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eLong, Inc. (NASDAQ:EPOC)

Q1 2012 Earnings Call

May 17, 2012 8:00 p.m. EDT

Executives

Guangfu Cui - CEO

Mike Doyle – CFO

Echo Yan - Investor Relations

Analysts

Fawne Jiang – Brean Murray

Alicia Yap – Barclays Capital

Eddie Leung – Merrill Lynch

Wendy Huang – RBS

Gina Chen – TH Capital

Operator

Good day to everyone and welcome to eLong's First Quarter 2012 earnings report conference call. (Operator Instructions) I will now hand over the line to Echo Yan and I will be standing by for the Q&A session. Please go ahead, thank you.

Echo Yan

Hello everyone, thank you for joining eLong’s first quarter 2012 conference call.

Today, Guangfu Cui, our CEO, will make some remarks about the company’s performance in the first quarter 2012 followed by Mike Doyle, our CFO, who will provide additional detail on our financial results. Following their prepared remarks, Guangfu and Mike will be available to take your questions.

Before the management presentations, please allow me to read our Safe Harbor Statement. During this call representatives of the company will make certain forward-looking statements within the meaning of the U.S. Securities Act and the Securities Exchange Act. These statements are based upon management’s current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are, by their nature, subject to a large number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a wide variety of factors. eLong undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Please refer to the risk factors described in our Annual Report on Form 20-F, as well as the full text of the Safe Harbor Statement in our Form 6-K, which will be furnished to the SEC in connection with our press release, for discussion of some of the important factors that could affect future results.

I will now turn the call over to our CEO, Guangfu Cui.

Guangfu Cui

Thank you, Echo. Hello everyone, thank you for being on this call.

In the first quarter, we continued to see customers respond strongly to our market leading hotel network, easy-to-use hotel website, coupon program, and hotel groupbuy product. Hotel room nights grew 67% year over year to 2.8 million. More than two-thirds of our customers now book online at eLong.com and through our mobile applications. As a result, we believe we are gaining market share in the online hotel booking segment.

Our domestic hotel coverage network expanded 46% to over 28,000 domestic hotels as of March 31, 2012, and in May we expanded our coverage to more than 30,000 hotels. In addition, our international hotel coverage totals over 150,000 through our direct connection to Expedia. eLong continues to provide the largest selection of online hotel direct booking options in China.

Our hotel groupbuy product is the clear market leader in China. eLong contracts groupbuy deals directly with hotels and sells majority of volume through eLong.com website, and we generally have more than 2,000 groupbuy hotel deals on sale at any given day. Normally hotels offer discounts of 50% or more for groupbuy deals. Hotel groupbuy product provides significant consumer savings, and our leadership in this product segment reinforces our overall hotel business competitiveness.

In 2012, eLong has launched prepay hotel bidding model and prepay opaque hotel model which allow customers to obtain significant discounts on participating hotels.

We continue to see high growth from our mobile booking channels which are an important element of our online hotel strategy. Our iPhone mobile application has received many favorable reviews and was recently selected by the editors of the Apple Store as an “Editor’s Favorite” application. In addition to our updated iPhone and Android applications, we have also recently released the first version of our iPad and Window Phone applications. I encourage everyone on this call to download our mobile applications and try them for yourself.

To support our growing hotel business, we have been upgrading our IT infrastructure in recent quarters, and we will continue these investments in Q2, and we expect the IT infrastructure upgrade work will be carried throughout the year. We have also made significant investments to set up the second customer service center in Hefei. We currently expect Phase I of our Hefei customer service center to be up and running in Q3.

We have defined the eLong brand position as “Book hotel, Use eLong”. We believe this is the right brand position given our fast growing hotel business and the overwhelming hotel mix in our business. “Book hotel, Use eLong” is also a simple, clear and focused message. With this clear message, we hope consumers will first think of eLong when they book hotels. We believe now is the right time to advertise in order to let even more consumers know about our brand.

In 2012, we continue executing on our online hotel strategy. Let me repeat our initiatives in 2012:

1) To offer more competitively priced hotel products via innovative selling methods;

2) To offer more domestic and international hotels;

3) To aggressively attract online customers while striving to improve marketing efficiency;

4) To improve the online booking experience and overall customer service quality; and finally

5) To make IT and operation infrastructure investments to support our growing business.

Now, I would like to hand the call over to Mike for a review of our financial results.

Mike Doyle

Thank you, Guangfu. In the first quarter, strong online hotel performance drove our year-on-year net revenue growth to 23% compared with Q1 of 2011.

Our hotel business benefited from our continued product investment and innovation. We added new hotel inventory, launched new booking models such as prepay hotel bidding and opaque hotel, made it easier for customers to book with us by adding several mobile channels, including iPad and Windows Phone mobile applications, as well as ongoing website improvements. Room nights booked through eLong increased 67% year-on-year to 2.8 million, which was an acceleration from the 50% year-on-year volume growth that we saw in Q4 of 2011.

In the first quarter, hotel revenue grew by 36% year on year due to increased room night volume, partially offset by lower average commission per room night. Commission per room night decreased 19% year-on-year primarily due to lower ADRs which were a result of mix shift to groupbuy and budget hotels which represent a growing proportion of our room night volume. The success of our coupon program also contributed to a decrease in commission per room night. Hotel revenue now represents 75% of our total revenues, which is an increase from 68% in the first quarter of 2011.

Air ticketing commission revenue decreased 10% for the first quarter of 2012 compared to the first quarter of 2011, driven by a decrease in air segment volumes to 554,000 and a decrease in commission per segment.

Other revenue, primarily derived from advertising on our websites and travel insurance, increased 12% year-on-year for the first quarter of 2012. Other revenue decreased to 8% of total revenues from 9% in the prior year quarter.

Gross margin in the first quarter of 2012 was 73%, which was flat compared to the first quarter of 2011, as gross margin improvements from mix shift to hotel and online bookings were offset by higher personnel expenses and lower hotel commission revenue per room night.

Total operating expenses increased 41% or RMB31.9 million for the first quarter of 2012 compared to the first quarter of 2011. Total operating expenses increased to 71% of net revenues from 62% a year ago.

Service development expenses increased 33% in the first quarter of 2012, mainly driven by an increase in headcount. We continue to invest in improving our online user experience and technology systems, as well as expanding our hotel coverage. Service development expenses increased to 18% of net revenues in the first quarter of 2012 from 17% in the same quarter of the prior year.

Sales and marketing expenses for the first quarter of 2012 increased 53% or RMB23.3 million over the first quarter of last year which tracked the increase in our room night growth and was somewhat impacted by growth in higher cost online marketing channels and increased hotel commission payments to affiliate partners. Sales and marketing expenses increased to 43% of net revenues in the first quarter of 2012 from 35% in the same quarter of the prior year. We continue to invest aggressively in order to acquire new customers and promote our brand online.

Q1 G&A expenses increased 14% compared to the first quarter of 2011, mainly driven by higher personnel and related expenses. G&A expenses were 10% of net revenue in the first quarter of 2012, which was the same as the prior year quarter.

Other Income in the first quarter of 2012 increased year-on-year primarily due to a higher cash yield and lower foreign exchange losses as a result of a lower mix of USD in our cash balances.

Effective tax rate in the first quarter of 2012 was 18% compared to effective tax rate of 27% in the first quarter of 2011, mainly due to the increased proportion of offshore interest income compared to operating income.

Net income for the first quarter was RMB11.9 million, compared to net income of RMB7.7 million in the first quarter of 2011.

Moving to our Balance Sheet, I’d like to mention that as of March 31, 2012, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB1.9 billion or approximately $303 million US dollars. Of this balance as of March 31, 98% was held in Renminbi and 2% in US dollars.

Now, let me share with you our Business Outlook. We expect Q2 Net Revenue growth of 20% to 30% year on year.

We see a compelling opportunity in front of us as we continue to gain traction in the online hotel marketplace through focused execution and product innovation. Our momentum from recent product introductions, supported by our fifth consecutive quarter of room night growth of over 40%, supports our making additional investments throughout 2012 in our infrastructure, including the customer service center in Hefei, and in expanded marketing efforts in order to support our growth and attract and retain more customers.

This concludes my remarks; and, Guangfu and I look forward to any questions you may have.

Moderator, if you would now open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions).

Our first question comes from Alicia Yap of Barclays. Ma’am, you may begin.

Alicia Yap – Barclays Capital

Hi, good morning. Yeah, good morning. Thanks for taking my questions. Wanted to understand a bit on your hotel business breakdown, how much of the volume is from leisure versus the business travel. And is the first quarter high volume growth helped by the Chinese New Year promotion that we should expect some seasonal drop in the second quarter?

Mike Doyle

This is Mike. As far as the mix between business and leisure, it’s not a metric that we track closely regularly. We believe that our growth is very much being fueled by the expansion of the leisure market in China, and we believe that our mix is shifting towards leisure. Our best guess is that we are about two-thirds business, one-third leisure today, with the leisure market growing faster than the business market.

As far as the seasonality of our business, we certainly do see a spike around Spring Festival with leisure demand, but we saw strong rates of room night growth in every month of Q1, and we don’t expect any difference to seasonal patterns in Q2.

Alicia Yap – Barclays Capital

I see. And then among the hotel revenues, not sure if you can share, in terms of revenue contribution by ranking, for example, among the group buy, the coupon and also the last-minute deals, and also the year-over-year growth among these products.

Mike Doyle

We haven’t shared the revenue contribution by hotel segments. I think what we have shared in the past has been the mix by [start] categories. Now with the fast growth of our group buy products, given that group buy transactions look financially a lot like a budget hotel transaction, the metric that we’re prepared to share is about half of our room nights come from group buy and budget hotels.

Alicia Yap – Barclays Capital

I see. That’s helpful. So if we exclude group by from first quarter, can we kind of get a rough sense like how fast is the auto, you know, programs grew?

Mike Doyle

No, we haven’t separated up the room nights that way.

Alicia Yap – Barclays Capital

Sure, sure. And then lastly, on the overall demand, just can you comment in terms of the traveling demand in China. Have you seen any cautiousness or the impact from the soft economy on the booking?

Guangfu Cui

Alicia, this is Guangfu. It’s hard to tell. We are seeing a weak economy, but at the same time, we see our online hotel strategy working very well for us, and we think we are gaining market share in this economic environment. And going forward, we are, like Mike said in his [comment], we are projecting a good quarter for the next -- for Q2, so that has taken the economy into consideration.

Alicia Yap – Barclays Capital

I see. Just last one, on the -- housekeeping, if you can share the cash flow number -- cash flow from operation for the quarter.

Mike Doyle

We haven’t disclosed quarterly cash flow. I think we did in our annual, [passed] the number in our 20-F, and I think our depreciation looks very similar year on year, if we were to [create the year] on Q1 cash flow.

Alicia Yap – Barclays Capital

Okay, great. Thank you.

Operator

Thank you. (Operator Instructions).

Our next question comes from Eddie Leung of Merrill Lynch. Sir, you may begin.

Eddie Leung – Merrill Lynch

Hi, good morning, Guangfu and Mike. Congrats on a very good quarter. I have a couple of questions. The first one is regarding your group buy business. Wondering if you can discuss a little bit about its impact on the hotel commission rate as well as whether there’s any impact on the cash collection cycle, just from a process difference perspective.

And then secondly, you also mentioned about this year would be more like an investment year for eLong. So, could you give us the current headcount and your target for yearend, as well as the potential capital expenditure for the year? Thank you.

Mike Doyle

This is Mike. I’ll take them in order there. The revenue per room night was down 19% for the quarter. There were three primary drivers. The first was mix shift to group buy and to budget hotels; the second is impacts from -- sorry, the first was mix shift to group buy, the second was mix shift to budget hotels, and then third being the impact of our coupon program. In Q1, the biggest contributor of the decline in revenue per room night was mix shift to group buy hotels.

And then on the cash collection, on the cash collection related to group buy, it is a prepay product, and so we are getting -- taking payment from the customer in advance of the booking. It’s not a significant driver yet of our cash balance on our balance sheet, but it does have obviously a favorable cash flow cycle for us.

And regarding the level of investment as it pertains to headcount and to capital expenditures, our current headcount is a little over 2,100 employees. We haven’t given a forecast for full year staff count, but we will be adding headcount through the year.

Capital expenditures will be up during the year, that we haven’t given a guidance number on that -- in that area, but we are making investments, in two primary areas. One is in opening the second customer service center in Hefei, and the other is in expanding the capacity of our existing systems and network to accommodate our fast-growing hotel business.

Eddie Leung – Merrill Lynch

Got that. Thank you very much.

Operator

Thank you. Our next question comes from Fawne Jiang of Brean Murray. Please go ahead and begin.

Fawne Jiang – Brean Murray

Good morning, Guangfu and Mike. First question is actually also regarding your hotel booking. It’s very strong volume growth for this quarter, but you did mention that you actually distribute those hotel rooms partially through your own network, partially through your third party or your partners, distribution partners. Just wonder whether you would share the proportion from the third party affiliates or distribution partners.

Mike Doyle

Yes. Fawne, this is Mike. About 20% of our room night volume comes from our affiliate partners.

Fawne Jiang – Brean Murray

Okay. Also, really the question is really your sales and marketing expenses, basically I think the increase of sales and marketing partially from your marketing like online, internet promotion, partially from the fee to the partners, just wonder like in terms of the increase, what’s the higher factor of driving the sales and marketing expenses?

Mike Doyle

I think the biggest driver is just growth. So, in driving an online business, we are often acquiring transactions, and so there is a marketing expense associated with incremental transactions. So, given the 67% room night growth, the marketing cost of acquiring each of those orders is also naturally going to increase.

There is also some impact on the mix of marketing channel that’s driving the growth and the relative efficiency of those channels. We are seeing high rates of growth in some of the higher cost channels. I would say the increased online marketing expenses is the bigger driver than any change in affiliate commissions.

Fawne Jiang – Brean Murray

Got it. Also a follow-up question regarding your distribution call centers, just wonder what’s the update of collaboration with Tencent so far. And how is Tencent [linked] within your partners as of now in terms of the volume contribution? And what’s the plan on those and how much of a momentum do you expect from that partner for 2012?

Guangfu Cui

The cooperation with Tencent is -- the performance is improving, and we are seeing quarter-over-quarter volume growth out of cooperation with Tencent. Another benefit we are getting from Tencent is what we are working very aggressively with them on social network marketing. We got over 10 million followers in Tencent microblog and Tencent page which is the same -- kind of like Facebook in China. So that is a tremendous uplift of eLong’s brand awareness among the Tencent [Qzone] users.

We are going to work with them in other ways of branding, marketing, and I hope I have more new to report to you over the next few quarters. Thank you, Fawne.

Fawne Jiang – Brean Murray

Thank you. Thank you, Guangfu. And I’ll jump back to queue.

Operator

Thank you. Our next question comes from Wendy Huang of RBS. Ma’am, you may begin.

Wendy Huang – RBS

Hi. Just a quick question, what’s the implied volume growth by your Q2 guidance?

Mike Doyle

Wendy, this is Mike. We haven’t given product-level details in our guidance, but certainly the 20% to 30% net revenue growth is very heavily influenced by room night growth. We also don’t expect really -- we’ll have the same pressures on revenue per room night, so I think in thinking through how those two -- think of it as the interplay of volume growth and revenue per room night to arrive at net revenue growth. So our room night growth will be greater than the net revenue growth.

Wendy Huang – RBS

So, actually the Q1 revenue growth was 23%, driven by 67% volume growth. So, given that your Q2 guidance, 20% to 30%, quite similar to what you have achieved in Q1, should we expect the Q2 volume growth to be at the similar level as Q1?

Mike Doyle

We’re not going to comment on volume growth outlook.

Wendy Huang – RBS

Okay. Thank you.

Operator

Thank you. Our next question comes from Eddie Leung of Merrill Lynch. Sir, you may begin.

Eddie Leung – Merrill Lynch

Hi, guys. Sorry, just a quick follow-up question on the group buy business, it’s [inaudible] question, how do you guys book the revenue related to the group buy volume to the third-party partners?

Mike Doyle

This is Mike. On the group buy revenue, most of our group buy vouchers have a 90-day expiration or 90-day valid period, and today we have a very conservative approach where we don’t recognize the revenue until the expiration of the voucher. We don’t always have perfect information on when the customers use the voucher because they are free to set the reservation [days] directly with the hotels, and because of that, we’ve taken the most conservative approach, which is to only book the revenue once the vouchers expire.

Eddie Leung – Merrill Lynch

Got that. Thank you.

Operator

Thank you. Our next question comes from Fawne Jiang of Brean Murray. Ma’am, you may begin.

Fawne Jiang – Brean Murray

Hi, just a few quick follow-up here. One is actually regarding your air business. Just to understand, hotel is the [focus] for this business going forward, it seems like the air growth has been decelerating in the past few quarters. Just wonder what going forward do we -- at some level do we expect stabilizing of the air growth or the air would continue to be declining as a proportion of the revenue?

Guangfu Cui

This is Guangfu, I’ll take your question. Over the past four, five years eLong has been executing online hotel [strategy], which means that majority of our marketing resources, the human resources are put in behind the hotel business. And we view our business as complementary products, but our core business has always been hotel. So, our growth in hotel and our decrease in air somewhat reflects our strategy over the past few years.

Going forward, we still view the air business as a complementary product. I think it’s a good and important product, but we will continue to drive hotel business. Our goal is trying to do everything possible to enable, you know, to become the leader in the hotel booking business. That’s how investors should view eLong and judge eLong’s performance. Thank you.

Fawne Jiang – Brean Murray

Got it. Thanks, Guangfu. Also, just wonder, Guangfu, if you could comment on this current competitive landscape, were there anything that you have noticed that may be different just given competitors step up their promotions as well? Any change or like potential strength for the sector?

Guangfu Cui

Yeah. I would say there are two companies, have released news that -- about potential IPO, by Qunar for US listing, another is [inaudible] in domestic listing. This is from their official news release. So, in China, the online travel market is very dynamic and highly competitive, not only the existing players but also the new entrants. We believe consumers win when there is product competition, so we always welcome competition.

Unfortunately, some companies may use their size of monopoly power to shift the market improper or illegal way. For example, some company has sometimes used, twice, to use its size to restrict the freedom of hotels to set price or to work with us or other distributors. And also we know Qunar may receive preferential upside to traffic from its controlling shareholder Baidu which is China’s monopoly search engine. So we believe these sorts of practice harm consumers and suppliers and the entire supply chain, and we encourage all players in this market to compete fairly. Thank you.

Fawne Jiang – Brean Murray

Got it. Thanks, Guangfu. Next question is actually regarding the air and hotel pricing trend in the second quarter. Just wonder whether you could comment on what the trend year-over-year you have seen so far for the second quarter?

Mike Doyle

Yes, so let me first comment on the first quarter. So, while our ADR for eLong was down 12%, we did see flat to slightly positive growth in each star-rated category in the hotel industry. So, our own 12% decline was entirely due to mix shift to group buy and to budget. We’re seeing similar trends in Q2. So, flat to very modestly positive growth by star category. And the eLong result will again be driven by mix shift.

On the air side, in Q1, we saw average ticket prices up about 1%, and we’re seeing similar trends in Q2 as well.

Fawne Jiang – Brean Murray

Got it. Thanks, Mike. Last question is actually regarding call center. I understand you're going to open a new call center in Hefei. Just wonder like what’s the capacity there. And also, how do you see your call center headcount to grow? Also, are there any people that are currently based in Beijing going to move there, or is it just more new capacity you're going to add there?

Guangfu Cui

Yes. This is Guangfu, I’ll take your question. So, the second customer service center in Hefei, which is a long-term investment to support our accelerated hotel business growth, we are running out of capacity in Beijing, so we will keep our Beijing call center, and we are building up our second call center in Hefei.

The first phase we are setting up 500 seats, and it’s going to be up and running in the third quarter. So, basically in Q2 we are hiring people, training them, we are -- we have finished decoration of the first phase, and there are more rooms to expand in Hefei, but we’ll build the call -- build the customer service center as demand come in. So it’s not that we build, there’s whole space and waiting the business to come in. Thank you, Fawne.

Fawne Jiang – Brean Murray

Thank you. Thank you, Guangfu and Mike. Congrats on a good quarter.

Mike Doyle

Thank you.

Operator

Thank you. Our next question comes from Tian Hu of TH Capital. You may go ahead and begin.

Gina Chen – TH Capital

Hi. This is [Gina Chen](ph) calling in for Tian. I just have a couple of quick housekeeping questions.

It seems like interest income increased a lot this quarter. What was the reason behind this increase? And how should we think about this going forward?

Mike Doyle

Yeah, there’s two reasons. So, one, we brought in USD125 million of new cash a year ago in May, from the issuance of shares to Tencent and to Expedia, so we had a larger cash balance year on year, we’ve got about USD303 million. We’ve also increased our interest yield on that cash as well. So those are the two drivers. I think you can expect a similar performance on our cash balance in the next quarter.

Gina Chen – TH Capital

Great. And then just I guess your sales and marketing has been kind of -- it was 10.6 million this quarter, up slightly q-to-q but kind of up year over year from about 6 million in 1Q. So, how should we think about sales and marketing going forward?

Mike Doyle

Yes. So, sales and marketing as a percentage of revenue was up 43% -- was 43% of revenue in the quarter, up from 40% last quarter and 35% for the full year. We’re continuing to make investments in sales and marketing. And as we noted on the call, we’ll continue to do that through the balance of the year. We feel like we have a very strong product and service and are ready to invest in bringing more users to the site, to the call center, and to retain those customers. So we’ll continue to see a high level of investment in sales and marketing through the remainder of the year.

Gina Chen – TH Capital

Okay, great. Thank you.

Operator

Thank you. Our next question comes from Wendy Huang of RBS. Ma’am, you may begin.

Wendy Huang – RBS

Hi. I just want to get some color on the rationale for adding one call center and also expand the customer service capacity, because I recall that your strategy is actually to shift -- increase online hotel booking volume and also your differentiation versus Ctrip is actually to do more online versus offline. That’s why you didn’t really keep a big customer service and call center Ctrip is doing now. So, what’s your rationale behind that? It seems you're -- continue seeing the online shift and have already two-thirds of volume coming from online.

And also related to that, you said to add 700 people to that new call center, so, what’s the current customer service headcount? Thank you.

Guangfu Cui

Okay. Wendy, I’ll take your call. The rationale to set up the second customer service center in Hefei, first of all, that the human resources in Hefei is better than in Beijing. There are rich, educated human resources in Hefei as -- in China because the coastal area is now well-developed and Hefei is kind of second-tier city, and the operation cost is going to be lower. So, strategically speaking, this is just the right choice for us to build the second customer service center in Hefei, with rich human resources and lower operation costs going forward. So this is a long-term strategic choice.

Another thing is that with our [accelerated] hotel growth, there are service and also interactions between eLong and hotel. So, the two-thirds, our customers booking online, however, there are still one-third of customers booking through call centers, and almost all customers may require after-sales service, for example, change, cancellation, complaints, and other customer service.

And also, online service like in social network media, for example, the microblog, eLong staff 24 hours microblog customer service. Anybody who raise a concern or questions over microblog, eLong’s response will be within five minutes we will let customer know our -- we have got their complaints, concerns, and we will address that in an hour. So that’s our standard of service. We also have online chat service, 24-hour service. Basically with online service, it doesn’t take the service away, it’s just that shifting some of the service from the booking to other after-service, or during the booking, assistance.

Another aspect of the growth of human resources in the service center is that with growth volume, we are interacting with hotel with confirmation, audit, settlement, that headcount has increased over the time. So, going forward, what we are trying to do is trying to staff proper number of staff in the customer service center, and also at the same time, trying to automate our interaction with the hotel, especially in the confirmation audit and the settlement.

So we don’t break down our people between the customer service and the other functions, but our customer service function has been in the past over half of our employee force. Thank you.

Wendy Huang – RBS

Thank you, Guangfu.

Operator

Thank you. (Operator Instructions).

Guangfu Cui

Moderator, if there’s no more questions, I want to conclude with final remarks, and we can end the call.

Operator

Okay. At this time, there are no further questions, I’ll hand it back over to the eLong management team. Thank you.

Guangfu Cui

Yes. To compete and win, eLong must continue to provide customers with broad hotel product choices at competitive price, coupled with an outstanding user experience. We are doing a very good job in executing our online hotel strategy over the years and we are very excited about the great opportunity in front of us. It can be done.

Thank you, thank you all.

Moderator, now you can end the call.

Operator

Thank you. That concludes today’s conference. Thank you for participating. You may now disconnect.

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