JD Logistics Inc
HKEX:2618
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JD Logistics Inc
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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Logistics Third Quarter 2022 Results Conference Call. [Operator Instructions] I will now turn the call over to Liu Oh from Investor Relations team at JD Logistics. Please go ahead, Oh.
Thank you, operator. Good day, ladies and gentlemen. Welcome to the third quarter 2022 Results Conference Call. Joining us today are our Executive Director and CEO, Mr. Yu Yui; and CFO, Mr. Shan Su.
Before we start, we would like to remind you that today's forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by law.
During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and a reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of financial information and business highlights for the third quarter ended September 30, 2022, issued earlier today.
For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the Q&A session. A third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In case of any discrepancy, management's statements in their original language will prevail.
I would like now to turn the call over to Mr. Yui. Please go ahead, sir.
Dear investors and analysts, welcome to JD Logistics Third Quarter 2022 Earnings Call. I'm Yui, CEO of JD Logistics. Thank you for joining us.
In the third quarter of 2022, facing multiple challenges including the intensifying global economic headwinds and persistent COVID-19 flare-ups in China, we continue to reinforce our supply chain infrastructure, carry out technological innovation, refine professional service capabilities and pursue the ultimate user experience, all aimed at facilitating the safe, efficient distribution of goods, making logistics and supply chain the stabilizer for our customers in an evolving environment.
Thanks to our effective strategies and outstanding execution, in the third quarter, our total revenue achieved steady growth of 39 -- of 38.9% year-over-year to RMB 35.77 billion. Excluding Deppon, our total revenue amounted to RMB 29.95 billion, up 16.3% year-over-year. In the third quarter, revenue from external customers was RMB 24.87 billion, representing a year-over-year increase of 67.8% and accounting for 69.5% of the total revenue for the quarter.
Meanwhile, through cost reductions, efficiency enhancements and refined operations, our quarterly profitability continues to grow year-over-year, delivering a positive adjusted net income of RMB 450 million in the third quarter. And the business volume was seasonally lower.
We continue to empower both new and existing customers to reinforce the supply chain resilience and logistics efficiencies, leveraging our highly synergistic networks, industry expertise as well as our digital and intelligence capabilities built through long-term technological investments.
In the third quarter, our integrated supply chain or ISC business recovered somewhat compared with the last quarter. Specifically, the number of our external ISC customers continue to grow, reaching 63,000, up 10.6% year-over-year. And quarterly average revenue per customer rose by 7.2% year-over-year to RMB 117,000. Fueled by these 2 factors, our revenue from external ISC customers grew by 18.6% to RMB 7.33 billion in the third quarter.
In times of macro uncertainty, collaboration with partners in the upstream and downstream of the industry value chain is particularly vital to a company's development. Moreover, an integrated supply chain is immensely beneficial for companies to withstand risk, quickly respond to market changes as well as reduce costs and enhance efficiencies. For our part, we formulated industry-specific ISC solutions based on the characteristics of each industry vertical and extended their application from leading customers to more medium-sized enterprises.
In the third quarter of 2022, we continue to strengthen our competitiveness in FMCG, home appliances, home furniture, apparel, 3C, automotive and fresh produce industries. As a pioneer of ISC services or automotive aftermarket parts, we further reinforced our leadership position in the third quarter. Our experience in this field dates back to 2021, where we built an ISC project for the automotive market from the ground up as part of our collaboration with the global premium car brand, Volvo. By replicating and promoting this successful experience, we have since provided multiple automotive companies with parts, ISC solutions and logistics services, unlocking the potential of the automotive aftermarket and facilitating industry upgrades.
In addition, capitalizing our service experience in automotive parts, we continued expanding our customer base this quarter in the construction machinery industry. Bolstered by our warehousing network planning capabilities and digital technology applications, we significantly improved customers' spare parts build rates and inventory turnover, thereby reducing their costs and enhancing efficiencies.
With outstanding commitment to providing high-standard services, we continue to update our products and services to comprehensively elevate the customer experience. According to statistics from the State Post Bureau, we have maintained top-tier customer satisfaction ratings in express delivery services for many consecutive quarters.
In the third quarter, we launched our new full insurance service targeting personal delivery and pickup, an upgrade of the previous price guarantee policy aimed at addressing customers' long-time pain points in price guarantee and claim settlements, further improving their experience. Our excellent customer experience has translated into robust business growth. Revenue from our C2C delivery business increased by 50% year-over-year in the third quarter.
With the rise of live-streaming e-commerce and other emerging platforms, we started with to-door pickup of reverse logistics and steadily expanded the express delivery and supply chain businesses. After serving as Douyin's official partner providing nonstop logistics services for its Spring Festival sales promotion, we became one of the first logistics companies connected to the Yinxuda service of Douyin's e-commerce platform in the third quarter, offering high-quality delivery services such as to-door delivery to Douyin users.
Building on our sound cooperation with live-streaming e-commerce platform, we further explored the ISC business with the Douyin ecosystem, helping platform merchants improve fulfillment timeliness and inventory turnover via our industry insights, networks and operational services. Aided by these efforts, the merchants were able to focus on user experience, cost and efficiency in a fast-developing live-streaming e-commerce industry and continue to enhance their market presence.
In terms of logistics infrastructure, with consistent efforts, we have gradually established a worldwide logistics network, underpinning the flexibility, resilience, agility and certainty of our supply chain. As of September 30, 2022, JD Logistics operated over 1,500 warehouses including the ones managed by Deppon Logistics, with an aggregate GFA of over 30 million square meters, including warehouse space managed through the Open Warehouse Platform.
It's worth noting that on August 31, 2022, JD Logistics received the Operation Certificate of Public Air Carriers of Large Aircraft from the Civil Aviation Administration of China, CAAC, marking the official commencement of the operation of JD Logistics Airlines. At present, JD Logistics' self-owned all-cargo routes between Nantong and Beijing is fully operational. Building on this momentum, we'll take steps to create a comprehensive backbone network for domestic air freight. JD Logistics Airlines will not only play its part in supporting our ISC services capabilities but also be instrumental in our end-to-end cost reduction and experience and efficiency enhancement efforts.
On July 26, we completed the acquisition of a controlling stake in Deppon Logistics, which owns a nationwide freight network. As of June 30, 2022, Deppon Logistics owned nearly 9,000 service stations in China, covering almost all the counties nationwide, 145 sorting centers with a GFA of over 2 million square meters and more than 20,000 self-owned vehicles. Our acquisition of Deppon has effectively strengthened our bulky items and freight network capabilities. Right now, we are exploring our business and network integration according to our plans, examining and validating our business model, work processes and mechanisms to progressively unlock our synergies.
We have extended our ISC advantages to fulfilling our social responsibilities and advancing sustainable development. On August 15, as China's first logistics enterprise adopting battery-swapping vehicles on a large scale, we put our first batch of battery-swapping new energy vehicles into operation to lower carbon emissions.
Moreover, our achievements in sustainable development has gained the recognition of international authorities. For example, in the recently released S&P Global ESG Scores based on the S&P Global Corporate Sustainability Assessment, we received a score of 47, at the forefront of the global transportation industry, a testament to our excellent environmental, social and governance performance.
Going forward, at a time where market risks and opportunities coexist in a volatile external environment, we will stay true to our original aspiration of driving superior efficiency and sustainability for global supply chains through technology. We also continue to enhance our presence in the logistics industry and ensure our supply chain stability and reliability powered by digital and intelligence technologies as well as empower more customers to respond to any changes with flexibility and resilience. Meanwhile, as always, we'll actively fulfill our social responsibilities and promote the integration of the digital and real economy. We're fully confident in the company's long-term development and truly grateful for your continued support. Thank you.
Next, I'd like to invite Mr. Shan Su to discuss the details of our financial performance.
Thank you, Mr. Yui. Hello, everyone. This is Shan Su, CFO of JD Logistics. I'm pleased to present the financial performance of JD Logistics for the third quarter of 2022.
During the quarter, against macro headwinds and the lingering resurgence of COVID-19, we continue to steadfastly advance our prudent financial strategy with a consistent focus on improving our business. We took a series of effective and refined cost and expense control measures with a stronger-than-ever emphasis on our profitability and cash flow.
We are delighted to have achieved a net profit in our business in the third quarter even before we take the Deppon consolidation into consideration. This demonstrates our steadily improving profitability. And meanwhile, Deppon also contributed positively to our profit.
On July 26, we acquired a controlling stake in Deppon Logistics and started its financial consolidation from that day onwards. As of September 30, 2022, we held about 72% of Deppon's issued share capital with a consolidation period spanning 2 months and 6 days in the third quarter. To provide a clear picture of our business performance with and without the impact of Deppon, I'd like to present our results including and excluding Deppon, respectively.
In the third quarter of 2022, total revenue from our consolidated business reached RMB 35.77 billion, up 39 -- 38.9% year-over-year. This includes RMB 5.82 billion from Deppon during the consolidation period and RMB 29.95 billion excluding Deppon, which maintained a steady year-over-year increase of 16.3%.
In the third quarter, sporadic flare-ups of the COVID-19 pandemic across various regions of China continue to weigh on our logistics fulfillment and the pace at which our customers resume production. This posed a challenge to the growth of our consolidated revenue, especially revenue from our ISC business. With the sustained commitment to enhancing our presence in our 6 core industry verticals, we continue to accumulate and expand our supply chain solutions for each vertical to increase the penetration of our ISC business.
In the third quarter, revenue from ISC customers totaled RMB 18.23 billion. This accounted for 51% of total revenue and was 6 -- was up 6.6% year-over-year. Specifically, our ISC revenue from JD Group amounted to RMB 10.9 billion, down 0.2% year-over-year. The slight decline was primarily due to the adjustments of JD Group's Jingxi business. Excluding the effect of these adjustments, our ISC revenue from JD Group maintained single-digit growth in the third quarter.
In addition, our revenue from external ISC customers continued to grow by 18.6% year-over-year to RMB 7.33 billion in the third quarter. This included Deppon's revenue from warehousing and its supply chain businesses, which totaled RMB 160 million during the consolidation period. Excluding Deppon, our revenue from external ISC customers was RMB 7.16 billion in the third quarter, rising 16% year-over-year, an improvement of 5.3 percentage points compared to the second quarter. The consolidated number of external ISC customers contributing to revenue was about 63,000 in the third quarter, increasing 10.6% year-over-year. Our average revenue per customer ARPC in the third quarter was up 7.2% year-over-year to RMB 117,000, showing signs of recovery compared with the year-over-year growth in the last quarter.
In this quarter, revenue from other customers experienced significant growth, totaling RMB 17.54 billion, up 102.8% year-over-year. To be specific, revenue from Deppon's express and freight deliveries during the consolidation period amounted to RMB 5.66 billion. Excluding Deppon, revenue from other customers was RMB 11.89 billion, increasing by 37.4% year-over-year.
Our continued high-speed growth was primarily driven by the implementation of our core strategies. In the third quarter, revenue from external customers as a percentage of total revenue reached a new high of 69.5% including the incremental growth from Deppon's consolidation. In addition, excluding Deppon, revenue from external customers as a percentage of total revenue was 63.6%, an improvement of 5.3 percentage points compared with 58.3% from the second quarter. This set a new record and demonstrated our success in our continued expansion of our business from external customers.
In addition to revenue growth, our consolidated gross margin for the third quarter improved considerably by 2.5 percentage points year-over-year to 7.4% from 4.9% in the same period of last year. This highlighted the effectiveness of our continuous refined cost management and the manifestation of our economies of scale and Deppon's consolidation.
Our cost of revenue in the third quarter were RMB 33.12 billion, rising by 35.3% year-over-year. Besides extra costs incurred to support business development, the increase also reflected additional costs from Deppon during the consolidation period, which were reclassified according to our standards.
Now let's turn to the main cost of revenue. First, consolidated employee benefit expenses were RMB 11.22 billion in the third quarter, up 27.8% year-over-year. In addition to Deppon's consolidation, the increase was due to a rise in the number of operational employees from 271,000 at the end of third quarter of last year to 297,000 at the end of the third quarter of this year, a quarter-over-quarter reduction of 7,000.
The growth in the number of our employees was mainly a result of adding more personnel to the key steps of our operations, including last-mile delivery to ensure high-quality services and elevate our customers' experience.
In this quarter, consolidated employee benefits accounted for 31.4% of our total revenue, down 2.7 percentage points from 34.1% in the third quarter of last year. In addition, excluding Deppon, employee benefits as a percentage of revenue improved year-over-year in third quarter largely due to our economies of scale from business growth and more refined management.
Another important component for cost of revenue was our outsourcing cost, which reached RMB 13.37 billion in the third quarter of 2022, up 36.4% year-over-year. This accounted for 37.4% of total revenue, lower than 38% in the same period of last year. The year-over-year improvement will be more significant once Deppon is excluded. Nearly 80% for stand-alone outsourcing cost was attributable to the transportation expenses of third-party suppliers. The lower outsourcing costs as a percentage of revenue in the third quarter compared with the same period of last year was primarily driven by refined transportation resources management and investments in big data and intelligent technologies. These factors enhance deployment, precision and efficient matching of vehicle and transportation routes. Meanwhile, we also maintain stable collaboration with transportation suppliers and conducted friendly negotiations for a reasonable price as the impact of oil price fluctuations on our operations was manageable.
Finally, our consolidated rental costs were RMB 2.88 billion in the third quarter, up 19.3% year-over-year. This was primarily due to an increase in the number and geographic area of the logistics facilities including warehouses and sorting centers as well as Deppon's consolidation. As of September 30, we operated over 1,500 warehouses including the warehouses managed by Deppon. Meanwhile, the GFA of our warehouse network, including warehouse managed through the Open Warehouse Platform, exceeded 3 million square meters.
Consolidated rental costs in the third quarter constituted 8.1% of total revenue, down 1.3 percentage points compared with 9.4% in the same period of last year. The decrease was partly attributable to Deppon's lower rental cost as a percentage of revenue.
Apart from the main cost of revenue mentioned above, consolidated depreciation and amortization costs and vehicle usage costs also rose as a percentage of revenue after consolidation. This was due to Deppon's higher expenses related to self-owned vehicles as a percentage of revenue.
Our consolidated expenses in the third quarter were RMB 2.66 billion, growing 16.5% year-over-year and accounting for 7.4% of total revenue, a decline of 1.4 percentage points compared to the same period of last year. Among them, selling and marketing expenses were RMB 980 million, which made up 2.7% of total revenue and 3.9% of revenue from external customers, a decline of 1.5 percentage points from the same period of last year. Our selling and marketing expenses excluding Deppon as a percentage of revenue also declined year-over-year.
In the third quarter, our R&D expenses were RMB 790 million, accounting for 2.2% of total revenue and a higher percentage of total revenue excluding Deppon. We have maintained R&D expenses at a considerable percentage of revenue to boost the company's core capabilities, laying a solid foundation for the expansion of our customer base, investments in operational resources and empowerment of the external customers.
G&A expenses were RMB 880 million for our consolidated business, accounting for 2.5% of total revenue, a reduction of 0.4 percentage points from the same period of last year.
In terms of net profit, I recommend that you consider our non-IFRS measures, which we believe better reflects our operations given that adjusted non-IFRS net profit largely excludes factors such as share-based payments, amortization expenses of intangible assets arising from acquisitions and fair value changes of investments.
In the third quarter, consolidated adjusted non-IFRS net profit was RMB 450 million at a profit margin of 1.2%. This included positive contributions from Deppon. Specifically, our consolidated adjusted non-IFRS net profit included RMB 260 million contributed by Deppon consolidation. It also included an adjusted non-IFRS net profit excluding Deppon to the tune of RMB 190 million. This represented a profit margin of 0.6%, which means that we realized a net profit during the off-season. This was a notable profitability improvement compared with a loss in the same period of last year.
We continue to monitor our capital reserves and cash flow to maintain healthy and sufficient capital to support business development and meet our operational needs. Our consolidated cash flow from operations in the third quarter under IFRS improved significantly from the same period of last year. Meanwhile, our capital expenditure was essentially flat in our consolidated business for the third quarter compared with the same period of last year. It also accounted for a higher percentage of revenue than in the first half of this year. We will steadily and effectively deploy capital according to our business development needs to consistently improve our network layout and operational efficiency.
I'd like to thank our shareholders for their continued support of our company. Sustaining our steadfast commitment to our core development strategy, we'll focus on improving our core competencies and further refining our operations to gradually unlock our profitability potential and create value for shareholders. Thank you.
Thank you, Mr. Shan Su. This concludes our prepared remarks. We will now start the Q&A session. During the Q&A session, we'll only be accepting questions in Chinese. The management will only answer the questions in Chinese. Thank you. Operator, we can start the Q&A session now.
[Operator Instructions] The first question comes from Goldman Sachs.
I would like to ask, so the revenue growth from external customers was 16%. Compared with before the pandemic, it was pretty fast growth. And given the pandemic's impact, I was wondering when can we resume the growth rate like in last year. After all, an ISC business for external customers is also a source of revenue, so I was wondering what's your view towards the growth of the ISC business from external customers especially in finding new growth areas for this business.
And secondly, regarding Deppon, in the future, if we consider costs and including outsourcing costs, then how will the acquisition contribute to synergies? What are the quantifiable impact that will increase efficiency and reduce costs?
Okay. Let me answer your question, and Mr. Shan can make additional remarks. Regarding the growth of our ISC business from external customers, it's true that we achieved growth compared with last quarter. But frankly, currently, given the macroeconomic situation, including the downturn in the real estate industry, our customers are impacted. So this year, when making business decisions, our customers would be prudent.
As to when our growth will return to a similar level as last year, I think we'll need a few positive signals. First is the overall macroeconomic growth especially in retail. And secondly, pandemic control. We hope to have some positive changes in pandemic control measures that would contribute to our business growth.
And regarding the synergies with Deppon, the acquisition is highly valuable to us. Firstly, it could increase efficiencies and reduce the cost of our network because Deppon has their self-owned transportation network nationwide. And they also own their vehicles. There is still tremendous room for us to further reduce costs and enhance efficiencies in our network operations. And with Deppon, they can also complement our portfolio and enhance our service capabilities to customers. In the future, when serving our supply chain customers, I think Deppon could really be complementary to us.
As to cost reductions and efficiency enhancements, I think in the following quarters, the effects will be unlocked gradually. So probably every quarter, we'll see some efficiency and cost improvements.
Next question comes from Jefferies.
Great performance in the third quarter. I have a question regarding long-term and short-term development. So the pandemic obviously had pretty big impact on logistics. I was wondering what's the short-term situation. Like over the past few months, what was the impact on logistics?
And regarding business with large customers and also with small- and medium-sized customers, what's the situation of that? In the future, over the long term, what's the prospects?
And I see that JDL has achieved a net profit in the quarter. That was a review of JDL's long-term profitability. Do you think there will be a positive change?
Let me answer the question about the long-term prospects and the long-term net profitability. Well, we have a lot of confidence that our profitability will grow gradually and then stabilize. In Q4 and next year, we can be certain of rough direction but not more than that. It's difficult to give a specific number. Especially considering the pandemic's impacts on our customers, it's difficult to predict how well our customers will recover and also how the macro economy will go.
Over the long term, in terms of customer contribution, I think most of the contribution made from SMEs. And as to large customers, it's not about increasing the number of large customers but more about increasing their ARPU. The performance across the industries may vary, but we can see the ARPU of our small customers has been increasing.
Over the past few months, it's true we were impacted by the macro situation, but I think it's a fluid situation that is changing by the day. And mostly, it's only for the short term. Now we have like 10% of service stations that were affected by the pandemic. And again, this number keeps changing, including our warehouses or our sorting centers. Some of them may be disrupted shortly. And compared with the second quarter, the situation is not bad at all. And there has been sporadic COVID-19 outbreaks in China lately, which differed from Q2. So it's true the pandemic disrupted our operations in Q3. I hope I answered your questions.
Next question comes from Citi.
First, congratulations on an excellent quarter. And I want to ask about profit. I know you said it's difficult to give guidance on profit for next year. But as the economy recovers, will JDL continue with its cost controlling measures? Or will JDL increase investments as the economy recovers?
Regarding costs, we will be implementing cost control measures for a period of time. And of course, it's not to boost long-term growth. And to answer your question, firstly, we will maintain our cost controls. And next year, we will be bolder in our network and transportation route investments with the specifics depending on the economic situation next year.
So overall, regarding our resource investments, we have our models for us to calculate the right amount of the investment. And we'll make the investment according to the pace of our business. Basically, if the pandemic situation eases, we'll continue with our investment to create long-term value. But these investments, they will take effect over the long term. But again, we'll use our models to control our costs. Thank you.
Next question comes from CICC.
I have 2 questions. The first is about the number of customers. So excluding Deppon, in Q3, customer number dropped slightly, even though just very slightly. And I was wondering how much of that was proactive action on JDL's part and then how much was due to customer retention.
And the second question is regarding Deppon regarding its costs and expenses. Are there some classifications or other different standards regarding their costs and expenses, like maybe they have certain very large costs but are not reflected in JDL's consolidated performance?
First, to answer your question on Deppon, I think they can -- they come in, in different categories. Firstly, under IFRS, you can see their numbers under PRC in their own financial statements, but we will address that to IFRS. And secondly, after the IFRS adjustments, based on our own classification of costs and expenses, we'll make adjustments to the numbers from Deppon. So there's a reclassification process. Like some would be counted as selling and marketing expenses, some would be considered cost, and some of that classification will result in large changes.
And we only consolidated 2 months and 6 days of Deppon's financial performance, not full 3 months. So it's not completely comparable to Deppon's PRC-based performance. And excluding Deppon, the number of our customers increased by close to 10% year-over-year, meaning that our stand-alone business' customer number is still growing. And like I said, we have added close to 10% of new customers. And one reason is that our business growth has slowed down in Q2 and Q3.
Okay. I have one follow-up about Kuayue. You mentioned Deppon has financial statements. And this year, there has been progress in the freight delivery market. So how about the performance of Kuayue including revenue and profitability?
Okay. Deppon was an Asia-listed company, so it discloses its financial statements according to the rules of the Asia market. And in our consolidation of their performance this quarter, we separated our performance.
Just to give you a clearer picture regarding Kuayue, it's already part of JDL, so it's within our stand-alone business. That's why we did not separate their performance in our disclosures. After we assumed control of Kuayue, both their revenue and profitability progressed very well, and it exceeded our expectations. Thank you.
Next question comes from Macquarie Capital.
I have 2 questions. Management just shared that revenue from JD Group has a gap with JD Group's revenue growth because of the adjustments of Jingxi. I was wondering how long will this impact last.
And second, management shared JDL's progress in working with live-streaming e-commerce. And I was wondering if JDL has any mid- to long-term goals in this area. Like what's the targeted revenue from this segment? And from a long-term perspective, how is this segment compared with the original business of JDL?
Speaking of the Jingxi business, the adjustment or the downsizing took place in Q2. And in Q4 and Q1 next year, there will be a single-digit impact on us. So starting from Q2 next year, the impact will decline, and basically, there will be no impact anymore in Q3 next year from Jingxi.
Regarding your question on live-streaming e-commerce, we haven't set any mid- to long-term revenue targets from this collaboration. Our strategy is still to serve our customers better with reduced costs and enhance efficiencies. And we are not planning to set any revenue target. And again, we're not disclosing the profit from specific customers. We are looking to create value for our customer base and enhance the service experience. Thank you.
Next question comes from CICC.
I have 2 questions. The first question, from a long-term perspective, I see business takes time to build up. And the -- what's your standard for selecting which industry verticals to work with? And I believe there are some commonalities in -- among the industry verticals that you provide your ISC services to. Could you maybe elaborate on that?
And second, to my understanding, JDL is still in the process of improving your product offering by enhancing your capabilities. Do you have a priority list next year?
First, regarding the industry verticals and our standards for choosing industry verticals, we mentioned in our perspective that we focus on FMCG, apparel, the 3C, home appliances and home furniture. We focus on 6 core industry verticals, and this is for the long term. We'll continue to invest to work in these industries. And again, we will endeavor to solve the difficult problems and pain points for our customers in these industries and then make them into modularized products to serve other customers in the industry.
So basically, we would try to serve industries that have the need for more services such as construction machinery. We first started with the automotive aftermarket. And then we realized that the construction engineering industry, because it's heavy machinery, is kind of similar to the automotive aftermarket. And then going forward, again, we will make use of our existing capabilities to expand to other industry verticals based on similar needs in those industries.
For us, our IC -- or ISC products, they involve a lot of steps. And so we hope to get involved in the whole supply chain process of our customers, starting from planning all the way to execution. And for us, for a long period of time in the future, we will prioritize customer experience. And only by making our products more competitive and creating value for our customers can we achieve good revenue and profitability. Thank you.
[Operator Instructions] Due to time constraint, that concludes today's Q&A session. At this time, I will turn the conference back to Oh for any closing remarks.
Thank you again for joining us today. If you have any further questions, please contact our IR team directly. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]