Q3 2019 Earnings Call

November 7, 2019

Ladies and gentlemen, thank you for study by welcome to the <unk> call just called at night.

Next conference call.

Hi, all participants are even understand.

After the speakers presentation.

A question and answer session.

A question during the session press Star one telephone.

So why should that today's conference is being recorded.

The conference.

Speaker today, you must have a nation director of <unk>.

Thank you. Please go ahead.

Thank you.

Hello, everyone.

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We deliver.

Year over year.

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We have a spot in the pipeline.

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That's all mainstream.

Dedication to Chinese culture, apart from origin, no drama hobby lobby, the young and a flagship she public policy listings.

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Patent applications as well.

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Production distribution.

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On the money position.

Leveraging all cutting edge.

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Runways for growth such as short form video for that comes in.

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So what rapid <unk> and that we do feel grows in recent calls.

Recent event in October .

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<unk>, China Computer Federation sites on the Technology Award.

Well the sensing technology advances as though 2019 trend the national deals are compressed.

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And you to install a computer on that I know that's it.

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In summary, we made solid progress during the call.

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Well, it's a boat with both challenges on the alternative asset X. I know.

In warm and comes into that chance well use RP favor.

Monetization models continue to.

You won't.

We are probably that English logs from prospective of online and the team and the industry, that's with increasing demand from consumer us well high quality content with that revenue.

Development, Oh, I see I mean, the fighting technology.

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Otherwise.

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Somebody to college, it will not only in users.

On the overall promote reach for.

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Technology.

And the Fiveg combined with craved.

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New opportunities that make possible you Rick swing in comes into production distribution.

Our team and the format.

Patient and that either in the useful and that's even the lives.

We all continue to pool for <unk> <unk>.

Hi watch and see a beach in technology are produced more often.

<unk> pasta content, stressing our ecosystem and the incubated premia I've he's a.

Great deeper value on the grades for prospective for the field trial.

We signed up.

I will have so called which often go all the naturals.

Turning or was it may go through all financial highlights.

Well, the so called off.

<unk> revenue.

Oh.

Membership service revenue will be.

Like seven visit offsetting.

This was driven by the solid growth even number why because remember.

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Good.

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And also the quota.

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All of these revenue arm.

Oh.

Yeah when they.

Due to the challenging macroeconomic environment each fine the label Southern company located under the events if I could potentially.

Hi.

Thank you Richard revenue were RMB.

$680.4 million <unk>.

Limited due to the legal.

Content.

Well I mean.

Other revenue will be not unrealistic.

2.3 million up for the year over year.

With many driven by the growth.

Well, we never knew them.

I mean.

Moving on the call revenue.

Our club revenue will be a point.

Yes.

Permanent fighting the fight for them.

Oh, the artisans funding or easy for them.

You did talk through some year over year.

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It's usually.

The 1.3 billion up.

Yeah, we probably.

Michael <unk> <unk>.

With Oh visual.

Well I might be spending.

Yes.

Oh R&D expenses.

Are you come up on seven.

Uh huh.

3.2 million up.

For years, and we'll probably do with.

Our continuous investment.

Oh pretty low obviously.

Compared with the open level.

2.6 billion.

Last year operating loss margin.

So they tend to come coaches <unk> module.

Jim Carrey loss.

<unk> expenses RMB 806.8.

With a total audience.

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Certainly not committed.

Last year.

The year over year.

Amenity.

That's associated with all the <unk>.

Hi.

The loss related to the rigs like.

Before you are.

With RBC replaced some feeling.

With a lot of RMB 2.1 billion nuclear last year.

Income tax expenses.

Excuse me.

Yes.

On the.

Our.

Yes.

Yeah.

Net loss.

Such beautiful.

She was.

Yes.

Really.

The law.

RMB 2.1 because of your.

Yes.

Diluted net loss.

Yes.

RMB <unk> <unk>.

Okay.

<unk>.

The company.

The strict.

Absolutely.

Our <unk>, let's see.

[noise] funding for the fourth quarter.

<unk>.

We expect that older revenues would be.

<unk>.

The bill in RMB 7.28.

Depending where you might miss.

Yeah.

<unk>.

Well costs reflect our.

<unk>.

This conclude our prepared remarks.

Over the.

[noise]. Thank you, ladies and gentlemen, they've been I'll begin the question and answer session. You should ask the question. Please press star one on the telephone and it certainly seems to be announced it took us to 10 silver request. Please press the pound all hash key.

Please state your question in Chinese tourists that English so good opportunity to audits sheesh lead me to one question each time.

Just first question comes from the line off Thomas Chong from Jefferies. Please ask your question.

Oh, yes, I'll, let you it sounds like.

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So should what do you typically have been something you Satoshi I didn't Nancy.

Woman died.

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You penetrate some when you saw a woman.

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Pensions major medical taking my questions.

I have a question on but.

And then try and be a strategy in public color on.

I think as well at our net ads in membership for next year.

But the fact that penetrating into low but he had to keep the any differences in the U.S acquisition strategy.

There's a pop he had to keep the past.

My second question just relating to.

The content costs.

You bet any color about how we should think about vis vis a vis line next year. Thank you.

How much influence our nickel phone call home health and I won't call shelf life in the long off you My mom <unk> food.

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People have on how to lead off on you know Jim that mail Kung Fu BG young commodities young.

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Topic.

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Some jobs, we do what are some each in quite sometime I may all.

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Your workforce a whole that Florida.

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Gentlemen.

Oh I close my first question.

We have two kinds of money Brent.

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Brent.

Because you'll given the Michael.

We actually kind of see any sign of improvement next year. So we tend to be.

Right.

For a woman.

We have taken a lot.

So we are relatively I'm more optimistic.

<unk>.

And well membership Patterson into larger cities younger right that we already.

Ratio.

Yes, it is compared to the launch of cities. So we are trying to focus more.

Sorry, 50, or TV and initiative, we are seeking to improve penetration include one we are.

You mean more locked he'll come down.

Looking at Citi users and secondly, we are definitely more targeted marketing and operational I birds eye. For example, we are launching more membership to attack.

And.

And over time.

Attack that market.

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I think we will.

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My first night or some of that these comps we offer.

Hey.

Really the potential that we could.

Increases on the pricing in the.

Sure.

And I will comment a little bit comic con.

Have you all know the license content.

Rapidly.

Declining the unit price is declining so if you look out.

Yes.

Hi team with a 2018th of groceries actually.

Decelerated a lot.

For that he is looking at how to 2020 odd because the life license coffee license content.

The pricing.

Volume.

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So why those I will not too will offset each other it depends a lot we think I'd be content costs.

Grow slower pace last autumn.

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Goodness, because we've seen content costs is kind of investment.

For example life as copper I didn't quite passe, reinvestments or deductibles wholesale produce cotton and quote activity investment all this investment.

Actually message here for the beneath a point that I don't think those pesky would you estimate <unk> or the license copyrights.

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We look to continue keeps or didn't talk is lower than I'm a little.

Somewhere below 70% next year, I think that's consistent with <unk> or target.

Thank you.

Your next question comes from a line of a lot G from China based on please ask your question.

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The regulation environment.

Current quota and outcome for next year.

My second question is regarding <unk>, our <unk> of <unk> lower tier city market.

Hi, if youre a pool, how how does the apple comparing two major tier cities in the Hollywood content cost all comparing to the major.

Comparing to the contents that the major tier cities.

People like I. Thank you.

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Robin.

Drama called me I mean that talked before.

Young generation.

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Those are all use would be that type of content.

We.

Rapidly received either to what literal.

Fourth quarter or the skinny.

First quarter.

Thank you.

Thank you very much.

Your next question comes from a lot off when do Chen from Goldman Sachs. Please ask your question.

I think the Glennie tell me whats your limit Oh, it can be when can you give your parents value chemical you.

The time, because that's how should subside.

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Fourth quarter guidance, which we are still seeing grabbing if you've got a great. Despite the pipeline has been okay recover obsessively [laughter]. So just wondering what Chris it sounds like specialty salary and if I may add email question why were flat with the pocket revenue growth decelerated.

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Sorry.

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On TV.

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Hi, Patrick.

I do I.

I think if you look have the losses.

If you can you add the girls readied actually.

I thought single digit right now.

We have lost efficient model.

Okay.

<unk>.

Michael.

Well, we hope it will regain momentum in the future for membership we have seen.

<unk> growth.

And we hope that.

We'll continue to be relatively high.

And we also see Bob.

Gaming license.

Other key rocky.

And for.

We also.

You know.

In Egypt, we love.

Bye.

That's a life.

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Performance.

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Uh huh.

Okay.

So as an almost half of the fourth quarter has caused by the with the are you with future. It has what we're talking about content.

In the fourth quarter. So you.

You know with and that says as most of those content to would be released and off the fourth quarter, which wouldn't contributes and limited soon.

Her shows you this quarter. So that's why we provide a relatively soft guidance you, but we see a better now and about the other revenue is also has something to do with a content because even though the to kind of other revenues why is it like seat for the one time issue of our traffic.

Another wise for them on how did you all IP sold so for the topic apart because often <unk>, we can see a manager to contribute to some.

In the past few quarters, but for the IP related to other revenues because often like like all like on the control southern content.

We don't have a lot of new IP related to this year. That's why you see a relatively low even GAAP.

Revenue, but it was we effect to the normal track next year on that and export or even next year, you will see a a more or is it the or did those come online and mobile IP, which in there.

Content or free and then gradually the west to the reason why the revenue.

Thank you.

Thanks very much.

Your next question comes from a line of Binnie Wong from pitch SBC. Please ask your question.

Hey, John how ugly it pushes you don't Tony how such as I said, it's just kind of <unk> point, what she said she thought there just to do the almost $50 shafi debt now woman Joe's you're kind of thought she didn't know what moisture sensors, you really need for Tim.

Sean.

No well know he did you wait till it usually takes quite a team quantitative color to that no one kindle and initial holding up well and then they said just what you're doing them sounds okay. Young you cannot at home and ensure that you're sure well mentality or do you mean.

So.

Hi, censorship died appears shorten it doesn't show that they said that your sadness <unk> well in Sheepishly My House isn't just a short time.

The short you could talk which we're not sure.

Sure he showed no.

How does she said that's helpful to assess.

Nothing like everyone knows what went just real well then kind of caught it sometimes tissue yet.

He just did good shuffled she knew when Oh Gee I wish I know when you come to you guys are certainly made a she then there's a pipe diminish the change it could not typically that wasn't okay.

Quick.

Well you think that I just short you wait just sit tight ship. He thinks he should Yale 10, which I talked to you say in country. So you T shirts hip annually that shouldn't be that comes out yeah. I just said she does.

No. It is not yet so I'm not sure what you just don't eat it about she was treated and what do you actually shocked to see that sell it seems like <unk>.

Well that Michelle.

But my sense.

Got you know what you just look like any good content cost on that goes to the tune that woman. She is kinda table Tito Chicago and Taposh. It [laughter] not what you don't want me and traditional took I just like I should just stop I should not take a show like I said that I can show <unk> chip waits for such a good thing.

Yes.

Sorry, I was actually my question on the first question here is that there's talk to all look right actually do you see that the softness was actually do too in terms of the advertising well actually on the subscription Bascome side and then in terms of the because for me try and she said that like Ted movies respecting that dose.

And they bought into like I'll be confident that that's supposed to ones will get approval and we will be anything in our once you're trying to 20 well is it that it quick might still see some debate you said, okay can you say that worse in terms of the retro niche and they should be oh, sorry, and that into can differentiate Michigan.

Oh no that's recovery from here and then second question is also on advertising side I wonder that understanding on the structurally.

Steve I think even trees in the shock Peter space.

On the competition side that because that's why I thought that long form video advertising or is it not maybe especially it's more just because of up does that condition and volumes yet and that we received up because to me trying to educate patient picking much as soon as to content approved lease that we leased at MWC.

Because we trimmed back away and then last question your thoughts on the content cost vicious cycle, and then close this quarter spike up to 84% rather be so yes, I guess intends hopefully teeny at a range of 70% to 80% I just a realistic.

Thank you.

Sure Yes.

Well its union the argued or some people social data from Jim one woman the homes or.

Well go next year I lose your from high though do you know you should use social Chandra funk for that portfolio slowdowns use all the overall the only thing you hold who runs you are you looking agile.

Uh huh.

Position that Jim wasn't good high school charges, Ginger Chemmax harsher fall venture.

Funk for Wolfcamp.

Adult don't go to take what Oh, hi.

Okay, I phone controls and Jim level than say the goals important.

We should know for talking portal.

Not quite you Fossella central Wilmar Jerome.

Ah, yes, you'll convenient bye bye.

Do you get each I'd love to its our pipeline.

Sure. So she has it affords for young people together the label.

Harmful that general journals, while our dot dot dot all up.

Nitrogen the some jobs.

Total what outdoors your hobby lobby 12.

Sure.

Which I'll just do a coincidence.

Yes.

Oh.

So.

I think since Q2 in Q3, we do have.

Okay.

Our pipeline.

Hello.

[laughter], especially on the cost you John .

If you look had a d. These three platform since June actually only one cup examine each.

You can see the regulation it takes time.

Okay.

Got it gradually.

And dot, we aren't able to really more.

In our.

I think I started the to kind of content cutting drama.

Remake of classic video content, a week, we can't gradually loosen up but I cannot guarantee.

Exactly when that will be released by my estimation is we should be able to release.

Late.

Right.

That's one of these here in Q4 or in Q1 next year. That's my after that.

And also for your second question advertising, we do see impact from truck on video.

Your next question will be its Patrick on the competition.

User time.

I will let children comment.

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