Cango - Q4 2023

Transcript

Operator (participant)

Good morning and good evening, everyone. Welcome to Cango Inc.'s fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the company's IR website. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer, and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct the Q&A session. Before we begin, I refer you to the Safe Harbor statement in the company's earnings release, which also applies to the conference call today, as management will be making forward-looking statements. With that said, I am now turning the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead, sir.

Jiayuan Lin (CEO)

[Foreign Language] 大家好，欢迎参加灿谷2023年第四季度财报电话会议。

Speaker 5

Hello, everyone, and welcome to Cango's fourth quarter 2023 earnings call.

Jiayuan Lin (CEO)

[Foreign Language] 2023年是极具挑战的一年，整体经济回升向好，但短期承受国内、国外多重因素叠加带来的下行压力，恢复速度低于预期，消费者信心仍然不足。从车市看，传统燃油车市场继续萎缩，新能源市场占有率提升，但内卷严重，价格战席卷整个车市。格局重构之下，车企加速优胜劣汰。经销商层面，自2023年下半年起，部分经销商集团出现经营危机，下沉市场中，小经销商更是面临生存问题。

Speaker 5

2023 proved to be a year of resilience in the face of headwinds. While the long-term economic recovery remained on the horizon, the confluence of domestic and international factors caused a temporary slowdown. This resulted in slower than anticipated growth and dampened consumer confidence. In the automotive sector, the traditional fuel vehicle market contracted steadily, while new energy vehicles, or NEVs, experienced a surge in market share, sparking fierce competition within the segment. Price wars became the norm in the auto sales landscape, triggering a necessary restructuring within the industry. This shift favored larger players and accelerated the survival of the fittest scenario. Dealerships, particularly smaller ones in lower tier markets, faced significant operational challenges, especially in the latter half of the year.

Jiayuan Lin (CEO)

[Foreign Language] 在这样的环境下，2023年第四季度公司实现总收入人民币1.31亿元。2023年全年公司录得总收入人民币17亿元，截至四季度末，全量在贷余额降至人民币100亿元，M1+为2.66%，M3+为1.37%，风险敞口进一步缩减。此外，公司继续推进严格的降本增效政策，有效降低运营成本。

Speaker 5

Despite the challenging market environment in 2023, Cango delivered total revenue of CNY 130 million in Q4 and CNY 1.7 billion for the full year. The company strategically reduced its total outstanding financing balance of facility financing transactions to approximately CNY 10 billion by year-end. Our credit risk metrics remained stable, with M1+ and M3+ delinquency rates at 2.66% and 1.37% respectively, reducing our risk exposure further. In order to navigate this dynamic market, Cango implemented strict cost reduction measures and efficiency enhancements, successfully lowering operating expenses.

Jiayuan Lin (CEO)

[Foreign Language] 值得一提的是，公司具有较强的流动性和现金储备。截至2023年12月31日，公司持有现金和现金等价物，短期投资及限定的短期投资认购总额为人民币33.3亿元，这为公司现有业务发展以及新业务拓展提供了有力的保障。

Speaker 5

Notably, Cango maintains a strong financial position backed by robust liquidity and ample cash reserves. As of December 31, 2023, the company boasted CNY 3.33 billion in cash, cash equivalents, and short-term investments, as well as restricted cash that is bank deposits held for short-term investments. This strong financial foundation provides a springboard for the sustainable growth of our existing businesses and fuels our exploration of new ventures.

Jiayuan Lin (CEO)

[Foreign Language] 在业务层面，管理层研判市场及行业走势，一方面对在手的新车库存进行清理，另一方面制定了双平台合一的战略方针。第四季度，灿谷正式将专注新车交易服务的灿谷好车，并入专注二手车交易服务的灿谷优车运行，实现资源整合，提升运营效率。融合后的灿谷优车APP将打造一个线上市场，向上连接车源供给方、后市场服务提供商，向下连接下沉市场小微车商用户，围绕二手车交易真实发生的线上拍卖，B2B撮合和经纪人帮买三大业务场景，提供贯穿整个交易过程的产品及服务，涵盖历史车况查定、车辆评估及检测、交付物流、保险、供应链金融等等。平台收益将主要来源于上游店铺租金、会员费和服务产品收费三个方面。

Speaker 5

To adapt to evolving market conditions and capitalize on industry trends, we took proactive steps to streamline our operations. This included clearing our new car inventory and consolidating our platforms into a single powerful solution. In Q4, we successfully merged our new car platform, Cango Haoche, into Cango U-Car, our used car platform. This strategic move optimizes resource allocation and boosts in operational efficiency. The upgraded Cango U-Car app now functions as a comprehensive online marketplace. It connects upstream vehicle suppliers, aftermarket service providers, and downstream small dealers in lower-tier cities. This integrated platform offers users a full suite of services throughout the used car transaction process, catering to three main scenarios, that is online auctions, dealer-to-dealer transactions, and broker-assisted deals. Cango U-Car goes beyond facilitating transactions. We provide a robust ecosystem of services.

This includes access to historical vehicle reports, vehicle evaluation and inspection, logistics and delivery, insurance solutions, and supply chain financing. Our revenue streams will primarily come from upstream store rentals, membership subscriptions, and transaction-related service fees.

Jiayuan Lin (CEO)

[Foreign Language] 四季度，我们对融合后的灿谷优车平台进行了精益运营，聚焦异地交付，打造一口价端到端交付服务，通过在核价、验车、担保、交付环节的赋能，让二手车异地交易更放心，更便捷。

Speaker 5

We streamline operations within the integrated Cango U-Car platform in Q4. This included the introduction of a fixed price end-to-end transaction service for cross-regional used car purchases. This innovative service simplifies and secures long-distance transactions by offering price verification, vehicle inspection, guarantees, and delivery services.

Jiayuan Lin (CEO)

[Foreign Language] 第四季度，灿谷优车APP内上线的上游第三方卖家店达到38家，涵盖新车、二手车和流量服务等综合类别。同时，我们通过销售漏斗管理策略，共挖掘商机9,887条，服务了线上3,499家小微车商用户，促成二手车成交共计530台。

Speaker 5

By Q4, 38 upstream third-party sellers have set up stores on Cango U-Car, offering a comprehensive selection of vehicles, including new and used cars, along with traffic generation services. By leveraging our expertise in sales funnel management, we identified 9,887 potential business deals leads in Q4. We successfully converted a significant portion of these leads, providing services to 3,499 online small dealers and facilitating 530 used car transactions.

Jiayuan Lin (CEO)

[Foreign Language] 在大力招募第三方卖家店铺进驻平台的同时，我们也通过运营自营店铺，增加平台活跃度，孵化并探索更多可能性。目前，我们自营店服务的内容主要包含四大类别。首先是自营处置车，以存量金融业务的处置车源为主，同时合作其他金融公司的处置车源作为平台车源。其次是C2B，即把C端线索变为可交易车源，在平台上撮合C端客户和B端车商完成交易。初期主要依托存量贷款客户，四季度也引入外部线索进行转化。再者是服务小微车商之间的撮合业务，公司为促成其交易进行相应的撮合及物流服务。最后是后市场中的保险业务。四季度，除车险外，我们的保险KA团队在区域大客户内进行了非车险产品的尝试和推广，如工商险、船舶险等险种。

Speaker 5

Besides attracting third-party sellers, we are also maximizing engagement and exploring new opportunities through our self-operated stores. These stores offer a diverse range of services in four key areas. First, they repossess car management. We handle repossessed vehicles, primarily sourced from our auto financing business and collaborations with other lenders. Secondly, C2B lead conversion. We transform individual customer need, leads into tradable assets, facilitating transactions between them and dealers on our platform. We initially focused on existing financing customers, but now we have expanded lead sources in Q4 to boost conversion rates. Thirdly, B2B transaction facilitation. We provide transaction and logistic support for small dealer-to-dealer sales. And fourthly, we have expanded our insurance services. Our insurance teams offer it offers comprehensive coverage, including auto insurance, and as of Q4, non-auto options like work injury and health insurance for key regional clients.

Jiayuan Lin (CEO)

[Foreign Language] 作为一个在线市场，好的用户体验，以平台的技术底座为基础。第四季度，我们通过打造AI中台，借助数字化手段，将车源、客源、资金的各项资源高效匹配，辅之以规范化、标准化、智能化交易全链配套服务，希望真正促进二手车在全国范围内的异地高效流通。与此同时，切实服务好我们的小微车，车商用户，帮助他们在行业低谷期降低运营成本，扩大收入来源，从而提高存活率。灿谷构建购车服务平台愿景从未改变，未来我们将通过优质的服务和产品，不断打磨和提升灿谷在行业价值链中的核心能力。

Speaker 5

At Cango U-Car, we understand that a superior user experience hinges on a strong technological foundation. In Q4, we deployed a central AI platform, leveraging our digital expertise to optimize resource matching for vehicle inventory, customer leads, and auto financing. This powerful tool, combined with our standardized, streamlined, and intelligent transaction services, aims to create a nationwide network for efficient used car circulation. Furthermore, we remain dedicated to empowering small dealerships. We offer services that help them reduce operating costs and diversify revenue streams, especially during challenging market conditions. Ultimately, our goal is to enhance their survival rates and overall success. Cango's vision remains steadfast to become an industry leader by continuously refining and offering top-notch services and products across the entire automotive value chain.

Jiayuan Lin (CEO)

[Foreign Language] 在以灿谷优车为载体的线上市场业务外，我们也时刻留意新业务探索的机会。与国内汽车市场存量博弈不同，中国二手车出口具有较大的增长机会。中国作为全球最大的汽车制造和市场国家，拥有庞大的汽车存量，这为中国二手车出口提供了丰富的资源。与此同时，中国政府出台了一系列政策来支持和规范二手车市场的发展，这不仅有助于提升二手车市场的透明度和公平度，还有助于提高二手车的质量和可靠性，从而增强它们在国际市场的竞争力。中国在汽车制造和零部件供应方面拥有强大能力，这令中国二手车价格在全球范围内具有较大的竞争力。同时，作为最大的国际贸易国，中国拥有广泛的国际物流能力，可确保安全快速地将车辆交付给全球买家。

Speaker 5

Cango Used Cars online marketplace is just one facet of our growth strategy. We see significant potential in China's burgeoning used car export market, unlike the fierce competition within the domestic market. China, as the world's largest auto manufacturer and consumer, possesses a vast pool of used cars, a gold mine for exporters. Additionally, government policies are fostering a more transparent, regulated used car market. This translates into higher quality and more reliable vehicles that are competitive internationally. Furthermore, China's robust auto manufacturing and parts supply chain keep used car prices competitive globally. Leveraging its position as the top international trading nation, China boasts a well-developed logistics network, ensuring efficient and secure delivery of used cars to international buyers.

Jiayuan Lin (CEO)

[Foreign Language] 2023年，中国汽车出口量超过500万台，位居世界第一，这一数据有望持续增长。我们看好二手车出海业务发展前景，正在积极推进和落地出海探索业务。依托灿谷在中国国内汽车市场的丰富经验和根基，以及作为一家美国上市公司可以带来的资本支持和更广阔的市场机会，我们打造线上线下一体化的二手车信息交互和出口服务平台，主要面向新兴发展国家的汽车经销商，帮助其轻松获取中国这个全球最大的汽车制造和消费市场中丰富的汽车资源。

Speaker 5

China's position as the world's leading auto exporter, with over 5 million vehicles shipped in 2023 on a projected upward trend, presents a compelling opportunity for the used car export market. Recognizing this potential, Cango is actively pursuing this exciting new venture. Leveraging our extensive experience and network within China's domestic auto market, combined with the advantage of being a US-listed company, which brings us access to capital and broader market reach, we've launched a comprehensive used car information exchange and export service platform. This innovative platform, integrating both online and offline resources, caters specifically to auto dealers in emerging and developing countries. By partnering with, by partnering with Cango, these international dealers gain easy access to China's vast pool of used vehicles, a significant advantage in today's global market.

Jiayuan Lin (CEO)

[Foreign Language] 我们的跨境二手车信息交换网站，www.AutoCango.com，已于本月初上线，在线SKU总数超过75,000个，并每周新增约500-1,000个新SKU。AutoCango将利用创新AI技术，提高车辆的可访问性，搜索效率和交互友好性，以准确满足每位客户的个性化需求，并确保交易的透明度、效率和安全性。我们的目标是成为海外买家选购中国二手车的优先网站。

Speaker 5

AutoCango.com, our cross-border used car information exchange platform, or www.autocango.com, was launched in early March 2024, with an impressive inventory exceeding 75,000 SKUs. This platform is constantly growing, with approximately 500-1,000 new vehicles added weekly. Leveraging cutting-edge AI technology, AutoCango.com empowers users with an intuitive search experience, making it easier than ever to find the perfect car. Furthermore, our platform prioritizes user interaction, ensuring it caters to each customer's evolving needs. Transparency, efficiency, and security are at the core of AutoCango.com. We are committed to providing a seamless and secure experience for all users, with the ultimate goal of becoming the go-to platform for overseas buyers seeking high-quality used cars from China.

Jiayuan Lin (CEO)

[Foreign Language] 尽管外部环境依旧充满挑战，我们对中国市场的发展潜力以及灿谷全流程平台服务的业务模式充满信心。2024年，我们将继续深耕汽车交易领域，坚持数字创新及AI赋能，拓展灿谷在整个价值链上的产品和服务覆盖，与我们的车商伙伴携手共进，在中国汽车产业数字化、科技术化的变革进程中，奏响自己的强音。

Speaker 5

While acknowledging the current market complexities, we remain bullish on the long-term potential of China's auto industry and the strength of Cango's end-to-end service model. In 2024, we are committed to solidifying our position within the auto transaction market, pioneering digital innovation, and leveraging AI to enhance our platform and user experience, as well as expanding our offerings by introducing new products and services across the entire value chain. By working along with our dealer partners, these initiatives will allow us to create significant value and become a key player in China's dynamic, technology-driven automotive landscape. I'll hand over to our Chief Financial Officer, Michael Zhang, for a review of the company's financial performance.

Yongyi Zhang (CFO)

Thanks, Jiayuan. Hello, everyone, and welcome to our fourth quarter and full year 2023 earnings call. Before I start to review our financials, please note that unless otherwise stated, all numbers are in RMB terms and all percentage comparisons are on a year-over-year basis. Total revenue in the fourth quarter of 2023 were CNY 130.2 million, compared with CNY 487.1 million in the same period, 2022. Guarantee income, which represents the fee income earned on the non-contingent aspect of a guarantee, was CNY 42.1 million in the fourth quarter. Now let's move on to our costs and expenses during the quarter.

Total operating costs and expenses in the fourth quarter of 2023 were CNY 159.1 million, compared with CNY 698.7 million in the same period, 2022. Cost of revenue in the fourth quarter decreased to CNY 110.9 million from CNY 481.7 million in the same period, 2022. As a percentage of total revenues, cost of revenue in the fourth quarter of 2023 was 85.1%, compared with 98.9% in the same period, 2022. Sales and marketing expenses in the fourth quarter decreased to CNY 4.4 million from CNY 19.2 million in the same period, 2022.

As a percentage of total revenues, sales and marketing expenses in the fourth quarter of 2023 were 3.4%, compared with 4% in the same period, 2022. General and administrative expenses in the fourth quarter decreased to CNY 45.6 million from CNY 66.2 million in the same period, 2022. As a percentage of total revenues, general and administrative expenses in the fourth quarter of 2023 were 35%, compared with 13.6% in the same period, 2022. Research and development expenses in the fourth quarter decreased to CNY 7.3 million from CNY 8.4 million in the same period, 2022.

As a percentage of total revenues, research and development expenses in the fourth quarter of 2023 were 5.6%, compared with 1.7% in the same period, 2022. Net loss on contingent risk assurance liability in the fourth quarter were CNY 22.2 million. Net recovery on provisions for credit losses in the fourth quarter were CNY 31.2 million. The recovery was primarily due to the positive impact of collections of financing receivables. We recorded CNY 28.9 million in loss from operation in the fourth quarter of 2023, compared with CNY 211.6 million in the same period, 2022. Net loss in the fourth quarter was CNY 103.8 million. Non-GAAP adjusted net loss in the fourth quarter was CNY 99.2 million.

On a per-share basis, basic and diluted net loss per ADS in the fourth quarter of 2023 were both 0.95 respectively, and non-GAAP adjusted basic and diluted net loss per ADS in the same period were both 0.91 respectively. For the full year of 2023, our total net revenue were CNY 1.7 billion. Total operating costs and expenses were CNY 1.8 billion. Net loss was CNY 37.9 million, and non-GAAP adjusted net income was CNY 0.6 million. Basic and diluted net loss per ADS were both 0.31. Non-GAAP adjusted basic net income per ADS was 0.01, and non-GAAP adjusted diluted net income was 0, respectively. Moving on to our balance sheet.

As of December thirty-first, two thousand and twenty-three, the company had cash and cash equivalents of RMB 1 billion, compared with RMB 665.6 million as of September thirtieth, two thousand and twenty-three. As of December thirty-first, two thousand and twenty-three, the company had a short-term investment of RMB 635.1 million, while the company had restricted cash, current bank deposit held for short-term investment of RMB 1.7 billion. As of September thirty, two thousand and twenty-three, the company had short-term investment of RMB 2.4 billion. Looking ahead to the first quarter of two thousand and twenty-four, we are now predicting our total revenues to be between RMB 50 million and RMB 100 million. Please note that this forecast reflects our current and preliminary view on the market and operational conditions, which are subject to change.

This concludes our prepared remarks. Operator, we are now ready to take questions.

Operator (participant)

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from. Pardon me, Pingyue Wu, your line is now live. Thank you. Your next question comes from Emerson Zhao, Goldman Sachs. Please go ahead.

Emerson Zhao (Analyst)

[Foreign Language] 管理层好啊，我这边是高盛的Emerson，我这边其实有三个问题，首先就是看到公司今年和曹操出行达成了一个战略合作，那请问一下目前具体的进展是怎么样的？第二的话是看到目前公司账面有大量的现金，那想问一下之后是否会有分红的安排？我第三个问题是，看到说两个app合并之后，那新的这个灿谷优车app和之前的会有什么样的不同？谢谢。

Speaker 5

Thank you, I'm Emerson from Goldman Sachs. I have three questions. First question, we noticed that the company has entered a strategic partnership with Caocao Mobility. Can the management share some details on these progress? And second question is that we noticed the company currently holds a substantial cash position, will the company, you know, issue dividends or distribute dividends? And my third question is, what are the differences in Cango U-Car before and after integration?

Jiayuan Lin (CEO)

[Foreign Language] 好，谢谢Emerson。关于第一个问题，作为国内领先的共享出行平台，曹操出行一直致力于为用户提供更智能、更绿色、更健康的出行服务与体验。而灿谷在汽车交易和售后市场领域有丰富的经验和资源，我们希望利用灿谷自身的渠道、网络和车源优势，与曹操出行共同开拓探索下沉市场的业务机会。

Speaker 5

Thank you, Emerson, for your questions. The first, for your first question, well, Caocao Mobility is a leading domestic shared mobility platform. It provides users with smarter, greener, and healthier travel experiences. Cango is a powerhouse in automotive trading and aftermarket services. Our extensive network and vast vehicle inventory will enable us to jointly pursue business opportunities in China's high-growth, lower-tier markets.

Emerson Zhao (Analyst)

目前我们的双方的IT同事正在做后台系统程序开发的沟通中，有最新进展，我们会及时同步大家。

Speaker 5

Currently, IT teams from both parties are working together on the back-end system and program development. We will provide regular updates to keep everyone informed of the latest development as they unfold.

Jiayuan Lin (CEO)

关于第二个问题，公司上市几年均有分红，我们希望与股东分享公司发展的阶段性成果，增加市场对公司未来发展的信心。未来是否会继续有分红的安排，我们还是会从公司整体战略布局出发，结合业务发展以及现金，现金开支情况进行规划。

Speaker 5

On your second question, since going public, we've established a track record of rewarding shareholders with consistent dividends to further solidify confidence in Cango's long-term growth trajectory. For further dividend plans, we will maintain a prudent approach, carefully considering factors like overall strategic plans, business development, and our cash flow position to ensure sustainable dividend policy.

Jiayuan Lin (CEO)

[Foreign Language] 关于第三个问题，两个APP合并，原先独立运营的灿谷优车主要集中在二手车交易类服务，包括车源、寻车和限时报价等服务。整合完成后，除了已有的二手车业务，灿谷优车还合并了新车功能，新车的交易功能，包括新车交易、保险、流量等综合类的第三方卖家店铺。接下来我们会发掘并上线更多的第三方卖家店铺，活跃平台生态，为平台用户带来更多样的产品体验。

Speaker 5

On your third question, prior to integration, Cango U-Car functioned as a stand-alone platform dedicated to used car transactions. This included sourcing vehicles, facilitating car switches, and hosting online auctions. Following the integration, Cango U-Car has evolved beyond the used car platform and now builds the comprehensive marketplace, featuring third-party sellers offering new car sales, insurance, and traffic generation services. We are committed to continuously expanding this ecosystem by integrating even more third-party vendors, offering a more dynamic and enriching user experience.

Jiayuan Lin (CEO)

Thank you.

Speaker 5

Thank you。

Operator (participant)

Thank you. Your next question comes from Pingyue Wu from CITIC Securities. Please go ahead.

Pingyue Wu (Analyst)

[Foreign Language] 管理层好，我是中信证券吴平月，想请教两个问题，第一个是我们怎么看去年2023年汽车市场表现，以及，怎么展望2024年的这个行业发展？第二个是我们公司的二手车出海业务，现在的进度是怎么样的？另外，有没有考虑和一些头部的，主播进行一些商务合作？

Speaker 5

I'm Wu Pingyue from CITIC Securities. I have two questions. The first question is, could management share your insights for 2023 automotive market and provide outlook for 2024? My second question is on the used car export business. What about the progress, and have the company considered working with some KOLs?

Jiayuan Lin (CEO)

[Foreign Language] 好，谢谢。2023年整体出现前低后高的姿态，临近年底，包括2024年初，车企都开展了一系列促销活动，我们认为这样的降价促销将会持续一段时间。同时我们也看到，激烈的竞争导致产业链下游的各方利润受到挤压。

Speaker 5

...Thank you for your questions. On your first question, despite the sluggish start in 2023, the automotive market accelerated towards the latter part of the year and into early 2024. This momentum was fueled by a series of promotional activities launched by car manufacturers. We anticipate these price reductions to persist for some time. However, the intense competition within the industry has resulted in margin pressure for various players throughout the year supply chain.

Jiayuan Lin (CEO)

[Foreign Language] 2024

Speaker 5

outlook. NEV penetration rate has been surging over the years. It rose from 28% in 2022 to 35% in 2023, and it is expected to reach 40% by 2024. This rapid shift is intensifying competition within the NEV segment, as well as the conventional fuel vehicle segment. While traditional gasoline-powered vehicles remain profitable, their market share is contracting rapidly. NEVs are experiencing robust sales growth, but manufacturers are currently absorbing significant losses. So this contrasting dynamic presents substantial pressure on the overall market. 2024 outlook. NEV penetration rate has been surging over the years. It rose from 28% in 2022 to 35% in 2023, and it is expected to reach 40% by 2024.

Jiayuan Lin (CEO)

This rapid shift is intensifying competition within the NEV segment, as well as the conventional fuel vehicle segment. While traditional gasoline-powered vehicles remain profitable, their market share is contracting rapidly. NEVs are experiencing robust sales growth, but manufacturers are currently absorbing significant losses. So this contrasting dynamic presents substantial pressure on the overall market.

Speaker 5

On your second question, our used car export business. Well, in March 2024, we launched AutoCango.com, the first of its kind cross-border information exchange platform for used car market. AutoCango.com bridges the gap in information services by connecting domestic Chinese used car dealers with foreign buyers, specifically targeting auto dealers in left-hand drive markets across emerging economies. Leveraging China's position as the world's largest auto market, AutoCango.com empowers these international buyers with easy access to a vast pool of quality used cars. Powered by innovative AI technology, our platform streamlines the user experience, enhancing vehicle discovery, search efficiency, and user interaction to precisely meet evolving customer needs. AutoCango.com prioritizes transparency, efficiency, and security throughout the entire transaction process, ensuring a smooth and secure experience for all parties involved.

Jiayuan Lin (CEO)

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Speaker 5

On partnerships, we are open to partnership opportunities that align with the following criteria. Firstly, profitability. We prioritize ventures with clear business models and transparent cost structures, and secondly, long-term growth potential. However, to ensure efficient resource allocation, we conduct regular assessments within defined time frames.

Jiayuan Lin (CEO)

Thank you.

Speaker 5

Thank you.

Operator (participant)

Thank you. We have no further questions at this time. I will now hand the call back to management for closing remarks.

Speaker 5

Thank you all for your participation. That closes today's earnings call.