Q4 2019 Earnings Call
Thank you for standing by <unk>.
The fourth quarter.
2019.
This conference call.
Stein all possible.
After the speakers presentation.
It's especially if you wish you all the question Im today, especially.
Spread star followed by one on your telephone keypad.
Your name to be.
Please note that this conference call is being the club.
The conference.
Speaking today, it's got the thing. Thank you. Please go ahead.
[music].
Thank you operator, Hello, everyone. Thank you for joining us today for a moment squad quarter in fiscal <unk> earnings Conference call.
Companies result.
Earlier today that are available on the company's IR website.
On a call today from all Army <unk> co founder Chairman and Chief Executive Officer.
That's or Wyoming, President and Chief operating Officer, Mr. volume founder and Chief Executive Officer.
Mr. Johnson drawn Chief financial officer, they want to Scott's to companies.
Operations on highlights as always the financial Sungard guidance.
We will all be available to answer your question during <unk>.
Before we begin I like to remind you that this call may contain forward looking statements made under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Statements are based on management's current expectations and current market and operating conditions I related events that involve known or unknown risks uncertainties and other factors.
Oh work, which are difficult to predict that many of which are beyond the company's control, which may cause the company's actual results performance where she.
The different maturity from though the forward to keep them.
Further information regarding these and other risks uncertainties on factor.
Included in a company filings with the U.S. Securities and Exchange Commission.
The company does not undertake any obligation to update any forward looking statements on the result of new information.
Treatment or otherwise.
Except as required under GAAP.
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Hi, John.
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Good morning, Good evening, everyone. Thank you for joining our conference call. Today Q4 was the another solid quarter working out of food for your 20 <unk>.
Oh, my team and I will take you through the details.
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Personally a brief overview of the financial performance.
For the fourth quarter couldn't Nike hurt a revenue reached 4.69 billion and B R. 22% year on year adjusted operating income for the quarter was 1.46 billion and then be up 42% from the same period last year.
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For fiscal year, 20, Nike and how to revenue came in a 17 billion really be up 27% year over year. Adjusted operating income reached 5.12 billion, maybe up a 30% yeah young here or a 38.1% operating margin.
What percentage point higher than that of last year, excluding compounds financial impacts adjusted operating income for the core Moema would have been 5.54 billion Andy.
A 35.2%.
Or a 35.2% adjusted operating margin.
<unk> 0.8 percentage points higher than that of 28.
I'm very proud that a financial performance of the year has exceeded our expectations at both topline and bottomline levels.
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Were not just switching gears up.
Now a deeper dive into the quarter Firstly, our community can you continue to grow the corn on my I pod 114.5 million monthly active.
For the fourth quarter.
Percentyear over year, I, representing a 400 K navigation from the previous quarter.
The user acquisition environment, it's in the fourth quarter was not ideal which puts some pressure on the number of new registrations.
Costs are I mean, you not acts to be modest.
The fight a pressure at the top of the funnel I'm happy to see that we were making impressive improvement we didnt use their final.
First.
I can continue to increase during the quarter and have bounced back through the pre suspension period.
<unk> per user time spend per day reached a record high in the recent two years alacrity total paying users for the core Momo platform accelerated its growth and reached 9.3 million in Q4, 2000, 1980 400000, so now to detract from the last from last quarter. These.
Comedies improvements laid a solid foundation for us to drive further user growth in 2020.
We were made or they were made possible by our relentless focus on product innovation and operational efforts throughout the year, which my team and I will elaborate a bit later.
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Is there for compound was 4.5 million in the fourth quarter Francis from last quarter, partly due to the slower than expected user recovery and partly due to the change in the Io at 13, so scripts and management policy, which in turn out to a one off increasing the churn.
I saw some downward pressure around if your retention ratio starting from late Q3, which led to a slower than expected recovery process.
We were able to pin down the cause of that true to work late November.
Team, then coke effective measures through drop the problem I need January through attach a having bought it has already gone back to the princes entry level, allowing Patrick experienced rapid user growth told me February 5th then I had started to see some central pressure around maybe new registrations. We believe this stress can be largely a true.
EBITDA is attributed to the social dispensing control in connection with a koby 19 outbreak that said we remain confident that after this temporary disruption is over that's how we'll be able to see rapid growth in its users on paying users Bobby well have more details about their user growth strategy later.
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Foothold <unk> so the individual.
As we close out the year 2019, and started and started going into 2020.
To review the few things that we've done well on the product and operational side last year, followed by our plan to grow the user base and drive revenue growth in 2020.
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[noise] our mission is to help users discover new relationships some build meaningfully interactions on our platform our crop one.
One of the biggest highlights on the product side for 2019 is that we have significantly improved the products and operation from the audio and video experience is outside of the talent show.
Represented by the chart willing parties that we won't see experiences.
As a result frosty users they can use and engagement metrics of these experiences have seen substantial increase during the year.
In addition in Q4 29 team the team 30 to test the video dating experience Cod matchmaking.
We believe it has the potential to become a popular way to connect people and lower tier cities, which is unusual from that we're pushing hard on right now.
Our age on air Walmart fruitful each on children and adults we thought there was a trina <unk>.
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In 2019, we also introduced a virtual community service.
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These new experiences pick up one of many social game.
When you know weighted with a social features and relationships on the law. They can help users easily break the <unk> and connect to others in a more effective manner.
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We believe this progress is on the product and operational side, we have vital role in cooking to retention engagements, we didn't exist or funnel, which I mentioned earlier part of my speech no over.
They also create new business opportunities Mommy, we'll have more details on the monetization endeavors around them later.
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No I like to talk about the wide area, where I like to see better performance in 2020.
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Currently we are seeing some secular tailwinds in China as open Sophie mobile and <unk> are the two biggest top ones in this sector with high level of complementarity.
Together, we still have a lot of growth opportunities.
Order to capture these operating.
Here are a number of things ARX <unk> execute well in 20 flight.
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Firstly, we need to continuously improve their social experience on our problem.
If we can keep doing a better job in say flying to demand that we were not able to serve while in the past.
We have the opportunity to call back with woman users and see if we can better retained.
Currently we are looking at a pool of hundreds of millions of women accounts that we can draw.
That's a real opportunity for use of world.
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Second expected growth driver for 2020 like in the lower tier cities.
There are plenty of growth opportunity there.
Pat we didn't have a particular strategies either on the product side or channel side targeting the lower tier demand.
Our approach on that front will be different this year in January we wrote out from a like a light version of the core assets in order to more effectively you penetrate into the lower tiered and that you.
Can you talk that are encouraging and we will continue to push hard on that front.
For the corn on law, we have also developed specific product on operational climb to better serve the users in lower tier city.
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Thirdly, right looking to significantly improve their marketing efficiency has how come this year.
We don't collectible Mckee side, I really believe we should get to.
I had a big part room to grow.
More effective marketing approaches together with improved product series product experience and get their attention are the two angles that what glide path on closer to our target.
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Other them on compounds were also making new back with the separately affleck with separate applications in order to.
The growth opportunities in other vertical areas within the open so for state both in China, ending oversea market, we have accumulated at some valuable experience in this area and made remarkable progress as law next year, a this year I like to see the team continue to push forward and take bigger strides I'm on the crop.
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In addition for use in gross revenue and profit also stays on top of management priority list.
I think that's broken see in our Q1 guidance since late January we had been experiencing some pressure on the revenue side due to the negative impact some of the Corona virus outbreak an adjustment to some interactive features on the core Momo platform.
In order to effectively counter these stressed going and continued to drive revenue growth. The biggest priority on the business side for more this year is to focus on effective product and operational niches and keep introducing new experience improving user experience.
Like screening and <unk> vast team have plenty of it it's experience and expertise in driving growth VR products and operational innovation.
We have proven our capabilities through many different adverse situation is coming from the outside or at a macro level as a matter of fact, the team are already making progress on that front.
We have full confidence that a team will take effective measures to cope with the current challenges I stared at business back onto the <unk> as soon as possible.
<unk> <unk> Mommy and allow you will have more detailed for you on our opportunities on execution plans to drive revenue grew up later.
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Happy I would like to finish my speech today by announcing that our board has declared a cash dividend in the amount of a 0.76 thought the U.S. dollar per 80 yet.
We will amount to a total cash came in approximately 161 million U.S. dollar or a 25% or 25% of our adjusted net income attributable to more inc. in 2019.
The second time, we've shared the fruits of our operation to our shareholders, they demonstrate management's commitment to creating and delivering shareholder value.
It's more continues to generate excess cash flow compared to the need for operation and reinvestment.
And if approved by our going up their efforts, we would like to continue to share our CRE Saturday with the shareholders in the form of future dividends.
Thank you for trusting Milwaukee with that I'm handing over to longer for our business reveal Muslim please.
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Currently our library passing total revenue from like I think this is for the fourth quarter was 3.38 billion it'd be an increased 14% from the same through last year.
The library passing revenue for fiscal 2019 was 12.4 billion I really would be up 16% from last year.
Good luck in 2900 was driven by the second <unk> strategy to apply different product can operational efforts.
Our different cohorts of users.
For the middle cohorts.
We introduced interactive skip represented by the Penguin at the beginning of 20 Nike.
Such innovation greatly enhance the sense of participation and improve the paying experience from the middle cohorts for the high paying users.
The second quarter, we've started to methodically introduce a series of new operational efforts to drive spending the most except for one include that don't nobility system and the offline Yaki music <unk>.
Collectively these efforts have allowed us to see impressive growth in a number of core paying users and 20 Nike.
Thank you for the number of core paying users grew 20% from the same period last year.
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During the year. It's funny 19, we also substantially strengthened the supply end of the library testing system.
For the number of professional broadcasters increased 19% year over year and the number of facts about talent agency, who crossed the 2 million rather than be working freckles increased 44% compared with a year ago period.
Eat heart working performers and agencies have formed a solid foundation for US there continues to drive better user experience in 2020.
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I mean, your 20, Nike and we've also made adjustment to the operational strategy in order to reducing reliance on a quarterly competition events.
As a revenue driver and increase their revenue during the night even day.
That's dependent on the tournament events has led to a more stable unhealthier revenue structure.
In addition, it has also led to reduce phone and spending around the competition, that's allowing us to improve the efficiency in using a payout.
Many of the investors now in 20, Nike and I'd like to me space solid intense competition, where many bigger problems offered higher payout ratio than we did however, I'm proud that in such an environment. We have been able to Oh, we have been able to maintain stable payout ratio compared with 28.
At the same time have achieved healthy topline growth.
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Now turning to that well you will talk about how kinds of businesses later and I'll be focusing on the vast business, where the core momo revenue from that on an ex primetime basis wage 819.3 million and be in the fourth quarter of 2019.
Fixed.
64% increase on a year over year basis.
For fiscal 2019, that's when the next time time totaled 2.85 billion ending up 94% year over year, such growth rate significantly outperformed our expectations at the beginning of the year driven by the team's relentless focus on the product innovation in fact, if operational efforts.
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[noise] the biggest driver for back on home or what's the audio and video base, social and for pain and experiences which may include quick Chad and party wearable and the chat room experience.
Hi, I mentioned one of the biggest highlights for 2019 was.
That we substantially improve their products and operations of the audio and video experiences outside of the talent showrooms for.
For example.
The party experience our team took the ideas from some of the popular reality shows and trends.
Has prompted them onto our platform. These new again to find activities together with the contribution from professional moderator greatly improved that social experience and the monetization potential of the party experience.
In addition in Q2, we also started to gradually sandy the scale of the monetization, we didnt chat room experience, which is currently the biggest use case in terms of Diego penetration within all audio Sosh videos.
Entertainment experiences on the core model within the chart when experience. There are commercially operated channels that are moderated by professional home.
Good channels have been gaining traction since the second quarter and have now become a powerful growth engine for us.
We also have channels that are set up and maintained by regular momo users.
Uhhuh organize their own social activity there.
Hi, 90% of the topic went into Catlin, what directed to the non commercial channels with only 10% of going into the high our people commercialized.
Compared to the older experiences such as the party and where both the cat room, it's still meaningfully under monetized.
We decided that user base and the current level of monetization, we still have a lot of growth potential within a chat room experience, we plan to make it a new engines for 2020 by directing more topic to at a higher ARPU channels and improving the operational efforts in the non commercial channels as well.
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Greetings, the I am cats and the interest groups also grew pretty meaningfully in 2019, driven by product optimizations as long as operational events, such as the romance car.
In addition, we also saw mutual success with the monetization efforts into virtual community services, such as the parking lot.
We have one to roll out more such kind of experiences and replicate our monetization model in that.
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How about Mccain has not being one of the priority areas throughout the year 20 Nike.
So the challenging macro environment and the fact that it does not intend to use are experiencing the same way I thought about in San Francisco.
We will continue to apply the same strategy to the marketing business in 2020.
I've said on the prior cost jointly operated game.
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Lastly, and most importantly, I wanted to address the Messrs concerns around the pressure that we are recently fee on the revenue side as indicated by our Q1 guidance.
He believes that pressure could be attributed attributed to the compound as several different factors.
First based on a survey conducted by the last winning team and also based on management's assessment of the current situation. We believe that the uncertainty that a macro level caused by the Cobi Nike in Albright has adversely affected the sentiment of our high paying users.
Secondly, the virus outbreak has caused a significant portion of our users that delayed or time, because they're hometown and got back to the big cities will work.
This prolonged Chinese new year and that has led to a slower recovery of D.A., you and I know you on the core Momo platform than what we saw in prior years.
Over the nationwide social distancing control and associated applying outdoor activities due to the virus outbreak have also been limiting the users intention to use open social products.
Certainly in late January we made adjustments to some interactive features on the form a sophomore.
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Good afternoon, Chinese new year.
We've been developing products, an operational plans to overcome the abovementioned difficulties a big focus here is to introduce new products and experiences to revise the consumer sentiment.
Has already started to put some of the plan effort into the system. Some of them are making good good progress but of course the team you'll have a lot of heart wants to do in the coming through quarter in a coming through month.
We have a strong team and their track record of executing well meet challenges on an uncertainty.
The product side <unk> are also points, while quite a while to benefit from the secular trends favoring the online dating and opened social platform.
Hi conviction that the team will be able to overcome the temporary difficulties and continue to drive value for shareholders.
She's already volumes there as I look at all covenant.
Yes.
With that let me hand over to Mr., allowing it to review has product in business development Mr lumpy.
Thanks.
So let me briefly review some comes off Oh I'm sorry.
[laughter] growth.
One thing users.
We're talking about the fourth quarter 2019 was 4.5 million like ordered last quarter, but not as trend that good to know it's in the number of paying users with many called for two reasons first after the SaaS resurgence after being reinstated RUPS markets.
Recovery has been a bit slower than expected due to an issue that we found the six in November.
Second in mid September I was rolled out a new subscription management policy, which caused the churn to go up meaningfully in the paying users.
Impacts of the second factor came in slightly higher than our exposure on the expectation or the end of 2019.
60% or the users had completed Iowa 13 upgrade we expect this factor to say less important role in the first quarter of 2020.
Churn rate should go down to a normal level passive we exit Q1.
Regarding the first sector. We also made some progress in Q1, we're going to go going to elaborate later.
Now I'll briefly on revenues total revenue.
The fourth quarter was.
300 and.
69.8 million RMB.
66% year over year, and 19% from the previous quarter. The gradual rollouts of the flash has experienced starting from a mid November has caused the ARPU to increase on a sequential basis, which contributed to growth and coupon on sequential basis. There was also an element of deferred revenue impacts which caused revenue to grow a good.
Soft in Q4, the walking dead on the Q on Q a basis.
Next I'm going to briefly review, what we've done and our future plans against different strategic priorities.
Our top priority is to expand the size of the talk on communities through product innovations and marketing efforts.
During Q4 at one of the biggest focuses was to identify the cost of the slower than expected user recovery to find the solution as soon as possible.
In November we had been able to come down the cost of the call them was primarily due to the tide heightened constant review and reviewed and policy and if you spend measures, which caused us to overshoot and ended up limiting the activity. So the good users who are mistakenly isn't it probably customers.
Overshooting across the retention or the mail users decrease.
In a meaningful way [noise].
Due to less number of matches and interaction. So these mailed users with <unk>.
After the call them, what's identified the team took me these auctions to solvent, we introduce a series of optimizations to depart interface and algorithm aiming at improving the female user experience and engagements, which would in turn in cost experience and not a matching for male users.
In addition to product an old algorithm optimizations in mid November we also gradually rolled out a brand new experience called flush huh.
The feature old aimed at driving the number of matches and conversations on home phone.
Well built monetization features into the such that occurs.
Like experience significant volume to users, especially mobile users.
By the end of December last that has already been fully rolled out.
Data has been trending well both in terms of engagement and revenue contribution.
The product an algorithm optimizations together with a new feature launch played an important role improving.
User retention by January the retention ratio has already gone back to the pre suspension period laying a solid foundation for us to drive user growth in 2020.
Now, let me give some color on the latest user trends, we're seeing against the backdrop with a cobas 19 outbreak.
Dr., we fix a these experiences.
Issue I mean users and paying users numbers grew rapidly until mid February, especially during the couple of weeks immediately following the Chinese new holiday.
The shows that young people today have genuine demand for different applications.
However, after mid February we started to encounter downward pressure around user engagement trends, we highly suspect that a large part of it can be attributed to the bars.
Because many of our users stay at home and significantly cut down their outdoor activities.
Have limited the urged to you sometimes it's to discover potential things.
We believe that pressure.
Should gradually eats up and.
After activities normalized and the alkermes meet hubs begins to pick up again.
Although at this point, we don't know when Doug will happen, we believe firmly stating sentiment among young people will eventually come back strongly up to the shadow test of the by the virus phase out and they life goes back to normal.
[noise], possibly look further down into your 2020 [noise].
Used to growth is still the most important objectives without them.
In order to achieved that goal, we have three southern objectives.
First as Tom mentioned, we need to significantly increase deficiency or user acquisition effort.
We believe we still have a greenfield opportunities to improve on that songs.
We need to continue to focus on enriching the use of it did the product features and patent user experience on them.
Not being able to good quality matches and Butte build meaningful conversation is a key reason for user trends you things on them.
If we can get more and more effective in helping users discovering new relationship and building meaningful coming drugs on and off our platform will be able to lower the churn and improve the long term retention I'll call them, which is a critical importance for user growth for the end close.
Of course, it's not an easy task, but we are committed to working very hard to patients. It gets.
Thirdly, we expect to continue to grow the average revenue per users that we can invest more aggressively into yourself position with a positive ROI in the second is that it's actually bottom line.
These are three components of our user growth we're doing 20.
We're off to a not so easy starting Q on Q due to the coke over 19 disruptions.
However, the temporary difficulty.
Doesnt change long term vision oral strategic plan for themselves.
No quick update on our second part, where the which is to drive monetization through losses of my vision of existing feature is a premium features.
Introduction of new paying experiences.
In Q4, our main focus was on testing and tweaking the new Nonsubscription monetization featured.
The new features not just for monetization, but then you used the consumer experience does have an impact on the user experience and engagement as well.
Then, making progress with testing and seeing gradual improvements in into different metrics that we are monitoring.
The team has also had the new news, how new learnings about how to make it work better was in the leading ecosystem.
But its new feature Q1 is still largely about refined product operations, making sure that the key starts continues in crude to the point, where we feel comfortable through these more traffic to it.
Looking into 2020, the priorities are the monetization side, we'll silver to gold or along three pillars.
Wanted to optimization optimizing existing monetization features to dive drive better adoption.
The second pillar is introducing new premium features and services.
Within ladder. The biggest project is obviously the non subscription feature that is currently under dosing.
Our goal for 2020 is sports to start generating meaningful revenues toward that.
[music].
In addition to the US we're also looking to experiment on other new monetization features on both subscription because we can be.
The third pillar is our overseas development in the past you would have built up a sizable user base in some parts of Asia and reach possible our ROI in many of the markets we are.
Our findings in these new markets prove our earlier it really depends on poses a universal appeal to use is outside of China.
But to southern funding our goal is to skilled revenues and profits in markets that we are already getting and keep pushing into new markets doesn't make sense in terms of Orlando.
With that I'm, not talking to call to Mr. Johnson down for financial review.
Thanks, Hello, everyone.
After the call today.
Let me for if you briefly secure through the financial review.
Total revenue for the fourth quarter put all the 19 was 4.69 billion RMB up 22% year on year, 5% quarter over quarter.
And exceeding the high end off our revenue guidance.
Our total revenue for fiscal year 2019 was.
17.02 billion RMB compared to.
13 point.
41 billion for 2018.
The 27% year over year broke.
Non-GAAP net income attributable to mobile for 2019 was four point 49 billion MMP compared to three point 46 billion.
For 2018 increased 30% year on year.
Now, let me jump directly into the review our cost and expenses items of revenue line being covered comprehensively.
By.
Mr Lunghi and won earlier.
Our non-GAAP cost of revenue for the fourth quarter of 2019 was two point.
Threeq 2 billion I mean be compared to 2.8 billion.
For the same period last year.
I'm kept cost of revenue as a percentage of total revenue was 49.6%.
Decreased from 54% from Q4 2018.
Non-GAAP cost of revenue for Q4 2018 included.
The production costs for FEMSA City, which was 56 million.
I mean b.
Excluding the effect of Citi impact.
Non-GAAP gross margin for Q4, 2019 was up 3.1% year on year.
Due to lower payout ratio from both like broadcasting and invest business.
We're very proud that the team has been able to drive robust revenue growth at substantially lower payout ratio.
Especially given that many other platforms have been trying to compete with the right thing payout since the beginning of 2019.
On a sequential basis.
Non-GAAP gross margin decreased less than 1%.
From 51.1% to 60.
0.4% to four.
The decrease was caused.
Bye.
Cost incurred in connection with a live streaming.
Your end tournaments.
Non-GAAP R&D expenses for the fourth quarter.
What's.
444.3 million RMB compared to.
193.9 million RMB for the same care to last year, representing 5.2% and 5%.
Total revenue.
Actively.
On a sequential basis non-GAAP R&D expenses decreased in absolute RMB, a month due to less yearend bonus accruals during the quarter.
We ended the quarter with 2350 total employees.
Which 675 are from <unk>.
The R&D personnel as a percentage of total employees for the group was 58% compared to 55% for last year.
Non-GAAP sales and marketing expenses for the fourth quarter was 654 million there may be for 14% of political revenue.
Compared to.
557 point, Threemillion, there, maybe or 14.5%.
Total revenue for the same quarter last year.
On a sequential basis sales marketing expenses decreased.
From.
701.7 million.
In two or three we spent incrementally a marketing to recover from the home page and downloads suspension.
In Q4 core normal.
So to scale back.
Sometimes domestic marketing costs also decrease year on Q4 offset by the increase in marketing spending for pushing through the overseas markets.
Non-GAAP DNA expenses were 151.7 million R&D for the fourth quarter 2019.
Compared to 133.1 million RMB for the same quarter last year, representing 3.2% and 3.5% total revenue respectively.
Non-GAAP operating income was 1.6.
1.46 billion RMB.
An increase of 42% from Q4, 2018, representing 31.1% non-GAAP operating margin for the quarter up 4.4%.
From the same care to last year.
One thing I'd like to mention here is that for the core mall.
The annual non-GAAP effective income tax rate for 2019 was.
15.5%.
As one of our major profit, making subsidiaries featuring more information technology Company limited.
The enjoyed a 12.5% preferential income tax rate for the past three years.
Start real from.
20, renewable every three years it will be subject to a.
Chris for initial income tax rate up 15%.
For a qualified higher new technology enterprise.
We expect our annual non-GAAP effective income tax rate for Walmart will be increased to 17.5% going forward.
Now turning to balance sheet and the cash flow items.
As of December 31st 2019, almost a cash cash equivalents and termed because this portal.
14.9, Keith 3 billion.
Even be compared to 11.9 billion.
To be so December 31st was on the 18.
Cash provided by operating activities.
For the fourth quarter was 1.6 billion.
I mean be compared to 1.16 billion there maybe for the same quarter last year.
Before we turn for our first quarter 220, your revenue guidance.
On behalf of our company I'd like to express our condolences.
So those deeply affected by call it 19 virus outbreak.
And pay tribute.
To people, who worked diligently to fight for public health and wellbeing.
We have also being.
See an adverse impact on our business from the virus outbreak.
Together with a search and other factors that while you mentioned earlier.
We expected our first quarter revenue to come in the range from 3.4 to 5 billion RMB two three point 55 billion R&D.
Representing a decrease of.
7.3% to 4.6% year on year.
A decrease of 26.4%.
To 24 point.
3%.
Quarter over quarter.
Please be mindful that forecast for represents the company's current and preliminary view on the market and operational conditions, which are subject to changes.
That concluded our prepared portion of today's discussion with that.
Let me turn call back to affect the infrastructure and [noise].
[laughter] Prescreen minor before the QNX for those to analysts who can see Chinese. Please ask the question in Chinese first followed by English translation by yourself.
ER and also if you could then mid.
Two questions per person.
No doubt that would give other people opportunities to ask questions operator, we're ready for questions.
Ladies and gentlemen, we will now begin the question on suspensions Jewish do ask your questions from me up on line. Please press star one.
Telephone keypad than me if anything else.
[music].
First question coming from the line was Oh from Jefferies. Please go ahead.
[noise] jump out since you had one each hung James show that he went.
Well and guarantee these were going to see.
Each home woman kind of outside isn't a huge and should catch it football, which had no hoagie change I think all lagging cotton valley.
Hi, Chief Philadelphia Energy, So I wouldn't in Charlotte drinking more Mr. Bush away can bowed out you said you would have shown with a lot of cotton Bob.
Oh, what each home wave energy each and then took a one five halogen being shot which you should told you eat why didn't you probably somewhere down the bye-bye true.
Yeah, So do the Gabby.
But you can buy dish again should so each one and JMP begin shop EG, earning on demand more so that you cheap.
Yeah, I tried to take the first question first.
Thanks management for taking my questions as we are seeing that business. These spotting getting back to normal in the month off much.
And we are actually seeing the Cowen though I wish. This also under control and just want to get a sense.
To see whether we are seeing tropic as well as our Bakken now.
Is coming back in terms of the business trends and how should we think about Nicole will know why rise as well as the gentlemen.
The interactive features.
Last fall, how long and what other strategies to offset the pressure coming from debt and how should we think about.
More trendy trend he.
Revenue outlook as well, but the overall impact.
Well nickel NOI risks.
That's my first question and then I have got very quick follow up thank you.
[noise] Hodapp [noise].
[noise], which I guess, there's no question David Lynch.
Sure as shown on the huge I'm, just wondering tend to trend and they could come out.
No I mean, you should go to genome UK Toyota.
So I definitely Kindle.
Well I mean.
She told us out of it usually that it does show.
So when can you do it took us a double triple meeting the yachting.
Oh Wow, there's one other to use shooting shop, they got to push on the shift.
Just so you should listen to you sold into law, so well why isn't that contributed a lot years about eventually you actually get since almost on that so you don't do it by the Saudi women.
So you have a normal much less the build out but it also using June boots and show you go we're not big attrition.
I believe that's a question that is on every investor signed at this point of time. So now let me first we talk about the revenue impact and the Oh your outlook.
Lead Friday, given our Q1 guidance has you guys can see due to the us the three factors that while he talked about.
Actually it's the compound these three factors.
Because of the compound of these three factors our Q1 revenues.
Especially live broadcasting revenues have been under.
Some pressure that is also going to be adversely affected by the strategy is not going to be Isaac.
So that's the overall revenue situation in Q1, but if we try to break the quarter down by month and look at the must be trajectory for the most part of January things were pretty much at a normal state.
And you know sad battery it was obviously struck the heart is.
By the different factors that we talked about and actually starting from March a at core mall, we are already seeing some gradual recovery in trends about.
Both.
So.
Both in terms of traffic and in terms of revenues.
No material. So do you go usually would your T.I. Aloha.
So one of the regarding its hologic perpetual, which I'll jump in.
Neither usual larger so you can do you change it about you couldn't under shoulder choose turns into a concentration you should the customer.
We will continue well unions hosted I didn't do it so.
It's hard to discussion so both the last time did a good times, there's a lot of course, we didn't John.
Number one about elderly hinge on our country, that's what you're not sure if I just need.
Just to show because what I was just you are not hesitate socialist has multiple choice.
So if I'm you know mode or they have been a hopeful that eugenia.
Moving on your seems you then go can go so should I was quoting you misfortune do seem to be usually.
So you want me to try and I can give you much and kind of all the you've attrition.
Gee a tone goes I mean, you do you actually to begin our jewelry occasional I'd be if I'm have no running telerik solutions and Jewish available you got beans, and you might he doesn't have anything.
So if you look at the several factors that we talked about for the person that factor the pressure around the topic in connection with a virus outbreak that pressure is going to start to gradually eats up from the second quarter.
One other factor the economic impact.
The virus outbreak is probably going to have some lingering impact on consumer sentiment for dad outlined here is to cope with it the or proper product and operational methodologies.
I think starting from the second quarter, the library testing and that team are going to be stepping out there there revenue driving.
Yeah.
On a graduated basis.
With regard to the feature adjustment the team has been trying to make up for the last year. The introduction of new experiences as it as a matter of fact some of the new experiences that we introduced into the system are already beginning to play a positive role in driving revenue.
This it this is in an area, where moments team has very which experience and expertise.
I'm extremely confident that we will be able to mitigate the impact from that specific factor the or continuous innovations on the product side and also on the operational.
On the operational side.
So.
If we try to look for Q1 into the rest of the year.
And based on the current trajectory that we are seeing our expectation is that at a company level Q. I should be the low point as the year.
In the second quarter is going to start to see sequential rebound.
And as management of the company, we're very confident that as we entered into the second half of the year. We can have a growth level that we feel happy with.
Number two.
Good she there so soon enough.
Boy yellow matures and we also twoish into one thought too hard to people, who does so physicians took us both available.
Let me surgical tools for the juggle I'm about to catch all the tool, which includes a little less I suggest whether it's in July.
You want to nearly all of which we share similar involved.
And you will see element you don't here's what I guess and especially since which also keeping a geologic as if I'm in a good how should [noise].
With regards to our growth strategy tariffs on key points for live broadcasting at this point. The most important thing to do is to keep introducing new experiences in order to revive the consumer sentiment as good as possibly especially.
The sentiment among the higher paying cohorts faster for we introduced a new experience Cod got caught that rule in Chinese and English, it's something like the family experience, which allows a bunch of high paying users to ban together and be identified as a so called family so that they.
They could enjoy the Gloria a fight for and enjoy the glorious that that all family.
Since its introduction a b C back toward that experience has been very.
Very positive. So this year were looking to maybe connect got experience with some of our competition lands on trade something you on top of that.
And also for sure that way or the offline reaction music tours were also looking to introduce a new upgraded version of that for example in April we will be introducing a new competition formats competition event cod.
Producer project.
That's an example of what we're trying to do here.
[noise] losses are probably around the Sunday Watson I'd be happy how many international congested summed up so you are sometimes on the treaties and I'm sure. So much in many different structures all our digital professional tour.
Oh I passing for Boston last on time time. These two businesses guys tend to be relatively under monetized. So we do see a lot of things that we can do on a product side to drive further revenue growth.
With regards to exactly what we're going to do we've already laid a fair laid out a fair amount of details in a previous section so I won't be repeating here.
I think there the second question from from from you.
So Jay a will be opened he just function when you shop on change I didn't see that fee on her new induction funk same guy you want me. He said tool would that kind of no Vodafone Chen from buttoned.
Savings that you highlighted by highway seeds.
Thanks for taking my follow up questions. My follow up question you asked about.
Overall spending as well as profitability for this year.
Any opinion movie assessment that can be shared and also any cost saving pen.
I'm going to pursue thank you.
Hi, Thomas a bit so Jonathan let me address your second question.
On the on the cost side actually.
Given the current circumstances and competitive environment.
You know it is very likely as a percentage of total revenue or the overall cost a will.
Go up by a couple of percentage point I'm used to gross margin is likely so good.
By a couple percentage points due to the on the payout ratio of collaboration is as agencies and revenue continue to increase and also all the various operating adverse to be rolled out.
In connection with our live streaming business and Nevada.
Business.
On the Opex side due to their revenue pressure caused by the virus.
Outbreak, how we are surely going to be more disciplined on the all pack size.
But.
In order for us to continue to support our user expansion our user recovery, our current stage, Oh, we definitely need to maintain certain.
Level off a marketing spending time in terms of Oh absolute dollar amount so as a percentage of total revenue.
We will see the Opex, probably will go up and especially in the first half of the year being so we'll get better in the second half.
In terms of.
Operating margin although.
Currently all four.
For the whole year.
For core mall, Oh, we're still shooting at around 30% operating margin.
With the Q1 being the lowest all below average and all our Q tool will start to law and ramping up gradually.
On the pipeline side on the net loss will also significantly narrowed down for the year, especially as we enter into the second half.
While we were going to happen more quantitative V or after the virus situation got behind us and people are back in their normal lives.
Thank you.
[laughter]. Thank you [laughter].
Operator, we're ready for next.
Thank you.
You have the next question coming from the line up.
She from the World resource.
Hi, good evening on management, Thanks for taking my questions.
Well I know you won't go into so quite a ton time do you still wasn't going to put it on their own social challenge him. When you talk just a Washington.
That makes a prepared remarks sunbelt, Jonathan that's supposed to eat nonsubscription feature teenagers and young.
Glenn It's an unknown said keep on boys you. That's a good details claims you go non subscription feature to do you see here so beyond that you can service.
No there was no.
She is just a woman tend to use those.
Two quick GNS science, you've got something that you put a deeper than don't thumbnail night.
She had us against each element you know adult Oh, yes about as you went teaching Jos Carlos you sound judgment to yield which has been Uh huh.
Sure I bought on listen again, well monthly you don't forget sometime into the D.A. you normally dollars. He thought union as you go home. She does anyone seeking to hold Ohio, which is shown chili's shopping one is on the routine in Trinidad woman do you see it sometimes I think a sole doesn't even though because you see.
Since then somebody on the she's yet whats the design shop, our translate my questions.
I wouldn't like to pull off on the news on subscription feature sometime.
And just wonder if management may provide more details details on these new feature and also management mentioned earlier.
You have identified that policy issues with some of your efforts to recover content.
Users. So I just wonder based on management's current estimate how long it may take.
I have to take intimate takes more time pence idea you to fully recover to previous peak level last night, just one day you can management provide any comments on the Oh all guidance on the revenue.
Gross ton Titan Twentytwenty. Thank you.
Okay.
The first regarding the non subscription.
Revenue stream.
We have already provided quite a few details and we'll try to all the best we feel.
Comfortable providing.
The point in time, we will.
Provide more more more detailed best.
Service progresses.
Regarding.
The general outlook.
Given the uncertainties caused by the virus outbreak the related social listening thing and the related sort of distancing controlled measure it's hard for us to pinpoint the timing for a full recovery to the peak user levels than was the.
The number of active users picked up rapidly in January for about two weeks.
In January and until about two weeks after Chinese new year holiday.
And the Hudson spend under pressure due to just reading of the bars and nationwide social disciplined control, we expect the user and paying users start wrap up again after the off I'm getting a business recover in scale.
Likely to happen sometime in the middle Q2, but it's going to be a progressive causes instead of an immediate bounced back soon.
Quarter starts.
So Q1 will be under pressure Q2 could be a gradually ramping up quarter, depending on when that does start to pick up as gill and currency were very optimistic but the growth outlook in the second half.
Regardless to user growth strategy I've already laid it out and the three things and in my remarks.
The only outlook again, it's hard to be.
Two quantitative about revenue numbers now, but you are my thoughts.
Yes.
Subscription revenue will largely follow the user friendly with a deferral at the swing factor. So the first pass could be under some pressure, but the subscription revenue can ramp up meaningfully from Q3.
Our startup is away.
Subscription revenue, it's will also likely to materialize in is that enough.
Given these two factors the revenue growth will be more heavily loaded into the buckets.
Yeah, I hope that answers your question Gallo given.
Given the time I'm, sorry about the over the previous parts of the call, but I guess that concludes the conference call for today.
Thank you for joining us way well see you next quarter, operator, we're ready to close.
Let me, ladies and gentlemen that concludes our conference.
Thank you all for your participation you may disconnect your lines little thing.
[music].