Weibo Corp (WB) 2015 Q1 法說會逐字稿

Good day and welcome to the Weibo Corporation first-quarter 2015 conference call. (Operator Instructions). I would now like to turn the conference over to Julien Gong. Please go ahead.

Thank you and good morning. Welcome to Weibo's first-quarter earnings conference call. Joining me today are our Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Herman Yu.

The conference call is also being broadcasted on the Internet and is available through Weibo's IR website. Before management's presentation, I'd like to read you the Safe Harbor statement in connection with today's conference call.

During the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update their forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's Annual Report on Form 20-F for the fiscal year ended December 31, 2014, filed with the SEC on April 28, 2015, and other filings with the SEC.

Additionally I'd like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financial includes certain expenses, gains, or losses and other items that are not expected to result in future cash payments or that are non-recurring in nature or will not be indicative of our operating results and outlook. Please refer to our press release for more information about our non-GAAP measures.

Following management's prepared remarks, we will open the lines for a brief Q&A session.

With this, I would like to turn the call over to our Chief Executive Officer, Gaofei Wang.

(Interpreted). Thank you and good morning. Welcome to Weibo's first-quarter 2015 earnings conference call. During today's conference call, let me share with you the latest updates on Weibo products and user traffic, as well as the progress we have made on Weibo's social marketing.

Let me start with our first-quarter performance. In the first quarter of 2015, Weibo continued to achieve strong revenue growth and user growth. Weibo's total revenues grew 43% year over year to $96.3m. Advertising revenues grow [53%] (corrected by company after the call) to $79.2m, with mobile ad revenue reaching 58% of our total advertising revenues. Our non-GAAP net income in the first quarter reached $2.9m compared to a non-GAAP loss of $4.8m last year.

Turning to operating results, in March, Weibo's monthly active users reached 198m, up 38% from the same period last year and 13% from last quarter. Daily active users reached 89m, up 34% from the same period last year and 11% from last quarter, representing the largest user growth rate since our IPO in April 2014. We also saw significant growth in mobile usage, with 86% of Weibo's MAU in March via mobile. Weibo users who have activated Weibo Pay reached 45m in March or 37% of our mobile MAU.

On the operational front, let me elaborate on the key progress we have made. Each year around Lunar New Year in China, many Weibo users living in the first- and second-tier cities in China would return to their home in the second- and third-tier cities to celebrate with their families and friends.

We have, in the past three years, taken this opportunity to run a large-scale red envelope giveaway social marketing campaign to expand Weibo's user base and increase user stickiness, known as [Hong Bao Fei] or Let Lucky Money Fly, Weibo users can give away red envelopes or Lucky Money to attract new fans as well as compete to grab the Lucky Money, the winning of which can be into cash or Alipay.

Our Lunar New Year Red Envelope giveaway campaign this year not only significantly increased Weibo's user activity throughout the first quarter, it also gave businesses the opportunity to participate in social marketing by letting them experience first handedly how to grow the fan base on Weibo through a promotional event.

Weibo's Red Envelope giveaway campaign has really become our hallmark event at the beginning of each year to generate massive user engagement and strong participation from our added customers, including key accounts, large brand advertisers and small- and medium-sized enterprises or SMEs.

Results from this year's Red Envelope campaign are quite encouraging. Over 70m users participated in the campaign and over 1.9m businesses collaborated and other Weibo user accounts together give away RMB1.5b or approximately $140m in cash and coupon value. Compared to last year's Red Envelope campaign, revenue from this year's campaign increased over 2 times.

This was also the first time we are working with Alipay at a strategic level to integrate our product and campaign promotion, which significantly increased the usage of WeiboPay and Weibo Coupon. For example, during the campaign, 36m users used the Weibo Pay and 17m Weibo users redeemed coupons. In coordination with CCTV's Chinese New Year gala and the Lantern Festival shows, Weibo's daily active users for the first time surpassed 100m.

The Red Envelope campaign not only expanded Weibo's user scale and increased user engagement, it also showcased Weibo's marketing tools, like WeiboPay, Red Envelope giveaway, and Weibo Coupon, which provided the foundation for businesses and marketers on Weibo to leverage even based social marketing to grow their following.

On the product front, at the end of the fourth quarter last year, we launched Weibo Group Chat, which differs from QQ and WeChat. As our group chat is interest-based and is designed to enhance the asymmetrical relationship between celebrities and others with their fan base increasing the liveliness of the fans. In a little over three months, we saw the monthly active chat groups reach 120,000 which validates the value that interest-based group chats brings to Weibo's user base.

Weibo's group chat function increases user activeness and engagement. We noted that Weibo users who use Weibo group chat on average log in to Weibo 1.5 times more than our average user. We will continue to ramp up our efforts in Weibo group chat to provide an improved user experience.

On our call last quarter, we highlighted that Weibo's core advertising offering evolve around native app, news feeds and mobile marketing solutions. We recognize that social marketing in China is currently at an early stage. Thus our priority at this moment is to attract businesses and marketers to Weibo to experience social marketing without the requirement to spend a lot of marketing dollars will compel them to use Weibo's marketing tools and service.

We are working with third party service providers to develop and improve service support for businesses who wish to do social marketing on Weibo. With Weibo enterprise accounts reaching 1m and a series of marketing solutions now available, we are gradually cleaning up undesirable marketing behaviors on Weibo. We believe the net impact of our actions will create a healthier environment for business and marketers to conduct social marketing on Weibo.

Historically, the first quarter is the slowest quarter for online advertising in China, particularly with Lunar New Year this year occurring in the middle of February. Nevertheless, we witnessed strong growth in advertising sales this year. In the first quarter, the number of active SME added customers reached 388,000 or 21% increase quarter over quarter.

One key point to highlight is that rapid pace we are seeing Weibo's self-service business growing. Although revenues from self-service native apps represent a small fraction of Weibo SME revenues, the engagement rate of such product lines is 1.4 times of normal ads. Self-service native apps is an important offering on Weibo and we plan to offer promotions and price discounts for this native app service to establish a broad customer base.

Lastly, with mobile user proportion increasing, we are cooperating with mobile-based business in various industries to increase Weibo usage as well as increase users from such verticals. We tested such vertical strategy last year, for example in the area of movies using Weibo's promotional tools, and saw very good results. Our focus this year is also to broaden Weibo's offering from information sharing and the discovery to offering lifestyle services and related promotions.

With that, let me turn the call over to Herman for financial update.

Thank you, Gaofei. Good morning and good evening, everyone. Let me now walk you through our financial highlights.

Revenues came in solid for the first quarter of 2015. Weibo's total revenue grew 43% year over year to $96.3m, which was above our guidance of $93m to $96m. The scale of revenues that Weibo has reached allowed us to have a profitable quarter.

Non-GAAP net income attributed to Weibo's ordinary shareholders was $2.9m compared to a non-GAAP net loss of $4.8m for the same period last year. Non-GAAP EBITDA was $6.9m compared to a negative [$0.5m] (corrected by company after the call) for the same period last year.

Let me give you more color on revenues. Weibo's advertising and marketing revenues for the first quarter of 2015 was $79.2m, up 53% year over year. The strength of our advertising growth was led by our small- and medium-sized enterprise business, which generated $22m in revenues in the first quarter, up 125% from last year.

The first quarter is historically the slowest season for many of our advertising sectors, such as e-commerce and fast-moving consumer goods. However, SME revenues was down only 6% sequentially as the seasonal downtrend was blunted this year by the increased spending from our O2O and app developer customers, as well as the strong momentum that our self-service marketing platform is experiencing.

As mentioned on last quarter's call, Weibo self-service was launched in the fourth quarter of 2014 and we include such revenues in the SME category. For the first quarter, total SME customers, including self-service, was approximately 388,000, up 21% from last quarter. As our self-service platform becomes more established, we're seeing some smaller SME customers who might have otherwise purchased Weibo marketing services from SME distributors use Weibo self-service.

For this reason, we have combined the total SME market direct and indirect together for the purpose of showing revenues and number of customers. This is consistent with our strategy over the long term to have smaller SMEs who require minimum service support to go through our self-service platform and have the larger SMEs and those who require value-added services go to our SME distributors.

Weibo's self-service marketing platform is a service available to businesses and individuals who wish to build an active fan base. On some social platforms, this is known as people marketing. We call this fengsi jingji or fan economy. Based on Weibo's social interest graph recommendation engine, we allow users to purchase fans by promoting the self-service customer account to users whom we think are likely to select for following. Since the new fans are opt-in, we believe to the Weibo customer this will have long-term value.

Through Weibo's self-service, users can also purchase services to ensure that their fans see the feed that they are promoting. We then empower our users to strengthen their relationship with their fans by offering group chat, promotional tools like Lucky Money and coupon giveaways and WeiboPay to enable closed-loop transactions.

We also are working with third party service providers to offer services to our users to enable them to more effectively build their following. People marketing, the model that has worked for social platforms in western markets, and we believe this is a big opportunity in China.

Moving on to KA. Revenues from our key accounts, mostly large brand advertisers, were $22.7m, a drop of 15% quarter over quarter. The sequential decrease was anticipated as Lunar New Year occurred late this year, in the middle of February.

As Gaofei mentioned, during the first quarter we hosted a large social marketing event involving 70m participants, known as [Hong Bao Fei] or Let Red Envelope Fly, which allowed businesses and celebrities, among others, to give away Lucky Money and coupons to recruit new fans and increase interaction with their existing fans. Feedback from our KA customers were quite positive.

The success of this event, positive feedback on Weibo Plus TV and the opening of promoted feeds to KA customers, as well as the launch of advertising on WeChat have our customers asking to learn more about social marketing. In April, we hosted three customer seminars across China, in Beijing, Shanghai and Guangdong, to educate brand advertisers about BigDay. This customer event was designed to educate brand advertisers on how fan economy marketing works, as well as using Weibo social marketing for new product launches.

Given that China has been facing a macroeconomic slowdown over the last couple of years, many businesses are adapting to this environment by launching new products to reignite revenue growth. BigDay is a social marketing solution that we are offering to brand advertisers to help them generate buzz in the initial launch period of their new products.

Revenue from Alibaba in the first quarter was $34.5m, representing a growth of 74% year over year and a decrease of 9% quarter over quarter. Historically, the first quarter is the slow season for Alibaba. By working with Alibaba and Alipay at a strategic level, integrating our product and promotional offerings for the Red Envelope giveaway event allow us to derive incremental revenues that dampened the typical sequential decline of Ali revenues in the first quarter.

We are developing other strategic initiatives with Alibaba that we hope will turn into recurring promotions over time. However, revenues from such strategic initiatives do not occur in a linear fashion as they need to factor in the targeted customer audience and we plan around other promotional events in the industry. For this reason, a big portion of the new businesses with Alibaba that was originally planned for the second quarter, we expect, was still large in the second quarter, but revenue for which may be pushed back into the second half of this year to meet revenue recognition requirements.

For the first quarter of 2015, Weibo's mobile ad revenues reach approximately 58% of Weibo's total advertising revenues compared to 31% for the same period last year. With an MAU of 198m, businesses on Weibo have an advantage to be able to target both PC and mobile users. At the same time, when users begin to access the Internet more from mobile devices, such as the period around Lunar New Year, Weibo offers an advantage as [86%] (corrected by company after the call) of our MAUs or 170m are on mobile.

Weibo's strength on mobile can be seen from first-quarter mobile advertising results, which was down only 2% year over year and was up 185% year over year.

Moving to value-added services, Weibo value-added services revenues increased 9% year over year to $17.1m. Game-related services revenue was $10.9m, up 52% year over year. Membership revenues were $3.6m, up 17% year over year. And data licensing revenues was $2.6m, down 52% year over year or down 11% quarter over quarter. As we explained on the last call, we made a strategic shift in the fourth quarter last year for data licensing and we may see further declines from such revenue.

Turning now to cost and expenses, as a reminder, unless otherwise noted, any comps will focus on non-GAAP financial measures, which excludes stock-based compensation, change in fair value of the investor option liability and amortization of intangible assets and related income tax effects.

Total cost and expenses were $94.7m, up 30% year over year. Cost of revenues was $28.7m, up 66% year over year. Higher cost of revenue growth can be attributed to two primary factors, higher bandwidth and other infrastructure cost resulting from traffic growth as well as the launch of Weibo native video in the fourth quarter last year. And two, higher revenue share cost associated with Weibo value-added services.

Operating expenses totaled $66m, up 18% year over year, primarily due to an increase in headcount-related cost as well as marketing expenditures. For the first quarter we recorded an operating income of $1.6m compared to a loss of $5.6m for the same period last year. This is a great achievement for Weibo as we are able to grow revenues at a pace twice the growth rate of our operating expenditures.

Non-operating income for the first quarter was $1.5m compared to $0.3m last year. Income tax expense for the first quarter was $0.1m compared to a tax benefit of $0.5m last year. Non-GAAP net earnings attributed to Weibo ordinary shares for the first quarter was $2.9m compared to a loss of $4.8m last year.

Non-GAAP diluted earnings per share was $0.01 compared to a loss of $0.03 per share last year. Non-GAAP adjusted EBITDA, defined as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, were $6.9m compared to a negative [$0.5m] (corrected by company after the call) last year.

Turning to balance sheet and cash flow items. As of March 31, 2015, Weibo's cash, cash equivalents and short-term investments totaled $452.5m. Cash provided by operating activities for the first quarter of 2015 was [$7.1m] (corrected by company after the call). Capital expenditures totaled $3.8m, and depreciation and amortization expenses $5.6m.

Turning to Weibo's second-quarter 2015 guidance. We estimate that Weibo's total revenues for the second quarter of 2015 to be $102m and $105m, recognizing the situation around strategic initiatives with Alibaba as explained above.

Before I turn over to the operator, let me quickly summarize this quarter. Weibo's traffic is growing at its fastest pace since our IPO, particularly mobile traffic, which is seeing a growth rate of 57% year over year.

Social marketing is at an early stage in China. But we believe this will be a huge market, similar trends we see in the western market. As social marketing kicks off in China, we are in a good position to benefit given our user scale and brand strength, the viral nature of Weibo and the steady increases of business fundamentals that we have put in place to enable businesses and individuals to perform people marketing.

On the cost side, this was the first time in the first quarter that we turned profitable. And we are growing operating expenses at less than half the rate of our revenue growth.

With that, let me now turn to Q&A.

(Operator Instructions). Eddie Leung, Merrill Lynch.

Good morning. Thank you for taking my questions. Just two questions. The first one is about your revenue guidance for the second quarter. There seems to be a bit of a deceleration. So just wondering if it has something to do with the red packet promotion-related revenue in the first quarter. If so, how you could assess the impact from missing these red packet promotion revenues in the second quarter?

And then secondly, just a follow-up question on your user base. Could you give us an update on the number of corporate accounts as well as the verified individual accounts in the past quarter? Thank you.

Hi, Eddie. Good morning. With regards to the first question, we actually answered on the call that it has more to do with strategic initiatives that we're working with Alibaba, particularly in certain verticals. So it has nothing to do with red packet envelope. And if you look at our guidance for the second quarter, we're expecting the trends for our business, excluding the Alibaba, to continue as we have in the last few quarters.

With regard to the second question on verified accounts, as in the prepared remarks of Gaofei, we said that total enterprise accounts now are above 1m.

Thank you.

Piyush Mubayi, Goldman Sachs.

Thank you for taking my question. Herman, you mentioned that there's greater interest this year on the back of WeChat's P4P advertising launched. Could you share with us the sort of feedback you're hearing? Is this from the SME accounts or the brands? And at what point of time should we be anticipating a ramp-up or an acceleration in your revenues?

And the second is we noticed that your MAU has accelerated but the DAU has been just a touch behind. I suspect that's going to catch up. Could you comment on the time spent, if possible? Thank you.

Okay. So, Piyush, I'll take the first one and then our CEO will take the second one.

With regards to the first one question you mentioned is that our customer feedback and where you expect our revenue to ramp up. So if you look at our revenues breakdown between the key accounts, brand advertisers and SMEs, I think the SMEs over the last few quarters have been producing pretty strongly. They're doubling every year. I think that this trend we see right now should be continuing.

With regards to our key accounts, in the first quarter it was quite -- I recall, going back to the last year first quarter, were quite strong if you look at it sequentially last year compared to this year. And as we mentioned, it had to do with the Chinese New Year. And probably it's because social marketing has just gotten significant increase in the beginning of the year. So as we go into Q2, we expect the trend from key accounts on a year-over-year basis to ramp up compared to the first quarter.

(Interpreted). Okay. So for the second question, for the first quarter, what we noticed is that because in China a lot of the population go back to their home in the lower-tier cities during Chinese New Year, so you'll see a lot of the new users that come on to Weibo would help drive up the monthly active users. And for these new users, it takes some time for them to get accommodated -- to get acclimated with Weibo, to learn how to use it more frequently. So once they become the residual users, we will see them actually helping grow DAU over time. But I think initially, as they become new users, it takes time to learn about Weibo and to use it more recurrently.

And as to your question why the growth rates for DAU lagging behind the growth rate for MAU, this has been a pattern we have observed in the last two years. And, for example, in the year 2014, DAU growth on a yearly basis grows about 31% and -- 31%, 33% -- 31%. And I think MAU grew by 36% on year-over-year basis. So this has been a trend and a pattern we observed. And probably the customer MAUs are not using the application very frequently. That's the only explanation we can have.

Thank you. Thank you very much.

Chi Tsang, HSBC.

Hi. Thanks for taking my question. I have two questions. Firstly, I just wanted to go back to the revenue guidance. So you're talking about the revenue guidance as it relates to deferring revenues as it relates to strategic initiatives. And I was wondering if you can tie that in to the original revenue agreement between Alibaba and Weibo, the $380m over three years. If you can tie that in, that would be helpful.

And secondly, I'd like to get a better sense of actually the MAUs from maybe a more tier 1, tier 2 basis, age and maybe gender. Thanks a lot.

Let me answer the first question and Gaofei can prepare the second one. Regarding the revenue obligation between Alibaba and Weibo, and, as you know, it's more on a yearly basis for three years. And this year is the last year for our -- the commercial arrangement between the two companies based on original contract. Of course we're going to talk about a new contract in the future.

But for the current year, we actually never had so-called obligation based on quarterly basis. And it's more on yearly basis and [extends] a little bit dependent on Alibaba's own need and strategic need and their advertising need. So I think what would reflect in the revenue guidance is what we know they plan for this current quarter. But on a yearly basis, there's obligations. And we're probably more firm on the yearly obligation, but not too much control over the quarterly obligation. So this is what you refer -- what would reflect in our guidance for the current quarter.

Maybe Gaofei can answer the second question.

(Interpreted). Okay. So with regards to our MAU, those are -- tier 1 probably represents around 30%. And below tier 1 is about 70%. With regards to the age, before 1980s, we're talking about 20%. And then after 1980, 70% to 80%.

Okay. Thank you.

Thank you. Next one, please.

Gene Munster, Piper Jaffray.

Hi, guys. Just a quick question around the revenue recognition again. I just wanted to get a sense for how we should think about net revenue being deferred to the second half of the year. Is there any sense in terms of just the growth rates you could give us? Should we expect acceleration Q3 from Q2? Thanks.

(Interpreted). Okay, Gene. So previously with Ali, we used to have an arrangement where we focused on providing brand inventory and performance-based inventory. For this year we wanted to try some things that are new, focusing basically on Weibo which we're working on various vertical strategies. And Ali has agreed to participate in some of these vertical projects, including movies, including travel, e-commerce and so forth.

So for the second quarter we have not finalized the total amount and plans for these new verticals. These initiatives will start in the second quarter. But with regards to revenue recognition, right now some of these might be deferred into the second half.

And just one --.

Did that answer your question?

That was helpful, Herman. Just one quick follow-up. In terms of just thinking about the growth rate and the effects and the impact of that revenue deferral, do you feel like it's reasonable to assume that revenue could reaccelerate on a year-over-year basis as we go into Q3 from Q2? Thanks.

Gene, this is Charles. This is really hard to say. I wouldn't say this is so-called revenue deferral per se. It's really depending on their own plan in terms of how to spend their marketing dollar for each Q. And for this second Q, they happen to be spending a bit less. But in the third Q, naturally they will spend more, but we don't know exactly how much they're going to spend in Q3 or Q4. And so it's really hard for us to say the growth rate on a yearly basis. It will be high in Q3 compared to Q2, I guess. But the trend definitely will be, in the second half of the year, they will have to spend more money. You know that.

Thank you.

Juan Lin, 86Research.

Hi. Good morning. Thanks for taking my questions. I have one question regarding gross margin and the cost of revenue. You mentioned the impact on gross margin was mainly due to traffic and bandwidth, also [IVAS] revenue sharing. So I'm wondering, out of the 66% year-over-year cost increase, how much was caused by bandwidth cost increase and how much is cost by IVAS revenue sharing? And how should we look at the gross margin going forward? Thank you.

Yes. So I think for gross margins, if you look at first quarter I think going into second quarter, you should see similar gross margin. With regards to the breakup between that, I think it's pretty even. Part of the revenue sharing that we have is our games and [it takes off]. Some of the games that we offer have lower gross margins.

Thank you.

Okay. Next question?

Jin Yoon, Mizuho.

Hi. Good morning, guys. Herman, correct me if I'm wrong, but I think Weibo's ad system is now open to all the Baba merchants. If that's the case, are those revenues hitting the Alibaba contribution line or is that hitting the SME contribution line? And how much of your SME contribution is actually coming from Baba merchants?

And finally, the Baba merchants advertising on Weibo, what's -- do you have a sense, I know it's early, but what the seasonality on that could be? Is that following more towards a media seasonality or more towards e-commerce seasonality? Thanks.

Good morning, Jin. Yes. I think you made a good point. The way our business is separated, it depends on which channel the revenue comes in. If the Alibaba merchants go through our distributors or if they buy through our self-service system, then the revenue will be considered SME, because of the channel that they come in from. So that's a good point if that happens.

And your other question was with regards to the seasonality, how do we look at our SMEs. I think if you look at SME growth, it's mainly a big part of that business has to do with e-commerce. But we also have a lot of O2O. We also have a lot of app developers. These three are the bigger categories. We also see some fast-moving consumer goods.

Typically if you look at seasonality, Q1 would be the slowest of the four quarters if you look at spending on a customer basis. But when you look at the growth rate that we have and the amount of new customers that we're adding and the increased ARPU from these, then you actually see them even going on a quarter-over-quarter in the first quarter, it's -- the sequential decline [has dampened].

Thanks, Herman.

Tian Hou, TH Capital.

Hi. Morning, Gaofei, Herman and Charles. The first question is related to your vertical strategy, particularly on the movie channel. So I went into the movie channel. So I saw definitely it's rich in content. I'm just wondering how Weibo is going to make money. And if a movie -- upcoming movie is going to air, so they are marketing on Weibo. And if several celebrities promote this movie between each other and the movie gets promoted instantly, millions of people that notice this movie, and in terms of adding scale, this definitely can reach maximum potential audience. However, how Weibo is going to get paid? So that's the first question.

The second question is related to your TV Weibo strategy. And for such programs, [summer] TV program to go along, so what's the TV program pipeline throughout each quarter in Q3, Q4 and Q2? Thank you. That's all my questions.

(Interpreted). With regard to the first question, Tian, in China we're seeing the movie market growing about 20% to 30% a year. And we entered the movie vertical last year to increase and aggregate the audience for movies. And what we're seeing is that domestic movie producers are basically all spending money to promote their movies as they launch. And we're beginning to see international movie producers to do the same.

So I think our monetization opportunity, one is from the people who make the movies. And secondly, as we're able to aggregate Weibo users into this vertical for people who are very interested in movies, we're seeing advertisers from the fast-moving consumer goods and automobile industry particularly also targeting these set of users for advertising purposes. So being able to verticalize our user base helps enlarge the revenue opportunity -- advertising opportunity from these industries.

With regards to your second question on TV programs, second and third quarters are usually the high season for TV variety shows. And we work with several television stations, such as Hunan, such as Jiangsu television stations. And basically we are the exclusive social media partner with them. And as we get into these seasons in the second half of this year, we think that our revenue opportunity in here would be great, particularly the second and third quarter.

So let me give you another stat. Last year, for this television show, we basically work with the television station and have one show per quarter. This year, with Hunan, with Jiangsu and with Zhejiang television station, we have now up to three shows per quarter.

That's very helpful. Thank you.

Okay. Thank you.

Thomas Chong, Citigroup.

Hi. Good morning. Thanks for taking my questions. I have two questions. My first question is regarding the user trend. Can management talk about how we should think about the second quarter and subsequent quarters? Would other user addition continue to accelerate?

And my second question is about your vertical strategy. Apart from movie tickets, which other areas would you be focused on in the remainder of this year? Thanks.

(Interpreted). Okay. So, Thomas, with regards to your first question on user trend, because of the activities that we have around Chinese New Year, you typically will see our MAUs grow the fastest in the first quarter. And what we tried to do is we tried to keep some of these new users active through Q2 with technological and operational methods. So you should see a very good growth in second quarter. But obviously we expect the growth rate to be slower than the first quarter.

With regards to our verticals, our focus would be on a variety of verticals. But the key ones would be, for example, e-commerce with Alibaba's certain merchants, with movies, with music, in travel and certain -- with O2O.

Okay. That helps -- I hope that helps. Maybe last a one?

Thank you. There are no further questions at this time. I would like to hand back over to management for any closing remarks.

That concludes our conference call. Thank you, everyone.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.