Q3 2019 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to see Nice earnings Conference call for the took Porto often thoughts I eat at this time all participants in listen only mode. After the speakers presenting shouldn't there will be a question answer session ask why shouldn't give me the fashion you would need to press star one Entre times like this.

Yes that today's conference is being recorded I would now like the hand, the call says Oh, yes, because the data center John . Thank you. Please go ahead.

Oh please.

Welcome to Cienas earnings conference call during the quarter to seven nights.

The next to date or can you tell so I don't see every Bonnie John .

It will be Brock.

And for me to boost with senior IR website.

Now, let me lead you to seek hobby.

Oh, it's called our discussion today will contain forward looking statement, which involve inherent risks.

Chemicals accident now could be for maturity somehow constipation.

Assumes no obligation to update.

Colin elsewhere for deeper discussion of risks and uncertainties leased before 12, ladies and report on some caveats and other funny I see in addition, I like to remind you that discussion could be crew sounds good natured, which means you can still be conversation I said, all the items, we use non-GAAP measures.

Scheme Tibetans <unk> okay.

Operating results in future calls that.

Please be foods money cities for more detail information I'll make a ceiling skills gaps and also badger.

Let me discuss non-GAAP measures we've.

Applied to see methodology.

Any non-GAAP measures.

Awesome actually be mine.

Your life will remain so.

Yeah, I would like to kind of come over to example, Bonnie.

Thank you Andrew and thank you all for joining our conference call today, Let me walk you through the operation lined up for National High nine for the third quarter 2019 before the detailed financial review I will like to remind you that my prepared remarks would've focus on non-GAAP results and older comparisons on a year over year basis unless other.

It was noted.

Let's start with an overview officer, who do 2019 was don't see nothing that revenue for the third wonder what 550 point, Emily and an increase of 1% or 5% on constant currency basis.

Operating income was 170, Neely, representing an operating margin of 30% flat year over year net income attributable to see now with 67 million under the diluted EPS was 94 cents.

Oh, that's trying to keep financial items.

All non advertising revenue for the third quarter were 461.1 million a decrease of 5% one per se now I'm a constant currency basis primary due to a decline quarter advertising revenue and a negative currency translation.

Let me start with Weibos goodness <unk> third quarter, we will continue to deliver the user growth with it may you, reaching 490, some Emily in September and the average you used to reaching 216 million underpinning to fight we bought distinguished position as the leading social media platform in China, I sleep, let's celebrate.

Its 10th anniversary this August .

We are grateful that we blocking the sustained.

What momentum to grow our community and the weather just for many rounds up for market challenges leveraging ongoing optimization and diversified at content ecosystem. We bought has evolved into trying to go to popcorn to discover trends and engaging public conversation around topics of interest.

Along with our <unk>.

The net efforts to strengthen our differentiated assets social media were also focused on incubating new products to further talking to users diversified interesting to me and drive value for our growing community in the longer term.

Monetization, we bought online advertising revenue for the third quarter were 412.5 million up 1% or 5% on constant currency basis. We were key accounts business grew 6% or 10% on constant currency basis, FMCG sector and the luxury brands continue to outperform.

As we attract their high customer count to embrace the platform leveraging a wide spectrum of social product come probably at designs are rising influence appeal, which all together better feel customers integrated ran plus performance marketing to me.

On the flip side of the talk sector, particularly mobile handsets exhibit a tough data growth and made at the five two transitional period with limited promotion activities White entertainment industry faced a near term challenged due to lack luster Comcast schedule.

Tightened a regulation.

Oh, we bought S. Annie's sector was up 1% or 5% on a constant currency basis in the third quarter sees the industry has I've not witness a ton of aren't yet.

The favorable supply and demand a market dynamics, we continue to see at impression growth on both anyway to sequential basis, demonstrating team step up efforts in developing new customers and are retaining existing existing customer spend through going up automatic out to place.

And enhancing at around them and the end of cells channel optimization, none of them to our SMB revenue growth was due impacted by the pricing discrepancy on a year over year basis, the de sequentially pricing has been stabilized.

Mystery why we're pleased to see solid performance of ATP downloads and the consumption related sectors and a modest a recovery of online gaming industry. Despite that the gross was largely offset by a budget cut back from certain large ticket item category with tough comps last year a under the current.

Good macro uncertainties uncertainties in a market competition.

Turning to port openness portal revenue for the so quarter were 50.1 billing and a decrease of 33% or 30% on constant currency basis, mainly resulted from AD budget cut back for SMB customers as well as sort of Brent industry, but at a certain such as automobile.

Turning to non advertising business I'll see not not out revenue for the third quarter were 97.7, Emily up 30% or 43% on constant currency basis. The increase was mainly driven by incremental revenue from see nothing type operation and it we bought the live stream.

You mean, Dennis Porto now I revenue for the third quarter were 47.8 million up 98% or 100 of 5% on constant currency based primarily fueled by the greed and momentum of our micro loans facilitation.

Two years operate a two years upon consolidation of the business line were encouraged by team's ability to navigate through regulatory landscape and a scale up the operation by driving.

Oh, no our our loan origination Bobby <unk>, which were Sol posture to by strong customer demand and a diversified funding sources.

Turning to gross margin gross margin was if that's what it was 80% flat year over year.

Advertising gross margin was 83% compared to 82% Arash here not at a non advertising gross margin for the third quarters, 62% down from 70% Nosh Your primary due to their rather to lower person working for the acquired a live streams and is available.

Now moving on to the operating buses in this third quarter operating expenses totaled 274.9 million down 1% operating income increased a 1% to 170 million, representing an operating margin of 30% flat year over year.

Turning now operate <unk> nonoperating item under the GAAP measure not operating loss for the third quarter of 29. He was 4 million compared to a non accretable income 77.3 million for the same here last year not pre law for the third party 29, including.

<unk>.

25.5 million that loss self investments at fair value changes and impairment of investment, which is excluded under a non-GAAP measures number to 19.9 million.

Net interest and other E com and number three a 1.6 million net earnings of from equity method investment, which is the reporting a 1.8 years.

Please refer to our earnings release for more detailed information about non operating items for the same period last year.

Turning to time under GAAP measure income tax expenses were 27.9 million in this third quarter compared to six 8.1 million last year largely attributable to reversal of deferred tax Chargers recognized from the fair value changes Uh huh.

Net income attributable to see not in this quarter was 67, only where 94 cents diluted net income per share.

Now, let me turn to balance sheet in international item I saw on September 30, 29, he's seen us cash cash equivalents any short term investments totaled at 2.9 billion compared to 2.3 billion I Suppose December 31st 2018, mainly resulted from that.

He received from Weibos senior notes offered.

For the third quarter net cash provided by operating activities was 220.2, knowing capital expenditures totaled a six milling and depreciation and amortization expenses amounted to 10.9, though.

With that operator, please open up before the call.

The call for questions.

Yes.

Ladies and gentlemen, it will be to ask question fish that style, one entre talison <unk> I know it at least I can't say you already class pissed pressed upon all hash key you first question comes from the like <unk> from Bank of America. This asked a question.

Oh, given I think it would begin my questions.

May I have two questions. The first one gets about your efforts how you some makes 'cause Oh, we heard dot com some off the a key industries hoping.

I picked up a pressure bought this year. So wondering if you could talk he was at an update off your Paul Appetizer industries and the how has that changed.

Last year, that's safe and then last second me. We also heard that Oh sole waibel Hot incubating new products. All for example, like lasers, Oh, So just wondering where the seemed though ought to put the media pieces as your so called any plans to incubate.

I mean, you products, including any department he thought fintech. Thanks.

Yes.

Oh, okay.

Regarding the first person at or advertising revenue mix.

And that.

I wouldn't know historically I mean.

Pretty strong.

I'm talking with the portal sorry, okay.

Some of you sector finishes Sir.

And also some of.

Mcg and.

So so far it actually products I think the O. these sectors I mean.

As a negative trends this year I'm talking about 29 machine.

Looking for reasons of course automobiles in general.

As you probably know.

And if you over years.

So to system.

Yeah.

Impacting margins significantly I'm talking about it in process.

Advertising dollars quite significantly.

It's a good sector.

And if you look at their Q3.

So quarter business.

It's a good sector.

Probably 23% or would you.

We submarket and.

And also for the financial sector I mean, Oh of course, we are actually do anymore.

Maxing dog.

Right It was hard in school.

Susan.

This year, but also.

We're also losing another oh.

Marketing dollars so another thing that companies.

Because as you probably noticed the bigger sectors underground.

Yeah.

I mean.

Huh.

Having crooks Oh I've been in trouble getting that budget.

So this is under the SEC says that.

Quite big but also.

Net net basis was also impacted and FMCG, whether that's not sector, that's doing very big in the Internet.

Phase, but unfortunately, <unk> not getting towards shift from that because historically.

We have bought a system.

Okay, and penetrate a few months worries for FMCG, but no I think is for this particular year without getting too much smoking share for FMC to because we're not really.

I become.

Area.

Generally think F and G.

Well, we booked a tree nuts.

So basis, because some of the big sectors.

And Oh pieces of total yeah, actually having some negative trends going forward I seem to travel will be similar except maybe automobiles, so well civilized because.

Based on current course, the trees nice things in car or the market.

They were lies ahead of it and hopefully maxing dollar for automobile industry also world.

And in terms of new products, yes.

First about Oh, it's just in the previous.

Coal for the we fall.

And.

ER.

We actually don't have.

Cranfill.

For that.

Areas would be.

Awesome.

But as you probably know doesn't like you nothing is going as you know schools.

The most sectors I think we've got three wells and they're looking to continue investing these stupid areas in terms of.

Mobile apps and also a lot of activities.

Ah two to two brothers.

Even further.

And I hope that answers your question.

Oh sure if I give her a charge.

Sure.

Thank you.

Next question comes from the lie off Elisha yet from Citi Cook. Please ask the question.

Oh, Hi, I'm, good evening, a child and Bonnie Ah Thanks for taking my questions.

My question just related to the solid year over year growth off the non at Robin Neil believe a large part off these girls. It's true then Vida Fintech [laughter]. So could you share leave us your latest thoughts and the strategy photos fintech business the growth outlook and.

How should we think about these rapidly with revenue lines into 2020, and then do you think the regulatory policy that affecting the fintech business is largely behind us.

Now and upcoming all potential need a potential new regulation deck will emerge a in the coming months. Thank you.

Yes. The second question first maybe yeah, I'm not sure that policy.

Yes.

Yes.

I stopped or whatever I mean, because we cannot predict.

I mean.

Well the policy.

And well be but that based on the situation. The last several quarters you probably have.

See a lot of new policies.

Ah Degradations, that's a good area, which has Ah I know basically significantly increased barely a.

For this particular business has also has significantly reduced book players.

'cause sector.

So it's I think that's true probably work could continue there will be more regulatory policies areas, which cannot predict.

When and how it will come and.

For the coming back to our own strategies and we are elaborate many times before this is the boat areas would be the week will be very much focused upon it goes.

In the if you look at the other companies you Miss sectors.

Being you know.

Well, but they're having gone mainly because I think yeah no.

I mean possessing a lot of the vintage is where possessing here like you there.

Based and also data.

Which would be that's very important.

So so eventually if you look at.

The revenue and the versus the cost you huh.

Really really to that.

Customer use acquisitions into so.

You know that bad debt. These type of thing, though called it a coke Pepsi.

Yeah.

Assuming the cost of property. The same then you said that's cost him well use acquisition and of what data.

Becomes more important because they're the ones who will determine.

What kind of modular warehouse for that.

Ah think type business.

No. We believed that will win another few companies in China, which would suggest these kind of data and the user base.

And so I think.

Predicting that said the environment, we're getting tougher in the future.

In a minute being bad for our company.

Going forward, because there will be much.

Feed all players in this.

And although I think.

The margin will be for the screen.

And because our business were made it much focus upon though.

The microphone business right now and says so.

Given this heightened requirement other their regulatory environment.

Ah offering.

The.

You the with longer term of that long, whether with the lower rate right. Now. So this probably will be the trend for a while in the future.

I said I mean, it's going it isn't very choppy.

Okay.

We are determined to be seen is smoking diabetes tend to wells into alone.

And.

I think that's about it.

Thanks, [laughter], just just quickly on the revenue growth trend into 2020 .

Uh huh.

It's difficult to say at this point for <unk>.

Did with the folks to extend our approach.

Given that the tougher environment for regulatory.

Policies, we are subject.

Quite conservative approach in terms of net revenue bookings and the forecast. So so that will provide adequate reserve for any you know.

Potential losses, when they have because of these changes environment.

And so so that's always always.

In terms of our revenue gross.

Okay, and expanded use or too much.

That would result in more risk for on this so were actually tend to our use of a condition very tightly to make sure we're getting that food customers Oh.

And so you could further.

I mean.

You know tighten needs as regulatory and then when they potentially I tried to countries. Even further so were however, lower revenue gross for the system.

But this is for shorts electrical Robert Hill with Barclays.

Yeah.

Thank you Josh.

<unk>.

Thank you.

Your next question comes from the line Awfulness Chung from Jefferies. Please ask your question.

Hi, Paul much like this whole thing.

Hi, Hi, Thanks money into my new Baltic taking my questions.

Quick question.

<unk>.

Hey, batsmen can management comment about.

At the close that we Oh, we have something yeah interest swing back in June .

Like forced by names or any other you can share. Thank you.

I think it would have been talking along the areas.

Focus upon intense but the areas.

The finance and board.

But there's a couple of US both first I think that's both.

At the media rights for the.

Fourth.

Live video and the coverage streaming coverage are being you know going up.

This is it because they over the past several years and I think are we're probably not in the position.

I mean to acquire Oh, we have the ability to.

Acquire a you know these famous kind of media Kobrite me do what a major sports events.

So we actually creating some of the sports events are self was ourself IP like a three to three basketball.

The five to five football soccer.

Gaming and which you have.

Got a lot of attention in the market and I think that weve had been doing quite well into <unk>.

<unk> <unk> and also.

Oh.

Oh I become Ken.

To generally revenues flowing to the timing for sponsorship.

And but we're not.

Planning to acquire a lot of a major major you know.

So even a media rights so they've been in.

In the area of basketball and soccer because these.

Copyright.

Let me do right have.

Tumor.

Yeah.

Our I think.

At a two to absorb to call.

And the intensive but the area for finance and I think.

Well I have always been.

Our strongest area and the but in terms of the content so would generate another country ourself and also we work with all the major financial media companies. So just to get their conversion and that's just part of it and but we're also very much.

Okay. All these you know treating beta I mean for this dog football for everything Oh.

Market to enhance our offering for us an issue.

Data and the for the financial.

So this is 12 users so weve increased our user base and also increased the stickiness Oh, you the baseball finishes sector and this area would have been doing quite well and that was going to continue to invest.

More data I mean for financial services and too so we're used to be.

Thank you Carlos.

Thank you.

Uh huh.

Thank you yeah no further questions at this time I would now like hence the conference back to Sandra Thank you.

Thank you. This concludes our conference call today. Thank you for doing that we've seen this quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you participating you may now disconnect.