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Vipshop Holdings Limited (NYSE:VIPS)
Q2 2018 Earnings Conference Call
Aug. 14, 2018, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good day everyone and welcome to Vipshop Holdings Limited Second Quarter 2018 Earnings Conference Call. At this point, I'd like to turn the call to Ms. Jessie Fan, Vipshop's Senior Manager of Investor Relations. Please proceed.

Jessie Fan -- Senior Manager of Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining Vipshop second quarter 2018 earnings conference call. Before we begin I will read the safe harbor statements.

During this conference call, we will make forward-starting statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our recent expectations, assumptions, estimates and projections about Vipshop Holdings Limited and its industry. All statements, other than statements of historical facts, we may make during this call are forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as anticipate, believe, continue, estimate, expect, intent, is or are likely to, may, plan, should, will, aim, potential, or other similar expressions. These forward-looking statements speak only as of the date hereof and are subject to change at any time, and we have no obligation to update these forward-looking statement.

Joining us on today's call are Eric Shen, our Co-Founder, Chairman and CEO; and Donghao Yang, our CFO. At this time, I would like to turn the call over to Mr. Eric Shen.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

Okay. Good morning and good evening everyone. Welcome and thank you for joining our second quarter 2018 earnings conference call. We are pleased that our active customers grew by 6% year-over-year in the second quarter. With continued improvement in customer stickiness, our collaboration with Tencent and JD are starting to show initial results. New customers from these channels accounted for 24% of our total new customers in the second quarter. Our JD flagship store currently hit around 1.5 million fans and our WeChat mini-program is becoming a strong channel for new customer acquisition. New customers from the mini-program increased by over 500% quarter-over-quarter. We are also pleased to see improvement in its conversion rate.

Our core strength lies in discount retailing. Recently we launched a few new initiatives to deepen our expertise in this field. For example, we launched an app called Wei Pincang [ph], which is a specialized platform for wholesalers. Through Wei Pincang, wholesalers and the WeChat merchants can purchase off-season discounted inventory in book to be sold through their own channels. This is a extension of the discount retailer model, which will help Vipshop and our suppliers clean inventory more efficiently. With Wei Pincang we can truly provide our brand partners with full product cycle inventory management service, helping them resolve their inventory issues more completely. Further, we added a new channel called (inaudible), which hosts products at over 70% off. This is another step we are picking to bring products with great value to our customers.

At this point, let me hand over the call to our CFO, Donghao Yang, so that he may discuss our strategy in more detail and go over our operational and the finance results.

Donghao Yang -- Chief Financial Officer

Thanks Eric, and hello everyone. In the second quarter of 2018, driven by the robust increase in shopping frequency, our average revenue per customer increased by 12% year-over-year. This is a testament of the loyalty of our customers and our operational capability. We are keenly focused on serving our customers and providing them with a superior shopping experience. Therefore, we are increasingly focused on our merchandising strategy. As we continue to offer differentiated products at great value, we are confident we will expand our market share in the long run.

During the quarter, our Super VIP loyalty program continued to expand its customer base, adding around 430,000 paid members. As of the end of June, around 1.9 million customers enrolled in our Super VIP program, which represents a 30% increase quarter-over-quarter. In addition, we recently launched a joint membership program with Tencent Video. Now our Super VIPs are able to enjoy Tencent Video's annual membership at a deep discount, offering them even more value.

In order to capture more growth opportunities with the WeChat ecosystem, we recently launched around 400 official WeChat mini-programs for our brand partners. Further, our initiatives to focus on male customers and post-90s customers are starting to bear fruit. In the second quarter, the number of male customers grew by over 35% year-over-year. Conversion rate for both male customers and post-90s customers increased by around 10% year-over-year, which was driven by more precise targeting as a result of our improved algorithm.

Turning to logistics. We continued to invest into our warehousing capacity in the second quarter, adding another regional logistics hub in Shenyang, China. With this addition, we currently have six regional logistics hubs located in Guangdong, Jiangsu, Sichuan, Tianjin, Hubei, and Liaoning. As of June 30, 2018, we have approximately 2.9 million square meters of total warehousing space, of which around 1.8 million square meters is owned by the company.

During the quarter, we delivered around 99% of orders through our own last mile delivery network, up from 95% in the prior year period. More than 81% of customer returns were handled directly by our in-house last mile delivery network, up from 68% in the prior year period.

Turning to our Internet finance business. Approximately 5.8 million active customers used our consumer financing during the quarter, which accounted for around 22% of TMV. As of June 30, 2018, the total balance of credit outstanding to customers was approximately RMB4.4 billion and the total balance of credit outstanding to suppliers was approximately RMB1.6 billion.

Going forward, we will continue to work closely with Tencent and JD in order to realize potential the partnership presents for all three companies. We are focused on our merchandising strategy, aiming to bring the best products to our customers at the most favorable costs. Over time, this will create more differentiation and further solidify our leading position in China's online discount retail space.

Now, moving on to our quarterly financial highlights. Before I get started, I would like to clarify that all the financial numbers presented today are in renminbi amounts and all the percentage changes refer to year-over-year changes, unless otherwise noted.

Total net revenue for the second quarter of 2018 increased by 18.4% to RMB20.7 billion, primarily driven by the growth in the number of total active customers and the improvement in average revenue per customer. Gross profit for the second quarter of 2018 increased by 4.8% to RMB4 billion from RMB3.9 billion in the prior year period. Gross margin was 19.5% as compared with 22% in the prior-year period, primarily attributable to our investment into promotional activity.

Fulfillment expenses for the second quarter of 2018 were RMB1.9 billion as compared with RMB1.6 billion in the prior year period, primarily reflecting an increased sales volume and number of orders fulfilled. As a percentage of total net revenues, fulfillment expenses decreased to 9.1% from 9.4% in the prior year period. Marketing expenses for the second quarter of 2018 were RMB900 million, as compared with RMB752 million in the prior year period. As a percentage of total net revenue, marketing expenses remained stable at 4.3% year-over-year.

Technology and content expenses for the second quarter of 2018 were RMB511 million, as compared with RMB448 million in the prior year period. As a percentage of total net revenue, technology and content expenses decreased to 2.5% from 2.6% in the prior year period. General and administrative expenses for the second quarter of 2018 were RMB615 million, as compared with RMB579 million in the prior year period. As a percentage of total net revenue, general and administrative expenses decreased to 3% from 3.3% in the prior year period.

Our income from operations for the second quarter of 2018 was RMB400 million, as compared with RMB622 million in the prior year period. Operating margin was 1.9%, as compared with 3.5% in the prior year period. Non-GAAP income from operations, which excludes share-based compensation expenses and amortization of intangible assets resulting from business acquisitions, was RMB595 million as compared with RMB888 million in the prior year period. Non-GAAP operating income margin was 2.9%, as compared with 5.1% in the prior year period.

Our net income attributable to Vipshop shareholders for the second quarter of 2018 increased by 76.4% year-over-year to RMB682 million from RMB386 million in the prior-year period. Net margins attributable to Vipshop shareholders increased to 3.3% from 2.2% in the prior year period. Net income attributable to Vipshop shareholders per diluted ADS increased to RMB0.99 from RMB0.64 in the prior year period.

Non-GAAP net income attributable to Vipshop shareholders, which excludes share-based compensation expenses, impairment loss of investments, amortization of intangible assets resulting from business acquisitions and equity method investments, net of tax and gain on disposal or revaluation of investments, net of tax, was RMB577 million, as compared with RMB673 million in the prior year period. Non-GAAP net margin attributable to Vipshop shareholders was 2.8% as compared with 3.8% in the prior year period.

Non-GAAP net income attributable to Vipshop shareholders per diluted ADS was RMB0.84 as compared with RMB1.09 in the prior year period.

As of June 30, 2018, our company had cash and cash equivalents and restricted cash of RMB6.4 billion and short-term investments of RMB2.1 billion. For the second quarter of 2018, net cash used in operating activities was RMB502 million.

Looking at our business outlook for the third quarter of 2018, we expect our total net revenue to be between RMB17.3 billion and RMB18.1 billion, representing an year-over-year growth rate of approximately 13% to 18%.

With that I would now like to open the call to Q&A.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of Alicia Yap from Citigroup. Please ask your question.

Alicia Yap -- Citigroup -- Analyst

Hi, good evening, Eric, Donghao, and Jessie, thanks for taking my question. I have a question regarding the collaborations with Tencent and JD. Could you help us reconcile the 24% of the new user coming from these two channel this quarter, which we thought is a positive signal. And even it takes time to ramp and convert, why couldn't we see the revenue growth rate either stabilizing or even reaccelerating? Instead, I think, from the 3Q guidance that you provide, it actually shows a pretty surprise deceleration. So could you help us to analyze what happened to your user base and also the new user acquired from those channel? Any color would be appreciated. Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So, Alicia, in the second quarter, we did receive help in terms of new customers from Tencent and JD, but because these customers are new to Vipshop, their ticket size and shopping frequency is lower than our existing customers. But these -- the revenue contribution is not shown as significantly as the customer growth in the second quarter. As we continue to work with Tencent and JD, we expect to get new customers from these channels consistently. And due to our CRM expertise and our merchandising capability, we do believe that over time we would be able to turn these new customers into high-quality existing customers and over time we would see higher revenue contribution from these new customers acquired from Tencent and JD.

Operator

Thank you. Your next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question.

Eddie Leung -- Merrill Lynch -- Analyst

Hi, good evening. Thank you for taking my question. I also have a follow-up question on new customers. Actually not so much about the new channels, like JD and Tencent. I'm more curious on your strategy in acquiring new customers from other channels, perhaps mobile and other channels. If we look at the marketing expense as a percentage of sales versus a year ago, still you're quite stable. So should we expect some leverage on sales and marketing going forward, if we can rely more on JD and Tencent for finding new customer traffic? Any thought on that front will be great. Thanks.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So, Eddie, at this point in time, we continue to invest in other channels besides just Tencent and JD. So we continue to invest into other digital channels after doing mobile phone (inaudible) and working with app stores and so on. Still with Tencent and JD, we do have high hopes in terms of customer acquisition and we do believe that over time they would be more meaningful. However, in the interim, we're still investing into other channels and we do expect to see operating leverage over the long term.

Operator

Thank you. Your next question comes from the line of Wendy Huang from Macquarie. Please ask your question.

Wendy Huang -- Macquarie Capital -- Analyst

Thank you. Can you share some detail about the user demographics of those new users acquired through the JD and the Tencent channels, i.e. the age and also city, and whether those users are complementary to your existing user base? And also a small question about the Wei Pincang you mentioned in the prepared remark. Can you give some color on the value [ph] and also fulfillment cost impact on this new product? Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So, Wendy, regarding the first question, regarding the min-program customers and what they're like. So the mini-program customers are quite similar to our own. It's heavily -- heavier male contribution in our core app. And the new customers have lower ticket size comparing to those of our native app. But as we mentioned, as we continue to work with them and show them better product and operationally know better of what these customers want, we will continue to improve the product offering for these new customers and also improve their overall spending on our platform. We did try some groupbuys and things like that over the WeChat channel over the past few months and what we noticed is that although customer growth is quite fast, the quality of those customers is not there. So I think we had some learnings from there and over time we will be able to more sustainably gain quality new customers from the WeChat channel.

[Foreign language] So regarding -- Wendy, regarding the second question about Wei Pincang and the fulfillment expenses, so with Wei Pincang the product won't be sitting in our warehouse, but they will be using our last mile delivery service from Tianjin. So in terms of the delivery components, there's one is less, then our -- also the cost should be lower than our core business.

Operator

Thank you. Your next question comes from the line of Wayne Wang from HSBC. Please ask your question.

Wayne Wang -- HSBC -- Analyst

Hi, good evening, Shen, Donghao, and Jessie. Thank you for taking my questions. My first question is on the new users that we acquired from Tencent and JD channels. What is our strategy down the road to raise the frequency and order size, eventually to turn them into always our core users? And also in terms of the data sharing, what are the -- because, I guess, most important for users to come into our store is for us to understand why did they not buy too, right? It's not just that they come in and then -- especially for customers that have left the channel, and they just come and visit, but they did not essentially add -- like add the product into the basket. So for those kind of customers on our core platform, you will have access to those -- we realize those data. But then from Tencent and JD channels, any sort of those data that they will share back with VIPS, so that we can target those customers to achieve better targeting. Thank you.

And my second question is to Donghao Yang. Was wondering that in terms of the margins that we're seeing here, because we understand that our margins have been on the downtrend and (inaudible) continuing to invest in. How do we see such trends to proceed into the second half, how should we think about the margin trend? Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So, Wendy, with JD, because it's not our intention to bring them to our own app. So, they will just continue to shop via JD. And in terms of Tencent, we do get certain customer tags from WeChat in terms of customer demographics, such as gender, age and so on. And for that we'd be able to better target these customers with different versions of landing page and showing them different products, depending on what our big data team and our own merchandising team think that is suitable for those customers, as over time that will help a lot with conversion rate.

And also, in terms of WeChat, one good thing that it has is there are drop-down users, meaning once you've clicked into the WeChat wallet, as you enter Vipshop app, even if you didn't buy, you are tagged as a drop-down user who has entered Vipshop's mini-program in the past. So we won't be able to reach those customers and we'll continue to get a repeat tag on those customers' demographics. And we also have our public accounts in the WeChat's ecosystem. So we are trying to do better in terms of connecting the same customers in different ecosystems, such as the WeChat mini-programs public accounts and our own native app. And over time, as we better understand those customers and their shopping behavior in each channel, we would be able to better convert them into our customers and also improve their conversion rate on products over time.

Donghao Yang -- Chief Financial Officer

Wendy, let me take your second question about margin. Well, in Q2 2018, our margin came down due to a couple of things. One, we reclassified costs related to our third-party logistics business fulfillment expenses to cut revenue, which had a 1.1 percentage point impact on our gross margin for the current quarter. And then secondly, during the second quarter, we had a few major promotional events, namely April 19, May 20 and June 16. In those events -- promotional events, we offer deeper discounts to our customers. Going forward, we will focus more on our merchandising strategy and our buyers will try to negotiate better deals with the suppliers, so that we can improve on our gross margin in the long term. But in the next few quarters there might be some fluctuations in our margins. But over the long term, we are quite confident.

Operator

Thank you. Your next question comes from the line of Xiaoyan Wang from 86Research. Please ask your question.

Xiaoyan Wang -- 86Research -- Analyst

Thank you, management for taking my questions. Two questions here. First one is regarding your wholesale business, Wei Pincang. So how will you recognize the wholesale business GMV, like will it be in the total GMV? And also on the revenue side, is it the 1P revenue, or you're recognizing as other revenue line? And the second question is regarding your cash flow this quarter. Operating cash flow is again negative. And I think the most -- the biggest impact is due to a comparable item, which led to a negative free cash flow. So can you provide some color on the outlook of the operating cash flow and the free cash flow in the quarters ahead? Thank you.

Donghao Yang -- Chief Financial Officer

Okay. Let me take your questions. Well, for the revenue generated from our Wei Pincang business, we will recognize gross sales as a revenue. And for your second question on operating cash flow, well, there were a couple of things that resulted in a negative cash flow in Q2. Number one, there was the decline in our margins. And secondly, starting from the second half of 2017, payment from customer returns are deposited directly back to the customer's original payment method, instead of being returned to their Vipshop wallet. This change has resulted in a decrease in our advance receivables from third-party platforms, which impacted our operating cash flow. Going forward, this was -- the second reason is actually a temporary thing and we're expecting the impact from that to go away in the next one or two quarters. And also, going forward, as I said earlier, as we focus more on our merchandising strategy, we will push our buyers to negotiate better deals, higher margins with the suppliers in order to improve our gross margins. So, operating cash flow, I think will come back to its normal level or will start to go up in a few quarters.

Operator

Thank you. Your next question comes from the line of Alex Yao from JPMorgan. Please ask your question.

Alex Yao -- JPMorgan -- Analyst

Hi, good evening management. Thank you for taking my question. I think that you guys mentioned quite a few initiatives that are already done in relation to the integration with the Tencent and JD platform. Can you give us a road map in terms of -- for the next 12 months? What else would you be doing to further improve the efficiency of the integration or the conversion ratio from traffic to transactions? I think, a follow-up and a related question is the market generally expects your revenue to accelerate in the next one or two quarters, given the relatively skill in user base between you and these two partners. Is that assumption at risk or it's just still reasonable? Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So, Alex, on JD, our goal is to sell more merchandise. So that's why we are drawing [ph] different entries on JD's app. We switched from the one entry on the front page to four different entry points, including a spot in the same panel of the original, but also in terms of categories and flash sales, now you're able to see a Vipshop entry point. So we're continuously learning about the efficiency of different channels and different panels within the JD app, trying to gain higher efficiency and more revenue from the JD customers.

In terms of Tencent, as we've mentioned, we already are seeing new customers coming in and we are also exploring for new ways to gain more customers from Tencent and also the WeChat team and the mini-program team. So, in terms of how we view the growth, we are pretty confident that in the next 12-months we are able to meet our expectations in terms of new customer acquisitions from Tencent and JD. But if we want to see a lot more than that then we would have to continue to work with them to find a new way to grow and an effective way to gain new customers.

Donghao Yang -- Chief Financial Officer

Okay. Let me -- Alex, thanks for your question. Let me take your second part of the question. Well, we are acquiring a lot of new customers from both Tencent and JD. But with the new customers the ARPU are relatively low and it takes time for them to improve or increase their ARPU, or improve on their average basket size. So it takes time for the new customer acquisitions to have meaningful impact on our revenue. So it's hard to say if in the next couple of quarters our revenue growth will start to reaccelerate. But in the long run, I think we will see meaningful or significant impact on our revenue from the new customer growth from the two partners.

Operator

Thank you. Your next question comes from the line of Ronald Keung from Goldman Sachs. Please go ahead.

Ronald Keung -- Goldman Sachs -- Analyst

Hi, thank you Shen Dong, Yang Dong, and Jessie. I have a question more on the business model. I think we have talked a lot on the channel is how to attract customers. But more back to our basics, our business model, how do we see our core apparel business, sort of, in terms of the focuses on, for example, off-season? Second would be, how are we in our strategy for marketplace, just share from a 1P to a 3P model and even possibilities of, for example, cooperation with any offline players, it could be an asset light, but some form of cooperation. And besides apparel, how are we with our category expansion? Are we now focused on apparel? Would like to hear your thoughts. Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So, Ronald, to answer your question, apparel is our core and why customers come to us in the first place. So we'll continue to focus on this as our core customers, attracting more customers. They are coming to us because we have the best selection of apparel at the most favorable prices. And for e-commerce, obviously, it doesn't have one category, so we already have a variety of categories and we also have a marketplace model, although a small contribution. So going forward, this model won't change too much. We will have the other categories, even though the reason that customers come to us is mainly because they're coming to us for the selection of apparel on our platform. But we will continue to have marketplace and other categories in order to meet customer demand. We are a discount retailer, so we are deeply focused on heavy and deep discounts, giving back value to our customers. Regarding offline, we're learning about the offline business model and we are exploring different opportunities.

Operator

Thank you. Your next question comes from the line of Jerry Liu from UBS. Please ask your question.

Jerry Liu -- UBS -- Analyst

[Foreign Language] My question is on competition. I just want to get an update on how we see the competitive landscape, most recently with the major players, including Ali, JD and Pinduoduo. But also as we do more on JD's platform and on -- in Tencent mini-programs, how do we see some of the other competitors that are on those programs? And then the third-party flagship stores and whether that changes some of our promotions and even the business model a little bit going forward? Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So Jerry, there is always competition, and in the future there is going to be competition. But our positioning is that we are a discounted retailer, focused on the apparel category and that's where our strength is at. So we will continue to focus on our core and leverage our expertise in our core category and the deep discount field to offer back value to our customers. And we believe that with this strategy in mind, we will continue to gain and retain these customers.

Regarding your question about the different competitors that are emerging from the WeChat ecosystem, we believe that the group-buy model is quite different from us. And as we mentioned in previous remarks, tried the group-buy model and didn't find it to be too suitable for our business model and the kind of customers that we want to serve in the long term. So in terms of ticket size, we're around RMB300, which is quite a bit higher than those of the group-buy competitors in the WeChat ecosystem.

Operator

Thank you. Your next question comes from the line of Monica Chen from Credit Suisse. Please ask your question.

Monica Chen -- Credit Suisse -- Analyst

Good evening management. Thank you for taking my question. I have one question regarding our paid membership program to which we actually see quite decent growth for this quarter. So I want to understand how many of the users who actually convert into the paid members after their free trial period, and how is the retention for that. And also, for this membership, how is this our service different from some of the other membership products launched by other eCommerce platforms and how do we expect this service to further improve our user stickiness and the ARPU trend in the future? Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So Monica, we are seeing quite good results from our Super VIP program, and on average the ARPU from these customers are 50% higher than those of the non-Super VIP. And as you mentioned, we do have a lot of trial members who are testing this program for free and they have the option to become a paid member at the end of their trial period. And the current conversion rate, we're seeing it around 18% to 20% from trial to becoming a paid member. So, as we disclosed, we had around 30 million customers total in the second quarter and only 1.9 million Super VIPs. So we do believe that there is a lot of room to continue to convert our existing customers into Super VIP paid members. And over the long term, we'll continue to improve their ARPU and continue to improve their stickiness on our platform.

Operator

Thank you. Next question comes from the line of Natalie Wu from CICC. Please go ahead.

Natalie Wu -- CICC -- Analyst

Hi, good evening management. Thanks for taking my question. I have two here. First one is, how do you see the competition from some newly emerging players, such as (inaudible). I saw you launch the Wei Pincang, so just wondering how do you prepare to check merchants, because you know those merchants are of very different nature versus those existing ones on that platform. And also, how do you compete with those existing players, as I just mentioned before, those are, like, mainly backed up by those VC capital. Also given that the Wei Pincang, it's an independent app, just wondering, will you invest heavily to accumulate users for this independent app? Will this impact your margin in the upcoming quarters?

Second question is that -- actually you have very good cash flow and you have very loyal customer group and several nice start-up programs, which can go into (inaudible) 0:53:21.9, given the example of their peers in the private market. But actually your valuation is kind of depressed in the secondary market. So just wondering if there are any chances that you would consider of taking your company private. Thank you.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

[Foreign Language] So, Natalie, our goal is to solve problems for brands. Our consignment model works quite well. However, we do return the products that we can't clear to our brand partners and the returned products are still an issue for those brands and they struggle to clear the inventory that is not able to be cleared by the Vipshop platform. And on the other hand, there are lots of wholesalers and WeChat merchants and mini merchants out there looking for product to sell, but they often don't have a lot of reliable and trustable sources to source those products. And our goal is to connect those two groups, the brands and then the wholesalers and the WeChat merchants. We are strong in the discount retail space and that's how we are able to grow to the size today. So we certainly recognize that there are some other players doing similar things out there. But we work with brands directly and our DNA is in clearing inventory for brands. And by launching Wei Pincang, we're able to solve them -- to help them solve their inventory issues. And we do believe that as soon as we enter this space we will be able to capture a lot of the opportunities within this space.

[Foreign Language] So, Natalie, regarding your second question on whether or not this would affect margins in terms of marketing expenses. Because Wei Pincang is business-to-business model, we are selling to smaller businesses, merchants and wholesalers, we don't need to do a whole lot of marketing as in B2C. So we do believe that in a market as big as China, we likely need around 50,000 users and sellers that use the Wei Pincang platform and we don't need to do a lot of marketing to attract them, but instead we attract them with good brand resources and our operational strength, as well as ease of using our app.

[Foreign Language] Natalie, we are currently not thinking of taking the company private.

Operator

Thank you. That's all the time we have for questions today. I'd like to hand the call back to today's presenters for their closing remarks.

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

Thank you all for taking the time to join us and we look forward to speaking with you next quarter. Thank you.

Donghao Yang -- Chief Financial Officer

Thank you.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

Duration: 60 minutes

Call participants:

Jessie Fan -- Senior Manager of Investor Relations

Eric Shen -- Co-founder, Chairman & Chief Executive Officer

Donghao Yang -- Chief Financial Officer

Alicia Yap -- Citigroup -- Analyst

Eddie Leung -- Merrill Lynch -- Analyst

Wendy Huang -- Macquarie Capital -- Analyst

Wayne Wang -- HSBC -- Analyst

Xiaoyan Wang -- 86Research -- Analyst

Alex Yao -- JPMorgan -- Analyst

Ronald Keung -- Goldman Sachs -- Analyst

Jerry Liu -- UBS -- Analyst

Monica Chen -- Credit Suisse -- Analyst

Natalie Wu -- CICC -- Analyst

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