JOYY Inc (YY) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the JOYY Inc.'s Second Quarter 2020 Earnings Call.

(Operator Instructions) Please note, this event is being recorded.

I'd now like to hand the conference over to your host today, Mr. Matthew Zhao, the company's General Manager of Investor Relations.

Please go ahead, Matthew.

Thank you, operator.

Good morning, and good evening, everyone.

Welcome to JOYY's Second Quarter 2020 Earnings Conference Call.

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

For this call, management will first provide a review of the quarter, and then we will conduct a Q&A session.

The second quarter 2020 financial results and the webcast of this conference call are available at ir.yy.com.

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 we will make forward-looking statements.

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

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

Please go ahead, David.

Thank you, Matthew.

(foreign language)

[Interpreted] Hello, everyone.

Welcome to our second quarter 2020 earnings call.

(foreign language)

[Interpreted] Before we jump into details about the business development, in order to provide everyone with a better picture of our quarterly performance, I would like to remind you that starting from this quarter, we have deconsolidated Huya's financial results and listed them as discontinued operations.

Such deconsolidation applies to both current quarter and historical comparative periods.

(foreign language)

[Interpreted] In light of the rapidly changing market dynamics due to the COVID-19 and recent geopolitical uncertainties, we have been actively reviewing our global dual engine growth strategy.

Our conclusions are three-fold.

First, we remain committed to global expansion.

Although our business in certain countries experienced some setbacks due to local regulatory changes, we believe such setbacks are temporary as we are convinced that the movement towards worldwide connectivity is irresistible.

Not only does globalization lead to streamlining of information exchange, emergence of innovative technologies and replication of successful business models across geographic boundaries, it also unleash the power of Internet to boost productivity and raise living standards.

We are at the forefront of this globalization wave, and we intend to ride it out deftly and profitably.

For example, through Bigo Live, our global licensing platform, we plan to expand to more regions and further reduce reliance on any single market.

As Bigo Live's user base expands, we will remain focused on developing a highly integrated ecosystem for social and entertainment live streaming.

We believe Bigo Live has the potential to generate 4x as much revenue as YY Live over the next few years.

(foreign language)

[Interpreted] Secondly, we continue to advance our local operations.

In response to growing geopolitical tensions and to ensure our full compliance with changing regulations in terms of content, products and operations, we proactively engage in frequent dialogue with various local authorities in every one of the geographic regions we operate.

Because Bigo Live is headquartered in Singapore, it has been under the Singaporean jurisdiction since inception.

We have also maintained its operations independently out of China even after our completion of its acquisition in 2019.

Going forward, we plan to find more local employees and boost their contribution to BIGO.

As we leverage our network of over 30 localized operations around the world, the breadth and depth of our global operation increases, and our operational and financial performance enhances accordingly.

(foreign language)

[Interpreted] Thirdly, we firmly anchored our competitive advantage in video content and video services.

We believe that video has become the mainstream medium for disseminating information over the Internet.

We are also convinced that for the coming generations of Internet users, video will become the dominant format for social networking, content production and content consumption.

Therefore, we plan to diversify our monetization capability through advancements in live streaming, short-form video and BIGO-based information sharing.

Furthermore, we plant to enhance our monetization capability in areas including advertisement and e-commerce.

As a precursor to our expansion into e-commerce, we made a strategic investment in Tongcheng Life this quarter.

We believe that we will be able to generate recurrent revenue from live streaming, advertising and e-commerce as our global user base grows.

(foreign language)

[Interpreted] Executing the three aforementioned growth strategies, we achieved solid operational performance during the second quarter of 2020.

As a result of our extensive global presence and localized operations, we are well positioned to help people around the world to combat COVID-19.

In May, we launched a 24-hour nonstop global charity concert online, harnessing the strength of global -- Bigo's global community, the concert featured more than 100 live streaming hosts in over 20 countries, attracted close to 4 million viewers around the world and raised more than USD 100,000 of donation for the World Health Organization's COVID-19 Solidarity Response Fund.

An event on such a worldwide scale is made possible only through a truly global social platform like Bigo.

It also exemplifies Bigo's unique combination of organization and localization capabilities.

Besides the online charity concert, we also joined hands with live streaming hosts around the world to launch a series of online activities to bring comfort and joy to our users in need.

For example, to help local communities stay fit and healthy at home, we launched the #STAYATBIGO campaign that features informational seminars by healthcare professionals, entertainment performances by local music DJ and workout sessions by fitness enthusiasts.

(foreign language)

[Interpreted] Our ability to serve the various local communities around the world not only enhance our brand recognition in local markets, but also boosts our operating and financial results.

Despite the uncertain and challenging macro environment during the second quarter, we grew our net revenues by 36.3% year over year to RMB 5.84 billion.

In particular, Bigo's live streaming revenues grew by 158.8% year over year to RMB 2.95 billion, contributing more than half of the group's total live streaming revenues for the first time ever.

Bigo Live's mobile MAUs increased by 41.3% year over year and 10% quarter over quarter to 29.4 million.

Its paying user base also grew as a result of our efforts in cultivating users' paying habits on the platform.

(foreign language)

[Interpreted] In addition, Bigo Live's healthy growth is also attributable to our diligent effort in nurturing users' habitual use of live streaming as a medium for both entertainment and socialization.

During the quarter, for example, we optimized our social interaction feature called BAR to continuously intensify Bigo Live's highly engaging and interactive nature.

BAR enables users to -- and hosts to share updates with one other in an increasingly frictionless manner.

As a result, over 50% of Bigo Live's users accessed BAR during the second quarter.

In addition, through live streaming showrooms or BAR's synchronized friend circle, each Bigo Live user follows 11 hosts on average, representing a significant increase over the previous quarter.

(foreign language)

[Interpreted] On the short-form video front, we focused our efforts on cultivating Likee's global ecosystem, diversifying its content offerings, refining its product features and synchronizing expansion with local market characteristics.

As a result, Likee's total MAUs surged by 86.2% year over year and 14.2% quarter over quarter to 150.3 million in the period.

We also continued Likee's geographical expansion by deepening its foothold in key markets such as Russia and Indonesia.

Notably, Likee's total MAU in Russia almost doubled year over year in the period.

(foreign language)

[Interpreted] As Likee's brand influence becomes increasingly pervasive and as its user base expands continuously, we are actively exploring various innovative marketing initiatives to help it penetrate into younger generation.

In May, for example, Likee cooperated with a series of fashion and cosmetics brands in Russia to launch a thematic short-form video challenge called Beauty Festival.

Leveraging our state-of-art technology, we developed special effects template and customized interactive gameplay features for the campaign to boost its user participation and enthusiasm.

As a result, the event struck a societal nerve, enticed a large number of female Russian users to voluntarily create and share short-form videos and generated more than 200 million cumulative views on the platform.

Thus, making it a perfect stage for bolstering our partners' brand exposure in the local market.

(foreign language)

[Interpreted] Now let me share some updates on HAGO.

By focusing on local monetization initiatives with favorable ROI, we delivered significant revenue growth in the period.

HAGO's MAUs also remained relatively stable at 31.7 million.

As we continued to explore different methods of bolstering HAGO's long-term user value, we were able to further enhance its social nature, strengthen its user connection and develop additional context for user interactions.

Meanwhile, to cater to the younger generation's preferences, we have expanded its content offering with comedy, dance and music performances.

In addition, we continue to update Hago's product features with cutting-edge technology.

For example, by integrating data analysis with AI algorithms, we optimized HAGO's content recommendation system, so that it can match content with individual users' interest more precisely.

Moreover, our user data analytics has led us to upgrade a number of features in HAGO, such as party chatroom and user groups, in order to enhance user experience, stimulate social interaction, improve user community and group penetration, enhance HAGO's social nature and increase its user stickiness.

(foreign language)

[Interpreted] Last, but not the least, on the domestic front, we fortified our leadership in China's live streaming entertainment industry and expanded our live streaming offerings during the quarter.

After our live streaming celebrity variety show, Idol Friday, became a smash hit upon launch and is continuing to attract additional viewers in the second quarter.

Building upon our success with Idol Friday and other variety shows, we launched a new program called Let's Sing.

Similar to Idol Friday, Let's Sing has created a virtual stage for professional musicians to broadcast their performances online while engaging in real-time online chats with their fans.

It is well suited to facilitate social interactions among users, hosts and guests.

As the combination of music talent, celebrity charm and live interaction proved especially attractive to audiences, we plan to replicate its formula for success to other future endeavors.

(foreign language)

[Interpreted] To ensure a steady flow of premium live streaming content on YY Live, we further expanded the variety of our content offerings during the second quarter.

For example, we introduced customized support initiatives to help high-quality celebrity launch their own personalized live streaming channels.

The effectiveness of such incentives has led to the formation of several partnerships with professional chess players on YY Live.

Top chess players from prestigious institutes, such as the National Chess Academy can now invite our YY Live users to participate in online games while providing play-by-play professional narratives from live streaming.

As user intrigue with these special types of live streaming content grows, so does the popularity of our chess-related live streaming at a rapid pace.

(foreign language)

[Interpreted] In addition as we advance each of our businesses and full value, we are always looking for ways to increase returns to our shareholders.

This quarter, our Board of Directors approved a quarterly dividend policy for the next 3 years.

Under this policy, quarterly dividend will be set at approximately USD 25 million in each fiscal quarter.

As always, we appreciate and value the long-term support from our shareholders, and we are always devoted to maximizing the interest for our shareholders.

(foreign language)

[Interpreted] In summary, we firmly upheld our build engine growth strategy during the quarter.

We upgraded our platforms, localized our operations and brought joyful experiences to people around the world.

Despite the macroeconomic uncertainties posed by COVID-19, we remain confident in our business model's underlying strength and favorable outlook.

Our long-term business plan remains intact.

We continue to work tirelessly to build our global live streaming and short-form video ecosystem.

We remain fully committed to serving our users, delivering shareholder value and constructing a truly global video-based social media platform for all.

That concludes David's prepared remarks.

Now as JOYY's CFO, I will talk about the financial results.

Please be noted that the financial information and non-GAAP financial information disclosed in our second quarter earnings press release is presented on a continuing operations basis, unless otherwise specifically stated.

After the deconsolidation of Huya, the company accounts for our investment in Huya as an equity method investment and applied the equity method accounting 1 quarter in arrears to enable us to provide financial disclosures, independent of the supporting schedule of Huya.

During the second quarter of 2020, we maintained our strong momentum and delivered robust financial and operational performances.

Our total net revenues for the second quarter increased by 36.3% year over year to RMB 5.84 billion, exceeding both the high end of our previous guidance range and street consensus.

In particular, our live streaming revenues for the second quarter increased by 40.1% year over year to RMB 5.61 billion, driven by live streaming revenues growth from Bigo segment.

Other revenues in the second quarter decreased by 18% to RMB 232.3 million primarily due to the decrease in other revenues in YY segment.

Cost of revenues for the second quarter increased by 50.8% year over year to RMB 3.77 billion.

Revenue-sharing fees and content costs increased to RMB 2.6 billion in the second quarter from RMB 1.79 billion in the same period of 2019, which was in line with the increase in live streaming revenues.

Bandwidth costs increased to RMB 280.7 million from RMB 228.1 million in the same period of 2019, as the overseas user base and time spent continues to expand following the consolidation of Bigo.

Gross profit for the second quarter increased by 16% year over year to RMB 2.07 billion.

Gross margin in the second quarter of 2020 decreased to 35.5% from 41.7% in the same period of 2019.

The gross margin contraction was primarily caused by the fact that Bigo segment had lower gross margins but contributed significantly greater portion of net revenues in the second quarter of 2020 compared with the same period last year.

Operating expenses for the second quarter increased to RMB 2.02 billion from RMB 1.79 billion in the same period of 2019.

Sales and marketing expenses decreased to RMB 909.8 million in the period from RMB 979.9 million in the same period of 2019, primarily due to the company's less spending in sales and marketing initiatives in overseas markets due to the COVID-19.

Our R&D expenses for the second quarter increased to RMB 693.5 million from RMB 550 million in the same period of 2019, mostly due to the increase in head count and investments in talent recruitment as part of the company's efforts to enhance its research and development capabilities.

Our GAAP operating income for the second quarter was RMB 95.2 million compared to RMB 4.3 million in the same period of 2019.

Operating margin for the second quarter increased to 1.6% from 0.1% in the prior period, primarily due to narrowing operation loss of Bigo segment.

Our non-GAAP operating income for the second quarter, which excludes share-based compensation expenses, amortization of intangible assets from business acquisitions as well as impairment of goodwill and investments and gains on disposal of subsidiaries and business increased by 24.6% to RMB 509.3 million from RMB 408.7 million in the same period of 2019.

Our non-GAAP operating margin for the second quarter was 8.7% compared to 9.5% in the same period of 2019.

GAAP net income from continuing operations attributable to controlling interest of JOYY Inc.

for the second quarter of 2020 was RMB 619.4 million compared to net loss of RMB 6.1 million in the same period of 2019.

Net margin was 10.6% in the second quarter of 2020 compared to negative 0.1% in the corresponding period of 2019, mainly due to the income from fair value change in investment.

Non-GAAP net income from continuing operations attributable to controlling interest of JOYY Inc.

increased by 38.3% to RMB 493.6 million from RMB 357 million in the same period of 2019.

Non-GAAP net margin increased to 8.5% in the second quarter of 2020 from 8.3% in the same period of 2019.

Diluted net income from continuing operations per ADS in the second quarter of 2020 was RMB 7.39 compared to diluted net loss from continuing operations per ADS of RMB 0.28 in the same period of 2019.

Non-GAAP diluted net income from continuing operations per ADS increased by 27.2% to RMB 5.57 from RMB 4.38 in the same period of 2019.

In addition, as David mentioned in his prepared remarks, we are pleased to report that our Board of Directors has approved a quarterly dividend policy in the next 3 years.

Under the policy, quarterly dividends will be set at approximately USD 25 million in each fiscal quarter.

Accordingly, we will be distributing a dividend of USD 0.31 per ADS in the second quarter of 2020.

Looking forward to the third quarter of 2020, we expect our net revenues to be between RMB 5.85 billion and RMB 6 billion, excluding the revenue contribution from Huya in the same period of last year, representing a year-over-year increase between 26.7% to 29.9%.

We currently have limited visibility surrounding COVID-19 epidemic long-term impact and geopolitical uncertainties on our business and the markets 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.

(Operator Instructions)

Our first question comes from Thomas Chong from Jefferies.

(foreign language) Congratulations on the strong results for Bigo.

I have two questions.

My first question is about the second half outlook for Bigo.

In particular, how we should think about the business trend in developed and emerging market in the second half.

And my second question is about the competitive landscape.

How should we think about our competitive position for Likee and Bigo Live in coming years?

Thank you, Thomas.

This is Bing.

Let me address the question.

So regarding the second half performance forecast of Bigo.

We think Bigo is well balanced across different regions.

And we -- if you look at the second quarter performance, it's 148% year-on-year growth, which is very tremendous.

We expect that growth momentum to continue.

So we will raise up our full year guidance for Bigo's total revenue, which previously we communicated to the market is around 65%, 70% year-on-year growth.

Right now, judging from the recent performance and taking into account of the latest situation across the world, we think Bigo can generate somewhere close to 100% revenue growth on a year-on-year basis for 2020.

And that effort, obviously, is driven by the increased expansion to Bigo's market and also the existing market as well.

So that's about the kind of performance guidance for Bigo for the second half and full year.

And then in terms of competitive landscape, again, Bigo Live has achieved potential great growth in users and revenue.

We think we don't see any other competitors for Bigo Live in all the key markets that operates.

And we remain very focused on driving our revenue from the 4 key markets that Bigo Live operates.

As we explained before, that includes Southeast Asia market, includes Middle East, includes North America and Western Europe.

We remain very committed for the diversified original exposure.

For the Likee business, as you can see, Likee's MAU has reached 150 million in the second quarter.

Given all the geopolitical risk, we have adopt various strategies in different markets.

First, we are cooperating with various local governments.

And then we are also enhancing our local operations to better fulfill for the local environment.

So we expect Likee's performance will continue to grow.

And meanwhile, we're also ramping up Likee's financial capability as well.

So we will enhance in the second quarter -- in the second half of this year, we will enhance Likee's monetization efforts in the key markets as well.

Our next question comes from Yiwen Zhang from Citi.

(foreign language)

Congrats on the solid result.

So first question is regarding the overseas strategy.

We noticed some markets have some uncertainty.

So how will we address our expansion strategy?

For example, key markets in terms of user acquisition and the monetization.

And secondly is about cash usage, we noticed you have very abundant cash reserve on balance sheet, especially in potential like USD 810 million in September.

So -- and we also noticed you have a regular dividend policy for the next 3 years.

So apart from that, how would you consider cash usage or will you consider ramp up the user acquisition in short video?

Or will you consider to develop new product or MA?

Thank you.

Let me address those questions.

In terms of our expansion strategy for Bigo, as I've laid out, we remain very focused for globalization, and we want to diversify our original exposure to compensate some of the geopolitical risk.

So we continue to strengthen our presence in existing markets, including Southeast Asia, Middle East, North America, Western Europe and Japan, Korea.

We will also further expand to other regions thanks to our global operation in over 30 offices around the world.

So that's about the overseas expansion strategy.

In terms of our cash position, we do have a lot of cash onshore and offshore, particularly after we sell a portion of the Huya share to Tencent.

And that's why we -- in order to maximize shareholder value, we have announced a 3-year regular dividend payout as a way to return some of those value to shareholders.

In terms of business expansion, we will continue to focus our efforts for live streaming and short-form video user acquisition.

In terms of M&A, we don't foresee that we will do big-scale M&As thus far.

We still want to organically grow our business on the global scale.

Our question comes from Daniel Chen from JPMorgan.

(foreign language)

Congrats on a very strong quarter.

My first question is on the Bigo's growth.

So this quarter, Bigo Live streaming grew by close to 50%.

What is the -- what are the major growth countries in such a strong growth?

And the second one is on the margin outlook.

So previously, we guided kind of a monthly breakeven by year-end.

Is there any update on that?

And how should we look at the Bigo's gross margin trend in the next few quarters?

Thank you, Daniel.

Let me address the questions.

First one is regarding the driver of the tremendous growth of Bigo.

I think it continues to be very strong across all the regions we operate.

That includes Southeast Asia, Middle East and also developed markets.

Developed markets as a potential of revenue continues to be very strong.

And we expect, going forward, the revenue contribution from all those markets will be driving the performance for Bigo Live.

That's why, as I said, we raised up our guidance for the full year performance of Bigo Live.

For the breakeven point, that remains to be the same as we communicated before.

On a single-month basis, by end of this year, in the second half, the Bigo -- in total for the segment will be breaking even, thanks to the tremendous revenue growth and operating leverage across many segments.

For the gross margin trend, I think that will be relatively stable for Bigo overseas because the main cost of goods items are revenue sharing, which we foresee to be stable.

And for the bandwidth and as well as the payment channel costs, we expect to be relatively stable in the next 1 or 2 quarters.

Our next question comes from Alex Poon from Morgan Stanley.

(foreign language) I'll translate my question.

My first question is related to the progress of Likee monetization.

As you have revised up the Bigo revenue guidance to 100% this year, how much of this is driven by Likee?

And Likee has about 5x the MAU size of Bigo Live.

If we take reference of China situation, short video makes much more live streaming revenue than pure live streaming platforms.

So how are you seeing the potential for Likee's monetization scale compared to Bigo Live in the next few years?

My second question is related to the post COVID situation.

Any user metrics you can share after the lockdown is over?

Are users still very active?

Thank you, Alex.

Let me address the question.

First, regarding the progress of the monetization of Likee.

As we explained to investors before, we are foreseeing 10% of Bigo coming from Likee this year.

But right now, because we raised the revenue forecast for Bigo as a total, so Likee's contribution, in terms of percentage, will be less than 10%.

But in general, Likee, I might say, is still underway.

So we foresee Likee's revenue monetization for the second half this year will ramp up.

And you asked about the potential for Likee's future monetization.

We do think, as you mentioned, that the short-form video can incorporate a lot of the live streaming features and has high potential for monetization.

In the mid and long run, we do think Likee can create another Bigo Live scale or even bigger than that, but that will take time.

So I think this year, our focus is to first still grow the Likee user base and then convert part of those users to live streaming to realize the close loop of live streaming.

One caveat is that due to the recent Indian government's banning of the Chinese app, Likee's MAU in India will be impacted in the third quarter.

But as I mentioned to investors before, starting -- from earlier this year, we strategically have -- we shift the focus from India to other markets.

So we have purposely reduced the sales and marketing spending in India to better ROI regions, including other developed markets and emerging markets.

So even our India users will be impacted, this does not impact the overall strategy and monetization for Likee.

Second question is regarding the post COVID-19 situation.

We are seeing some countries are returning to kind of normal post COVID-19 situation.

And luckily, we see that some of the users that are attracted in the COVID-19 season, they remain on Bigo and Likee platform.

So even after COVID-19 is gone, a lot of those users have formed the habit of viewing online entertainment, including live streaming and short-form video content, and they remain to be on our platform.

And that's why we are confident even after COVID-19, we will be able to drive the user base and monetization in the areas that we are not impacted by the regulations.

Thank you.

Our next question comes from Lei Zhang from Bank of America Merrill Lynch.

(foreign language)

My key question is about the strategy you mentioned, like four YY.

And can you give us more color on the expansion in key country in second half and 2020, especially considering the instability in U.S. and India?

And secondly, wondering what's your plan for the remaining shares you have for Huya.

Thank you, Lei.

Let me address the questions.

So first, regarding the potential for 4x of YY Live sale overseas.

We remain to be very confident.

And the forecast I just mentioned for this year, Bigo's revenue growth, already taking into account of some of the uncertainties resulting from COVID-19 and geopolitical risk.

In terms of the key markets, I think we remain to be focused, as I said, in those key markets where we are very strong already, including Southeast Asia and Middle East.

And including those areas that are growing at a much faster rate, that includes several markets include North America, Japan, Korea, Australia and New Zealand and some of the Western Europe countries.

Exactly which countries presents the largest opportunity, I don't think we need to rely on a single market.

We track the data on a quarterly basis.

The data that is shown across all those regions are all very promising.

So I think that is the result of our local operations, global brands and close relationships with some of the local regulations.

So we remain to be confident even under the -- some of the geopolitical risk.

We will be able to capture those opportunities going forward to create 4x the YY Live sales.

Now in terms of the disposal plan for the remaining shares of Huya.

As you all read from the news, that Tencent is urging the consolidation of Huya and Douyu.

We will -- after the sale of the shares, we still have around 15% of the shares in Huya.

So we will observe the future consolidation plan under Tencent regards Huya and Douyu, and we will benefit from any potential synergies coming out of those transactions.

And we will dispose the shares at the right time for the right side and create maximum value for our shareholders.

Our next question comes from Alex Liu from China Renaissance.

(foreign language) My first question is on the monetization level of Bigo Live.

I think the total revenue -- yes, the total revenue of Bigo Live is already larger than our legacy business.

I was just wondering whether the management can share some color on the monetization driver of Bigo Live in the next few years.

And second question is on whether -- on the e-commerce business.

I was wondering whether the management can share more color on that.

Thank you, Alex.

Let me address the first one, and Xueling will address the second.

First one, regarding the drivers for the per user value.

We think that overseas live streaming will have high potential or higher single unit user lifetime value than in China.

There are several reasons for that.

First one, overseas is what we call pan-live streaming model.

The entry barrier for live streaming is much lower.

That's why we're seeing the participation from the DAUs of Bigo Live is much higher than any other live streaming platforms in China.

That's the first thing.

Secondly, the social atmosphere and behavior within the live streaming community overseas is more diverse and prevalent than in China.

So a lot of cases, we've seen that each host, they don't -- they're not eager to cash out the money they earn on the platform.

They remain the money they earn within the ecosystem and they tip each other as a way for competition and social interaction.

And so that's why typically you see the ARPU, the paying amount per paying user, in Bigo Live is much higher in China.

And that is quite typical across many countries' region.

So we think that going forward, we Bigo Live will have high monetization potential than in China.

And that's the key reason why we think it has at least 4x of YY Live's scale overseas.

(foreign language)

[Interpreted] Yes, this is David.

Let me answer your question in terms of the strategy about e-commerce.

So firstly, if you look at the current, our gross revenue contribution, a super majority of the revenue is coming from live streaming and then followed by advertising only very small portion of our revenue has been generated from e-commerce.

But we do expect after several years' efforts, probably the whole group will become a company, which is majorly revenue generated from e-commerce model, then followed by live streaming and advertisement.

And for -- in terms of the development of the e-commerce business, we actually had the long-term commitment in terms of further develop of e-commerce.

We truly believe we have the advantage and competitive edge in the several aspects, right?

So firstly, for the overall JOYY group, we have over 400 million of the monthly active users outside of China.

That massive user base will be a very unique competitive edge compared with other peers.

Secondly, we truly believe the made of -- made in China as well as the advantage coming from our supply chain from the domestic industry will significantly help us to create a very unique model and apply that kind of the very unique competitive edge in China to the outside of China.

The thirdly, JOYY, we are a company which is driven by the AI technology and AI innovation through of our development in the short-form video arena, and we actually have been accumulated a massive capability in terms of -- which is related to the AI technology, For example, like the voice recognition, face recognition as well as object recognition, et cetera, ramp up of the very comprehensive recommendation capability.

We truly believe all those kind of AI technologies and expertise actually can be reused into the e-commerce arena, which will also create a very unique competitive edge compared with other -- the e-commerce company.

And for those kind of capabilities, which is cannot -- for the single commercial network and other middle and small-sized other company, which they couldn't achieve, while we can help them to develop that.

So all in all, we understand of the e-commerce business, and we actually have a very strong patience to continue to develop our e-commerce business in the next 3 to 5 years.

Thank you.

Thank you.

That's all the time we have for questions today.

I will hand back to management for their closing remarks.

Okay.

Thank you, operator.

Thank you, everyone, for joining our call today.

We look forward to speaking with everyone next quarter.

Thank you.

Thank you.

Thank you.

Thank you very much.

Ladies and gentlemen, that does conclude the call.

Thank you for attending.

You may now disconnect.

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