merchant Solutions. We expect Digital Commerce to represent the majority of our merchants, while increase its proportion within the total revenue continued in the next few years. Subscription Solutions will be the fundamental deliverable we provide and Merchant Solutions will really add on to provide value-added services that enhance merchants' chance of business success at the same time help us monetize more. As a technology company, we continuously to invest today for future. The core investment is in R&D organization. The total R&D expenditure in 2020 amounts to CNY 251 million, which increased by 74% comparing with 2019. Even though we invest heavily today by properly balancing our business portfolio and generating profit for Merchant Solutions, we are able to come up with adjusted net profit of RMB 107 million in 2020. Last but not least, we have a healthy balance sheet. By the end of 2020, the total assets reached CNY 5.8 billion, with CNY 1.8 billion cash and cash equivalents. We are successfully managing our operating cash flow to reduce the operating cash outflow from CNY 452 million to CNY 53 million in 2020. So next pages, there will be some deep dives, and we will quickly go through it. On Page 7, it's mainly about Digital Commerce business. As we can see from the chart, Digital Commerce business grew at a high CAGR of 50% in the past 3 years. And this high growth was mainly attributable to the growth in both the number of paying merchants, which in the year of 2020 reached 98,000, representing 23% growth. And there are altogether 45,000 merchants using our Merchant Solutions increased by 41% year-over-year. The ARPU also increased by 15% to RMB 7,300 per year. With our strategy to moving up the market, we look forward to sustainable growth in ARPU for digital commerce as a whole. Our Merchant Solutions was successful in the past 3 years. The total gross billing for 2020 reached nearly CNY 1 billion, and the CAGR is over 115% year-over-year. Digital Media is our legacy business in which we provide advertising services and commit certain results to specific advertisers. In 2020, altogether, 2,500 advertisers used our Digital Media service, and the ARPU is CNY 326 million. Total revenue is CNY 818 million, and total gross billing is CNY 915 million. Now let's come to gross margin. The gross margin on financial statement decreased from 55% in 2019 to 53% in 2020. By breaking down to each business segment, we found gross margin for Subscription Solutions decreased mainly due to the heavy investment in R&D, and a significant portion of our R&D cost has been capitalized in the past few years and amortizing to cost of revenue. Since we continue to invest in R&D capabilities in the next few years, I expect the cost to have continued pressure on gross margin in the next 2 to 3 years before our revenue ramp-up and reverse the curve. Gross margin for Merchant Solutions is pretty high as currently majority of the revenue in Merchant Solutions are net rebate or commission from target marketing services. The gross margin for Digital Media business went down a little bit due to increased operation staff costs. On Page 8, basically, we talk about the R&D investment. As a technology company, a significant portion of revenue are reinvested into R&D activities so that we can continue to upgrade our SaaS solutions and expand our product offerings. By strengthening our R&D investment in addition to the traditional WeiMall solution, we have been offering a number of industrial vertical solutions. And our Weimob Cloud supports over 560 ISVs and offers over 1,000 applications. Recently, we started to further upgrade Weimob Cloud to turn it into an ecosystem, which build up not only a platform but also a partnership with numerous ISVs and service providers. Our investment in R&D has been increasing over the past 3 years. In 2020, the total R&D expenditure has increased to CNY 250 million, representing 20% of the Digital Commerce revenue. Despite the headwind and strengthened R&D investment, we continue to be profitable on adjusted EBITDA and adjusted net profit basis in 2020. The net loss from the financial statement is RMB 1.16 billion. However, the loss is mainly resulted from the fair value change of convertible bonds, which is RMB 1.08 billion compensation due to SaaS sabotage event RMB 94 million and other non-GAAP items. After adjusting the items, we have an adjusted net profit of RMB 107 million in 2020, which has increased 39% comparing with last year. The adjusted EBITDA reached RMB 299 million, representing 78% increase. As we explained before, the fair value loss of convertible bonds is directly associated with the increase in the price of our convertible bonds, in line with our share price. So this is a pure accounting matter and a little bit counterintuitive. We will continue to adjust this item so that investors can see a better picture of our own business results. The compensation due to SaaS sabotage event will be a onetime event, and we have completed substantially order compensation to the qualified merchants. So majority of the financial impact has already been reflected in 2020. So with that, I've completed the financial review. Next, let's have our CEO, Mr. Sun, to share with us the business strategy and development.

[Interpreted] Good evening, everyone, and welcome to the 2020 Annual Results Conference Call of Weimob. And in January 15, we have held our investment meeting, and I believe that most of you are quite familiar with the strategy of 2020 for our company. And it was including the 3 parts and which is moving upmarket, globalization and ecosystem buildup, and I will also elaborate on these 3 parts. And about the moving upmarket, we have realized a strong growth in smart retailing. Look at this chart that we have realized a more than 200% increase of the revenue. And also, we have increased more than 600 of brands merchants and also their ACV has realized a 31% of growth. And we have penetrated into all kinds of industries, especially in the fashion, shoes and home textiles and also women's fashion. And our leading position in the fashion industry has a share of 34%. And also, we have also have reached a very great result in the food and beverage and jewelry, electrical appliance and other industries. And our KA has accounting for 10% to 20%, and we think that it would realize a 30% to 50% of growth in the future. And last year, we have quite having heavy investment, and they are quite strong as the commercial real estate and also the convenience stores. So we can see that they have a share of 58% of market share in commercial properties and also 35% in the China convenience stores. Therefore, we think that the combination of these 2 companies would help us to have more penetration in these regard. And we have now combined ourselves and also all of their products are in our cloud. And we hope that -- we believe that after this integration, it would also accelerate the business for them. And also last year, we also have acquired the Yazuo, and they are quite good at the smart dining and also help us to have a leading position in this regard. And we think that about the dining technology besides Meituan and Ali, the other is focused on the WeChat private traffic flow. And we think that in this regard, we can have more SaaS products and to have a leading position. And we think that in the smart dining, it was including the operating, the marketing, cash share payments and also delivery. So we think that we could have this one-stop solutions for the smart dining. And we all know that it is not easy for the dining companies and restaurants in 2020. And also, this recovery speed is slower than the retailing. And the revenue of the smart dining of our company is not so prominent, but we still have seen the ACV of smart dining realized a 30 to 40 percentage of growth. And also, we think that we will have more than 5 to maybe 30 the ACV. And also, smart dining would be a highlight of the moving upmarket strategy, and we think that we have become more mature in this regard, and it would have the very wide future in this year. And the second strategy is the ecosystem development is also very important, including traffic ecosystem, developer ecosystem and investment ecosystem. And about the traffic ecosystem, we have facilitated the omnichannel smart operation. Besides the Douyin, Alipay, Kuaishou, Baidu, we also have an empowered off-line traffic, like the off-line store, POS cashier and off-line ad. And in the future, we will have will penetrate more like the KOL and also the short videos to help the merchant. And what's worth noticing is that the Douyin's traffic flow is surpassed 20%. And about developer ecosystem, the most important thing is the Weimob Cloud, and we have now mature into the PaaS 2.0. And in this June, I think it would be launched. And right now, it is undergoing testing in-house. And we think that whether it is about the technology or this openness would be unprecedented. And also we think that Weimob is also one user of the cloud PaaS. And together with our developers, we would provide much better solutions for our merchants. And our Weimob Cloud would provide 3 areas of solutions for our merchants: One is individualization. One is the professionalization and also the customization. And about the -- and we will have the targeted solutions like we would provide this customization for medium and large accounts. And also the marketing -- market solutions and also capitalization for our medium and small companies. And also, we would have the plug-and-use model for the other professionalization solutions like [indiscernible]. We will have more penetration of virtualization. In the investment ecosystem, we have the investment scope as in the retailing, catering, hotel tourism, short video education and live streaming. For example, in retailing, we have acquired Heading Technology and [indiscernible]. And in the catering, we have acquired the Yazuo and [ Syoo ] so that we would have 3 models, the direct investment plus the M&A and also the industry funds. And also this year, in Beijing, we have set up an industrial fund. And this is the first industry fund of Weimob [ AGP ]. It means that we can use this marketization ways to manage the fund, And it means that we -- our investment ecosystem has quite improved. And the third strategy is globalization. Now we have a footprint in more than 10 countries. And most of them are driven by agents model, but this is not our main business. We have the other business arrangements. The first service is for the clients going outside, and we would provide SaaS and also the ad placement for them. And besides that, we would have maybe select the 1 to 2 pilot areas to maybe to test the local solutions. And right now, we are under discussion with Facebook, Google and TikTok, and we will launch the ad placements very soon. And next, I will talk about the 2021 business outlook. The first one is to expand the leading position by enhancing industrial penetration and move upmarket. In the previous years, we are quite strong at fashion and textile regions. And later, we would have more achievements and also to localization. And since we have acquired the Heading Technology, probably we would move a little bit to the shopping mall and the convenience store, MNS, F&B and also the health care industry. And we predicted that the KA revenue would accounting for 30% and 50% by 2025. And also the upgrade, we would focusing on upgrading full-chain operating capabilities. Also in the annual investors meeting, we have mentioned the TSO concept, which is the traffic, SaaS, the software and also the operation. And we will empower our users and the clients to improve their traffic and operating capabilities. And we have carried out those TSO strategies for our head clients and which has been placed by them and welcomed by them all. So we hope we would continue to provide TSO for them. And for our mid-parts -- clients, we would provide T+S solutions for them. And for our long tail, those SMEs, we would provide a T or S service for them, which is a very comprehensive arrangement. And also, we will establish the open ecosystem, which I have mentioned before, so I will not go in detail. And how to expand cloud service offerings? Right now, our business focus is on the commercial cloud, for example, the smart dining, retailing and lifestyle. And also our smart beauty would be put online tonight or tomorrow. And also, we would pay more attention to Smart Hotel. In the marketing cloud, we would enhancing the back chain conversion and mainly through the Wei Station and Marketing Assistant. And we have just issued a piece of information that we have comprehensively connected to WeChat, and we would issue a WeChat private flow and Wei Assistant which would be connected to the commercial cloud and have this package. And in terms of Sales Cloud, Sales Cloud has been improved last year. And we believe that this year, it would realize an explosive growth. And about the acceleration of globalization, the first, we would provide the one-stop solutions, including those DTC to our overseas merchants to going overseas and also the multi-platform traffic access, we would connect with the Facebook, Google and TikTok. And also we would realize the globalization that we should set up this network deployment and also to explore more international M&A to increase our competitiveness. So this is my part of the business overview and outlook, and we will come to the Q&A session.

[Operator Instructions] First question comes from [indiscernible].

[Foreign Language] I'll translate my questions. My first question will be, what are the reasons behind our increasing churn rate and what's our focused? And my second question is, how will our TSO solution hit our gross profit and gross margin? And what's our outlook for gross margin going forward, given that there will be more operational revenue in the top line this year?

[Interpreted] All right. Thank you for your question, and I will answer that one by one. The first about attrition. And we all know that 2020 is a very challenging year for the -- all our clients. And some cannot even open in off-line stores. So some of our clients cannot renew their contracts or their fees and some cannot operate formally or function very normally. So it is to the -- a little bit decrease -- of increase of the recession. But due to the -- our focus more on the move upmarket, and there will be more and more larger clients, and we think that the attrition will decrease definitely. And about your second question, TSO, it would be our core strategy in the future, and it would empower our clients to realize the multichannel and the omni traffic and also the all-sized solutions, whether it is in the private or in the public traffic region. And about the T, the traffic, our margin would come from the ads commission, and it would be quite high and also SaaS also very high. And the O is the operating, and we would use the model of GMV, probably not still as high as the previous to, but still not slow. And in the future, we think that we would have this T+S+O. Those 3 parts combined together is going to be very prominent. And also, we are developing all kinds of smart tools to facilitate the operating. And we hope that, in the future, 70% of our operating is from the smart source and only 30% is by human being and manpower.

[Foreign Language] The question is, will Weimob leverage third-party partners to help with our operation work or it will be fully by Weimob itself?

[Interpreted] About the operating, of course, there are very qualified and very excellent partners or third parties, and that also we are -- we can -- we are willing to outsource. And also the operating is one part of our ecosystem building up. And we hope that we can open it and to have it more open service. But in the first beginning that we want to set up a very qualified and high-capacity team and to have it standardized and to provide our solutions and also our methodologies to our partners.

Maybe I can add something. So actually, our TSO major target for the future is to build up operating platform, and it's open to the partners who are capable of operating some services. So we are open to that. At the beginning, we are trying to consolidate all the best practices that we're trying to like that in the third-party accounts and others. So at the beginning, we are investing some labors to do the operations. But in the future, we are open to the -- we will be open to the ecosystem.

[Foreign Language]

Our next question comes from [ Larry ] at CITIC Securities.

[Foreign Language] I will translate that by myself. My question is about what about the future planning on the Weimob past cloud platform in 3 years? And what is the possible way of monetization in the future?

[Interpreted] All right. Very good question. Thank you for your question. And we think that right now, we have initially passed, and this is a very great upgrade of our past 2.0, this first cloud, which provided the following services. The first one is the developer tools platform and including those database, the matrix that to have more facilitation for the developers to use our platform. And second is the mid-stage capabilities would improve quite a lot. And for example, we would have our transaction center. We would have the other services that would be put down line. We think that it's in May or June. And the third one is the PaaS that's in-house in our company. It is also to set up this mid-stage as a business logic -- logic platform, and we could provide the customization services for our clients and to realize that it is not only the standardized but also according to their own needs and demand. And then the fourth is the iPaaS. iPaaS is now right -- right now, it's under survey. And we think that it will put online very soon. And also, we would -- right now, a lot of KA are using our PaaS to meet their customized or individualized demand like the Coca-Cola. And also through the M&A, we would have more strategic partners like [indiscernible], and also we will have more industrial partners. And about monetization, and we think that, in 2021, probably we would not have so much the monetization. And if there will be -- the monetization would come from 3 parts. One is the application service commission. And the second one is the KA service commission. They would use our server, and it is one in our package solutions. And the third one is the usage fee for our solutions.

Our next question comes from [indiscernible].

[Foreign Language] How much increment could TSO bring to our business? And what revenue proportion will the operation part account for in the future? [Foreign Language] You just mentioned in 2021, we will develop more vertical industries in Smart Retail, such as shopping center, fresh convenience and the Smart Catering and the smart travel. Among this business, which are the most important to extend and will bring increment this year and which are in -- okay, this is the question.

[Interpreted] About this TSO, we hope that we could provide this added value for our clients to increase their ACV. For example, if they are using our T and we would provide the S and O. And if they are using our S, and we would provide the T plus O. So that this -- it is one order that they could have 3 service. It could improve their income. And also, we would probably not focus so much on the SME, rather we would focus on the middle and large-size enterprises and the clients so we can have more commission. But the commission also depends on how many clients we are serving and also how many proportion that we could get. For example, if we plan to have 100 GMV surpassing the 100 million clients and each we would have a 5% of commission, then if it is for a year, then it will be quite a large number. But whether we could reach that, it is still open in the air. So we would help -- focus more on our head clients.

Okay. So actually, regarding TSO, it's kind of new model of business. So regarding the operation part, in -- say in the future, we are relying on CPS or CPA, these kinds of new subscriber models, including software revenues. So the potential for these kinds of businesses is quite huge. And it's -- actually, we are charging the CPS or CPA majorly. So if we have almost fixed amount of people serving the customer, if the scale can be increased, then actually, the profit will be increased. So the portion of this kind of business in the future could be -- could open a much bigger market for us.

[Interpreted] About your second question, about the vertical retailing penetration, yes, the Smart Retail, the retailing industry would be the biggest one. And the hotel, the beauty or the lifestyle that we are focusing on right now, of course, the revenue cannot be as much as the retail. But we think that we could build up the digital commercial platform. It is quite important to have more vertical sections. And also the -- in the Marketing Cloud, we would provide, as I have mentioned, the Wei enterprises assistant. And this function can be cross buying with the Commercial Cloud services so that it could add more value to our clients. And also in the future, we think that in the sales, the shopping mall and also the convenience store would be the next focus.

Our next question from Zhijing Liu at UBS.

[Foreign Language] I've seen quite a lot of large retail chains deploying SaaS infrastructure, while their different stores might be using different vendors. How do we see the difficulties to replace these different vendors? And my second question is, in 2020, China-based e-commerce platforms, like Shiying, achieved a great development in overseas market. So can we elaborate more about market potential on related SaaS products?

[Interpreted] About this retailing SaaS replacement or the competition, and we know that most -- some -- most of our clients, they have been through from the informationization to the digitalization. They have their own system, most of them. And some, we think we can have cooperation with them to connect with them. Some we could definitely replace them. And for those O2O, online to off-line smart retailer, those 2C platform, we could -- some of them are from the online to the off-line smarter retail, 2C. And some of them are doing the ERP or CRM, we would connect with them, not replace them. And for those -- the previous system, some of them are from the third party -- maybe they are not satisfied with their customization developments or their responding time. And some of them, they cannot have a very strong competitiveness in the SaaS. And -- but for Weimob, during this past 7 years, we are improving our capabilities to provide the one-stop integration services for them, including the transaction, the marketing and the other aspects. So our advantages are very prominent and very obvious. So it is not difficult for them to choose us. And also through the different words of mouth promotion and also we have accumulated more and more clients, it has realized a stronger become stronger this phenomenon. So some of them we can co-op with them and some we can replace them very easily. And in -- about the service for the overseas clients, yes, the market potential is quite huge, and we would help them with their retailing, with their trade. And seeing it very successful, they can have their own independent app. But we know that many of our clients don't have this capability to do their individual app replacement. So I think that we could use our TSO service for them to like to facilitate DTC and to focus more in the empowerment of they are going overseas. And our advantages is it's also about the TSO from the traffic to the software tools and then to the operation.

The next question is from Stephen Yin at Crédit Suisse.

[Foreign Language] So I quickly translate. The first question is be connected to the in-store and WeChat video channel and for live streaming services for the merchants. So will you consider some additional monetization from these live streaming e-commerce in the future? And the second question is on the progress of Heading Information integration with our overall business in the SaaS part?

[Interpreted] Let me first answer your question, and then we'll have Watson to add more. Of course, we would have more multilateral and multi-diverse ways to monetization. And right now, we are providing those client solutions. Besides the targeted ads and targeted marketing, we can also expand the other services, for example, the Weimob monetization, Weimob live streaming, Weimob finance even. So that we -- and also we can help our clients to guide their traffic and then to have the commission into this. And right now, we are using this customization, mainly using our PaaS 2.0 and also lots of KA are using the PaaS tools. And it is very effective according to their feedback. And also we could use our ISV -- together with our ISV to improve the services for our KA.

So maybe let me add some points on that. We see Douyin shop and also WeChat video account. It's an opportunity. And as these 2, say, it's evolving every day, so we are carefully managing and monitoring progress. We already has been a service provider for Douyin, and we are doing something for some customers to help them to open shops on Douyin and also open shops on WeChat video account, including providing SDKs. So we're seeing this as very good opportunity. And -- but these 2 opportunities are evolving very best. We are currently and closely monitoring progress. We are seeing some very good trend on that. We are having some customers to do the live streaming -- live forecasting on the Douyin ID, and the result is quite good. We are also helping some customers to live streaming on the WeChat video accounts. So we are seeing this as a great potential commercial opportunities. But these 2 at some, to be honest, at a very beginning stage of commercialization. So we see opportunities, but also needed to carefully monitoring that.

[Interpreted] And about our business integration with Heading Technology, right now, we have a in-depth integration with their products, with their sales business and also agent channels. And this journey is quite smooth. And our first one product will be online very soon. And also about this smart mall and smart convenience stores would be put online in this first half of this year. And the purpose we're heading with the focus probably mainly is about the mid-stage ERP. And right now, after the business integration, they could move to the front end of the shopping mall convenience store and to have an integration of the front end, mid end and the back end.

Our next question is from Brian Gong at Citigroup.

[Foreign Language] I will translate myself. My first question is still regarding TSO. You just mentioned that some few top clients already use our TSO. So not sure what take rates we are charging on the operation part? And over the long run, what take rates we expect to reach when this business more mature? And the second question is about the customer acquisition cost. I'm wondering commencement share -- the customer acquisition cost for the KA clients?

[Interpreted] The first question, I would let Watson to answer.

So we have some part of customers [ who's having ] our TSOs. And the range, it depends on the industries. So we have some customers 3%. We have some customers more than 10%. So it's very dependent on the industries. So in the future, we have -- we haven't made a very clear judgment on the future, but it seems that if our scale can be increased, our bargaining power will increase. Yes.

[Foreign Language]

So the customer acquisition cost for small medium merchants versus large merchants is very different. The average customer acquisition cost for brand merchants is about is RMB 200,000 for each individual customer. Major reason is due to the relatively longer customer convergence cycle. Because for large merchants, basically, they have to go through a formal internal evaluation process in order to decide which independent software vendor they would like to choose. And the second reason is because we had a relatively independent BD team, which consists of high-quality salespeople. So these are all our direct sales force, which basically we use in the Smart Retail business to go to those big merchants -- brand merchants. So because of these 2 reasons, customer acquisition cost for large merchants is relatively high. But if you compare that with the longer-life cycle for the large merchants as well as higher -- much higher average contract value for these large merchants, basically, I would say the profitability of large merchants would be much higher than the small medium merchants.

Due to time constraints, we will now conclude today's call. On behalf of the Weimob management team, I would like to thank you for your participation in today's conference call. If you have further questions about Weimob, please feel free to contact us. Thank you, and goodbye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]