JOYY Inc (YY) 2021 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to JOYY Inc.'s Second Quarter 2021 Earnings Call. (Operator Instructions) I'd now like to hand the conference over to your host today, Jane Xie, the company's Senior Manager of Investor Relations. Please go ahead, Jane.

Thank you, operator. Hello, everyone. Welcome to JOYY's Second Quarter 2021 Earnings Conference Call. Joining us today are Mr. David Xueling Li, Chairman and CEO of JOYY; Ms. Ting Li, our COO; and Mr. Alex Liu, the General Manager of Finance. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. The second quarter 2021 financial results and webcast of this conference call are available at ir.joyy.sg. A replay of this call will also be available on our website in a few hours.

Before we continue, I refer you to our safe harbor statement in our earnings press release, which apply to this call as well as we will make forward-looking statements. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in U.S. dollars.

I will now turn the call over to our Chairman and CEO, Mr. David Xueling Li. Please go ahead, sir.

Hello, everyone. Welcome to our second quarter 2021 earnings call. We maintained our growth momentum in the second quarter despite the negative impact from local holidays in certain regions. During the second quarter of 2021, we grew our total revenues by 39.7% year-over-year to $662 million, while BIGO's revenue increased by 38.4% year-over-year to $598 million. Notably, this quarter, on a non-GAAP basis, we almost achieved breakeven at group level for the first time after we deconsolidated YY Live as BIGO's non-GAAP net margin continued to improve to 3.3% from 1.6% quarter-over-quarter, and its non-GAAP net profit increased to $19 million.

Before we go into the detailed development of our products, we would like to share with you the latest progress in the further enhancement of our localized content offerings. As discussed on last quarter's call, we view our content ecosystem as one of our strategic cores that determine the long-term competitiveness of our products. During the quarter, we have made great strides on expanding our product content variety and enlarging our premium content library based on our thorough insights into local users' content preferences. We partner with gaming entertainment companies and local talent agency agencies and brought in a multitude of high-quality streamers and content creators in categories such as gaming, variety shows, music, lifestyle and many others.

In the entertainment content category, partnering with local entertainment agencies and celebrities, we achieved meaningful progress in further expanding our premium content and assembling top local talent in the music and variety show category.

In the U.S., BIGO LIVE hosted the BIGO IDOL talent competition in May with all-star lineup of judge, such as Tamar Braxton, Kreesha Turner and DJ WhooKid, attracting over 300,000 unique views.

In Turkey, our platform attracted the king of pop music, Serdar Ortaç, and the iconic new generation singer, Rem Derici to become star streamers on BIGO LIVE.

In Thailand, "MAI", one of our Thai country music streamers on BIGO LIVE participated in "Bonus Karaoke", a top music variety show, and debuted to great fanfare. To provide a stage of other country music singers to showcase their talent, BIGO LIVE's simultaneously launched a country music competition, bringing celebrity advisors and professional judges in collaboration with renowned local Thai talent agency.

After test running our game and streaming channel on BIGO LIVE and officially launched our own e-sports activities called "BIGO Fun" in the Middle East region in 2020, we have organized a variety of events, including video creation, challenges and content covering multiple hit games.

In the second quarter, we partnered with a number of gaming companies and further enrich the gaming content on our platform to better satisfy our users' enthusiastic demands. In June, we reached a strategic cooperation agreement with King of Avalon: Dragon Warfare, a mobile strategy, multiplayer role-playing game. We launched in France and Germany a series of middle age-themed online gaming events, during which virtual treasure chests was released randomly to the audience who turned into the live streaming channel while local top gaming live streamers played games and interacted with their local fans.

In Indonesia, BIGO LIVE became the exclusive partner of the Free Fire tournament and live stream playoffs among 137 teams, bringing immersive e-sport experience to the local audience.

In addition to our continued expansion of content categories, we have pursued seamless integration of content with the rich and diverse local culture. As mentioned previously, our mission is to cultivate an inclusive and global community where everyone can be heard and seen. Diversity and inclusiveness manifest not only in the number of regions in which we operate on the variety of content categories we have made available, but also in the degree at which we have integrated our content with local culture, user behavior and social environment.

For example, during Ramadan, BIGO LIVE launched the Good to Bigood campaign in Indonesia. The campaign motivated local youth to express their creativity by showing case Ramadan's unique culture and customers through music or stand-up comedy shows, thus winning endorsement from Indonesia's Ministry of Tourism and other government agencies.

As content creators serve as the foundation of our success in creating and maintaining vibrant and engaging content community, we have implemented extensive programs to identify, develop and motivate talented creators. In the past quarter, in addition to host local culture-themed competitions and talent challenges to better identify talented content creators, Likee also worked with external partners to help creators improve their public exposure, expand their social influence and pursue content creation as a lifelong career.

For example, in the second quarter, Likee hosted the third season of the Likee Star Idol talent show in Indonesia. In collaboration with a local entertainment company, Likee selected 5 top participants to form a pop girl group called DREAMGIRLS, which debuted soundtrack and music video garnered playback on more than 160 Indonesian radio stations, attracting a slew of offers for touring concerts and commercial advertising. That was the Likee's pilot project to test drive its ability to identify, develop and motivate professional content creators.

Going forward, Likee will launch more supporting programs to direct more user traffic to creators, help creators monetize their content and thus creating a friendly, engaging and dynamic content community. With the combination of more diverse, high-quality content from an increasing number of talented content creators, we believe that we will be able to build a richer and more lively content ecosystem and further expand our platform's user base.

Now let me share with you the quarterly updates of our core product lines. For BIGO LIVE, despite the negative impact from local holidays in certain regions, its overall MAU grew by 0.3% year-over-year to 29.5 million, while its MAU outside of India increased by 27.8% year-over-year, thanks to its progress in localizing its content ecosystem. Meanwhile, its paying users increased by 10.7% year-over-year, contributing to a year-over-year revenue growth of 31.8%.

Geographically, BIGO LIVE maintained its well-diversified growth. Developed countries continued to outperform as its regional revenue grew by 47.6% year-over-year. In particular, revenues from Europe grew by 104.6%, and revenues from Eastern Pacific region grew by 52.5%. Revenues from Southeast Asia and other emerging countries grew by 31.7%.

Through product upgrades. BIGO LIVE continued to improve its users live streaming experience as evidenced by the 1.6% sequential increase in average duration of live streaming sessions this quarter. By optimizing its content recommendation algorithm, BIGO LIVE improved the average viewer time spent among its new users by 4.4% sequentially. Furthermore, by introducing more gaming content, BIGO LIVE improved its overall user engagement during the quarter and prolonged its average viewer time spent in game streaming sessions by 40.9% sequentially.

Next, about Likee. As mentioned on last quarter's call, because we prioritize our long-term growth, we have placed a greater emphasis on the healthy -- health and sustainability of our ecosystem and growth model. That's why we have adjusted Likee's marketing strategy and focused our investment on content and social ecosystem since the first quarter. As a result of our marketing strategy adjustment, combined with Indian government's ban since the third quarter of last year, Likee's MAU contracted by 38.6% year-over-year to 92.3 million. MAU outside of India increased modestly by 6.8% year-over-year.

Despite the temporary user base fluctuation, Likee's total revenues in the quarter continued to increase by 136.7% year-over-year, mainly driven by strengths in developed countries and the Middle East. Revenue from developed country increased by 106.3%, and revenues from the Middle East multiplied by 4x year-over-year.

Product-wise, Likee upgrade its subtitle function based on TTS technology to provide automated subtitle and dubbing but also updated the features which enabled video upload up to 3 minutes and post-production recording, thus providing more efficient content production tools to content creators, especially those in the informative content category.

Furthermore, Likee updated its user traffic allocation and content distribution mechanism to direct more traffic to creators' private domains. As a result, creators' private traffic increased by 25%, strengthening the social connection between creators and their followers. To motivate users and creators to participate in live streaming, Likee made multiple updates to its fan engagement features and achieved a 7.7x increase in the daily number of users joining fan group, which in turn, motivated creators to host more streaming sessions by updating social interaction features. Likee improved its user experience in live streaming sessions and achieved a 22.3% sequential increase in its average duration of streaming sessions as well as a 13.9% increase in its average streaming time per user in multiuser chat rooms.

Lastly, about HAGO. Similarly, due to marketing strategy adjustments and the Indian government ban since the third quarter of last year, HAGO's MAU fell by 62.9% year-over-year to 11.8 million in the second quarter. MAU outside of India decreased by 25.5% year-over-year. However, HAGO continued to make meaningful progress in its user interactivity and product commercialization. Its revenue grew by 54.3% year-over-year, and its non-GAAP operating loss narrowed further on the sequential basis.

In the second quarter, HAGO launched its version 4.0 product to better satisfy users' needs for interest-based social entertainment. In this version, the feature channel enable users to engage with friends and community members and freely communicate with one another in the form of real-time text, voice, video and interactive games. Users can also publish posts in their virtual family, thus fulfilling their real time as well as non-real-time social desires. As a result, the penetration rate of HAGO's featured channel increased by 7.4%, and its 30-day user retention rate increased by 5.5% sequentially.

During the quarter, HAGO launched in party game a number of popular games, which feature multiuser audio chatting and gaming functions as well as upgrades of user experience in real-time interactive games. As a result, the penetration rate of party game increased by 10.7% and the average user time spent increased by 17% sequentially.

To conclude, despite the negative impact from local holidays in certain regions, we maintained the growth trajectory of our global business and achieved significant progress in further enriching our localized content offerings. With the enhancement of our product monetization, improvement in our operating leverage and execution a more prudent marketing strategy, we almost reached breakeven on a non-GAAP basis at the group level for the first time after we deconsolidated YY Live.

Despite the recent volatility in the macro environment and the increasing uncertainty due to COVID-19, we remain committed to our long-term vision and corporate mission. We will continue to deploy our resources to areas that can sharpen our competitive edge, including further optimization of our localized content and social ecosystems as well as enhancement of our research and development capabilities so that we can create greater value for our shareholders.

With that, I will now turn the call over to [Alex Liu], General Manager of Finance, for a more detailed explanation of our quarterly financial results.

Thanks, David. Hello, everyone. As JOYY's Finance General Manager, I will talk about the financial results. Since a majority of our revenues and expenses are now denominated in USD, starting from January 1, 2021, we have changed our reporting currency from RMB to U.S. dollar to better illustrate our operational results. Please note that the financial information and the non-GAAP financial information disclosed in our second quarter earnings press release is presented on a continuing operations basis, unless otherwise specifically stated.

Starting from the second quarter of 2020. The company deconsolidated Huya and accounts for our investment in Huya as equity method investment and apply the equity method accounting 1 quarter in arrears to enable us to provide financial disclosures independent of the reporting schedule of Huya.

Also, as the sale of YY Live was substantially completed on February 8, 2021, with certain customary matters to be completed in the near future. The historical financial results of YY Live are reflected in the company's consolidated financial statements as discontinued operations accordingly starting from the fourth quarter of 2020.

During the second quarter of 2021, despite the negative impact from local holidays in certain regions, we maintained our strong growth momentum and delivered robust financial results. Our total net revenues for the second quarter increased by 39.7% year-over-year to USD 661.7 million from USD 473.5 million in the same period of 2020, primarily attributable to BIGO's continued paying users growth and enhanced monetization capabilities. In particular, our live streaming revenues for the second quarter increased by [39.7%] (corrected by company after the call) year-over-year to $629.6 million, driven by live streaming revenues growth from BIGO. Other revenues in the second quarter increased by 40.3% to USD 32.1 million.

Cost of revenues for the second quarter increased by 32.2% year-over-year to USD 458.3 million. Revenue-sharing fees and content costs increased to USD 289.1 million in the second quarter from USD 198.2 million in the same period of 2020, which was in line with the increase in live streaming revenues. Bandwidth cost decreased to USD 27.5 million from USD 32.7 million in the same period of 2020, primarily due to the company's improved efficiency and termination of bandwidth usage for India users after the India government ban of Chinese apps in late June 2020, partially offset by the continued user base expansion outside India.

Gross profit increased by 60.4% year-over-year to USD 203.4 million. Gross margin in the second quarter of 2021 improved to 30.7% from 26.8% in the same period of 2020. Operating expenses for the second quarter increased to USD 314 million from USD 247.6 million in the same period of 2020. Among the operating expenses, general and administrative expenses increased to USD 101.1 million in the period from USD 51.5 million in the same period of 2020, primarily due to the impairment loss arising mainly from an investment made in the prior years.

Our GAAP operating loss for the second quarter was USD 101.1 million from USD 119.9 million in the same period of 2020. Operating loss margin for the second quarter was narrowed to 15.3% compared to 25.3% in the same period of 2020, primarily due to the increase of operating income of BIGO. Our non-GAAP operating loss for the second quarter, which exclude share-based compensation expenses, amortization of intangible assets from business acquisitions as well as impairment of goodwill and investments and gain on disposal of subsidiary and business decreased by 80.3% to USD 13 million compared to USD 65.7 million in the same period of 2020. Non-GAAP operating loss margin for the second quarter was narrowed to 2% from 13.9% in the prior year period.

GAAP net loss from continuing operations attributable to controlling interest of JOYY in the second quarter of 2021 was USD 109.3 million compared to USD 28.5 million in the same period of 2020, mainly due to the impairment loss arising mainly from an investment made in the prior years. Net loss margin was 16.5% in the second quarter of 2021 compared to 6% in the corresponding period of 2020. Non-GAAP net loss from continuing operations attributable to controlling interest of JOYY was USD 0.5 million in the second quarter compared to $50.5 million in the same period of 2020. Non-GAAP net loss margin was significantly narrowed 0.1% in the second quarter of 2021 from 10.7% in the same period of 2020. This means that we have almost achieved breakeven at group level for the first time since we deconsolidated YY Live.

Notably, BIGO has achieved a positive non-GAAP net income for the second quarter of USD 19.4 million, with non-GAAP net margin improved to 3.3% from negative 3.8% in the prior year period. Diluted net loss per ADS in the second quarter of 2021 was USD 1.43 compared to USD 0.39 in the same period of 2020. Non-GAAP diluted net loss per ADS was narrowed to USD 0.01 from USD 0.63 in the same period of 2020.

In addition, in accordance with our quarterly dividend plan approved on August 11, 2020 and on November 16, we will be distributing a dividend of USD 0.51 per ADS for the second quarter of 2021. This is expected to be paid on September 29, 2021 to shareholders of record as of the close of business on September 10, 2021.

Also, we would like to provide an update to our execution of the share repurchase program announced on May 2020 in which the company may repurchase up to USD 300 million of its shares till August 2021. As of June 30, 2021, the company had repurchased approximately USD 296.8 million of its shares.

We will continue to invest in business development initiatives to further expand our global market reach, cultivate our highly engaged user community and enhance our high-quality content offerings. We will also actively explore other ways to maximize shareholder value.

Beginning in the second quarter, we have anticipated some negative impact on users' online social entertainment activities from the gradual lift of pandemic-related lockdowns in certain countries. We expect our net revenues for the third quarter to be between USD 608 million and USD 635 million, representing a year-over-year increase between 13.7% to 18.7% on a constant currency basis, excluding the revenue contribution from Huya and YY Live in the same period of last year.

We currently have limited visibility surrounding the COVID-19 epidemic's long-term impacts and geopolitical uncertainties on our business and the market in which we operate. Therefore, this forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change.

That concludes our prepared remarks. Operator, we would now like to open up the call to questions. Thanks.

(Operator Instructions) Our first question comes from Thomas Chong at Jefferies.

(foreign language) I have 2 questions. The first one is about the Q3 revenue guidance as well as the margin outlook in the second half.

And my second question is about BIGO LIVE. Can management comment about the paying ratio, the ARPPU trend as well as the live streaming revenue performance across different countries?

(foreign language)

[Interpreted] This is Alex. I will answer your questions. Regarding Q3 guidance, starting from the end of the second quarter, some countries are gradually lifting lockdown bans during the pandemic. Therefore, we have anticipated some negative impact on users' social entertainment activities online, which may reduce time spent on online entertainment and therefore affect some users paying behavior, et cetera.

So far, we have limited visibility into the precise impact of the lockdown removals. Therefore, we have provided a relatively conservative estimation for our Q3 revenue, which implies a year-over-year growth of 13.7% to 18.7% at group level, mainly due to short-term fluctuation of BIGO LIVE paying ratio and ARPPU. We'll provide further updates once we have better visibility.

In terms of revenue growth for the whole year, we do expect BIGO segment to remain a decent growth.

(foreign language)

[Interpreted] As for the revenue distribution in different regions. The group's revenue growth in the second quarter was mainly driven by developed countries and Southeast Asia region. The Middle East region underperformed mainly due to the Ramadan season.

In terms of revenue distribution. Our revenue is well diversified across the above-mentioned region.

For BIGO LIVE in the second quarter, the MAU growth, paying ratio and ARPPU expansion together drive the growth in revenue.

In terms of future trends. In the long run, we feel positive about the potential of developed countries, including U.S., Europe and Eastern Pacific region as well as the Middle East market, considering that users in these regions have better paying capability and also better payments habit. We are also expanding our localized operations and content efforts in Southeast Asia and also other developing countries considering the huge user base and also that as we continue to cultivate users' behavior and habits in these regions, we believe that the monetization potential of these regions is also promising.

Our next question comes from Alex Poon at Morgan Stanley.

(foreign language) My first question is related to BIGO LIVE new product and content strategies. Recently, we have noted increasing penetration into game segments and also some casual games like Ludo. And also want to get an update around e-commerce strategy.

And my second question is related to the use of cash and the status of the Baidu transaction. We have almost used up the share buyback program of $300 million. Do we have plans to initiate a new buyback program and the use of -- any use of cash or in other purposes, if you can share?

(foreign language)

[Interpreted] This is David. In terms of the new content related to game live streaming and Ludo games. It's because throughout our operation, we found that users in certain regions, especially in Europe, Middle East and South America, are very interested in gaming content. Therefore, in the past few [quarters], we have gradually introduced more gaming content in these regions.

As the global mobile game market has a very huge user base and that Bigo Live's diverse content offerings and social interactivity fits mobile game naturally -- in the long run, we believe that gaming content will be an important part of our diverse content offerings. And we will continue to partner with leading mobile game companies to create an active and lively content community, gaming content community.

As for the Ludo games, this is a small attempt by us to encourage users to establish connections and interact with other users, enabling users to engage in social interactions, not only through live streaming but also by playing casual games. So far, we have seen positive impact on BIGO LIVE user activity and engagement level from these newly introduced gaming content and the Ludo games, but we might need longer time to draw any conclusion. The revenue contribution on gaming and Ludo games is still relatively small.

As for cash usage, I believe that you could see from our earnings release that in the second quarter, we have repurchased around USD 100 million of our shares, and we are still executing our quarterly dividend payout program. As for the remaining cash, as the sale of YY Live has been substantially completed but still with some customary matters still in progress, we would love to wait until the full completion of the deal to determine the remaining cash usage so that we'd be able to give you a more clear update. Thank you.

Our next question comes from Yiwen Zhang at China Renaissance.

(foreign language) I have two. The first thing is regarding the content ecosystem you mentioned a few times during the prepared remarks. Can you share more color in terms of how the localized content could help user acquisition, engagement and also the retention and how that could help differentiate with -- us from the peers?

And then secondly, on the monetization. Can you talk about the progress on non-live streaming monetization, for example, the advertisement?

(foreign language)

[Interpreted] This is David. I will answer your question. At this stage, the priority of Likee is still about content development, especially the motivation and cultivation of content creators and the development of a content-based community. This quarter, we have taken the first step. We have already seen positive impact on user retention rate, user time spend and frequency of usage on our platform. In the coming second half of the year, we will continue to launch more programs to better identify and cultivate creators and also bring more conducive updates regarding traffic allocation and provide diversified monetization tools for creators, especially for talented creators who have outperformed. So that would be able to enable creators to play a greater role on our platform.

But we would love to say is that compared with advertising, the cultivation of content ecosystem does not happen overnight. The improvement of content offerings and user experience is a gradual process. While we are still in the progress of adjusting advertising, we believe that there would be time spent to gradually change the users' using experience. We believe that it will have a positive impact on the health and sustainability of the product.

Regarding diversified monetization. Currently speaking, our revenue streams mainly include live streaming, advertising and membership subscriptions. As of today, live streaming is still our biggest revenue stream, contributing around 95% of our revenue. While other revenues, although growing at 40% year-over-year and close to 11% quarter-over-quarter this quarter, in terms of the size, is still relatively small. We are gradually progressing diversified monetization plan. And we'll launch some new monetization features in the second half, which we believe will be beneficial to the content creators, and it will better connect the fans and content creators and cultivate users' paying habits and therefore, driving the further growth of our revenues. Thank you.

Our next question comes from Lei Zhang at Bank of America.

(foreign language) Two questions here. First, can you give us more color on the regulatory environment in different overseas markets and any concern like data privacy content or the tipping behavior?

Secondly, I want to follow up on the sales and marketing adjustments since last quarter. Since we have a good cash position and monetization remains good, while our competitors are actually inviting overseas. So I want to know yourselves or do you have any concern on the user growth from the dynamic competition chain?

(foreign language)

[Interpreted] This is David. Regarding your first question about regulation. After the sale of YY Live, which has been successfully completed with certain customary matters to be completed, the majority of our business is located in non-PRC regions, but we do have R&D team located in China as there are lots of experienced talent here.

As for our global overseas market. As you can see, in 2020, as we penetrate into multiple markets, such as Europe, Eastern Pacific region, the Middle East and other emerging countries, our revenue is actually well distributed across different regions. So the risk of any single region has been greatly reduced. And what we'd love to emphasize is that since the incorporation of JOYY, we have been strictly complying with local policy and laws no matter in which countries we operate our business in. We will continue to execute our global strategy to reduce geopolitical risk to any particular region to further diversifying our revenue across multiple regions.

(foreign language)

[Interpreted] Regarding your second question. We understand that previously for any Internet product, the usual logic of expansion is [as follows]. At early stage, product might choose to excessively invest in advertising to grab a relatively sizable user base. Therefore, it could actually leverage on this advantage in terms of its user base, to gain other competitive advantages in terms of attracting more content creators and attracting more advertising vendors. And in the third stage, via all of these advantage lead to a further user base expansion.

That is a common logic of Internet products. But we don't see that applicable for short-form video, and it's not applicable to JOYY. Because what we can see is that our main competitor right now is actually investing in dollar amount way more than what we can afford. From what we know, one of our key competitors has been investing billions or even tens of billions of U.S. dollars into user acquisition. And in such circumstances, if we invest a couple hundred million U.S. dollars or USD 1 billion into user acquisition, it will not actually make any difference.

So I think that Likee would like to be more practical and take a relatively more balanced growth strategy, whereby we'd love to ensure the health and sustainability of the product. Therefore, we'll be more able to obtain an established position from the longer-term perspective. We believe that we still have opportunity to change or to obtain competitive advantage in the longer term. Thank you.

Our next question comes from Tian Hou at TH Capital.

(foreign language) YY has been doing live streaming for a long time. It was deployed in China. [So what we will find], what's the difference between doing live streaming in China and overseas? That's number one.

Number two, we have been doing overseas live streaming for a while. And what's the management's outlook in terms of the gross margin and net margin going forward?

(foreign language)

[Interpreted] First, regarding the difference of operating live streaming business in PRC versus other areas of the world. There are quite significant differences. First of all, if you operate in global markets because there are so many different regions, so many different culture, you're actually operating multi-language, multicultural markets. While if you operate in China, there is only one single market. That's why for BIGO LIVE currently, we have operating capabilities and teams in over 30 regions. And our local team operates based on very thorough understanding of local culture, law regulation and the maintenance, and the development of local content and content creators are also maintained by these localized operational teams.

And secondly, I believe that there is another difference in terms of user acquisition channels. In China, actually, every user acquisition channel, all of these companies are doing live streaming themselves. So for live streaming platform, it's actually very difficult to obtain additional user and to continue the expanding user base.

As for the overseas market, the main user acquisition channel and advertising platform is Google and Facebook. And they themselves do not actually heavily rely on live streaming as a business. Therefore, the public pool of user traffic is available, and the source of user traffic channel is also very abundant for global live streaming business.

Regarding margin trend. What we would love to say is that we've seen improvement of our net margin, non-GAAP wise, in the second quarter, mainly due to 3 factors: the first is continued revenue expansion with diversified monetization progress of multiple product lines; and the second, improved operating leverage, lower bandwidth costs and payment channel costs; and third, as mentioned, the decrease in Likee's advertising costs. So for the second half of this year, we believe that we will continue to improve operating efficiency. And although gaming content has been introduced into BIGO LIVE, we do not foresee content cost margin to be increased significantly and will likely remain relatively stable in the future.

And for marketing activities, as small marketing activities will roll out in the second half of the year, sales and marketing expense will be higher, but sales and marketing expense margin will likely to be slightly lower than the first half.

So in conclusion, we believe that BIGO segment will enter into a new era of sustained profitability. And from the full year perspective, we believe that BIGO segment will achieve a positive non-GAAP net margin for the full year. And from a longer perspective, considering that the stand-alone operating profit of BIGO LIVE has remained around 20% and as other products are gradually moving towards breakeven, we believe that the overall profit margin will be gradual. Thank you.

And that's the end of our call, and we look forward to speaking with everyone next quarter.

Thank you, management. This does conclude today's conference call. Thank you all for joining. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]