Charlie Chen: Hi Management. Thanks for taking my questions. I have two questions here. The first one is regarding the channel inventory. I remember, last time you mentioned that you expect the China inventory of old products on distributor or consumers’ level should be exhausted by somewhere around December. So how do you think the progress right now, or do you still think December will be amounts that the older China inventory will be completely depleted. How is that compared with your original expectation? My second question is on, your company’s sales, monthly sales actually do you see a month-on-month sales recovery since October when the new regulation started to be implemented? Thank you.
Sam Tsang: Thanks, Charles. The first one is, mainly on better the actual results of our channel inventory meet our expectation. And also the second one is about, how the sales trend in recent months. So I mean regarding the inventory of our channels, so for our last earnings call, we expect that this channel inventories will be digested in six to eight weeks. So as we discontinue these older products during the third quarter, we expect that the current channel inventory is extremely low and currently consumers are consuming their products on them. So we expect that the majority of channel inventory of older products will be consumed by our users by the end of fourth quarter. So at that point, we would have a clear picture of the consumer demand for next year.
And so regarding the recent months sales, we understand that investors and research analysts are concerned about, how consumer demand has changed since we adjust the pricing of our products, to accommodate the change of consumption tax together with the change of our products from older generations to GB products. But honestly speaking, till the 16th of November, together with the first week of October, is the golden week holiday, it’s difficult for us to provide an apple-to-apple comparison at the moment. Thank you, for your question.
Charlie Chen: Thank you.
Operator: Our next question will come from Peihang Lyu with CICC. Please go ahead.
Peihang Lyu: Hi, there, management, this is Peihang at CICC. Thank you very much for taking my questions My first question is what are the differences between the Phantom Pro’s use and original products with regard to target customers and positioning strategies. And my second one is recently we have noticed that the retail purchase rate of national standard products might not be very optimistic. So could you please share some causes for this? And also some e-cigarette users might change back to use cigarettes. So how will be the churn rate from your perspective?
Sam Tsang: Thanks, Peihang. So the first one is, about our new product launch, what’s the difference we see in our portfolio. And the second one is about our user retention and also what’s the churn and also how you sort well GB products being launched or tools. So far the first one is about the difference of products. So the key difference between the Phantom Pro and Phantom devices that €“ the Phantom Pro features and addressable power. So for example the fixed power level for the original phantom cartage is 6.5 watts. And with the Phantom Pro and device together being used consumer can select or range the power level that bases where betas stronger or less on from five to five watts to eight watts. This is our ultra-premium device boosting both adjustable power and also resistance level.
And in our view, it is perfect for adult smokers with a longer history of smoking. So as we did in the past so it lands a more diversified product portfolio offering various consumer segments, offering best-in-class products to various user groups pricing opacity and also other passengers. So your second question is about our consumer behavior, how the retention goes and also what the churn rates whether these users have changed to use cigarettes again. So, I think, we are still in the process of gradually rolling out our entire product portfolio problem by province. So therefore, I think, the asset severity and availability of products are factors that will affect our consumers’ purchase journey and also their retention ratio. And also as said before, we believe that a significant portion of our consumers are still consuming their remaining inventories of our older generation of products and some haven’t tried on new GB products yet.
And therefore, I think, the current phase of users for calculating retention rates may be distorted. And also we would like to keep in mind for both investors and research analysts that the performance of one to two or three stores may not be resulting of the company’s overall product performances. And second question is regarding the shift from e-vapor back to cigarettes. And we think that this portion would be extremely limited. We believe that harm reduction and also convenience are two major factors that adult smokers try to the vapor products according to our internal consumer survey. So while our product experience may have changed these two factors i.e. the convenience and also harm reduction will continue to play an important role in our user retention.
So thank you very much for your question.
Peihang Lyu: That’s very helpful. Take care.
