JOYY Inc (YY) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to YY Inc.'s First Quarter 2018 Earnings Call.

(Operator Instructions) I must advise you that this conference is being recorded today, Wednesday, 6th of June 2018.

I would now like to hand the conference over to your speaker today, Mr. Matthew Zhao, IR Director of YY.

Thank you, sir.

Please go ahead.

Thank you, operator.

Good morning and good evening, everyone.

Welcome to YY's First Quarter 2018 Earnings Conference Call.

Joining us today are Mr. David Xueling Li, Chairman and acting CEO of YY; Mr. Bing Jin, CFO YY; and Ms. Ting Li, COO of YY.

For today's agenda, the management team will provide us with a review of the quarter.

Following their prepared remarks, we will conduct a Q&A session.

The first quarter 2018 financial results and webcast of this conference call are available at ir.yy.com.

A replay of the call will be available on the website in a few hours.

Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements.

Finally, please know that, unless otherwise stated, all figures mentioned during this conference call are in renminbi.

I will now turn the call over to Mr. David Xueling Li, our Chairman and acting CEO.

Please go ahead, sir.

Thank you, Matthew.

Hello, everyone.

Welcome to our first quarter 2018 earnings conference call.

This is Bing Jin, the CFO YY.

I will now speak on behalf of our Chairman and acting CEO, David Xueling Li.

We entered 2018 with robust growth in the first quarter.

Our total revenues increased by 43.3% year-over-year to RMB 3.25 billion, exceeding the high end of our previous guidance.

Such growth was mainly driven by a rapid 27.4% year-over-year increase in our live streaming revenues which further demonstrates our leading position in China's live streaming industry.

The successful separate listing of our game live streaming subsidiary Huya on the New York Stock Exchange in May opened a new chapter for YY as a group company.

This is a very important milestone in our twin growth engine strategy.

We originally developed Huya 4 years ago with a clear vision of building it into a leader in game live streaming with YY Live as a leader in entertainment live streaming.

Huya has always been an integral component of our ecosystem and shares synergies with YY's other businesses.

We will continue to consolidate Huya's financials into the group company post its IPO.

We believe Huya's IPO will unlock its growth potential, lay a solid foundation for its next stage of development and create greater value for all stakeholders.

Going forward, both Huya and YY Live will continue to solidify their leadership positions in their respective markets.

Together as a group company, we are very confident that YY will further enhance its dominance in China's live streaming industry.

In addition, we just announced yesterday that YY further invested USD 272 million in a Series D preferred shares of Bigo as the lead investor.

Bigo is a fast-growing video-based social media platform.

YY is Bigo's existing shareholder and has become the largest shareholder of Bigo after Series D financing.

YY has also obtained the right, exercisable after the first anniversary of the closing date, to purchase additional Bigo shares at the then fair market value to exceed 50.1% of the voting power in Bigo.

We believe that the significant synergistic relationship between YY Live and Bigo will further contribute momentum to our expansion into the global market.

Next, I would like to give you an update on YY Live's recent efforts in product innovation, content enrichment and AI-backed technology enhancement.

We continued our product innovation by rolling out a series of new functionalities and features in the latest version of YY Live which was launched in May.

In that version, we introduced a new feature called Host Battalion.

It combines live streaming and casual games with social features in an innovative manner and encourages both users and their hosts to engage in personalized interaction through the game.

Since we launched a new game called Happy Whack-A-Mole in May to beta test the Host Battalion feature, thousands of hosts have connected with their audiences through this new feature on a daily basis, and we have received very positive feedback from both the hosts and users.

We are planning to launch more games with Host Battalion features in the second quarter and the rest of the year to further enhance the user's engagement and interaction as well as the monetization in our ecosystem.

During this quarter, as the leader in China's live streaming industry, we produced more live streaming content to cultivate a healthier and more positive social environment.

As part of our effort to lead the charge on this social responsibility, we actively worked with many live streaming hosts and launched in the first quarter over 90 streaming sessions with social well-being-related content, such as protecting those susceptible to discrimination, helping the low-income groups and advocating Chinese traditional culture.

In addition, we have always strived to stay compliant with the guidelines of regulations and proactively monitor and manage our content to promote the social well-being of the general public.

By offering more high-quality live streaming content to the Chinese audience, we are confident that we will continuously enhance YY's social image and solidify our position as the live streaming industry leader in China.

In addition, we're very delighted to announce that Mr. Jeff Pengjun Lu has joined our firm as our CTO.

Jeff is a top-class IT expert in search technology, recommendation algorithm, computer vision and speech-related AI technologies.

His experiences should contribute significantly to our strategic and technical capabilities.

Augmented with Jeff's working experiences and tech insights, we are further building our AI-based system to provide customized live streaming contents and better interactive experiences.

Going forward, we remain very committed to investing in technology and product innovation to ensure YY's continued market leadership in the live streaming industry.

Overall, we're very pleased with the progress we achieved in the first quarter.

Looking ahead, we will remain committed to our social responsibility and continue to develop more positive and upbeat live streaming programs.

We are confident that our comprehensive live streaming ecosystem, including both Huya and YY Live, will be able to achieve the large share of the live streaming market in China, and our further investment into Bigo will also position us well to capture the massive opportunities in the global market.

That concludes the remarks of our Chairman and acting CEO, David Xueling Li.

Now as the company's CFO, I would like to discuss our financial results in more detail.

We are glad to see continuous growth in the first quarter of 2018.

Our total net revenue for the first quarter increased by 43.3% year-over-year to RMB 3.25 billion, which exceeded the high end of our previous guidance range.

Such growth was mainly driven by a 47.4% year-over-year increase in revenues from live streaming, which contributed 93.3% of our total net revenues in the first quarter.

As we continued our efforts to invest more resources into the mobile platform, mobile contributed 57% of our live streaming revenues in the first quarter of 2018.

Mobile live streaming MAUs increased by 23.9% to 77.6 million in the first quarter of 2018 from 62.6 million in the prior year period.

Live streaming paying users increased by 17.3% to 6.9 million in the first quarter 2018 from 5.9 million in the prior year period.

Mobile paying users constituted 79.1% of our total live streaming paying users in the first quarter of 2018.

Cost of revenues for the first quarter increased by 46.4% year-over-year to RMB 2.02 billion.

Revenue-sharing fees and content costs paid to performers, guilds, and content providers as a percentage of the live streaming revenues increased year-over-year, primarily because of our efforts to strengthen our relationship with performers and further enrich our live streaming content offerings.

Bandwidth costs as a percentage of total revenues decreased year-over-year, partially because of our improved efficiency through technological advances and better pricing terms resulting from our economic upscale.

Gross profit for the first quarter increased by 38.6% year-over-year to RMB 1.23 billion, and our gross margin was 38% compared to 39.3% in the prior year period.

Our operating expenses was RMB 649.1 million during the first quarter of 2018 compared to RMB 330.8 million in the prior year period.

Sales and marketing expenses for the first quarter were RMB 235.7 million or 7.3% of total revenue compared to RMB 88.6 million or 3.9% of total revenue in the prior year period.

The increase in our sales and marketing expenses this quarter was mainly driven by our increased investments in promoting our new mobile products and features.

Our R&D expenses for the first quarter were RMB 249.5 million or 7.7% of total revenues compared to RMB 165.6 million or 7.3% of total revenues in the prior year period.

G&A expenses were RMB 164 million or 5% of total revenues in the first quarter compared to RMB 76.7 million or 3.4% of total revenues in the prior year period.

Our GAAP operating income for the first quarter 2018 was RMB 596.4 million compared to RMB 617 million in the prior year period.

The decrease was mainly attributable to higher sales and marketing expenses in the first quarter 2018 and an increase in share-based compensation.

Our non-GAAP operating income which excludes share-based compensation expenses, impairment of goodwill and investments, and gain on deconsolidation and disposal of a subsidiary, increased by 20.6% year-over-year to RMB 727.3 million in the first quarter 2018.

Our GAAP net income attributable to YY was RMB 444.1 million in the first quarter of 2018 compared to RMB 543.2 million in the prior year period.

Our GAAP net income attributable to YY this quarter includes RMB 426.5 million of gain on fair value change of investments and deemed dividend to subsidiary's Series A preferred shareholders related to Huya Series B equity financing, which was a loss of RMB 489.3 million.

Excluding such impacts as well as gain on fair value change of investments, fair value loss on derivative liabilities, deemed dividend to subsidiary's Series A preferred shareholders, income tax effects of above non-GAAP reconciling items, and adjustment for non-GAAP reconciling items for the income attributable to non-controlling interest, our non-GAAP net income attributable to YY increased by 31.1% to RMB 699.9 million in the first quarter of 2018.

Non-GAAP net margin in the first quarter of 2018 was 21.5% compared to 23.5% in the prior year period.

Diluted net income per ADS in the first quarter of 2018 was RMB 6.86 compared to RMB 9.25 in the prior year period.

Non-GAAP diluted net income per ADS increased by 18.5% to RMB 10.78 from RMB 9.10 in the prior year period.

Looking forward to the second quarter of 2018, we expect our net revenues to be between RMB 3.6 billion and RMB 3.7 billion, representing a year-over-year growth of 38% to 41.8%.

In addition, we expect to have a fair value loss on derivative liabilities of preferred shares amounting to approximately RMB 2.3 billion due to an increase in Huya's enterprise value as indicated by the price of its IPO, which will cause a negative net income attributable to YY Inc.

in the second quarter of 2018.

This forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.

This concludes our prepared remarks.

Operator, we would like -- we would now like to open the call to questions.

(Operator Instructions) Your first question comes from the line of Thomas Chong from Credit Suisse.

(foreign language) I'll ask my questions in English.

My first question is about the strategies for Bigo over the next couple of years as well as the financial impact to YY.

And my second question is about the competitive landscape in live streaming over the next couple of years.

(foreign language)

Okay, let me do the translation.

So this is David.

Thank you, everybody, for paying attention to our investment to Bigo's news yesterday.

Actually, YY invested about USD 272 million to increase YY's holdings in Bigo in this round.

But YY actually was an existing shareholder for Bigo, and currently up to this round, YY has become the largest shareholder for Bigo.

And in total for the Series D financing, this is about USD 365 million investment.

So except for YY's $272 million, there is another around $93 million of the investment coming from existing shareholders as well as management teams.

And we think that $97 million is about 7 0 million -- $70 million is coming from the management team, which demonstrates the very strong confidence from the management team for Bigo's future development.

(foreign language)

So investment to Bigo actually is a milestone for the YY streaming environment.

So expect for Bigo, actually, the whole YY group also will -- implemented of international strategy going forward.

So all the separate, all -- every of the business unit of the YY group going forward will consider and pay more attention in terms of the international strategy, and that one will help of our business improve our competitive edge from the global market.

(foreign language)

Let me share with you more about Bigo's operational data.

So Bigo's business has been developed rapidly in the past 2 years from the global market.

So currently, its main business is coming from 2 parts, which is live streaming and short-form videos.

And actually, especially for the short-form video business, it's perfectly to complement of YY's weakness in terms of the short-form video business in the mainland of China market of the position.

And in 2017, Bigo has grew over 30 million of monthly active users, with revenues in excess of USD 275 million.

And currently, Bigo's business has covered more than 100 countries and different regions in the world, and it also has over 19 of the office worldwide.

So all of those kind of mentioned Bigo's experience as well as achievements from the global market is a good complement to YY's current business and also to provide a good experience in terms of YY's future international strategy.

(foreign language)

So that's the answer to your questions.

And just also quickly on -- you asked about the financial impact to YY.

I don't think there will be much impact from Bigo because we are not consolidating Bigo at this stage, as we disclosed in the news.

We have an option to consolidate Bigo in 1 year, but at this stage, we don't consolidate.

Your next question comes from the line of Eileen Deng from Deutsche Bank.

(foreign language) I have a question on the follow up of the investment on Bigo.

What is the current shareholding post the latest round of investments?

And what kind of support that YY will give Bigo in terms of this market share expansion in overseas?

Could management comment in terms of this technology, financial or traffic support?

And any color on this Bigo pay ratio and margin profile that management could share with us?

And which -- what kind of a scenario can trigger YY to consolidate Bigo in the future?

(foreign language) My second question is on the new version of YY Live.

Any operating metrics regarding the users and the hosts that management could share with us since the rollout of the updated version?

(foreign language)

Let me do the translation.

So currently, up to this round of the investment to Bigo, YY has become the largest shareholder for Bigo's business.

But in terms of YY's holding ratio, because of competitive reasons, we are not disclosing at current stage.

But you also read from our press release up to 1 year later, YY also got an option to increase our share position to exceed of 50.1%.

So that actually demonstrates between Bigo and YY's business, they have a close relationship and it will continue to show the synergies going forward.

(foreign language)

In terms of the future general strategy for the YY's group, we are not intended to spin off more of our business unit to be separate.

Rather than that, we prefer to attracting more good asset into the YY group's as a part of the disclose.

So because we truly believe that will continue to increase our competitive edge and also to increase the value for the whole group.

(foreign language)

I also want to introduce Mr. Jeff Pengjun Lu, our new CTO.

Jeff actually is a top-class IT expert in China in terms of AI technology and also the content management.

So after he joined the company, we actually also build out a very strong technical team to focus on AI technology development.

So going forward, AI also become another major focus for the YY's -- the technology innovation going forward.

In the past decades, YY already accumulate strong experience -- rich experience, in terms of audio, video, the image recognition as well as inappropriate content censorship.

So we actually can further develop those kind of technology embedded with AI features.

And going forward, we can actually apply our technologies to other companies and also even to other countries to use.

So this part of our strength in terms of the technology also will provide a strong support for Bigo's, going forward, development.

And for the financial questions, I'll let Bing answer that.

Thank you.

Yes, I mean, so in terms of financials, as David has mentioned that Bigo has raised $365 million around this time.

So majority of that money is coming from YY.

So that is definitely a source of our signal.

So on one hand, as David mentioned, YY going forward will kind of include more of rising business in our ecosystem rather than spin off some of the business.

So that's a very strong signal.

Secondly, we provide USD 272 million cash into Bigo, and Bigo also has its management follow on.

So with that amount of cash, we do think there's market potential that we can capture.

Now Bigo's scale is already quite sizable.

As David mentioned, last year's revenues is over $275 million.

So that's not a small business, first of all.

But secondly, we do think, globally, the live streaming industry as well as short-form video has massive market with less competition at least right now.

So we think Bigo is in the perfect situation to capture that growth momentum.

And with YY's support in technology, in personnel, in live streaming industry experience as well in the financial resources, we think Bigo has a bright future.

For the -- with regards to the paying ratio and operating margin for Bigo, I think it's still too early to disclose, but we'll closely observe Bigo's financial operating metrics, and at the right time, we will pull the trigger for consolidation.

Thanks.

(foreign language)

This is Ting, the COO.

So let me give you more colors in terms of our new features which is embedded of the latest version of YY Live, which is called Host Battalion.

So for the Host Battalion, it's a good -- it's a new feature which is more focused on the multi-people interactions within of the live showrooms.

There has 2 major goals, and I would say to further improve of our ecosystem.

Firstly is, this feature actually to help -- to further help the host -- in terms of the entry barrier for hosts to produce content will continue decrease.

The major reason, because we actually embedded those kind of features.

So the host can play the game with the audience together, so that actually can help the host to produce more content.

And secondly, in terms of participation from the users or the audience, it also has been significantly improved.

The previously features, most of that, the audience only can watch of the competition rather than participate on that.

But in the new version, like the Host Battalion, actually, the audience can participate within those kind of game features.

And currently, it's just about 4 -- 2 to 4 people, but in the future, it can be over 100 or even over thousand of users or the audience also can compete, also can participate within of the live showrooms.

So that, we truly believe, is an upgrade for our -- the live showrooms ecosystem.

That's our understanding about the Host Battalion.

Thank you.

(Operator Instructions) Your next question comes from the line of Natalie Wu from CICC.

(foreign language) Let me translate myself very quickly.

I have 2 questions here.

Firstly, I noticed that you still have a bottom cash in hand after investment on Bigo.

Any [shots] on regarding the -- maybe possible and then maybe in the future?

And secondly, as you know, some of your competitors launched incentive plans for guilds late last year and achieved encouraging performance.

I was just wondering any possible impact for the guilds originally active on YY's platform?

Thanks, Natalie.

Let me address those questions.

So the first question is, yes, we do still have a lot of cash onshore and offshore, and as we demonstrated yesterday, we made investment into Bigo.

In parallel, we're looking at various opportunities in China and globally.

The key thing is still on the upstream traffic acquisition.

As I've explained many times with different investment analysts that we are very strong in monetization.

A lot of the other competitors are following us, but we're relatively weak in terms of the upstream traffic.

So that's why we've continued to look at global social network, social games, instant messaging app, et cetera, with a decent amount of traffic, and then direct traffic to the downstream monetization.

We're also looking at good quality content, et cetera, to enhance the user stickiness.

So we'll make sure we use the money the smart way.

And cash is never enough, right, because there's just so many abundant opportunities out there.

So that's a first thing.

Second thing, you mentioned, Momo's incentive mechanism to guilds.

For us, we don't see any impact.

As I said, we are the innovator and lead runner in this live stream industry.

We have a very deep-rooted ecosystem with all the guilds, thousands of guilds to help promote, for example, those (foreign language), right, good quality, golden brands are guilds.

We have a very deep relationship, and they keep coming back to us to promote their host because they find that we have the most vibrant ecosystem.

And then the guilds and the hosts can get the maximum amount of shares of the revenue structure.

So we don't think that poses any threat to us.

Your next question comes from the line of Jerry Liu from UBS.

(foreign language) I'll translate that in English.

My main question is -- my question is about margins, mainly gross margin and operating margin, specifically within gross margins.

Just wondering about the revenue sharing, the content costs for the next few quarters because as we noted before, in 1Q, it's as a percent of revenue, slightly higher than a year ago.

So do we plan to maintain this level of revenue sharing going forward?

Thanks, Jerry.

Let me address the question.

So with regard to gross margin, this year's gross margin, a little bit lower than last year mainly because in the third quarter last year, we introduced -- we made change to blue diamond policy, basically giving out more revenue sharing to the small- and medium-size hosts, so for a long-tail effect.

And we still see a very healthy impact from that because those small and medium hosts, some of them actually left YY's platform before, but with this incentive, they come back and they embrace more time and content in our ecosystem.

So we think that's healthy for our long-term ecosystem.

But since we did that change, we won't expect more change moving forward.

So going forward, I think the gross margin on the YY Live side will be relatively stable.

Now on the operating margin side, we do have operating leverage for G&A and R&D.

For sales and marketing, as you see, the first quarter sales marketing a little bit higher in terms of absolute dollar and percent of revenue term compared to fourth quarter last year because we actively promote one of our product called Kaixin Dou.

It's a leisure game collection platform.

So going forward, in the second quarter and the rest of the year, we'll continue to launch new product features such as Happy Battalion (sic) [Host Battalion], other kind of Happy features, so that might entail some of the sales and marketing.

So I would say operating margin might fluctuate due to our spending on sales and marketing.

Your next question comes from the line of Karen Chan from Jefferies.

(foreign language) I will translate myself.

My first question is whether management can share your thoughts on product roadmap this year, particularly given the intense buying of short video competitive landscape.

Any update there on our short video strategy progress so far?

And my second question is about how should we think about the annual sales and marketing budget?

And in terms of traffic acquisition, both organically and inorganically, what's our consideration there?

(foreign language)

Let me do the translation.

So this is David.

Let me address your question in terms of the competitive landscape for the short-form videos.

Firstly, in terms of the China market, so although we noticed there are several of the major giants are arising from the short-form video arena, but we truly believe there still has abundance of the verticals of the opportunities there.

So from YY's perspective, we will continue doing more explorations in terms of our -- the short-form video focus of the product development as well as the future exploration.

But meanwhile, in terms of the global market for the short-form videos, we truly believe there still has a lot of opportunities, especially if you'll consider our newly -- including of the results that's coming from the global side.

And also, in terms of the global market, that has significantly diversified based on the different country and different cultures, different background.

So we also will closely monitor the development for the short-form video global market, and we will be doing more effort on that.

Thank you.

And Karen, regarding to your sales and marketing expense, organic and inorganic component, this is how I look at it.

So currently, roughly 60% of our sales and marketing goes to the traditional channels, meaning all the major app stores, the main traffic channels.

Those, we'll continue to allocate and explore because whenever we want to promote new product, we want to make sure those can be searched.

And also, the 40% goes to the so-called creative sales, marketing, branding campaign as we did last year.

We cooperated with some of the popular TV channels, some of the popular content channels and some of the offline event, or [gamer]-driven kind of events.

So we'll continue to explore very innovative way to cater for different demographic.

That's for the spending directly.

But I also think we can do good strategy in terms of M&A.

As I've said just now, we can acquire or invest in some of the decent DAU -- MAU kind of traffic social network platform.

Then that itself is a creative traffic acquisition channel.

And in those cases, the ROI can be even better if the deal can be structured in the right way.

So we do think we have multi-strategy to enhance our user acquisition.

Your next question comes from the line of Eddie Leung from Merrill Lynch.

(foreign language) So my question is about the potential expansion of vertical content in live broadcasting.

So wondering how management would think about the potential conflict or overlapping of content between YY Live and Huya in the future.

(foreign language)

Thank you for your question.

This is David.

I will address in terms of the differentiated comparative ads going forward between YY and Huya.

For YY, we continue focus on the -- what we call the empowerment.

So we actually trying our best through the product development as well as other efforts to enable more people to have the capability to do the live streaming.

And through those kind of efforts, actually that can help us to produce more diversified user-generated content from more general peoples, and we will continue focus as an entertainment platform going forward for YY.

But for Huya, it's the different directions.

So Huya's major focus going forward definitely will be continued focus on the potential esports market growings as well as game live streaming.

So in the past 2 years, we actually already to monitor the significant growth from the esports market in China.

So for Huya's major goal, definitely it's how we can gather the bigger pie from the booming, growing of the esports market going forward.

And for the entertainment live streaming business it's -- I will say it's a major traffic monetization tools for Huya, and its major need to attracting what we call the ME level as well as the long-tail of the entertainment live streaming host to doing the performance there.

But again, as I have addressed before, so going forward, Huya definitely will continue to focus on the esports efforts as well as game live streaming.

So in summary, between YY and Huya, they have different directions, they have different focus.

We don't see there has the potential cannibalization or the competition going forward between these 2 platforms.

Thank you.

Your next question comes from the line of Alex Yao from JPMorgan.

(foreign language) I have 2 questions.

Number one is that you discussed in the previous question that it's not likely that YY will spin off more assets in the next few years.

It's more likely that YY will integrate new business from external sources into the YY platform.

Directionally speaking, what kind of business fits into the YY platform?

And as a platform, what value can you provide to this new business?

The second question is regarding the core YY growth outlook.

So you guys continue to explore the vertical growth opportunities through either internally incubated assets such as Huya or externally invested assets such as Bigo.

How do you think about the core YY talent show growth outlook for the next couple of years?

(foreign language)

This is David.

Let me answer your questions.

So firstly, in terms of the cost strategy for YY going forward and what kind of asset we'll be more interested, we would say it's still live streaming related of the asset of the business is the most things we're interested in.

The major reason is because those part of business is most similar for ourselves, and in the past decade, we actually accumulated a lot of experience from -- for the live streaming business.

So we will continue to focus on that in terms of the both of the upstream as well as downstream.

For the upstream, we will look at more target in terms of the content production as well as other content-related asset.

And for the downstream, we will focus on more -- the live stream related of the consumption factors such as the Internet finance, or et cetera.

So that things is we will pay more attention going forward.

And secondly, we truly believe in the next decade, the shape of the live streaming business will be significant changed in the industry.

So we are more focused on the future and what kind of services or what kind of content we can provide for our future users in the next 5 to 10 years.

So that will be another focus, another -- the deep thinking from the management going forward.

And then the third parties is in terms of the live streaming or the entertainment live streaming itself.

It also can be evolving into more complicated and more interested of the format or forms going forward.

So recently, our practice, such as Happy Contest or the Host Battalion, is a good access for the live streaming format.

So we actually can embedded and involve more host and users to play games together.

So that's -- the third of the arena is we'll continue doing more exploration.

So in summary, these can -- 3 of the fields is what we are going forward to pay more attention.

Thank you.

Yes, and then maybe I'd just quickly add that -- because Alex, you asked about the user increase and also ARPU increase of Host Battalion.

I do think there's a lot of potential.

And as David has mentioned that the live streaming format and content might be very, very different.

And we're constantly innovating internally and also looking at excellent opportunities to do investment or acquisition.

But I think related to the core entertainment live streaming, several things will happen, right?

One is on the deepening and diversifying of content.

So we -- on our platform, we have more verticals than you can imagine.

We have patch, we have animation, we have e-commerce.

Those are all ways of attracting different people and also engage them longer.

And then we incorporate a lot of the interactive features, such as the Happy Battalion.

That's a new format of live streaming.

And then someday, it will increase the ARPU and paying ratio, resulting in good financials.

And also for the AI, AI has a lot of also room for global enhancement.

A single twitch on our homepage by different adaptation of the features and live streaming content will arouse the user viewing behavior and enhance the paying ratio structure.

So I do think there's a lot of potential that we can do.

I would now like to hand the conference back to the management team for the closing remarks.

Thank you, operator.

Thank you all for joining us today.

We're looking forward to speaking with you in the coming quarters.

Thank you.

(foreign language)

Ladies and gentlemen, we have reached the end of our conference call.

Thank you all for joining us today.

You may now disconnect.