U.S. Markets close in 2 hrs 25 mins

Edited Transcript of WUBA earnings conference call or presentation 29-May-19 12:00pm GMT

Q1 2019 58.com Inc Earnings Call

Beijing Jun 17, 2019 (Thomson StreetEvents) -- Edited Transcript of 58.com Inc earnings conference call or presentation Wednesday, May 29, 2019 at 12:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Hao Zhou

58.com Inc. - CFO

* Jinbo Yao

58.com Inc. - Chairman & CEO

================================================================================

Conference Call Participants

================================================================================

* Hillman Chan

Citigroup Inc, Research Division - Research Analyst

* Tianxiao Hou

T.H. Capital, LLC - Founder, CEO & Senior Analyst

* Wendy Huang

Macquarie Research - Head of Asian Internet and Media

* Rene Vanguestaine

Christensen & Associates - Chairman & CEO

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day and welcome to the 58.com first quarter financial results conference call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Mr. Rene Vanguestaine. Please go ahead, sir.

--------------------------------------------------------------------------------

Rene Vanguestaine, Christensen & Associates - Chairman & CEO [2]

--------------------------------------------------------------------------------

Thank you, Nancy. Hello, everyone, and thank you for joining us today. The company's results and an Investor Relations presentation were released earlier today and are available on the company's IR website at ir. 58.com.

On the call today from 58 are Mr. Michael Yao, Chairman and Chief Executive Officer; and Mr. Zhou Hao, Chief Financial Officer; Mr. Ye Wei, Deputy CFO; and Mrs. Ally Wang, IR Director. Mr. Yao will give a brief overview of the company's business operations and highlights, followed by Mr. Zhou, who will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows.

I'll remind you that this call may contain certain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies such as will, expects, anticipates, future, intends, plans, believes, estimates, confident and similar statements. 58.com may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties.

Any statements that are not historical facts, including statements about 58.com's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but are not limited to, the following: 58.com's goals and strategies; its future business development; financial condition and results of operations; its ability to retain and grow its user base and network of local merchants for its online marketplace; the growth of and trends in the market for its services in China; the demand for and market acceptance of its brand and services; competition in its industry in China; its ability to maintain the network infrastructure necessary to operate its website and mobile applications; relevant government policies and regulations relating to the corporate structure, business and industry; and its ability to protect its users' information and adequately address privacy concerns.

Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the U.S. Securities and Exchange Commission. All information provided on this call is current as of today, and 58.com does not undertake any obligation to update such information, except as required under applicable law.

It is now my pleasure to introduce Mr. Yao. Michael, please go ahead.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [3]

--------------------------------------------------------------------------------

Thanks, Rene. Thanks, everyone, for joining our call. Let me start by saying that despite an increasing economic uncertainty, we still had a great first quarter 2019. Total growth 24.5%, and that was slightly higher than our guidance. On a non-GAAP basis, operating and the net profit grew 30% and 42.6%, respectively. Our app users grew 24% year-over-year. Other user engagement-related metrics are improving as well. Our rolling 12 months app users have increased to 550 million, up 21% year-over-year. As you know, we have a huge user base and massive data across a wide range of content categories. As a result, we are often are asked about macroeconomic trends. Our feedback is deploring, thus it shows that we see a slow down in hiring, driven probably by increasing uncertainty in the business community about growth outlook. We can also feel that big-ticket purchase, such as homes and cars, are slowing down probably due to a combination of weak consumer confidence and the continued government ruling measures in the real estate market.

If confidence doesn't improve, we might see relatively low growth this year. And secondly, there is also a silver lining in the current situation. Government has been more vocal about stimulating holistic construction under the private sector, so they will properly be more supportive policies in the incentives related for job creation and the tax cut. This would help our hiring in the local service business.

But what I want to emphasize most is that we still have tremendous growth opportunity in China regardless of the macroeconomic trends, mainly for the following reasons: first, China is the big country and the user growth opportunities, especially in lower-tier cities and the countries is still massive, in the range of hundreds of millions. Things such as traffic shifting from off-line to online and the secondary home and used cars eventually overtaking new homes and the new cars continue regardless of the macroeconomic environment. Second, technology advances, especially in mobile and the big data and AI are creating tremendous opportunity for us to upgrade our platform to provide better user experience and to grow our universe and the profits.

So I want to take the opportunity to reiterate our 3 key focus areas: platform scale, platform steps and the operational efficiencies. First, from the platform scale point of view. 58 Town or (foreign language) has been a very innovative approach to expand our user bases into lower-tier town and countries. We believe we have attracted more than 100 million new users through 58 Town in 2019. We will continue to expand into more newer areas, improve content creation and traffic optimization. Monetization is very low [priority] for 58 Town this year, but we believe the monetization potential for a lot of growth with a potential of 100 million users is very significant once we start to focus on it.

On the business user front, we now have 2.4 million unique paying users, which is still a small portion of the tens of millions of SMEs in China. We continue to send our field sales or dealer teams to more lower-tier cities, expand -- expecting good feedback in terms of incremental revenue contribution.

Secondly, platform steps. What does it mean? (inaudible) has long been a place where users post and browse information, now with advanced technology and product mix. In addition to just reading and posting of information, then making a core that is increasingly a lot more than classified platform can do to help our users.

Zhuan Zhuan App our used goods platform, for instance, user can directly transact and arrange logistic service. In fact, on the C2C rental side, our platform also offer user directory transactional service.

In our yellow page category, (inaudible) relatively spend a small ticket-sized service, user can directly get a price quote and make a reservation. In some cases, they can also partner with someone who has better expertise in off-line transactional service instead of creating info transactional business ourselves.

As we have announced earlier today, 58 will fetch us convertible notes issued by Uxin for a principal amount of USD 100 million out of a total amount of USD 230 million from all co-investors, including Warburg Pincus and TPG. We believe our online traffic and the Uxin's off-line transactional status virtually create better user experience and accelerate business growth.

That said, let me -- let us be clear that transactional model pattern works for other content categories, especially those that are high value and are low to standard in nature. For those services, we are also defending our platform functions, such as which -- some of which are common in nature and work similarly across our content category, such as IM, instant messaging.

Higher-quality content, video, virtual reality, live streaming, user reviews and the feedback, AI-based recommendation essentially, so users have access to more comprehensive and better-quality information and can interact much more easier with service provider to facilitate decision making.

The center focus area is around increasing operation efficiency. This includes efficiency in user acquisition, new customer acquisition, existing customization, revenue per customer increase and also efficiency in how consumers interact with business on our platform. The solution is also very much technology-driven, such as big data, AI-based chatbots, business user apps, SaaS, et cetera. These initiatives might take a while to improve margins, but we believe in the direction and the need for longer-term margin improvement opportunities is huge as we still have around 16,000 sales in the customer service terminal.

So in summary, that is the main takeaway. There's the near-term macro slowdown, but China is massive and our user base is still growing nicely, and there is still a lot of ground for user expansion. Also, classified ads is a great globally proven, winner-take-all model with many inherent advantages in all our vertical models. And yet, our user experience, they still see a lot of improvement opportunities this particular technology and our proven ability to innovate. We have strong market share in core content categories, such as housing, jobs and auto, and we believe we can further widen the moat.

Let me hand it to Hao for financials. Thank you.

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [4]

--------------------------------------------------------------------------------

Thanks, Michael. Thank you all again for joining our call. This -- let me walk you through the first quarter 2019 financials.

Total revenues were RMB 3 billion, up 22.5% year-over-year. Membership revenues were RMB 1 billion, up 5.7% year-over-year. Online marketing services, revenues were RMB 1.9 billion, up 30.1% year-over-year.

Regarding paying users, we introduced a new metric starting from this quarter. Paying user -- paying business users, which refer to users who are identified as business users with unique identity information, such as business license or personal ID information and who use the company's subscription-based membership services or purchased at least one type of online marketing service in a given period. One paying business user can open up several paying user accounts on one or multiple online platforms.

Up until fourth quarter 2018, we have been disclosing the number of subscription-based paying membership accounts. We believe paying business user is a better metric, mainly for the following 2 reasons: first, over the last several years, our revenue mix have shifted towards OMS, online marketing services, from membership services. In 2013, the membership services revenue was 59% of total revenues, but by 2018, it was down to 33%. So the membership paying user accounts is less and less indicative of the trend in our entire revenues.

Paying business user covers users who purchase either membership services or OMS, so it is more comprehensive. Secondly, as we have always noted in the past earnings, some paying merchant members purchased membership services from more than one of our several platforms and thus contribute separately to the revenues of each platform. The number of paying merchant -- paying membership accounts, therefore, include some duplication. Business paying user, however, represent a unique paying user, eliminates duplication and hence is more indicative of the true size of our business paying user base and market coverage.

The number and the percentage calculation doesn't include paying business users on Ganji, which the company stopped selling stand-alone Ganji subscription-based membership services in 2018 or earlier in all of our content categories. The Ganji number was a very minor single-digit number in the first quarter 2019 number and included some membership packages, who were still under -- were purchased before and due under monetization. This number will further decrease because no new Ganji membership services are being sold today. We believe that by excluding the Ganji portion, we provide a more relevant number to analyze our business width, especially for forward-looking analysis.

In the first quarter of 2019, our total number of paying business users were approximately 3.4 million, a 7.5% increase from the same quarter of 2018. Compared with the 22.5% increase in total revenues, you can see that revenue per customer has increased at double-digit year-over-year. We have been quite successful, especially in innovating and optimizing in our various online marketing services revenue models. And in the meantime, our traffic has had very healthy growth, as Michael talked about earlier. And we have been widening and improving other services such as SaaS tools, streaming, data, et cetera, to our business users. As a result, we believe that our customers' ROI on the platform continue to be very positive.

Gross margin was 90.2% compared with 89.6% during the same quarter of 2018. Operating expenses were RMB 2.45 billion, up 25.9% year-over-year. Sales and marketing expense in the fourth -- in the first quarter of 2019 was RMB 1.8 billion, up 24.6% year-over-year. Within sales and marketing expenses, advertising expenses in the first quarter of 2019 was approximately RMB 887 million, up 30% year-over-year. Non-advertising sales and marketing expenses in the first quarter of 2019 were approximately RMB 907 million, up 19.7% year-over-year. Research and R&D expenses in the first quarter of 2019 were approximately RMB 495 million, up 42.9% year-over-year. The increase was mostly headcount-related.

General and administrative expenses in the first quarter of 2019 were approximately RMB 162 million, generally stable year-over-year. As you can see, advertising and R&D expenses were growing faster than revenues, so I believe that user growth and product technology investments will bring us bigger mid- to longer-term benefits. The nonadvertising sales and marketing expenses and G&A expenses were quite well controlled, and both grew at a slower rate in revenues, which speak to our progress in improving operation efficiency.

The total number of employees at the end of first quarter 2019 was still around 22,000, largely stable, year-over-year or sequentially. Non-GAAP income from operations was approximately RMB 465 million in the first quarter of 2019, up 13% year-over-year. Non-GAAP operating margin was 15.4% in the first quarter of 2019 compared with 16.6% in the same quarter of 2018. Other income in the first quarter of 2019 was RMB 554 million compared with other income of RMB 9 million in the same quarter of 2018, largely due to a noncash fair value gain as a result of the increase in the share price of 5I5J, a public-traded company we invested in during the third quarter of 2018 and still holds a minority stake. Non-GAAP net income attributable to 58.com Inc. ordinary shareholders was approximately RMB 436 million in the first quarter of 2019, up 42.6% year-over-year. Non-GAAP net margin was 14.4% in the first quarter of 2019 compared with 12.4% in the same quarter of 2018.

Now onto the guidance. Based on the company's current operations, total revenues for the second quarter of 2019 are expected to be between RMB 4 billion and RMB 4.1 billion, which represents a year-over-year increase of about 17% to 20% in RMB amounts. These estimates reflect the company's current and preliminary view, which is subject to change.

With that, we'd like to open the Q&A session. Nancy, please begin.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Hillman Chan from Citigroup.

--------------------------------------------------------------------------------

Hillman Chan, Citigroup Inc, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

(foreign language)

[Interpreted] My first question is on investment on Uxin. Could management share more about the rationale behind? And how we should think about the cooperation in the used auto business in the future, in particular the time line of the cooperation and the monetization of strategy? And how we should think about the vertical operation with third-party platform, including Ganji in the future? And regarding -- my second question is on the competition. Could management share more on our view as well as the impacts on Beike, Tencent, WeChat cooperation? And how we should think about the marketing spend on our core [divested] businesses, including [Anjuke] WUBA this year versus last year?

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [3]

--------------------------------------------------------------------------------

(foreign language)

[Interpreted] Yes. Well, on the Uxin case, the rationale is the following: first of all, used car has always been one of the key content categories on our platform, and we enjoy a pretty big user base on our used car category and covering a huge number of cities and regions, including lower tiers. Now for the lower tier cities particularly, our traffic is not that easy to monetize because for those cities they inherently have fewer cars. So even if users wanted to buy a car, he has only very limited option, and those dealers in lower cities are also less developed. Whereas in Uxin, recently, in the last 12 months, they started the business called the cross-regional sales, where they really digitized the car inventories from various dealers that they work with and really created the nationwide inventory of cars and that's visible for everyone that access on the Internet. So this -- they also have very deep experience off-line in terms of inspecting the cars and helping with logistic tile transfers, so on and so forth.

They also have big thousands of people who work on these projects off-line. So they have got experience, they have got a team and they actually have been able to show that they have been -- having pretty good momentum on these cross-regional sales in the last 12 months, and they have good ambitions this year as well. So we believe that 58 used cars traffic platform versus -- and together with Uxin's off-line transactional experience, especially in the cross-regional sales, is very complementary. And we can help Uxin to lower the user acquisition cost, and they will help us to have more verified listings on our platform and enable 58 used cars users to have an access to these services that -- to buy cars in different locations as well. And so we believe it's a good synergy. And we have been working with our web monitoring there, the new cross-regional sales for some time, and we've been discussing with them in-depth for the last several months. And so we've been very careful obviously with this investment, which is $100 million out of the $230 million together with Warburg Pincus and TPG's, et cetera. So we are today working on interfaces already. So it should be pretty soon, hopefully within the months where we can have online collaborations between us and Uxin. So hopefully, our intuitive services can really build a multi-wing situation where Uxin will become more a higher-efficiency company and where our users on 58 will have more selections, and we may have little incremental revenue, and it's a multi-wing outcome.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [4]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [5]

--------------------------------------------------------------------------------

Yes. With respect to Guazi, obviously, as many of you know, that it was initially incubated by us and spun off and they have done very well. And last -- early in the first quarter, we announced a deal to exit partially, our stake, in Guazi for more than $700 million. And even post, the deal has not been 100% completed, but post-deal, we'll also continue to have a stake, a minority stake, about 80% in Guazi. So we'll continue to have business collaboration with Guazi. We're a happy shareholder. They have done well, but it's important to emphasize that 58 used car platform and Guazi are very different in nature. We are a platform approach based on information. We have a huge amount of users. We don't have that many people. We don't get into actual transactions. We don't get into finance businesses, whereas Guazi has become a quite different model in the used car space, and they have done well. And it's also worth noting that Guazi and Uxin are having different models as well. So from a 58 point of view, we are happy to work with all dealers or agents, big or small, including Guazi and Uxin. So we're going to continue it that way in the future.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [6]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [7]

--------------------------------------------------------------------------------

Yes. With respect to Beike, which is also part of Homelink altogether, they were our customers before on our housing platform, and they were in the off-line brokerage -- chain brokerage company in China. But recently, they have started to put more investment quite aggressively on the online platform called Beike, and they are inviting third-party agents to join. And recently also, they got on WeChat Wallet access, but we believe that the mini program traffic that 58 has and together with Anjuke, et cetera, is actually then bigger than to Beike's mini program traffic according to some sources we obtained. But the overall traffic of the Beike platform link is a lot less in our traffic -- than our traffic on 58 housing and Anjuke. We believe it's also -- we're several times bigger than them on the entire total traffic, especially on the app. That's on the traffic side.

On the business side, on the real estate agent side, we're now at 3.4 million paying business users in Q1 '19. Real estate has about 1.2 million. So this is a huge number. And according to numbers that we have gathered from Beike, they alleged that they have about 200,000. And if you take out their original employee or the direct employees, they probably have only less than 100,000. So it's 10x difference. So both from traffic, consumer and from business point of view, I think Beike's platform is a very small fraction of what we have today.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [8]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [9]

--------------------------------------------------------------------------------

[Interpreted] Yes. And also, right around year-end, Chinese year-end or after that, based on data we can gather, that actually the traffic growth of our platform, 58 housing as well as Anjuke, is actually better than Beike and Homelink. Not only are we bigger in size but also we are better on gross rate in that period. We'll probably -- with a lot less advertising spending there. So everything ties in very different traffic acquisition efficiency there. And not only on the overall traffic, but also the user engagement metrics into the time spent and repeated business, et cetera, we are doing very well compared to what we can gather that they're doing. So I think we've been pretty very good competitively against Beike and Homelink.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [10]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [11]

--------------------------------------------------------------------------------

Yes. And it is true that we have increased somewhat our budget on advertising in response to the very aggressive spending from Beike's point of view and as a new challenger. But as far as we know, clearly, they are losing pretty significant amount of money on this. And for a housing platform, which is very low frequency, it's very questionable that if you can continue to be loss making and at a pretty big amount in how stable the model is. And today -- especially in today's financing investment, you see the capital marketing environment. And I think if you continue to lose huge amount of money and continue to rely on [BCMP] financing for a not-proven model, we think it's very questionable.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

Our next question comes from Wendy Huang from Macquarie.

--------------------------------------------------------------------------------

Wendy Huang, Macquarie Research - Head of Asian Internet and Media [13]

--------------------------------------------------------------------------------

(foreign language)

[Interpreted] I would just briefly change my question. So when the company went public, you guys were talking about WUBA's light-asset model and tougher model. So 40% to 50% of operating margin in the long term is achievable. And now even before we achieve that long-term target, we're still in the middle way of coming out to that long-term target. Given the recent macro uncertainties, we are having a setback on the margins. At the same time, we're seeing the companies are moving more towards heavy-asset model, directly or indirectly.

For example, recently, maybe to -- I don't know, maybe to -- for the sake to strengthen your ecosystem, you're making this investment in Uxin and also previously in Guazi as well. So this is actually indirectly or so lowering the return on your capital or indirectly affecting your margin in the long term. I'm not sure if my understanding is correct or not.

And related to this, regarding the [wide town] you're building, you're also actually having lots of town managers on the ground, which actually you need to subsidize them. Although these are not counted as your full-time employees, but in some sense, they are similar to the ground sales force you actually used to have for your [wide] city level of product in the past. So given all of these changes we had on the business front and the investment front, how should we actually think about the WUBA's long-term business profile and also the margin profile?

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [14]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [15]

--------------------------------------------------------------------------------

[Interpreted] Yes, Wendy. Thanks for the question. Actually, as we speak, as you know, our business is made up of a profitable core business in some categories and then some loss-making businesses like Zhuan Zhuan, 58 Town, where there are much earlier-stage business and in a sort of user expansion phase first and has not focused on one mission at a stage. So it's a combination of things that we have. If you strip out the earlier stage, the loss-making businesses, some of the core businesses are actually very close to, say, 40% margins. And even in those businesses, we are still spending for future growth in terms of product tech and user acquisition, et cetera. So in theory, if we further cut back those future investment-raised expenses, our core business can even go beyond 40% in this quarter if we wanted to do that. But we highly question that it is right thing to do. Because we -- in China, we are so blessed in China where there are so many opportunities beyond what we currently already have. If you look at lower-tier opportunity, the 58 Town is potentially addressing. If you look at used car, our collaboration with Uxin or Zhuan Zhuan upgrades of almost the e-commerce model, right? And these are -- these actually are new opportunities where we launched something and they have actually gained very good momentum. And then you further rewind, you can see that our investments in the Homelink and Guazi have yield very good returns, more financial returns today over time. So we had similar choices before we made our bets. And in hindsight, I think it's a good return. So I think on one hand, we do have a high-margin classified business already today, in housing, in jobs. On the other hand, we continue to see great opportunities. And it is our choice to continue to go after more opportunities and eventually create bigger platforms. And ultimately, I think the investors, if you believe in us, you'll get big returns, big profits and revenues down the road. And -- but it's also true that in China -- it's a big country. Not only we see opportunities in many others, big opportunity as well. So there was a lot of entrepreneurs in China, challenge our position from time to time, and we see them put the money in the companies. But then I remind you to look at our track record, right? So if you look at housing, if you look at jobs and some other factors. So by and large, I think we have been winning the competition. So not only we have ambition to create bigger platform and address new opportunity but also we have a pretty good track record in really beating the competitors. And therefore, we are cementing our position or continue to be leaders in more areas. So that's the reality in China, but I think we feel excited about the opportunity to create much bigger and more profitable business longer term at the expense of delaying some of the margin improvement opportunity today.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [16]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [17]

--------------------------------------------------------------------------------

[Interpreted] Yes. So just to add on to that, China is a big country, right? Has 1.4 billion people. And so therefore, competition is pretty much a norm, but we welcome that because competition sometimes makes current -- can be a little pressure, but it's really also educating the market. It is accelerating the user education. It's really just to help the eventual winner to get to the end goal faster. And the other thing it does is it prevents more potential competitors, so if it's already become more competitive and it's actually kind of -- it's not all bad. And the other thing that you looked at, sometimes we choose to do business on our own, sometimes we choose to invest, right? I mean, for instance, Uxin is a good example to show that even though it's an extension of what we want to do on 58, but we do it through collaboration. We do it through collaboration. So it has actually made us less asset-heavy versus if we were to do it ourselves. And if you look at our investments in Uxin, 5I5J or Guazi and 58 Home, today, on paper, they're probably already $2 billion, $3 billion. And we are already getting some of that back in cash from Guazi, for instance. And we believe that over time these investment decisions will prove its value in a more concrete manner.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

Our next question comes from Tian Hou from T.H. Capital.

--------------------------------------------------------------------------------

Tianxiao Hou, T.H. Capital, LLC - Founder, CEO & Senior Analyst [19]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Company Representative, [20]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Tianxiao Hou, T.H. Capital, LLC - Founder, CEO & Senior Analyst [21]

--------------------------------------------------------------------------------

Okay. English. So last earnings call, we did exchange ideas about how WUBA can start Uxin business. So Michael, you answered you're going to get started. So recently after Chinese New Year, we did see such action. It's great. Execution is really great. So (foreign language). So my understanding is, this is a forgotten group of people when people want to selling things to them, when there's time, they will think of them. However, there isn't any group once you help them to find a job to resolve the issues in the city in a strange place, and WUBA now offering such features is really helping them and able to help you. So I think it's great. So Michael, I really like to know what's your strategy going forward to continue step up and to make this a bigger deal for your next growth engine.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [22]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Tianxiao Hou, T.H. Capital, LLC - Founder, CEO & Senior Analyst [23]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [24]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [25]

--------------------------------------------------------------------------------

[Interpreted] Yes. So WUBA -- we'll probably give it a name, say, 58 Community. It's really a place for those who haven't used it. We encourage to try it out, and Tian, definitely thanks for trying -- thanks for looking into that and give us the feedback, which is very encouraging. So 58 Community is really a place in the 58 app where users come, not only -- instead of just typically going to 58 look for housing, jobs and very purposeful information. They come to this community for really to just share their learnings in their daily lives and find people with similar interests or similar viewpoints, so anything that they want to talk about. It's really a place where they discuss things quite freely and find a sense of community online. So this is a new product, but it has been growing very fast, and it has actually attracted more users on our platform than any other single content category in a very short period of time. So it's very popular, and we liked it very much because we think its very unique position, really kind of feel the void of what 58 inhabitant today in terms of what they do. Sometimes they are under pressure. They don't have an outlet for kind of -- some of the theme or just a place to find people who have similar feedbacks or a place to find comfort. So we think it's not -- it's a very unique product, and it's very -- it's a product that brings our users a sense of community and a sense of comfort, which is very nice. And so we'll continue to invest in that. We'll try to have our users to have a sense of belonging or family even. For instance, we allow people with similar professions to talk about their experiences of doing similar jobs online, which is really unique place versus -- instead of other places. They couldn't find other alternative places to kind of have that online interaction. So we feel like it's very useful. And the team internally that is responsible for this project is also very motivated and encouraged by the feedback that we got from our users because they clearly liked it, they visited and they gave us good -- great reviews as well. The 58 Town is also a good product. It's actually -- it's just a very similar product in a different location. So it typically caters to small towns. So Michael was asking, Tian, where she's from, but really, if you're from a small place and right now working in big cities, you kind of wonder what is happening in your home. And you would not know unless you have products similar to 58 Town. So Michael himself also looked back through -- he's from a countryside place, and he also used 58 Town to look back to the original hometown to see what's happening. So it is something that for China is very common, people move around different places. From a small place, they go into big cities for better living. But I think 58 Town also provides a place for those people who are in other places to check out what's happening. So we believe both products are very well. We'll continue to invest, and it's currently growing very nicely.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [26]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [27]

--------------------------------------------------------------------------------

[Interpreted] For people who are in the same town, obviously, they also benefit from a product like 58 Town because it is really digitizing the information for that particular area, which is pretty small. So it was not well served by Internet industry before, but now that with mobile Internet, it becomes conveniently possible. So we kind of enabled that. So it's possible for people living in the same town or also people from that town but not in other places to visit.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [28]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [29]

--------------------------------------------------------------------------------

Yes. So actually, it's the same team who incubated 58 Town and 58 Community. So that team has a very strong sense of mission today, and it's very motivated, too, by the initial success of both products. So we believe products like these will bring a different flavor to 58 on top of what we are already building.

--------------------------------------------------------------------------------

Tianxiao Hou, T.H. Capital, LLC - Founder, CEO & Senior Analyst [30]

--------------------------------------------------------------------------------

It's a great product. And congratulations, Michael and Hao.

--------------------------------------------------------------------------------

Jinbo Yao, 58.com Inc. - Chairman & CEO [31]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Hao Zhou, 58.com Inc. - CFO [32]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

This concludes our question-and-answer session. I would like to turn the conference back over to Rene Vanguestaine for any closing remarks.

--------------------------------------------------------------------------------

Rene Vanguestaine, Christensen & Associates - Chairman & CEO [34]

--------------------------------------------------------------------------------

Thank you, Nancy. Thank you all for joining us today and for your continued interest in 58. Don't hesitate to contact us if you have any questions. Good night.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect, and have a great day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]