Weimob Inc. (2013) Earnings Call Transcript & Summary

[Audio Gap] Good evening, ladies and gentleman. Welcome to Weimob Inc. 2022 Annual Results Conference Call. A copy of the annual results announcement can be found and downloaded from the company's Investor Relations website. [Operator Instructions] This call will be conducted in Mandarin, and English simultaneous interpretation will be provided. Participants may flip the PPT on the streaming platform. Please note that this conference call makes for non-IFRS metrics and refer to the company's results announcement. Joining us today on the call are Chairman of the Board and CEO, Mr. Sun Taoyong; and Mr. Cao Yi, CFO. Now I will turn the call over to Mr. Sun.

Investors, analysts, good evening. Welcome to Weimob's 2022 Annual Results Announcement. Now let me introduce to you our business. 2022 was an exceptional year. The environment was very challenging. There was COVID '19 impact. Our business operations were somewhat affected. Our revenue was RMB 1.84 billion, down 6.5% year-on-year. This is mainly because our Merchant Subscription and Precise Marketing business was greatly affected and challenged because of the macro environment and also customers tightening their budget, while Merchant business came down 29.7%. For our Subscription Solution, given the uncertainty in the year, there was still intrinsic growth up 8.7% year-on-year. In the second half of the year, up 22.4% half-on-half. Now our adjusted net profit is RMB 1.55 billion loss. This is quite a big number. First of all, there was the impact from the pandemic and lockdown and also our business development was greatly affected. Besides, in 2021, our R&D expenses, where there was a deferred effect and also we wanted to reduce cost and improve efficiency because of the overall environmental and economic impact, our fair value change and also financial asset impairment amounted to RMB 568 million. So excluding this one-off impact, the loss is around [ RMB 980 million ]. For the whole year, operating cash outflow, RMB 730 million. So comparing with the loss, there is quite a big gap for free cash flow in 2022, around RMB 900-odd million. In the second half, adjusted cash flow -- outflow was RMB 246 million, down 49.2% half-on-half. In the second half of the year, we reduced costs and improved efficiency, and our expenses were reduced. So we have seen quite good outcome from our work. Right now, our company's cash flow is very healthy. As of 31st December, we have cash flow of RMB 3 billion. For our Subscription Solution, it still maintained resilient growth. I think this is because of our moving upmarket strategy. For our Smart Retail revenue is [ RMB 513 million ], up [ 45.5% ] year-on-year. And right now, it is 40% of the Subscription Solution revenue. Overall speaking, our number of brand merchants almost 200. On average, each merchant has an average price of 200,000. So [ 200,000 ABC ]. Now let me do a review of our 3 major strategies: moving up market ecosystem, buildup and globalization. First of all, for moving a market, so we have actually smart superstore and also catering and so on. We are 47% of fashion retail and for commercial real estate, 43%, convenience store chains 35% of top 100. We focus on KA value and increasing the value last year because of the pandemic, there was some impact on new opening, but then for our key accounts, fee paying or renewal, it is quite good, up to 85%. Fee renewal revenue up 39% year-on-year because we continue to dig deeper into KA, key accounts. So many customers are using various products of our company. This has been rather effective. Those using more than 3 products up 141% and then 32% increase for even more purchase. So for KA GMV, we have achieved quite good results. There are more and more retail groups which treats Weimob as the first choice service providers. In 2022, apart from the past retail group, we have added some new brands, including Marisfrolg, Joeone, [indiscernible], Youngor, Uni-President Huangshanghuang and so on. Now in terms of fashion, retail, well, our retail group-based customers have a lot of advantages and strengths. Last year, we developed a number of big industries, for example, building materials and also furniture. For building materials industry, we have achieved quite good results. So there are some [ very ] representative, brands like [indiscernible] and so on. So these are very famous brands in the industry, including [indiscernible], they have become Weimob's customers. In food FMCG Digital, we have achieved good progress as well. Besides, in the past, when we face a smart retail product, where we have shopping guide products and so on, and we faced a full chain or omnichannel products, which are online now, so I think the outcome has been good among these customers. Feedback from customers has been good. So there are many more developments and customers getting on to our system, our WOS system. And then in the past, we have strong shopping guide product and CRM has become a very important smart retail product. And then for video accounts last year on 6/18, that is 18th of June, our video accounts e-commerce service, where we are #1 in terms of new anchor record ranking. And for video accounts, e-commerce training guidance service provider, our ranking is #2. We are regarded as the service provider of the year of Tencent video accounts. Now let me now turn to ecosystem buildup. We have more than 100-odd ecological working partners getting on to our cloud. So comparing with last year, we have now 155% more in terms of number of applications and services on the shelves. And there is 318% increase in ecological income. 87% is Weimob Cloud technology service renewal rates. Last year, for the newly built template market component market and game market where they are newly developed. For template market last year, it grew [ 17% ] year-on-year. More and more brand customers use our working partners develop templates. For our template customers, up 130% in number. Together with many developers, we developed many scenario-based solutions, for example, in relation to payment and contract signing and also live streaming. Number of brands using our platform exceeded 200-odd. In October last year, [indiscernible] was officially launched after that from last year, October until now, we realize that the development efficiency has improved significantly. So the efficiency improvement is at least 50% to 80% because we have now a lot of mid-office applications. And then for our R&D capability, it improved a lot last year. By reducing cost and improving efficiency, we managed to reduce the number of employees, but then that doesn't affect our productivity iteration now is even more efficient. For Weimob Cloud, if you refer to all the data comparing with the past, there has been a big growth. At present, more and more group-based customers choose Weimob's WOS in order to deal with the digital business. For example, there are now [ 8 ] brands within a certain brand that is [indiscernible] Group. So when they select products, they use Weimob's products and WOS and they also do their own personalized developments for their IT -- R&D people. There are [ 100-odd ] R&D people in their team. There will be more and more retail groups, which will place that digital work on Weimob WOS. And there may be smaller teams, which will work on personalized developments. The efficiency can improve significantly. And concerning stickiness in Weimob products, where stickiness is going to be much stronger. For globalization, right now, we are still developing globalization and also traffic channels. So overseas advertising results, there is quite big growth. Right now, -- we're still focusing on Chinese enterprises going to the sea, but in the future, there will be more overseas localization business. Now let me talk about business outlook. In 2023, we will work around a number of areas. First, improving products and services, deepening conservation of large customers will continue to invest in the moving up market strategy to enhance our market share. In fashion industry, we have quite high market share. The future will continue to do more in building materials and home furnishings. We want to increase market share. And then for shopping malls, superstores, catering, FMCG, health care, Visa and some of the categories that we will focus on to enhance our market share. In this way, we can also increase the revenue share of KA. For Smart Retail revenue, it can reach 50% this year. This year, during the strategy meeting, we introduced a new plan, and that is by 2027, we will have [ 1,000 million grade customer and 110 million grade customers. ] That's our plan. So in the future, KA's share of our total revenue will continue to go up. Number two, we will continue to invest in product technology infrastructure and build WOS ecosystem. We'll continue to invest in our technology infrastructure to make sure that our products will be leading in the industry. In relation to WOS, we hope that it will be connected to more ecology working partners and then there can be personalized development that will be co-building, co-sharing and win-win ecosystem. Besides, we will closely monitor new technology directions, such as AI and explore opportunities at application level. This year, ChatGPT has been very popular. So with open app and then -- and also on Baidu, [ Ernie ], we are the first batch of service providers. And we are using open-source model, and we do our own AI work. We make our own AI attempts. Now there will be emergence of new technology, which will bring about new opportunities for advertising, marketing, digital empowerment, user experience area, we will explore new products. In the future, we will develop something like WeChat for ourselves. So [ text and images ], digital or virtual live streaming, advertising and so on, all these will be incorporated into our [indiscernible] new products. So later on, we will make announcements in due course. So we will also do internal strategic interoperability to drive high-quality growth. Just now I mentioned our big plan. So together with [indiscernible], we will work with them and then various [ BUs ] will work together to achieve that plan for each customer. No matter whether it is our SaaS or marketing customer or operation customer, we will make sure that they will penetrate into our other products so as to attain our targets. We will work more on video accounts. This year, video account data growth is very good. In video accounts area, I think we are in a leading position on all dimensions, no matter whether we are talking about advertising, investment, marketing tools, operation, live streaming operation and so on. We are a top service provider. In the future, we will continue to enhance our strength in video accounts. Finally, we will deepen our TSO full-link layout and expand international business. That's all from me. Now I will defer to our CFO, to talk about our financial performance.

Thank you. I am CFO of Weimob, Cao Yi. Now I'm going to present to you our financial data. If you read our financial statements, now you have to look at the whole 2022 and also the external environments. As Mr. Sun mentioned, 2022 to many enterprises was a year full of challenge. External environment was hit by COVID-19. In the past 10 years, growth was the main emphasis in economic development, but this has changed a lot. So as a result, consumption, retail, catering, hotel industry and industries related to livelihood will be affected, no matter whether we are talking about SMEs and brands, the impact will not be different. So at the end of the day, the impact will be passed on to [ big ] enterprises. In the past 1 year, under the flow of external environment, we saw churn rates increasing and brands face very uncertain macro economy, and they compressed their budget for our sales and marketing activities. Well, there was reduction. So for new customers and orders, there is some impact. So given all these external challenges, Weimob [ still ] was able to maintain our business growth in a stable way so as to reduce impact on our customers and service. Total revenue came down 6.5% year-on-year. However, in the second half -- on a half-on-half basis, there is actually a recovery. So in the second half, revenue up 4.4% half-on-half or subscription revenues saw some resilience, up 8.7% year-on-year in second half, 22% -- 22.3% growth half-on-half. Merchant Solutions, down 29.7%. This is the main reason why our revenue declined. For Merchant Solutions, most is about advertising, marketing revenue. For advertising, well, it is closely related to the economic cycle. Given the problem in the macro economy, advertisers actually reduced budget. So placement of advertising was down 8.6%. For advertising in Q1 2022, we saw the trough and in the coming 3 quarters, there was gradual recovery and rebound. In first half, advertising gross income [ RMB 4.8 billion], the total for the year, RMB 10 billion in the second half, up 38% half-on-half. If you look at revenue breakdown, subscription revenue was very resilient. So in 2022, subscription revenue accounted for 70% of total. But if you talk about fee paying merchants, Subscription accounted for 65% relatively stable. In early 2022, our management realized that the external environment has changed. So we faced up to the change, and we adjusted our strategy and financial structure. In January -- early January, we said that we needed to reduce cost and improve efficiency. In Q2 and Q3, we phased out some unprofitable business lines, and we streamlined mid- to back-office R&D people. We did 2 organization optimization. So staff cost was saved by RMB 320 million total staff cost, RMB 2.09 billion. So all these optimizations lead to cost savings. They will be continued in 2023. As a result, salary for the prevailing year will continue to come down. We did a lot of preparation work to manage balance sheet so as to maintain enough liquidity. As of end 2022, our cash balance and also liquid equivalents, totaled RMB 3.065 billion, cash and equivalent, [ RMB 5.07 billion, ] and then Wealth Management products, RMB 570 million. So basically, we have some guaranteed funds in January 2023. Through the capital market, we did placement, we financed RMB 1.35 billion. With such cash, we are able to maintain normal operations. And also in the coming 1 year, we may meet our liquidity needs in terms of debt repayment. Now I would like to give you details of our business. In terms of revenue in 2022, business was resilient, especially the subscription solution for the whole year, 8.7% growth and increased 22.3% second half versus first half. So you can say that in second half 2022, that was a strong recovery. For SaaS, revenue split and also subscription fee renewal business model. During the economic downturn, I think this is very defensive. And from order point of view, there is a different degree of impact from the external environment. I will elaborate more later. For Merchant Solution, as I said, advertising gross billing experienced a recovery, a rebound for the whole year down 8.6%. When external demand was weak, internal competition was very intense for advertising, especially in second half 2022, there was a very intense price competition. There was strong discounting as a result. Our precise marketing strength is in operation and advertising. However, for channel, given the price war, we were subject to some impact. So for new -- for the number of new merchant number, there was negative decline in terms of this revenue. When advertisers increase their budget and also channels abnormal price competition, that will gradually slow down. In 2023, for gross billing and rebates, I think they both will improve and go up. Number of merchants and ARPU, subscription fee paying merchant number came down slightly for new -- for a number of new merchants down 15%; and then churn rate, 26%. So this shows that in -- given the macro environment challenge, our merchant development work has been affected, especially for small- to medium-sized merchants, the operation pressure is bigger. And then for KA, there is an increase by 12%. So merchant acquisition and development work has been affected for ARPU down 20%. This is mainly because advertisers have contracted their budget and also because of price competition in the channels. Impact of the pandemic. We have done an analysis, as I said at the beginning, for SaaS model, there is some resilience on 2022. But then in terms of orders, it is affected by external environment. And this impact will be shown later because of the sharing of revenue or profit model. The first half in Shanghai, there was the pandemic impact. So in Q1 and Q2, there is a decrease by 7% and 32%, respectively, in Q1 and Q2 in relation to subscription order. So comparing with the original budget, it will be 3%, 18%, 9% and 7% lower in the 4 quarters, respectively. In the first half, this subscription order gap has led to impact in Q3, Q4. So subscription revenue growth was lower by around 11 percentage points, so the final growth is 11.3%. In Q4, there was the resurgence of COVID-19 and in December, pandemic control policy change. So there was some impact on January. Q4 is a peak, but then customer acquisition work was affected. So the number of orders was lower than budget during the peak time. And -- so orders is lower by 28% for Q4 and then after the sharing in Q4, the impact was 2 percentage points, but then there will be impact on 2023 order growth. The impact will be around 5 percentage points of growth. In 2023, subscription revenue growth would be [ about ] 20% for core businesses, that is e-commerce retail. Subscription revenue growth will reach 25% to 30%. Next, let's take a look at gross profit and gross margin. Referring to the financial statements, GP margin in the past 2 years in the full -- half yearly period there was gradual decline. But if you look at the details, subscription gross margin, it was 75% from 2021 all the way to second half 2022, 59%. Merchant business gross margin was affected by advertising and marketing revenue and the difference in share. In the past 2 years, our merchant solutions as such for fintech gross margin, well, it rose faster and also TSO. And the gross profit margin is relatively lower. So for Merchant Solutions gross margin in the past few years, came down. If you exclude this impact, we can see that in second half 2022, Merchant Solutions gross margin is above 70%. At the same time, subscription revenue gross margin was mainly affected by 2 factors: one, for the acquisition, for acquired business, for example, hiding the revenue recognition model is such that the gross margin is different from traditional SaaS business. And this share will affect the overall subscription gross margin. In the past 3 years, we increased R&D expenses. And a part of R&D expenses was capitalized into intangible assets, and it will be amortized in 3 years. In the past 3 years, active R&D activities and also an increase in R&D expenses will be such that subscription gross margin will be under pressure. With these 2 factors on the right, you can see that subscription gross margin is between 80% to 90%. In 2022, as said just now, we did large-scale organization optimization. We reduced costs and improved efficiency, R&D expenses will come down significantly. So this will help improve subscription gross margin in the coming period. One important factor about our financials is in view of external environment change, we conducted organization optimization and cost down. Our development strategy in the past, was about high growth, and now we go for high-quality growth. In Q2, Q3, when there is -- well, for business units without profit and growth, they are being streamlined. So in 2022, if we do not consider [ ESOP ], overall salary cost was RMB 2.09 billion, in 2021, RMB 1.81 billion. We're up 15%. But if we analyze in greater detail, if there is no organization optimization, then in 2022, staff costs will reach RMB 2.3 billion. Originally, it's RMB 1.81 billion, but then there would be an impact then. So we did a lot in terms of optimization. There was [ RMB 310 million ] in cost reduction. And then there is also compensation for departure of RMB 91 million. Final expense is RMB 2.09 billion. This will also cause some impact for 2023 up to RMB 300 million. In '23, comparing to 2022, there is no longer the departure compensation. So in 2023, staff costs will go down to RMB 1.7 billion. So this will help narrow our loss. Now let's talk about net profit and net profit margin. In the past 2 years, in 2022, it was the most challenging year in terms of external environment since listing, our customers. And also target companies and ecology companies where we invest in M&A, they are also affected. These companies risk withstanding capabilities weaker than Weimob for profit. After the ESOP adjustment and GAAP impact, adjusted net loss was RMB 1.55 billion. It is quite big. However, within this amount, a big part is provision and impairment provision. In 2022, because of worsening external environments, we increased bad debt provision and also asset valuation impairment because of fair value change. So in the second half, we made provision on bad debt of RMB 136 million in the first half, provision was RMB 36 million. Besides of change -- because of change in financing, capital markets, goodwill and also fair value was affected as a result for our investee companies. So we are prudent and we made impairment provision of RMB 400 million. These are one-off provision. Excluding such items, in 2022, our continuing operating loss is RMB 980 million. In the first half, RMB 530 million, second half, RMB 450 million. Now because of pressure in the external environment, we actively manage our cash flow. Our free cash flow outflow in the first half, RMB 660 million, second half, outflow was only RMB 300 million. Comparing with second half 2021, it is smaller by RMB 800 million -- or actually RMB 800 million -- RMB 80 million, okay? We have done an analysis comparing with operating loss and also RMB 36 million of impairment provision, there is RMB 530 million loss. The reason why the loss narrowed is, first of all, on subscription revenue, there's a growth. 22.3% increase half-on-half that led to RMB 92 million growth in revenue for merchant service. Because of channel competition, gross profit came down by RMB 160 million, but by optimization and other cost savings, we achieved cost savings of RMB 150 million. In the second half, operating loss narrowed to RMB 450 million. And we have provision of RMB 530 million that is a special provisioning, that is our loss analysis for second half '22. Many investors pay attention to our development for 2023. We have done a simple analysis looking into 2023 when the external environment is such that emphasis will be placed on growth consumption will recover. So for subscription revenue, there will be a 20% growth. We have already digested the [ order gap of 5 ] percentage points. So for [ endogenous ] growth, it should be above 25% for merchant revenue, that will be around 40% growth. Gross income [ RMB 12 billion to RMB 13 billion ]. In first half '23, subscription and advertising gross profit growth will drive our overall profit improvement of around RMB 350 million, besides staff optimization savings will mean a benefit of RMB 390 million. In 2023, because of market recovery and also market activities and business trips, there will be more than in 2022. So we believe that in 2023, the operating loss will be controlled to around RMB 300 million to RMB 400 million. In the first half, the loss would be bigger because of seasonality of revenue. Usually, first half revenue is lower than second half. And then for our optimization to reduce cost and improve efficiency, the effects will be realized gradually. In the first half, the loss will be within RMB 300 million. Second half, that would only be a very small loss or we may achieve a turnaround. That is our overall expectation for 2023. Now I think some of the good effects of our cost control work will be realized in 2023 and also there will be improvement in the external environment. So that's all in my presentation.

[Operator Instructions] First question, [ CLSA, ] [ Yao Yen ].

Thank you, management. Thank you, Mr. Sun, Mr. Cao, for giving me this chance to ask question. Congratulations on your good results during 2022, which was an exceptional year. Recently in the market in relation to AI, there was a lot of discussion and then the AI -- some -- some new AI technologies were already announced. So in relation to AI and AIGC, what kind of change will it bring to the industry? Concerning business and some scenarios, I think it will empower your company's business and in the future, what will be some potential business models. This year, are you going to make new investment into this area? That's my first question.

Let me take this question. It is true that this year, after the introduction of ChatGPT, AIGC in business application has reached a new height. In fact, we are very excited to see this very exciting and also a disruptive moment brought by AI. For Weimob, I think we can explore this in 2 angles. First of all, our internal arrangement or improvement of efficiency and #2, commercial application. So for the first point, in the future for AIGC and ChatGPT, I think there would be a big decrease in the number of programming people. Now we are already doing some tests of [ GitHub ] tool -- the supplementary tool. There will be a 10% to 20% improvement in our R&D efficiency. This is only preliminary. When there is further evolution of ChatGPT, I think the efficiency improvement will be bigger in the future. I think it can go up to 30% to 40% in terms of improvement to capacity. So if you look at our own costs, first of all, our WOS -- after the introduction of our WOS, our structure has already been very -- been strengthened. And together with ChatGPT, I think there would be a big improvement to our production capacity in the future. That's about our internal situation for commercial application and products. Now we are connected to open AI and now it is [ GPT 3.5 ], I believe. So there has been connection already. We are working with [ Ernie ] Baidu. So we are using open source model to do some -- to make some attempts. So at least internally, many of our customers, advertising and SaaS customers sometimes, they need some text and some image generation. So text will be used to generate pictures or images, then we can offer a very good tool to support them. Internally, we are already using this product with good results. In the future, I think they will be integrated for launch. Apart from images and pictures, we are also doing some virtual video and live streaming. What does that mean? Many of our customers, well, if they need to place advertisement or if they need to play some videos, and they do not have much budget for shooting, then expenses and costs will be quite high. Then by means of virtual video by simulation of the gestures and lip movements. Well, the virtual host will be -- will look very much like a human. So overall speaking, the effects of such advertising is very good. Virtual live streaming is similar. In some cases, there may not be a very important event. If they use a virtual live streaming, then I think merchants live streaming market can be developed. At the same time, the distance, the gap with consumers can be shortened, conversion can be improved. So I think these are attempts in relation to advertising. And in terms of operation efficiency, in the future, we will help customers to think -- to realize the new business model. As long as they can tell us the concept, we can generate a smart creative plan for them. And then for different reports and statements, I think the right format of statements can be generated by using this solution. So for smart data and so on, selection of products, we will be able to help. And then regarding user experience, that will be personalized operation and also smart customer service in the future, we will introduce a [indiscernible] product. So all these different capabilities can be integrated into this product. This year, in Q2, we will launch this product. That is my answer.

Thank you, Mr. Sun. Very clear. My second question is about your actual cloud service or operation. For off-line events, where they are coming back, many merchants stores business is recovering. So on this dimension, what do you think about the coming 2 to 3 years? So for smart retail product lines as well as order growth, what do you think of it? When the industry developed like that, what will be your plan for development? Now the economy is recovering. If you look at other industries, there is also a recovery, but then there will be even more intense price war. So what do you think will be future competitive landscape in your industry?

Regarding off-line recovery, after there's recovery off-line, when we look at the retailers and merchants GMV, yes, there is quite a good growth momentum. To us, especially in the area of smart retail, we call it [ Pan ] retail. So within this big scenario, our core strategy is, as you said, just now. So we have to dig deep into the industry. And we also need to expand. So first of all, vertical cultivation, deep vertical cultivation. We have to enrich Weimob's product system so customers can make repurchase so as to enjoy growth and revenue increase. Smart retail, if you talk about cross-selling and repeat purchase and 1 customer buying different products and also [ AVC ] and then fee renewal of smart retail, all these are at high levels. We introduced the [ 7 plus X product system, 7 plus X. ] So shopping mall, cloud store, shopping guide, CRM data, marketing, we call all [indiscernible] products, and they will penetrate into the customer's operating scenario. In the past, Smart Retail products, well, they are based on online cloud stores and also off-line retail outlets, shopping guide. For these products, I think we are definitely leading in the industry. This year, we also expanded our CRM products after launch of WOS. Many merchants and customers started to use these products. More and more large retail group customers hope to offer one-stop solutions to their customers. They hope that Weimob can offer products like CRM and private domain WeCom service. So the richer our products are, customers will have greater desire to make repeat purchase and increase in purchases. So 7 plus 6, we have 7 core products. And then together with our ecosystem working partners, we offer a lot of very small products. For instance, our customers may need some online products like building materials and furniture and they may need some online contract signing. And we work with our working partner on this product, our customers can purchase this product. So we have also a working partner [indiscernible]. They are high-end female fashion brand. They have very high requirements, and our working partners have developed a lot of good templates and many components. So when they use our templates and components, they can build very personalized, small or mini programs page. For example, [indiscernible] Group on their page, they want a full page customization and then we can do that. So by providing the code to them, they can produce their own mini programs. So we will enhance our capabilities. And in the future, we hope that we can enjoy a lot more repeated purchases so that there will be more vertical in-depth cultivation. We also explore other new industries. I talked about our new plan about having more and more big customers. So we will focus on key industries. In fashion, apparel and footwear. We are definitely in a leading position in the industry. In furniture, building materials, food, FMCG, shopping malls, department stores, super stores, convenience stores, health care, medical, we are making moves in all these industries. And then with [indiscernible] smart department store and super store, well, they are online already. So this year, we will make marketing plan and expansion. So we believe that these industries will contribute new revenue growth to us. For instance, let's talk about smart shopping mall and department stores. In the future, they can contribute like RMB 300 million to RMB 500 million of additional revenue. If we add up all these industries than in the future, there will be a huge market and talking about competition to us. In the future, [ non-core ] competency is our product. And while we are leading in products, we will get some core customers. I think that is our biggest core competitiveness. Once customers start to use our products, the stickiness is very strong. Besides, more and more customers do not only use 1 product of ours, they use many of our products, at least 3 products, and they also use our ecosystem products. In the future. If they want to complete a transition or if they want to switch to other company, it will be very difficult. In the past 2 years, with WOS as a bottom layer business operating system, it is a very strong core competitiveness. For newcomers in the industry, if they need to or if they want to build their system, the funding cost and time costs will be huge. It would be very difficult for them to make such a big investment. So for our smart retail and WOS ecological system and also our product metrics, our ecosystem strategy, they have formed a very big barrier. So in the future, we want to grant more customers. At the same time, we will use 1 product to get our foot in and then we hope that they will penetrate to our other products. For many retail-based customers, we will use 1 of our products first to acquire them. And then gradually, we will introduce more products to them. Hopefully, they will use more of our products with this strategy in the future. For off-line chain, retail and the overall pan-retail industry, we hope to be able to develop better growth.

Next question, GF Securities, [ Yang Li Lin ].

Thank you, management, for giving me this chance. I have 2 questions. Just now Mr. Tao said that overall speaking, regarding 2023, second half, you will be able to achieve a breakeven. Does this mean that within the short run, you will sacrifice some revenue growth? So when you consider revenue growth and also breakeven, what is your consideration? My next question is about your video accounts. What is the progress so far? In the future, what is the growth outlook? These are my 2 questions.

First question, for Mr. Tao explained the outlook, let me supplement. I think you asked a very good question. All along, we have been considering balance growth -- revenue growth and breakeven and the balance in between the 2. We think that if a company wants to be profitable, it cannot only rely on sacrificing cost and expense or achieving cost savings. We have to expand revenue in order to narrow loss, so we have been maintaining such a balance. Overall speaking, we have not been very extreme that we have to achieve breakeven in the first half of this year. If you look at our cash flow reserve, this year, our loss would be around RMB 300 million. We think that, that is acceptable. We can control our loss with a good rhythm. In the second half, because of revenue growth, together with our optimization and efficiency improvement plan, the natural result will be almost a breakeven. So we have been controlling such a balance. Have we sacrificed revenue growth? Yes, there will be a bit. However, given today's environment, it is not like the past. If we only go for a certain numerical growth, our core strategy this year is high-quality growth. For high-quality growth, we need high-quality customers and high-quality revenue. Internally, we talked about how to define high-quality revenue and customers. So 3, 4, 5, 6, 7, 8, principle. I won't go into the details, but there are some critical indicators, [ 500,000 productivity ] and so on. I won't go into the details, but we want to make sure that our revenue will grow with high quality. At the same time, we will ensure that we can achieve breakeven. So in the second half, we will approach breakeven and in next year, I think we will be profitable. Overall speaking, our growth is positive. Second question is about our video accounts. This year for video accounts, when we presented the outlook, we mentioned the video accounts. Right now, relative to Tencent, we can say that this is our most important product is similar with Tencent. In terms of the status of video accounts -- video account market already exceeds the [indiscernible] circle and investment into video accounts in terms of advertising spend is rising. So Weimob, for daily consumption of video accounts around [ 7 million ]. Almost 20% of the total. So video accounts development speed is very fast. Besides data is growing fast this year, for video accounts, well, with our precise marketing and Merchant Solution revenue, that will be big growth. Now for single spend, that is around [ RMB 40 million ] for precise marketing. For video accounts, it accounts for like 20% of our total spend. So video accounts in the area of advertising grows very rapidly. This year, another strategy of video account is a very precise concept. So right now, our positioning is to help many merchants and also experts to do that work, and we will take commissions. In this area, Weimob is also a very leading service provider. If you talk about live streaming operation and also other blocker operation and so on, I think we are also in a very leading position. Regarding other details of video accounts and data, I am not in a position to disclose now, but we are very positive about video accounts.

Because of time, we will conclude the meeting here. On behalf of Weimob management, I would like to thank you all for your participation in today's conference call. If you have further questions about Weimob, please feel free to contact the IR team. Thank you. Thank you, investors. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]