Kate Wang: So the first question is on the growth of our industry and the second one is on the profitability of our company. I think the user demand for National Standard products has improved overall compared to what you mentioned in March 2023, before the regulators initiated a special crackdown on illegal products. However, after the special action ended, our industry faced waves of challenges from illegal products as their illegal sales have become more secretive. At the beginning of this year, retailers would publicly display illegal products on shelves. Now, after the special action, they only sell these products to users they are familiar with. Therefore, it’s difficult to accurately estimate the demand for this category and predict the need for the national standard products.
We are confident in our regulated enforcement and believe more users will gradually use National Standard products in the medium and long-term. So regarding your second question, I think as discussed in our second quarter earnings conference call, we have significantly optimized our cost structure and streamlined our operations over the past few quarters. As a result, the absolute amount of our gross profit improved by 7% quarter-over-quarter and our non-GAAP operating expenses for the third quarter decreased by 27% quarter-over-quarter and 3% year-over-year. With our top-line recovery and cost reduction efforts, we realized positive non-GAAP operating profit in September. We expect our non-GAAP operating profit to remain positive in the fourth quarter if our top-line and cost structure don’t change significantly in this or next month.
Furthermore, our operating cash flow has been positive for 2 consecutive quarters. In the third quarter of 2023, we achieved and operating cash inflow of RMB67 million, compared to a RMB41 million inflow in the third quarter and RMB231 million cash outflow in the Q1, demonstrating our ability to adapt to the changes in macro and industry development quickly.
Operator: The next question comes from Peihang Lyu with CICC. Please go ahead.
Peihang Lyu: This is Peihang at CICC. I have 2 questions here. The first one is about the product. Could you give us some color on the sales of the recent approved GV products in the third quarter? And how is the sales proportion for each major product? And my second question is about the channel. After the renewal of retail license, and what is the most updated number of domestic outlets, and how is their profitability and their operating situation from your perspective?
Kate Wang: So the first question is on new products and the second question is on the retail order sets we have. So for the first question, our user survey actually shows that 2 flavors that we launched a couple of months ago [Indiscernible] are becoming increasingly popular among users. These flavors are now available at most stores nationwide. And in October, the sales contribution of these 2 flavors to our Phantom series has already reached the mid-teens. Additionally [Indiscernible] Net Promoter Score now ranks number 3 among our Phantom series, just slightly behind our best-selling [Indiscernible] flavors. We anticipate that the sales contribution of Shenzhen Wuxin and [Indiscernible] will continue to rise. And in October, we also launched our 5th cartridge series, LEILI, which is compatible with ASUS device, but are more affordable than its cartridges.
By the end of October we have launched the LEILI series in more than 17 provinces. And regarding your second question, it’s about the number of retail outlets. The number of retail outlets has remained stable in the past few months, following regulators’ special crackdown on illegal products. Furthermore, more users have begun trying compliance products. As we explained in our opening remarks, only 40% of participants were aware that after October last year, retailers could only sell tobacco flavored cartridges legally. As more and more users gradually become aware of the new regulations and the benefits of national standards, such as required approvals before product launches and the assurance that all ingredients in the liquids are on the right list.
