Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by the Twentytwenty Stagecoach earnings Conference call, but Yeah, Inc.
It's time, all participants are going to listen only mode.
Today's conference call is being recorded.
I'll now turn the call arbitrary, let's Dana chain Company Investor Relations. Please go ahead.
Well I for one and won't come until February 2020 in French quarter earnings Conference call. My name is financial and operational results were issued earlier today and our palisade online you can also be on the earnings press release finally, hitting the IR website at <unk> Dot Com and originally I wouldn't call will be available on the IR website in the field hours.
Okay depends on today's call will be mr. rooms used on chief Executive Officer, well, Yeah enemies, Catherine Lu Chief Financial Officer manage my won't be game was prepared remarks entered the Pablo can for within a human nutrition.
Before we can see Neil please know that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U.S. Private Security Litigation Reform Act as 1995 forward looking statements involve inherent risks and uncertainties as such the common anyways off maybe materially different from the wheels Express it.
Further information regarding these and other risks and uncertainties, including the company's punch doctors and other probably fall and a solid fee U.S. as you see.
The company does not assume any obligation to update any forward looking statements, except as required under applicable law.
Please also note that we have earnings press release on this conference call include discussions of on lobbies. He's got financial information as well as I'm are elevated non-GAAP financial measures, who asked last release contains a reconciliation of the amounted to non-GAAP measures to the owner of 18, most directly comparable GAAP measures.
I will now open the call over to our C. O Newsrooms you don't please go ahead.
I don't know anyway.
Thank you blow Jamie all confluence pools are they seem to be so give me or do you feel the I V. NAND. He has caused a long haul and Wilson please worldwide.
We remain hopeful and are dedicated to helping people stay connected and realizing but where do you live online entertainment content building season critical path.
But the medical <unk> environment changes.
Oh bars up him damning.
So what was another phone or the quota.
We saw a fairness.
Oh, no said related to that growth, although mobile users you got booked for the which was a strengthened our leadership position and they put it used to a market this year evidently mobile and males. Oh, we on life woo none.
So depending on performance year over year using Sumant, They will fund to serve emitting exceeding oh, yes targets and the hitting a all time high.
We had to over smoking military maritime disease. So on mobile users from fuel pool. So that's where the growth was mainly driven by the rich something our fretful and Oh, a comprehensive and their sales.
The important thing you go sitting as whereas a lot of song and.
And then extended school holidays the offerings.
Oh not virus outbreak.
He also whose Ah onez youre all offline internet cafes.
During the course, calling a virus outbreak on demo values as well.
Well in there that you're waiting pets to impacted however.
Our total yoga he'll continue to go to put all.
Average M.A.O. Smith, who we are like you show would increase to then Playskool. Then yeah. We are you using 151 bonds of streaming live with their presenting over a 1 million net additions from fuel.
Well, our user coming if they stay around stuff fosters, finishing we will still able to achieve a high level I'll use the industry and engagement. So next month Yosef benching right well, all while who we are alive at limit.
The overall salmon type thing.
And does that daily time expenses.
Well I use does who we are like that increased to over 100.
And a 7 million.
On 100 million.
Can you guys quota.
And then they may decide to sell it led to that growth all mobile use Oh fuel Wayne given it was who Jorge <unk> percent year over year, reaching RMB 2.4 billion.
I live in real World.
Was that a company, though by modeling improvement.
Again, demonstrating our target.
Were still seeing capability.
Yeah, I would like to see a another important.
That's a data with you at least when you guys today announced a in April 10 cents has exercised its option to acquire the 16.5 minutes Fox P organ, though is Oh, we are well your wet.
Well, yes dollar pool instead, they said they food once that 6 million UK.
Joe I why that transaction made a 10 cents allows largest shareholder all four yeah, increasing its voting power in Korea to if they find says one thing I'm not fully diluted basis.
Incident that transaction of play we have been Centsone, Oh are collaborating with everything working close like Oh well route.
They are such as against these four and a high technology.
For example, we are developing new features and products and services so healthy.
That being cool Santander massive Yo Yos Cummins said, we are also cooperating with the same thing to get that's still our users and the World Cup.
As well as it has done it was a.
This means tencent and up we are well be John Jain Terry is forming new business models and that business opportunities a cost like gaming and they use both window chain with 10 cents strong support and the massive user community we believe.
We are well positioned user to strengthen our leadership in China game life Gimi industry, we see leases cooperation as a start our new journey for Korea, and we look for them to be Sq participants.
Im not dynamic and bullion market as well as you can send shopping malls. During fourth is all game last you mean within the eco system all the time things.
With that I will now in terms of cool over to all our Seattle answering who shop coating side on the operating metrics and the financial details censoring. Please go ahead.
Thank you Mr., Tom and Hello, everyone. Following Mr. Tom's remarks, I would like to first elaborate on our Thompson enrichment and diversification effort.
Our t. user growth pillar.
Our major content creators are aware broadcasters in Q1, I'm broadcasters and I screamed, a total of 65 million hours of constant on our platform representing increases of 53% year over year, I'm, 21% quarter over quarter. The number of can read.
Monthly active broadcasters on our platform in Q1 also hit a record high of over 800000.
I mean, what's in constant sources for a third party E Sports tournament due to the Corona virus outbreak. Some of this tournament that were originally scheduled in Q1, well either coupons or canceled as a result in Q1, the only broadcast at 67 third Party sports tournament.
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This is a decrease from the same period from last year, but the viewership of this tournament remained flat year over year at approximately 380 million.
In Q1, what casket major tournaments, such as LPL spring season, what else teams winter tempting CCOP and to be exclusively broadcasted L. L. Centenes Korea MPC MPG now summit as a reminder, esports tournament I typically leveraged to attack.
Back to user traffic, but I'm not.
A major contributor to our direct like streaming revenue even that we have achieved a search T mobile user traffic during the last time period.
Active impacts of the crime virus outbreak. So he spoke tournaments limited in terms of those users and government.
Given the challenging period, we continue to build long term relationships.
Third Party Eastwood partners.
And we partnered with yes, now exclusively livestream, yes, I will go to trial in China.
So we recently signed a strategic partnership because you can company, Russia East force organizer unsecured exclusive broadcasting rights for eight Aegions Fiasco tournament and four regions of don't have to tournaments.
In addition, many east both tournament have started to transition to online forums. For example, after more than one must have delayed LPL peak season was launched in March in the form a phone online competition with its final competition organized email offline studio we sell to audience in may.
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I'll try not began to emerge from the pandemic.
As we move forward, we expect to see more alternative structures to discuss them.
A continuous key focus for our company ecosystem is to do though and improve our self generated content capabilities.
Q1, <unk> organized to 18 tournament and you then slightly lower than last year.
However, the viewership increases 79% year over year, reaching over 113 million.
Notably, we our destiny.
Generated substantial viewership of 27 million more than doubled compared with our yeah. That's to me cheap so little viewed in the same period.
Yes.
In terms of conference diversification, we continue to cultivate non gaming content.
Such a ton shows any me.
Outdoor activities like <unk>, and I theater, Oh increasingly diverse constant is designed to help to retain existing gaming users as well as to attract new users.
We believe this strategy is working in Q1, the percentage of our users who watched 90, new content increased to over 60%.
For example, Oh nice open now changing here too.
Tom showed that combines the real performers with virtual backgrounds, and the night of China Comics, well managed to get a music show a food just like we asked virtual broadcasters.
Given by our rich and diverse mountain offerings as well as Dennis said from the locked down here is an extended school holidays doing the krona virus outbreak the growth of mobile users accelerated in Q1.
Average mobile and the use of who we I might grew 39% year over year, you want reaching 74.7 million and representing a net addition, 13 million from Q4.
Average total any use yeah life also increased 22% you know, but here in Q1, reaching 151.3, CNN and representing a net addition of 1 million from Q4.
Along with the fast growth of mobile users the paying users of your life increased by 13% to 6.1 million in Q1.
And also representing a net addition of close to one minute from Q4 <unk>.
Thank you one mobile users contributed close to 50% of our EMEA views, but over 80% of our paying users.
The like see me revenue per paying users for the I liked experienced a year over year gross.
But decreased quarter over quarter due to seasonality and accelerated growth of mobile users.
Moving onto our overseas business, we reached a 24 minute any use into while we remain optimistic about the emerging markets, but we are complete.
Yen and are likely to see positive impact to mobile users as users around the world continue social dispensing practices will help eliminate the threat of the krona virus.
Despite the ongoing pandemic affecting all aspects of the world, we remain confident in our business and I'll hop back, but we will continue to closely monitored evolving situation and adeptus intact accordingly.
Now, let me walk you through our financial highlights in Q1, our total net revenues grew by 48% year over year to RMB 2.4 billion. This is the eighth consecutive order that we exceeded our management guidance since IPO, we continue to successfully diversify our revenue stream.
Without kind of always our advertising and other business contributing 5.7% in Q1 compared it to 4.8% in the same period last year.
I would like feelings enemies increased by 47% year over year, approximately RMB 2.3 billion in Q1. The increase was primarily due to the increase the number of paying users and then the increase of revenue per paying user.
Just a crucial decrease was due to seasonality our live streaming ARPU increases year over year, but jumped to quarter over quarter as we discussed in the last earnings call a year and promotional activities through lots. The ARPU in Q4 I missed a high base. Additionally, we have also welcomed a lots of new.
New users are you paying users in Q1 and takes time to to cultivate they're paying behavior.
Advertising and other revenues increased 74% year over year to RMB 137.5 million in the first quarter, representing 13% quarter over quarter growth.
I really due to higher demand for more diversified advertisers.
When you advertising distribution platform and that was strengthened brand recognition on the quarter over quarter basis, well. Many advertising budget decline is due to the negative impact of common 19 other sectors with their experience the high revenue growth rate as most of our advertisers in Q1.
I mean, the online gaming industry, which were less impacted.
From the current a virus outbreak.
We are currently are particularly glad to be able to make continued investments incontinence products, while extending our gross margin operating margin and net margin, which further reflect our increasing economics of skill and operating efficiency.
Our non-GAAP gross margin improved to 20.3% compared with 19.5% in Q4, 2019 and 17% in Q1 2019.
Our non-GAAP operating margin improved to 9.4% compared with 7.4% in Q4, 2019 and 5.9% in Q1 2019.
Our non-GAAP net margin improved to 10.9% compared with 9.8% in Q4, 2019 and 8% in Q1 2019.
Now, let me move onto financial details.
Cost of revenues increased by 43% to RMB 1.9 billion. So Q1.
Really attributable to the increase in revenue sharing fees and content costs.
And with costs and personnel related costs.
Revenue sharing fees and content costs increased by 38% to RMB 1.5 billion well to finally due to the increase in go try them revenue sharing fees in relation to higher live streaming revenues and continued spending in content creators and eat sports content in both domestic.
And overseas markets.
The year over year increase was partially offset by benefits from economies of scale.
And with costs increased by 42% to RMB 240.1 million for Q1, primarily due to increasing bandwidth usage as the result of our larger user base and enhanced live streaming video quality.
And partially offset by improved efficiency in bandwidth utilization through continued technology enhancement efforts gross profit increased by 74% RMB 474.8 million for Q1.
Gross margin increased to 19.7% for Q1.
Research and development expenses increased it by.
73% to RMB 156.1 million for Q1, mainly attributable to increase the personnel related expenses.
Okay, and marketing expenses increased by 36% to RMB 106.5 million for Q1. The increase was primarily attributable to the increased marketing expenses associated with the promotions for product and brand name you, both domestic and overseas markets as well have increased.
Personnel related expenses.
General and administrative expenses increased by 5% to RMB 90.2 minutes for Q1, mainly due to the increased personnel related expenses.
Operating income increased the bye.
372% to RMB 133.3 million for Q1, and operating margin increased to 5.5% for Q1.
Non-GAAP operating income, which excludes share based compensation expenses increased by 137% RMB 227.2 million for Q1.
Income tax expenses increased by 98% why RMB 37.6 million for Q1.
Net income attributable to.
Increased by 170% to RMB 171.2 minutes for Q1, and the nothing just and then no margin increased to 7.21% in Q1, non-GAAP net income attributable to yeah, He which excludes share based compensation expenses field sat rally.
And on less meant an income tax effects on non-GAAP adjustments increased by 101% to RMB 200.
63.4 million for Q1.
Our diluted net income for Ats was RMB.
Zero point to 73 for Q1, and our non-GAAP diluted net income per ATM was RMB 1.212.
For Q1.
Let's look at March 31st the 2020, we had cash and cash equivalents short term deposits and short term investment of RMB 10.3 billion as of March 31st Tucson names at 2019.
As of March 31st Who's on the 20 [noise].
Net cash provided by operating activities decreased to two arms. The 135.1 young for Q1. The decrease was primarily attributable to an increase of annual cash bonuses paid to our employees the increase of fees paid to broadcasters and an increase of licensing fee.
Peter Broadcasting East for tournament.
For the second quarter of 2020, we are currently expected total net revenues to be in the range of RMB 2.6 billion to RMB 2.6, Switzerland, representing year over year growth of between 29.3% I'm, 30.8% is forecast to considers the potential impact.
Of course, 19 pandemic, including the temporary suspension of public entertainment activities in China's National day of Maureen on April four two some 20 and reflect our current and premium preliminary views on the market and operational conditions, which are subject to change, particularly.
As to the potential impact of the public 19 on the economy in China and elsewhere in the world.
With that I would now like to open the call to your question.
Thank you.
If you wish to ask a question placed Christopher one or the telephone and what's your name to be announced if you wish to cancel your request ice cream statues.
You want to speakerphone, please pick up your handset to ask your question.
For the benefit Oh participants on today's call. If you wish to ask a question to management then Chinese they may do like repeat your question in English.
Your first question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, Good morning Bank management, what became my question.
I've two questions on my first question just about I would do so or our traffic trends in April and May as a cool noble Iris is over.
My second question I'm, just about uptake on 10 cents cooperation as I remember that there would be my Oh, we have highlighted.
In gaming and you bought back on our technology all time, when it went up or the common I read a b and C or the the synergies to come out for the industry and would that be any changes in the competitive landscape.
Just like what each I was just over to you and what it wouldn't be grew out on that or do you. Just go through each and go to your whole Ah Ah two small bits region can both Europe and the rough and when do you want them, a little who should Oh, my God that by kids among young Young Hall Youre going to you last year woman gun published into her daughter guns.
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We are the clock on that we see that some of the finds that says it.
I'm sorry, she can't when I when I talk to Eagle in Keno Hill javelin teaching people don't Goodnight.
Thank you everyone I'll answer the first a question and Mr. At all the answer is that kind of question.
I think after the pandemic it being lumped in Q2 are we still expect our users to continue to grow, especially in China seems to be deep recovery of the pandemic, we expect our nonmobile piece.
Users Oh actually accelerate our growth.
And Oh to the second question or test for to Mr.
Okay. The because it doesn't seem can book, we are the woman took a multinational woman Davies either when other people universe or do you use it seems like <unk> 0.1 dozen or do you go to one on March one we teach institutions in the beginning with a tier.
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Just to American is it it's amazing team deserves he was he do that on phone number about because it wasn't sure you can use you need to cheesy feedback from downtown alone familiar I'm getting doing that because again, although the issue do you saw a month and another two border to get JGB sensors. He took on leases there seem to indicate that's well done.
They used to go to someone who can can bump in them and Sundar you see many she should ratio is huge.
And obviously, we didn't lose Anadarko isn't doesn't pay bunking to give people would tell you see hooky booking I'm finding disease can be done on some young.
Good good foundation or could it be refund that do don't take one.
Okay.
Okay, I will translate since having him our controlling shareholder the collaboration between the two parties has.
Strengthen in various ways all talk from a macro.
Rich back first firstly, a where they'll continue to improve user experience on our <unk> a an hour and for example in addition to the content for like streaming live we'll explore to provide additional for it must have content.
Operating income tend to operate users and also a will like to optimize their viewing experience to satisfy them on to watch the live streaming valday kind of also playing games or secondly is oh, we will explore a innovative business.
As models waste up 10th and especially on the east West cooperation come kind of licensing side or we aim to what percentage you'll find a other innovative value added services business more business model for the east West collaboration and from a anymore.
Do you feel the perspective.
There are two aspects I will talk about firstly is as all the data.
Okay, well, a little workplace that has a big data so that our Cabot Kennedy connected with a 10 cents and its.
For example, wake him a wait and I have the results of a broadcast trades are aiming competition and a shared that result on the real time basis with our viewers and then secondly, we will wage between that gave me analyze trading.
I mean I saw that the easier ways can see a combined the process, while they came up play and watching the income lifetime income 10 hour and.
Smoked way or eight close a swinton process I won't be provided to them.
That said, we can move onto the next question.
Next question comes from leading let's think of America's Securities. Please go ahead.
Oh, hi, plenty of times that somehow such as this all upside left well once you can't go and keeps us without its outlet.
I'll say no quoting and you go to sure no control and he told US. They got it doesn't go ahead with Alcobra tape on my part to balance our national well that you're shipping behavior to say that draw. The conclusion to know what does that ARPU. If I may or may or may not know that should be oh, I don't know about what you can collect them.
So yeah, well don't interrupt you got all accounts again, they'll come I cant open dialogue certainly you got to almost a 10 year old there, but well call. It took a quarter ago Mail you got.
Todd you got to actually shut them down they couldn't see no. Bobby I go once you see that got lifestyle brand DOCSIS without a doubt it back a bit no matter how about your part they think it's your kids shoes mismatch there have been trying to go trench other Trisha well, let you can talk more likely go course hurt or how much. It requires so while you of course asking about five times.
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I think if I need to about a self managed managed for taking my question all sports clubs in spot paying user we feel pretty good number I'll tell you that number in the fourth quarter total sure Oh, well color on the payment behavior up new you there with because they seem to there's no wants to chime in though you can share in apologies.
Theres a second play about so overstate do that line, especially after the global all corner of called on Dallas in types I do expect <unk> faster policy back then.
Overstated much Ah thank you.
Our paying user had a pretty good user growth or the growth is mainly due to our increased as a mobile users and more our mobile users actually continued over 80% of our paying users.
And so we expect to us our or mobile users continue to grow our paying users should also continue to grow a in terms of new users I think the the user behavior is similar to to existing users, but our pool or would that be a little bit more sand.
Than the existing a years are paying users. So in the next several quarters, we'll continue to calculate the paint you there for the new users.
And in terms of in terms of the E sports tournaments and thinly then the impact on the opinion would be or would it be less because.
Activities and ER and the tournament are mainly attracting sort of active users, but not contributing too much to the paying user side.
And in terms of overseas Oh, we do see similar trends overseas market as as in China.
In February and March due to the social distancing activities. So we do expect into two Oh, we're overseas a user so we'll have a accelerated growth.
And but anyway, we are still going into the sort of with the the trend of the corner virus in Hollywood well impact.
The whole world.
Okay Hope this on a circus and next yeah children to them.
The next question comes from Vincent Here with me 10 and company. Please go ahead.
Yeah, Hi measurement. Thanks for taking my questions. My first question is on their being pretty launch because it came in companion app on so as a separate out he's the anything we shouldn't be picture on their such as what the athletes that ARPU onto the spin. This my second question is on impact from schools as many Oh.
Oh I see them to go to school in weekends and also she can you give some indication.
Our view on impact our business such as and they you know winds I wish I wasn't that blend tee up you're going to ask why he will then take into your assumption does take or pay one that that's going to tell you that for many years somebody you want it seems you pay somebody will walk you through from opinion use or the other two views. The ARPU smelling. The audio was just why you like to show you some color.
Thanks.
Thank you.
So we recently launched our element clear companion a product called this shallow.
So since this is a very new product or we just launched last month, so would probably well share more of a detailed information.
With the Masters he in Q3 and currently we see those users sort of had a similar behavior as the USDA users or playing a this type of a feature a who are using the type of products and features in our main if he Pete.
In truth of the the impact of a schools like students going back to schools, we think that a continent. Our user retention rate is still kept a pretty well I'll use or if it's a retention rate is is over 70% and.
Our user spending time is its over it's over 100 Osama minutes, we shakes out we would still be able to retain a most of the users that we attracted in Q1 and ER and also a as the recovery of the or the economy and then we see.
And the some of the PC users will also increase which are in general we think our EMEA youth well continue to grow but of course. The I think you know a in terms of the company to the mix of the they use it probably wouldn't be a little bit different oh, I need the mobile users probably.
Well I'm not the growing as fast as our number mobile users a into too, but I think we'd expect to both will still be continue to grow.
Who this office.
Thanks.
Yes. Thank you very much appreciate it.
The next question comes from the me Wong.
If they say please go ahead.
Hi, I couldn't even in money and chances are taking my questions. Here. So my first question is actually on the competitive landscape after content someone to controlling shareholder I just wanted to follow up on whether and strategy for yeah I was at the phone Oh application.
To be eyes at opening for us and also how they pulled back the competitiveness. It would have changed example is you have other no other competitors I told you boot.
That was [laughter], but of course, what youre closer relationship with pets and how does that change in terms of let me know what's that.
That concludes our people to black <unk>.
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HM.
I think they can our controlling shareholders of collaboration and so getting towards a more dependent.
Such factors and wasting can maybe from the need for long time with Tencent County, I'm wondering how can we see collaboration designers it might be disruptive order I haven't found not trying to impacts to the competitive landscape in future and Oh from our perspective hands or from the English.
Three itself the mental fraction of the industry. After management's landscape, it's actually stayed home given that our whether it's still a delay our financial if not only this quarter and now they enter into this Ah can last for me industry. They weren't a actually here for a soccer players already but.
It is shorter than they have a broad to some changes to the industry. The first one as only broadcaster and Ah Ah talent agency at night.
'cause currently Oh, I think for our country concurrent agencies slates, they place more 410 or more importantly, this honor combination of content to include both penalize streaming and again videos.
So our this will be Oh, why now the ongoing focus fourq, we are a in the future and we hope that the video content. We act platform won't be posh Paris with all the after excluding age and secondly, wasting the its business model for.
Rock Hatcher himself themselves as getting more diversified and white dynamic because any at all times I'm not in 'em traction or for broadcasters as only a sign on bonuses and as a virtual gifts ti revenue sharing but for now a apart from those two inc.
Choices. They are also enjoying revenues coming from advertising and Lightstream E Commerce.
So I think when it's a those newcomers are getting into this industry or the income structure for broadcasters won't be continue to to optimizing future and.
Thirdly regarding attached to our weather deliberately its revenue sharing a incentive to the talen energy, it's going to impact to us I think.
We have seen that deliberately is providing hollysys greater around a sharing so the talent agencies and the degree of the adjustment, it's actually quite that but I think for all four yeah. It happening in the industry for a long and the SIFI nation in hacking plane that time.
As you might have a in the very beginning so it's actually why now Oh, yes commodities advantageously to a half.
Sorry, if that's how it is the modified early so I'm waiting for the time agencies I'm not worried it's actually a healthier and more optimized up we asked platform. So ah competitors adjustments to the revenue sharing isn't going to a change.
What we are sharing weights are telling you anything out his oh, we have in human rights any relationship. When you were not worry athletes other for like a larger older mounting symptom revenue sharing despite the patient change.
That's really nice.
Well John Katrina.
Thank you. Your next question comes from when they change let's Goldman Sachs. Please go ahead.
Hi, Thanks that Mr. Taking my question a lot to question once they start at the diversification of monetization all they have CPR platform lunch and other sort of thought monetization methods such as E. Commerce life training trial Canning short form video et cetera, So wondering how to match mesquite and future monetization.
14, like any profit lettuce, and young people portion will athletic set and my second question is about to see mobile user additions we have seen quite notable mobile user growth. This quarter. Some commencements shed some color on those incremental usage as saying that they would you say that come from the age group as well at the top.
The category they tend to consume a guy said don't don't catch all if you let all your that when you go then you should play additional like I said that suddenly it turned out not to how different channels I did I should that issue yet teach will lessen that they said <unk> esophagus out essentially boy I am yeah that she can she later, so you're definitely have plenty something.
And I think you're looking at it sounds like it simply I'm glad to get that although to a cabinet if possible pick a state I shot that pulls I should be with my team, which he show a well together when she should I see what does.
No multinational did I have no telephony, sometimes some place else I said I cannot you sit here so all that seasonality CIT a his opinion, but you just haven't T cell initial capital that nice step up quite a chip when there is it.
Okay.
Interests of the revenue diversification or we do see and expect that they revenue diversification will continue as a country. We're also exploring new opportunities a lot of new opportunities in business model I think you know in and of this.
The next a couple of months, we also I'm, probably well well launch our.
Lightstream E commerce business, but we won't be only a serve as a platform for broadcasters to.
Yourself merchandisers and so we're going to be on the light.
Leitmotif, instead of a pretty heavy model evolves supply chain.
So we do see a there will be more revenue types and also the revenue diversification will continue.
For the new users the we attract each one.
I think you know the type a de characteristics are similar to the existing users in terms of age and areas.
Problem, a slightly more of the the news are coming from the lower tier cities, but in terms of out there. There's a constant that they're watching similar to the existing users most of them are still watching the game content and.
And the some of them also watching Dunkin' content.
This office a Christian.
Yes.
Okay next.
Next question comes from Alex Flirt with China awareness for instance, please go ahead.
I see anybody calls I want to equal or exceed your true for what kind of walk through trigger talked on the tendency Turkish on for a whole cell, killing I was curious you called it out you're touching your watch all electric Oh.
Oh.
Trigger tissues, I said in New York, how excuse me out there.
But like so I'm wondering if you did a shortened lead up all that said you know trigger marching towards that person that runs through accutron, though.
Also control devices to go lives up to the marginal towards the reinvestment.
Somebody like that you're going to ship.
Your next year, so aereo shortages for two reasons for it.
Okay. So that's all.
I couldn't comment a little bit on the other current cash allocation strategies and also any area for further.
Thank you.
Currently we are we still plan to use our patch for a sort of a our internal investment in terms of products and Ah content and also as well as potential.
Segments or conditions.
In terms of investments I think you know there a couple of areas that we would like to particularly focused on in terms of internal investment such as I think you know one is content will continue to invest in content, including broadcasters and Ah you sports and also this year, we will trying to.
And we'll continue to keep investing in increasing our investment in self generated content and also we will investing some of our new product that we plan. So that would have already recently launched or planned to launch including they came companion.
And Oh, and a short form.
Video and Ah and Ah Clunky me or stuff like that.
But in terms of the potential investments and acquisitions outside a we will try to find what opportunities that along our to value chain around talking my streaming.
And to other and games and the like three me its such as Ah two to see if if the good opportunity arise we love to investments for commissions.
But the sophistication.
Sure. Thank you.
The next.
Our next question comes from Daniel Chan.
JP Morgan. Please go ahead.
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Cooperate you're going to order through.
To start they'll go into sort of quite you on the Oh, yeah without significant interest and actually the trends you're seeing those jobs or two girls nobody gets you to click through and they will come out in order to go people.
I said shoes, dozens or you'll should support on all fronts public elbow cellphone elsewhere, Oh check what other computer target I'm afraid juncture outlets, we translate or by Thrifts crush and you saw that came close resource.
We have some very promising titles such as our Cnf mobile only got that your mobile into second half, but we also see more and more platforms are doing game streaming subtracts. Our could go music. So do we think that you would pick more resource for us to acquire you hold suits for these pulp games in the second half secondly, or can we have some update on the enterprise.
Listeners are urged you sports, becoming an increasingly popular for job or are we seeing more and more brand. Apart. So just trying to add okay resources to game luxury man, who yeah, what's our future strategy or advertising mobile. Thank you.
Oh, well that we know they're continuing to petition.
Hey, good figure scenery issues or go to four door to door or Jinsong Du runway instigated you who didn't didn't shashi kids don't allow them to get done I'm certainly on the yoshito to bookings or something.
Finally, the economy, if we answered.
Some of those figures they didn't we're doing in he led to the good thing they wonder woman without relying now with regard to disease either younger than I was just to see very risky so to work with our teachers on Chicago shoot them in them and you seem to see news unionism into blah blah blah visual vigor to go figure.
Look we are sitting there was only when we know today. It would you wouldn't see I'm pretty sure vocal imagination Yahoo, though.
And she is you're going to one doesn't have anything on some advertising behind me pushing against the examines the baby Russell among ways.
There seems to be there from in the local they gave her big brother, So things you could be about that you're getting yes.
Oh I won't translate for your question regarding broadcaster acquisition, and then you'll games honor and two rigs back to talk about fish finance Guy I like to say the most important team for it and watch any competition to acquire Brock hatches it.
No I'm focused on the E Z pinball catches on Tinsley happening in the industry for law and having maintained a pipe did Madison for home page eight the gaming HM prop Brock Hatcher pool, we think I'm actually sassine.
In summary, transcend displays.
In terms of keeping up the Guinea ball passion for and secondly, it entry Harding on the new broadcasters I'm. Just wondering you don't gains coming she was a market. We think it is important if one of the platform to cultivate onto cultivating the broadcasters.
For a full yeah itself, we have a much worried and mechanics, and so on treating and the so called relates to be professional skills of the broadcasters and we also have a good insights is my kids and she will be me to meet here Brock hatches so anything.
For the new game Broadcasting acquisition, we are up I have nothing a cheap.
Okay to your next question or regarding to the advertising a we see a lot of the sort of non gaming advertisers star to advertise on our platform.
So actually our I think them in terms of number of the advertisers are our non kidney advertisers actually probably up approximately 40% on platform right now fiber in Q1 due to the Dependently me and actually the a lot of them more of the gaming advertiser.
I spent more advertising dollars onto our platform and are the non gaming sector advertisers a spent the last but we think that as the.
Along with the recovery of the economy, we think the non gaming advertisers will continue to through to increase their spending and we won't continue to diversify our where our advertising.
And in terms of advertising forms we will also I'm trying to.
To explore new opportunities in terms of different advertising forms for example, I thinking what you call. It is also a sort of like a new type of advertising form a for us and before that broadcasters.
Okay.
Thank you.
Your next question comes from T. on her.
H. capital. Please go ahead.
I think they finally tongue Oh, Yeah goes do you do too much chance you know that because then you could I just show Academy the molecule in the hurting me good it certainly would need to be Oh Gee, the Chilean home. She may use a team books, so without me shop, a it's I'm not.
He and say it even making oh, yeah, you'll meal either shut me on the each cheap I appreciate you could say or even though it sounds like people yet she thought Michelle right 35 to become a nimble chidiac. He got to attack that when it comes back at you shop uptake I take a had my father did quite well.
He translate your shop did ship in the piano statement said I saw Q1 gross margin and yeah operating margins both improved unlike young your basis. So what is the company's shot on the <unk> regarding the full year, you know I'm a gross margin.
And just pop in like Jim.
Second light years last quarter management mentioned to overseas expansion, such had said Nimo T cell can management give us an update on that front. Thank you.
Intrusive b or C. The margin infection I think you know this year, we as we grow our revenue or we will still like to maintain or grow our margins in in the next just a couple of quarters and into.
How much of the the overseas development. Our you are in terms of our overseas and many years into one Oh, we have already reached about 24 24 million and into two we feel we still expect a continued growth for our and they use.
I see I'm sort of the social displacing a union in overseas markets.
So overseas. We also this year will also trying to explore new business models, such as like subscription and advertising as well.
So hope that answers your question.
Sure Hi, Greg Thank you.
Thank you Ms. come to the end go back question answer session, Oh, now going back to the company for closing remarks.
Thank you all for joining today's conference call. If you have further questions. Please feel free to come to IR actually outcome. When I look forward to speaking with your international owner and Q.
This concludes the conference call you May now disconnect your lines. Thank you.
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So everybody's been gentlemen, thank you for standing by the Twentytwenty first quarter earnings Conference call, who you think.
At this time, all participants are in listen only mode.
Today's conference call is being recorded.
I'll now turn the call or the to the Stena chain Company Investor Relations. Please go ahead.
Oh I for one I won't come until Kodiak 2020 in first quarter earnings conference the common as financial and operational results were issued earlier today and our posted online in the automobile <unk> earnings press release by limiting the IR website at <unk> Dot com and really after call will be available on the IR website and I feel hours.
Okay depends on today's call will be Mr rooms, yet Chief Executive officer for Yeah, and missed Catherine Lu Chief Financial Officer manage my won't be game, which prepare remarks and at Apollo Cooper, We're gonna came in a nice session.
Before we can see me I'm quite know that today's discussion will contain forward looking statements made under the safe Harbor provision and stuff that you like private Security Litigation Reform Act as 1995 foreign looking statements involve inherent risks and uncertainties as such the comedy ways off maybe materially different from the will express or.
Okay for the information regarding these and other risks and uncertainties, including the combination contractors and other public filings as filed with the U.S. NBC.
The company does not assume any obligation to update any forward looking statements, except as required under applicable law.
Please also note that we have earnings press release on this conference call include discussions of online they take GAAP financial information as well as I'm sure I'll make it non-GAAP financial measures, who asked last release contains a reconciliation of the I don't know they can non-GAAP measures to the I'm not making most directly comparable GAAP measures.
I will now and what color can already see own interim they don't please go ahead.
Hello, everyone. Thank you book I mean, all conference call today things really so give me on Ccs feel the Ivy 90 has caused a lot I'll answer them plays well otherwise.
We remain hopeful and are dedicated to helping people staying connected in the providing but where do you live online entertainment content during the season critical path.
Despite the macro environment changes both home buyers up and then there.
So what was another phone or the quota slot.
We saw upset that I've said related growth all mobile users you got booked for the which for the strengthened our leadership position and they equated to a much of a shift.
Entergy mobile males. Oh, we are not ruled none.
So to the 9% year over year leaching, San Jose will function Theres, a milling exceeding our did you guys targets and the hitting.
Well time hot.
We had the over 13 million net disease. So a lot more valuable does from fuel pool. So let's say the growth was mainly driven by the rich content on our Brett pool, and the all comprehensive and their fail.
Reinforcing you go sit here as well as a lump sum area and that extended school holidays darlings.
Oh not wireless upgrade.
You know who's the overall, although offline internet cafes.
During the quarter, Oh, not virus outbreak on their mobile yoga.
Wanted to hear way impacted impacted however.
Oh I told you know that he'll continue to go to put all.
Average M. Aaos, all who we are life you show would increase the then they food defense Yeah will you.
Using 151 Ponca city ma'am.
The if there's anything over a one midtown net additions from fuel.
Well our use the ammonia they found out that fosters benching, we will still able to achieve a high level I'll use the energy and they engagement. So next month Jocosa dashing right well all while we are lies at the man.
The over 7%.
And as a daily time expenses.
By youth Oh, we are like that increased to over 100.
And a 7 million from 100 million include a quota.
Good event. They may decide that said it led to growth all mobile use Oh secure way given it was who both hey, a six year over year, reaching RMB <unk> buying to 4 billion.
I live in real World.
Was that a company that by margin improvement.
Again, demonstrating our phone or the is it fair filtering capabilities.
Yeah, I want the likes it was yet another important.
[laughter], but they don't with you as we believe out today, our longstanding April 10 cents, an exercise that it's all going to acquire the 15 points like Fry will not be Oregon, though is shot I hope we are all your wed.
Well, yes, all Oh, Gee, I guess, if they food on the fixed meaning they pick from.
Do I said transfection made up everything so loud largest shareholder olkaria, increasing voting power here, we are too if they find a way for thing I'm not fully diluted basis.
Thinking that's right batching upgrade we had will be extensively oh are collaborating with everything working phones like Oh well route.
They are such as games useful and AI technology.
For example, Yaki Levine, new feature called Us and so that says well healthy.
That being too that then submit to Yo Yos. Cummins said, we are also operating wouldn't everything to get up to our users and they both have pets as well as it had been able to.
You are there things happened and up we are well be John joins right. It's boring no business models and that business opportunities.
Well like gaming and they use book, where they'll try it was 10 cents.
Don't support and then they have to yourself community. We believe we are well servicing their food Jenson, our leadership and you try not game, who lives gimi industry, we see season cooperating as a stop a one meal journey footwear and the we look forward.
So there will be.
He'll participants is not dynamics and the Brazilian market.
And well and who can sense trucking more during fourth is all game last you mean within the eco 13, all the time thing.
Was that I will now in terms of cool over to all our vehicle ethylene who shop coating side on the operating metrics and the financial detail. That's doing please go ahead.
Thank you Mr., Tom and Hello, everyone. Following Mr. John's remarks, I would like to first elaborate on our Thompson enrichment and diversification effort, our t. user growth pillar our.
Our major content creators are aware broadcasters in Q1, I'll broadcasters nine streamed a total of 65 million hours of constant on our platform representing increases of 53% year over year, and 21% quarter over quarter. The number of can reach.
Monthly active broadcasters on our platform in Q1 also hit a record high of over 800000.
I mean, what's in constant sources was a third party E sports tournament due to the current on virus outbreak. Some of this tournament that will originally scheduled in Q1, well either postponed or canceled as a result in Q1. The only broadcast at 67 third party East was tournament.
This is a decrease from the same period from last year, but the viewership of this tournament remained flat year over year at approximately 380 million.
In Q1 broadcaster major tournaments, such as LPL spring season, or no teams winter temptation CCOP and to be exclusively broadcasted El Al Centenes Korea, and PC MPG now summit as a reminder, esports tournament I typically leveraged to.
Tractor user traffic, but are not.
A major contributor to our direct like streaming revenue even that we have achieved a search in mobile user traffic during the last I'm curious negative impact of the krona virus outbreak. He spoke tournament limited in terms of both users and revenue.
Given the challenging period, we continue to build long term relationship with the third party Eastwood partners for instance, we partnered with yes now exclusively livestream, Yes, I will go to trial in China also recently signed a strategic partnership with you can company.
Russia in sports organizer any security forces broadcasting rights for eight Aegion subsea skilled tournament and four we can build how to tournaments.
In addition, many east both sentiment have started to transition to online Forum. For example, after more than one must have delayed LPL peak season was launched in March in the form of online competition with its final competition organized email offline studio we felt the audience in may.
I was trying not begin to emerge from the pandemic.
As we move forward, we expect to see more alternative structures through this event.
A continuous key focus for our company ecosystem is to do though and improve our self generated content capabilities.
Do you want all nice to 18 to them in any event slightly lower than last year.
However, the viewership increases 79% year over year, reaching over 113 million, notably we I've got to me.
Generated substantial viewership of 27 million more than doubled compared with our yeah. That's to me g. So little viewed in the same period last year.
In terms of confidence diversification, we continue to cultivate non gaming content such as time shows enemy.
Outdoor activities like China, and online theater, Oh increasingly diverse comps and is designed to help will retain existing gaming users as well as to attract new users.
We believe this strategy is working in Q1, the percentage of how users who watched non gaming content increased to over 60%.
For example, Oh nice open now seem trend here too.
Talent shows that combines a real performer with virtual backgrounds and denied of China Comics, well managed to get a music show a food just like we asked virtual broadcasters.
Driven by all the rich and diverse onton offerings as well benefit from the locked down furious and extended the school holidays doing the krona virus outbreak the girls mobile users accelerated in Q1.
Average mobile and they use of who we I might grew 39% year over year, you want reaching 74.7 million and representing a net addition of 13 million from Q4.
One mobile users contributed close to 50% of our EMEA youth had over 80% of our paying users.
The live streaming revenue per paying users for the allied experienced a year over year growth.
But decreased quarter over quarter due to seasonality and accelerated growth of mobile users.
Moving onto our overseas business, we reached a 24 million any use in Q1, we remain optimistic about the emerging markets that we are currently.
Yes, and are likely to see positive impact to mobile users as users around the world continue social assistance in practices to help limits the threat of the Corona virus.
Despite the ongoing pandemic affecting all aspects of the world, we remain confident in our business and our prospects, but we will continue to closely monitored evolving situation and adeptus intact accordingly.
Now, let me walk you through our financial highlights.
Q1, our total net revenues grew by 48% year over year to RMB 2.4, Simeon. This is the eighth consecutive order that we exceeded our management guidance since IPO. We continue to successfully diversify our revenue streams with our guys always our advertising and other business contributing.
5.7% in Q1 compared to 4.8% in the same period last year.
Our lives fuming revenues increased by 47% year over year for approximately RMB 2.3 billion in Q1. The increase was primarily due to the increase the number of paying users and then the increase of revenue per paying user.
The sequential decrease was due to seasonality our live streaming ARPU increases year over year, but just the quarter over quarter as we discussed in the last earnings call. Our year end promotional activities drove up the ARPU in Q4 and reset our high base. Additionally, we have also welcomed a lot of.
New users are you paying users in Q1 and takes time to own probably.
To cultivate they're paying behavior.
Advertising and other revenues decreased 74% year over year to RMB 137.5 million in the first quarter, representing 13% quarter over quarter growth.
Primarily due to higher demand for more diversified advertisers, our new advertising distribution platform and our strengthened brand recognition on a quarter over quarter basis by on many advertising budget decline due to the negative impact of common 19 other factors this area.
Various the higher revenue growth rate as most of our advertisers in Q1, R&D online gaming industry, which were less impacted.
From the Corona virus outbreak.
We are currently are particularly glad to be able to make continued investment in content products, while extending our gross margin operating margin and net margins, which further reflect our increasing economics of skill and operating efficiency.
Our non-GAAP gross margin improved to 20.3% compared with 19.5% in Q4, 2019 and 17% in Q1 2019.
Our non-GAAP operating margin improved to 9.4% compared with 7.4% in Q4, 2019 and 5.9% in Q1 2019.
Our non-GAAP net margin improved to 10.9% compared with 9.8% in Q4, 2019 and 8% in Q1 2019.
Now, let me move onto financial details.
Cost of revenues increased by 43% to RMB 1.9 billion for Q1.
I'm really attributable to the increase in revenue sharing fees and content costs.
Bandwidth cost and personnel related costs.
Revenue sharing fees and content costs increased by 38% to RMB 1.5 billion for Q1.
Finally, due to the increase in go try them revenue sharing fees in relation to higher live streaming revenues and continued spending in content creators and eat sports content in both domestic and overseas markets.
The year over year increase was partially offset by its benefits from economies of scale.
Bandwidth costs increased by 42% to RMB 240.1 million for Q1.
Really due to increasing bandwidth usage as the result of our larger user base and enhanced live streaming video quality.
And partially offset by improved efficiency in bandwidth utilization through continued technology enhancement efforts gross profit increased by 74% RMB 474.8 million for Q1.
Gross margin increased to 19.7% for Q1.
Research and development expenses increased by.
73% to RMB 156.1 million procurement, mainly attributable to increase the personnel related expenses.
Okay, and marketing expenses increased by 36% to RMB 106.5 million for Q1 increase was primarily attributable to the increased marketing expenses associated with the promotions for our products and brand name in both domestic and overseas markets as well have increased.
The personnel related expenses.
General and administrative expenses increased by 5% to RMB 90.2 minutes for Q1, mainly due to the increased personnel related expenses.
Operating income increased the bye.
372% to RMB 133 point Threemillion for Q1, and operating margin increased to 5.5% for Q1.
Non-GAAP operating income, which excludes share based compensation expenses increased by 137% why RMB 227.2 million for Q1.
Income tax expenses increased by 98% to RMB 37.6 million for Q1.
Net income attributable to.
Increased by 170% to RMB 171.2 million for Q1, and the net addition, and margin increased to 7.1% in Q1, non-GAAP net income attributable to Korea, Inc., which excludes share based compensation expenses based on fair value.
Bench on investment an income tax effects on non-GAAP adjustments increased by 104, 1% to RMB 200.
63.4 million for Q1.
Our diluted net income for 80 it was RMB.
Zero point to 73 for Q1, and our non-GAAP diluted net income per idea was RMB 1.21 tool for Q1.
As of March 31st to 2020, we had cash and cash equivalents short term deposits and short term investments of RMB 10.3 billion as of March 31st 2009 2000.
Thank you.
As of March 31st was on the 20.
Net cash provided by operating activities.
Decreased to two RMB 135.1 million for Q1.
The decrease was primarily attributable to an increase of annual cash bonuses paid to our employees the increase of fees paid to broadcasters and an increase of licensing fees paid to broadcasting east for tournament.
For the second quarter of 2020, we are currently expects to total net revenues to be in the range of RMB 2.6 billion to RMB 2.63 billion, representing a year over year growth of between 29.3% and 30.8% is forecast to considers the potential impact.
Of course in 19 pandemic, including the temporary suspension of public entertainment activities three China's National day of Maureen on April four 2020, and reflect our current and premier preliminary views on the market and operational conditions, which are subject to change, particularly as to.
The potential impact of the call with 19 on the economy in China and elsewhere in the world.
With that I would now like to open the call to your question.
Thank you.
If you wish to ask a question. Please press star one or the telephone and what's your name to be announced if you wish to cancel your request first crystal cheers.
If you want to speakerphone, please pick up your handset to Astro Christian.
Well the benefit Oh participants on today's call. If you wish to ask a question to management, then Chinese placing maybe elaborate pick your question in English.
The first question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, Good morning, Brent management, Oh picking my question I.
Two questions on my first question just about I would do so or our traffic trends in April and May as a whole new I was just over my second question.
About updates on 10 cents cooperation I remember in the prepared remarks, we have highlighted.
In gaming and you bought back on our technology all committed month upper the common ran a b and C.
The the synergies to come out, but the industry and would there be any changes in the competitive landscape.
Just like what are you talking just I wanted to you and what it wouldn't be grew out of.
These girls hold true you try and go to your whole Oh, it usable surgeon can both Europe and the rather than anyone else. They know who should oh pardon bagpipes somebody doesn't go hall, you're going to you last year woman gun published into her daughter.
It goes up you Debbie must keep out dose to try that we see Oh jeez fought hi outside I need bare metal radio system due to her tool Ah Ah Onez hungry that further directly you signed up.
So I really like you do a byproduct credit card Bobby Garcia from Saudi right away.
Hi.
You know switch it up but yeah go home those people become probably should have a door to meeting.
Quite a use Oh, we are the product that we see that some of the five times that's it.
I'm sorry, she can't when I when I talk to Eagle into you know javelin teaching don't don't Goodnight.
Thank you everyone I'll answer the first a question and Mr. At all the author second question Ah I think after the pandemic. It being worked in Q2, we still expect our users to continue to grow, especially in China seems to be.
Deep recovery of the pandemic, we expect of our Nonmobile PC users will actually accelerate our growth.
And Oh to the second question or transfer to Mr.
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