Millicent Tu - Director, Investor Relations Eric Ya Shen - Chairman and Chief Executive Officer Donghao Yang - Chief Financial Officer.

Alan Hellawell - Deutsche Bank Alicia Yap - Barclays Natalie Wu - CICC Gene Munster - Piper Jaffray George Askew - Stifel Cynthia Meng - Jefferies Jin Yoon - Mizuho Securities Wendy Huang - Macquarie Binnie Wong - Merrill Lynch Tian Hou - T.H. Capital Thomas Chong - Citigroup Sean Zhang - 86Research John Choi - Daiwa Capital Henry Guo - W.R.

Hambrecht + Co./Summit Research.

Good day, everyone, and welcome to Vipshop Holdings Limited's Second Quarter 2015 Earnings Conference Call. At this point, I would like to turn the call to Ms. Millicent Tu, Vipshop's Director of Investor Relations. Please proceed..

Thank you, operator. Hello, everyone, and thank you for joining Vipshop's second quarter 2015 earnings conference call. Before we begin, I'll read the Safe Harbor statement.

During this conference call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations, assumptions, estimates and projections about Vipshop Holdings Limited and its industry.

All statements other than statements of historical fact that we make during this call are forward-looking statements.

In some cases, these forward-looking statements can be identified by words or phrases such as anticipate, believe, continue, estimate, expect, intend, is/are likely to, may, plan, should, will, aim, potential, or other similar expressions.

These forward-looking statements speak only as of the date hereof and are subject to change at any time and we have no obligation to update these forward-looking statements. Joining us on today's call are Mr. Eric Shen, our Chairman, Chief Executive Officer and Co-Founder; and Donghao Yang, our Chief Financial Officer.

At this time, I would like to turn the call over to Mr. Eric Shen. Shen Gong? [ph].

Good morning and good evening everyone. Welcome to our second quarter 2015 earnings conference call. We are very pleased with this quarter results which were driven by our mobile expansion, improved operating leverage and the continued growth of our core business. Let me start with the past growth and the future potential of our mobile platforms.

We have always believed that our core flash sales offering is very well suited for on-the-go shoppers over their mobile devices. For example, commercial release Apple and the show teams [ph] frequency is all higher on mobile than PC.

In the second quarter of 2015 the total actual customers for mobile in our core flash sales business increased by $186% year-over-year. Mobile earnings increased to 76% our total GMV from 46% one year ago.

As we leverage our customer base and the retail expertise, we believe there is great potential for us to help global brands tap into the Chinese customer markets, especially in mother, baby, beauty and bath and other fashion categories.

This is why we began our cross-border e-commerce business in the fourth quarter last year and ramped it up quickly in just two quarters. We were able to grow this business by over 10 times. We have also opened several bonded warehouses to enable faster import business process.

The cross-border business provides us with good cross-selling opportunities as our customers tend to significantly increase their spending once they begin to use this offering.

We believe cross-border business will pick up in the second half of 2015 in terms of total orders and sales contribution and are adding more categories and expanding our networks overseas merchandize and brands to support this growth.

We also continue to invest in [indiscernible] deliveries and warehouse expansion which Donghao will discuss in detail. With China's large online shopping population and our low customer penetration rates we are pleased that there is lot of room for customer growth in the future.

At this point let me hand over the call to our CFO, Donghao Yang, so that he may discuss our operations and the financial results. Thanks, Eric, and hello, everyone.

The strong results we delivered in the second quarter reflected the continued strength of our 400 cap [ph] retail business as revenues, orders and customers on our core platform all continue to expand in tandem.

We are observing powerful [ph] economies of scale demonstrated by our expanding markets, all particularly impressive with a sharp increase in operating margins to 4.9% from 2.9% in the prior year period, primarily driven by the reduction in fulfillment and G&A expenses as a percentage of total revenue.

We made great progress continuing to enhance and expand our logistical capabilities. We now have approximately 1.4 million square meters of warehouse capacity and recently commenced our construction of a new warehouse in Sichuan Province. We are well on track to beat our 1.5 million-square-meter year-end target.

On top of our warehouse expansion, with warehouse enhancement throughout the nation which we achieved this quarter in our Sichuan warehouse. This process improvement allows us to improve the efficiency and reduce labor costs as a percentage of total revenues.

Most importantly, our success in Sichuan can be duplicated in our other warehouses to ensure greater optimization in all the cases.

Just like with our warehouse initiatives, we continue to make headway with our investments in local logistics providers currently who are utilizing our network of in-house and invested core areas to deliver over 70% of our total orders across almost all provinces in mainland China.

Our core area [ph] investments will greatly improve our ability to reduce the delivery times, provide more coordinated and faster [ph] delivery service and in the mid to long-term reduce costs as with greater scale it will be cheaper to deliver ourselves.

Furthermore, we are also developing financial services for suppliers in the form of accounts receivable factoring to better support their business growth. The factoring will help us bring more small-to-mid sized buyers into our ecosystem.

As we continue to improve the overall shopping experience and strengthen ties with our loyalty we are confident that customers will continue to gravitate to our platform in increasing numbers with growing scale, strong operational efficiencies, promising new initiatives, and a focus on our core high margin platform of business we are very well positioned to solidify our leadership in China's discount retail sector and deliver increasing returns to our shareholders.

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

Total net revenue for the second quarter of 2015 increased by 77.6% to RMB9.0 billion, primarily driven by continued robust growth in the number of total active customers and total orders in our core discount retail business, as well as the increasing revenue contribution from our mobile platform.

We began to substantially scale down our growth by segment in the first quarter of 2014 due to a slower margin and customer retention rates.

As a result, the active customers for the group by business as a percentage of Vipshop's total active customers decreased to 0.8% from 22.2% in the prior year period and orders for the group by business as a percentage of Vipshop's total orders decreased to 0.7% from 13.2% in the prior year period.

Excluding the impact of the group by business and [indiscernible] the number of total active customers and total orders for Vipshop's core flash sales business increased by 84.4% and 86.1% year-over-year respectively.

On the mobile platform the number of total active customers and total orders for Vipshop's core flash sales business increased by 155.7% and 194.1% year-over-year respectively.

Gross profit for the second quarter of 2015 increased by 78.6% to RMB2.3 billion, primarily driven by our increased bargaining power with suppliers, due to the expanding scale of the company and the growth of our marketplace platforms. Gross margin for this quarter increased to 25.0% from 24.8% in the prior year period.

Fulfillment expenses for the second quarter of 2015 were RMB819.6 million as compared with RMB515.4 million in the prior year period, primarily reflecting the increase in sales volume, number of orders fulfilled.

As a percentage of total net revenue, fulfillment expenses decreased to 9.1% from 10.1% in the prior year period, primarily reflecting the scale effect associated with our rapid growth in total net revenue and the increase in average ticket size.

Marketing expenses for the second quarter of 2015 were RMB502.6 million as compared with RMB274.2 million in the prior year period.

As a percentage of total net revenue, marketing expenses were 5.6% as compared with 5.4% in the prior year period, reflecting our strategy to drive long-term growth through increasing investments in strengthening our brand awareness, particularly for our mobile applications, attracting new users, and expanding our market share especially within product categories such as cosmetics, home goods, baby and child care products.

Technology and content expenses for the second quarter of 2015 were RMB245.7 million as compared with RMB131 million in the prior-year period.

As a percentage of total net revenue, technology and content expenses were 2.7% as compared with 2.6% in the prior year period, primarily reflecting our continued efforts to expand headcount to better support future growth, as well as our investments in data analytics, which can help improve the ability to predict consumer behavior and further enhance user experience.

General and administrative expenses for the second quarter of 2015 were RMB286.7 million as compared with RMB225.9 million in the prior year period.

As a percentage of total net revenue, general and administrative expenses decreased to [indiscernible] from 2.4% in the prior year period, primarily reflecting the scale effect associated with our rapid growth and total net revenue.

Driven by the growing scale of our company's operations and decrease in fulfillment expenses and general and administrative expenses, as a percentage of total net revenue our income from operations increased by 192.5% to RMB437.8 million for the second quarter of 2015. Operating income margin increased to 4.9 % from 2.9% in the prior year period.

Non-GAAP income from operations, which excludes share-based compensation expenses and amortization of intangible assets resulting from acquisitions increased by 113% to RMB568.6 million from RMB267 million in the prior year period. Non-GAAP operating income margin increased to 6.3% from 5.3% in the prior year period.

Our net income attributable to Vipshop's shareholders for the second quarter of 2015 increased by 147.2% to RMB399.3 million from RMB161.5 million in the prior-year period. Net income margin attributable to Vipshop's shareholders increased to 4.4% from 3.2% in the prior year period.

Net income per diluted ADS increased to RMB0.66 from RMB0.27 in the prior year period.

Non-GAAP net income attributable to Vipshop's shareholders, which excludes share-based compensation expenses and amortization of intangible assets resulting from our business acquisitions and equity method investments increased by 96.6% to RMB517.6 million from RMB263.2 million in the prior year period.

Non-GAAP net income margin increased to 5.7% from 5.2% in the prior year period. Non-GAAP net income per diluted ADS increased to RMB0.86 from RMB0.44 in the prior year period. As of June 30, 2015, our company had cash, cash equivalents, and restricted cash of RMB4.4 billion and held-to-maturity securities of RMB2.9 billion.

For the second quarter of 2015, net cash used in operating activities was RMB467.4 million as compared with enterprise farm [ph] operations of RMB183.7 million in the prior year period.

This was primarily due to Vipshop substantially expediting our payments to suppliers in order to support their growth and create an ecosystem that will strengthen our competitive advantage. As a result, accounts payable days decreased to 71 days in the second quarter of 2015 from 80 days in the prior year quarter.

Meanwhile we also significantly increased our supplier financing and did rest one of the targets carried out through items in the second quarter.

Looking at our business outlook for the third quarter of 2015 we expect our total net revenue to be between RMB9.1 billion and RMB9.3 billion, representing a year-over-year growth rate of approximately 71% to 74%. These forecasts reflect our current and preliminary view on the market and operational conditions, which is subject to change.

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

Thank you. [Operator Instructions] The first question comes from Alan Hellawell from Deutsche Bank. Please ask your question..

Great, thank you very much. My main question is Donghao, as you rightly mentioned, we saw some very encouraging operating leverage specifically in some G&A this quarter.

I just want to know how we should view margin trend throughout the rest of the year and then 2016? I asked this because the market seems to be quite fixated on top line growth and I know that the company has in the past the willingness on occasional to invest in marketing and other areas to stimulate growth.

I sense that instead were more satisfied with slowing but still very strong growth and instead were focused on cultivating profitability.

Is that correct? And then just very quickly, it looks as though may be our cosmetics business may not be growing as quickly as the rest of our business and maybe even compared to our competitors and I would like some color there? Thank you very much..

Okay, Alan, thank you very much for your questions. On your first quarter margin trend, I believe the current margin level is sustainable in the long-term and the idea for this management team is to maintain the current margin level for a while, while focusing our resources and attention on top line growth.

And on the second question, Millicent?.

Okay. So I'll just summarize what Eric said. At Q2 beauty over GMV was U.S. $246 million, that slightly compared to Q1 because if you recall in Q1 we had a major promotion on customer in this year. And the other reason for that was after we acquired Lefeng we substantially cut their budget and their investment and to reduce loss.

So that obviously impacted the overall top line growth of Lefeng. But as a whole we at Vipshop overall beauty product is growing very strong and we continue to believe that in the future that segment is a major category for Vipshop will continue to recall healthy and fast growth going forward..

The next question comes from Alicia Yap from Barclays. Please ask your question..

Hi, good evening Eric, Donghao, and Millicent, thanks for taking my questions.

So I wanted to ask given your fast expansion of the warehouse capacity and also your ability now to provide a collocation service to some of your brands and also with your own delivery team, will you do anything differently this year for the single stage promotions in Q4? In other words can you leverage your infrastructure advantage this year to orchestrate a differentiated November 11 promotional campaigns that maybe allow you to capture more market share and user conversion? Thank you..

So yes, Alicia, you mentioned that we have aggressively invested warehousing, market scalability and non store location. We have invested greatly in our logistics infrastructure to cases where any significant major promotions that we have to consider in the second half.

So obviously, Singles' Day is a major promotion in Q4, but we even have a bigger one in December which is to celebrate our anniversary. So to sum it up, we have enough capacity and capability to handle any major promotion in the second half in order to ensure smooth operation..

The next question comes from the line of Natalie Wu from CICC. Please ask your question..

Hi good evening. Thank you for taking my question. I have two questions actually. The first one is, just wondering if I look at your cost, new cost and the acquisition cost, it seems to be growing rapidly for late in the several quarters.

So how should we expect the sales and marketing expense for the following quarters? And the second is, if I look at your other income items, it actually experienced some weakness on a sequential basis, wondering whether it is due to the conditions or advertising revenue of the market price and can you share with us some color behind that? Thank you..

So Natalie, as a percentage of total net revenues that you can see marketing expense increased only slightly from 5.4% in the second quarter last year to 5.6% in the current quarter, because we do believe that it is very important longer term to reinvest some of our profit into marketing by increasing our brand awareness.

In particular, to acquire more new mobile users and Eric was saying that marketing as a percentage overall will be made similar to the current level at around percentage. One thing to highlight, the mobile media's acquisition cost is going up year-over-year.

As I will believe this is worthwhile investing from the longer term prospective because our customer have high retention rates and they have a long life value which enjoys a very high consumer economics to the Vipshop's business..

Okay, let me take your second question and I am afraid I am a bit confused by your second question. You said other revenue in Q2 was down compared to Q1. But I've just checked the numbers, it was actually up because we had a stronger royalty [ph] platform revenue. So I am not sure if I got your question clear.

But anyway we can take this offline if you want to continue to talk about it..

The next question comes from the line of Gene Munster from Piper Jaffray. Please ask your question..

Hi good evening and question on the macro. I think there is some broader concern that some of the changes and speed of the growth in China could impact your business and any thoughts on how we should think about that going forward and maybe over the last three months how you feel that that's been impacting your business? Thanks..

Okay. So Gene, overall Chinese economy is achieving a new normal kind of growth rate, but overall online Chinese broad base [ph] to continue to pay more share [ph] offline. So we are obviously enjoying the growth [indiscernible] in terms of growth for the entire ecommerce. In particular, we had shopping in the accounts were cyclical business nature.

So we should be actually benefiting from if in the future any potential slowdown of the economy. We are selling substantially discounted products, which is very affordable for a lot of consumers in China..

The next question comes from the line of George Askew from Stifel. Please ask your question..

Yes. Thank you for taking the question. In the release you state that the company is substantially expediting payments to suppliers in order to support their growth, what is the benefit to Vipshop here, is it to win more suppliers, more categories, does it help your platform, your collocation business and is this a permanent change? Thanks..

We believe in creating a win-win, this is a relationship with suppliers. So we always have the suppliers' best interest at heart.

As you mentioned that we recently short-term the account payable to a number of days because our business in nature is very profitable and we don't need to delay payments in order to generate further the cash or further earnings.

There is a beauty to sourcing the payment, although turnover days is to help our suppliers to offer better terms working capital management..

The next question comes from the line of Cynthia Meng from Jefferies. Please ask your question..

Thank you, management. I have a followup question on the cross-border e-commerce business.

Can management give us some more color currently on the contribution to total from this part of this new initiative and is there are any margin difference between cross-border and your core business? In addition, if there is any description of your customer profile, particularly interested in cross-border e-commerce inbound business that will be great? Thank you..

So Cynthia, we are not disclosing the specific GMV contribution, but what we can say is just within a short period of two quarters we've recorded 10 times the growth in terms of GMV cross-border and we are pleased to find that margin for the cross-border business is actually higher than our domestic core lifestyle business.

And in terms of customers we are nurturing and pleased to find that some of our existing customers want to engage our shopping on their cross-border business. They are spending much more compared to their previous shopping behavior. In terms of category, we are aggressively adding more.

We already established bonded warehouses in China to ensure faster custom clearing to expedite delivery. At the same time, we have overseas merchandises ready to engage cooperation with Global Bank..

The next question comes from the line of Jin Yoon from Mizuho Securities. Please ask your question..

Hey good evening guys. It seems like a bit of confusion around your 84.4% total customer growth.

Any chance your could reconcile that number for us between the count for the core versus the group buying in the Lefeng and what was the number for the repeat and can you kind of break that out for us for the last handful of quarters so we could actually see the run rate heading into this quarter? Thanks..

Foreign Language..

Well, Jin Yoon, thank you very much for your questions. This is Donghao. Well, obviously you're asking a lot of details run rate and data. I am afraid we can't go into that much of detail on this call and we probably can take your question after this call..

The next question comes from the line of Wendy Huang from Macquarie. Please ask your question..

Thank you. I have two very quick questions.

First, can you give a sense how big your in-season product sales is, whether that has exceeded 20% of the total GMV? And also are you seeing your business affected by declining inventory level in the retail industry? Secondly, recently we have seen some M&A activities in the baby, maternity category, such as [indiscernible] exhibition of Bubble Show [ph].

So how will this actually affect your baby, maternity business growth going forward? Thank you..

So Wendy, currently we do have plans to engage in this, selling in-season inventories of Vipshop May [ph] product that accounts for 30% of our apparel category.

In terms of sorting or supply from our brand partners, we haven’t and we don’t expect to experience any buffer on that because a lot other brands do have a lot of inventories to be cleared and at the same time they apparently have in-season inventories ready to be moved through our channel and even take it further down the road we can consider customized products if we wish.

So we are not seeing any buffer [ph] on that in this regard. So yes, so you had seen a lot of verticals in the baby and maternity making of lot of moves recently and we actually saw is nothing completes and we are catching up very quickly and making a lot of new initiatives.

To catch of those big trends in the cost we have done quite a bit of maternity in terms of [indiscernible] it recently we expanded into milk powder, diapers and other categories, so we expect that in the future this category will recur more progress in future..

The next question comes from the line of Binnie Wong from Merrill Lynch. Please ask your question..

Hi, thank you for taking my question. So, I have two questions here, one is just a quick follow up on the margin improvement. So we look at the G&A and other [ph] expenses compared to your first quarter, is actually declining in both as well as values and also as a percentage of sales.

So, just want to see what have changed it from first quarter to drive this? And I guess going into the second half what is the company’s strategy, whether will be reinvesting the margin upside, just want to get a sense of the sustain ability of margin improvement.

And a second question was just a quick follow up on the [indiscernible] business can company share with us what are the core key categories would be? And also why is that Shen Gong was saying that we can have a higher margin than you see in the quarter, so just want to see where is the margin upside coming from? Thank you..

Well, thank you Binnie, for you question. Well SG&A in Q2 was only down slightly than Q1, basically it was largely flat, well due to our cost control efforts and also Q2 being the low season in the year.

And you are right the idea now is to reinvest some of the profits back to the business to drive pipeline growth while maintaining the current margin level. So, we believe as we continue to grow our volume and achieve more operating leverage, the current margin level is sustainable in the long-term.

And your second question are not now, the biggest category for our cross-border business is mother and baby, cosmetics, and apparel, and actually the cross-border business had higher gross margin in our core business, let me be a bit more clear on the margin profile of our cross-border business, the gross margin is higher, but if you consider the procurement products, although we see and inside tax, so the net margin level is very similar to our core domestic business..

Next question comes from the line of Tian Hou from T.H. Capital. Please ask your question..

Hi, Millicent, Donghao and Eric Shen Gong. Couple of questions one is related to your recent promotional activities in the second quarter in July and early August.

One thing we have seen is instead of the big storewide promotions once for a while you have a lot of small promotions and I wonder what is the thought source behind the new promotion arrangement, is that helpful to you more than occasional big promotions or it is otherwise? So what's the thought behind it? That's number one.

Number two, last year at this time, you announced the investment in the U.S. to have a R&D center. I wonder, a year later how this R&D center contributes through your technology improvement and where we are in terms of this center? The last question is the growth, the guidance.

Guidance is little bit similar, slightly below Q2 growth guidance and I want a base on what you gave this kind of guidance, do you see any weakness in July? That’s all my questions. Thank you..

Okay, so Tian, so you just mentioned that this year, yes rather than doing more major promotion, instead we’re doing more small promotions surrounding different categories, different plans and different kind of events in order to capture customer retention to encourage them to spend.

And as you can see recently we worked very closely with them to do more base to give them maximum exposure and the effect has been very effective. And then your second question on the RMB contribution, it has been a year since we have that R&D it is starting to contribute in different, in a lot of ways.

Number one, the teams are working more closely within the U.S. office and the China office and obviously they have, they’re on the ground and able to develop new ideas, innovations, the creativity back to China and to do some pioneering programs. So it has been worthwhile and hopefully in the future, we will see further contribution from the team..

Let me take your third question, about our guidance. I think our guidance is okay compared to Q2 and we guided RMB9.1 billion to RMB9.3 billion top line for Q3 reflecting about, 71%, 74% year-over-year growth. And that’s exactly the year we had growth when we gave guidance for our Q2 revenue.

So overall we believe that the growth of our core business as you yourself said is still very fast and strong and healthy..

The next question comes from the line of Thomas Chong from Citigroup. Please ask your question..

Hi, thanks management for taking my questions. I have one question regarding the supplier balance in business, can you comment about the scale of this business in the second quarter and also a fairly – this business is upon the double business? Thanks..

Oh sorry, okay let me take that question. Although we started our supply chain financing business in September 2013 so it’s a little less than three years. As of the end of the second quarter of this year, 2015 the daily balance of our factoring business was about RMB350 million.

So it’s growing very fast, it’s still not a profitable business at the current scale, but we believe over the long run, number one our factoring business will support our suppliers to do more business with us and number two, the factoring business itself will become a profitable business..

The next question comes from the line of Sean Zhang from 86Research. Please ask your question..

Hi Sean Zhang from 86Research. Thank you for taking my questions. Congratulation on the solid quarter.

I have two questions, Donghao mentioned your refocus on top line growth, so I just want to get a little bit more color on your growth movements and going forward it will be nice if you can breakdown for example the user from Tier 1, Tier 2 city and lower tier cities or breakdown the order from these different two markets? I have another question on cash flow, because of your returning back payment to suppliers faster than before to improve relationship, can you give a sense of how we should look at compare what going forward now we are around 70 days coming down from 80 days last quarter, what will that be in the next few quarters or this year? And I also see that the advance from customer also actually reduced by somewhere around US$60 million, can you give us some color on that? That will be all my questions.

Thank you very much..

So Sean, if we look at the growth rate including the – it grew by and Lefeng, our cool businesses still recorded very strong and healthy growth and we expected, and we expect that trend to continue in future..

Okay. Let me take your other question about our cash flow, well in the long-term at the impact from these new payment policies and supply financing activities are fully reflected in our operating cash flow situations. We believe our operating cash flow will be positive as we continue to grow our volume and improve profitability..

The next question comes from the line of John Choi from Daiwa Capital. Please ask your question..

Thanks guys for taking my question. I have actually a couple of questions. I remember that during the prepared remarks you guys talked about the automation that has been quite successful in the Tianjin facilities.

I was wondering how much investment is required in order to replicate this other fulfilment facilities and in that case how much cost saving or in terms of the fulfilment expenses, I mean how will this positive impact your operating margins going forward? Secondly, I want to quickly go back to the Hitao [ph] margin business, remember Donghao you mentioned that gross margins are higher and the net margins are more similar and that more or less means the fulfilment cost is higher, so in the longer run how should we be seeing this going forward? Thank you..

Okay. So John, the Tianjin automation CapEx is around RMB100 million and obviously with that automation we don’t need to increase the labor compared to that in the past and with that CapEx we can say we can reduce the headcount of around 300 people and based on our initial calculation it might take around three years to breakeven that project..

Okay. Let me take your second question on the fulfilment costs for cross-border business. For the fulfilment cross-border business definitely higher because we have to take care of the shipping products overseas.

But again in the long run as we improve the product the efficiency of our fulfilment, the supply chain we and also as we can achieve more operating leverage as our volume continues to grow, we believe that the total fulfilment cost will go down..

The next question comes from Henry Guo from W.R. Hambrecht + Co./Summit. Please ask your question..

Hey thanks for taking the question, so quick one, so, on the warehouse capacity, so what is the utilization rate, for now. From a management view, what is the best utilization rate coming into the Q4 this year? And also CapEx, do you guys have any visibility in terms of CapEx or second half of this year and next year? Thank you..

Okay. So obviously as you are aware we are still building and adding more capacity, so we are not running at full utilization, but will you think it's with the current capacity we have not experienced any bottleneck for our business. And obviously July is the low season so there is still room to improve back that utilization rate..

And there is very strong seasonality in our business as we, as thy mitigate power retailer in China and every year our Q4 is our peak season. So we’re expecting the utilization rate of a warehouse to go up significantly as we are getting to the fourth quarter of this year.

And about the CapEx, we have told our investors that this year and most likely for the next couple of years, we’re going to spend about $250 million every year on our warehouse expansion project..

Thank you. There are no further questions at this time. I would now like to hand the conference over to Mr. Donghao Yang, the CFO. Please go ahead sir..

Well, thank you again very much for coming to our call as I am looking forward to seeing you guys in a few months. Thank you..

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