Q1 2020 Earnings Call

Oh cool, looking payments qualified in their entirety by the cautionary statement and details of the company's filings with the SEC the time on the text. No due date to revise or update any forward-looking statements for selected event of some extent after the date of this conference call. Now, I am speak on behalf of our chairman and CEO Miss show the insurance.

We conclude the first quarter of 2020 was solid financial and operational results in the. Total net revenue increased by 53% off over year to be 2.28 billion plus perfect increased by 139.2% year-over-year to be 455.9 million. Well, gross margin expanded to 21.3% Meanwhile net income was 254 am presenting and then margin of 11.2% just is 19. Come go to be 296.9 million months preventing Justice the margin of 13% additionally coordinate paying users increased by 26.2% of years to 7 a.m.

For six minutes in the first quarter of a mobile user base maintain a rapid growth trajectory without average mobile increasing by fifteen points represent over here to 56.6 minutes. Although the first quarter is traditional slow season box and the coronavirus of break cause a certain amount of uncertainty in the marketplace. We're able to continue growing our mobile. And so it's active measures in the. For example, they broadcast it off top tier games developed more premium. If both accountants, it helps our collaboration with game developers and attract small high-quality streamer potential. We also implemented more productive streamer guidelines, which helped to augment total live streaming hours.

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All sides by the temporary closure of internet cafe in depend emack which caused our PCM use to decrease in the first quarter. Well the condition of the spec lot to a slight decline in our total total and the visual 158 from 1 million in the fourth quarter compared to 159.2 million in the same period of 2019.

Coming to the second quarter. We have be able to maintain our growth momentum in Mobile and use as we continue to refund our platform operation going forward after market will continue to be a strategic Focus for user growth as we believe that it still has a tremendous growth potential. We plan to keep enhancing our live streaming capabilities upgrading our community-based content operation and expanding our content often young live streaming. So that way we can further deepen our Contrition of the mobile market and sustain the rapid growth of a mobile user.

Underneath our user base attention like the solid foundation of our comprehensive ecosystem to the quarter. We continue to invest in high-quality Eastvale Century accountant at the same time. We also refund our operations to develop new content and maximize constant value as a result wage able to maintain high levels of user engagement and the user signes our platform with our user with our game live streaming segment calling for about 8% of our total dealership during the quarter.

Beyond internal counters operation our further exploration of value creation opportunities up and down the East Coast value chains also uses promising results wage order fourteen continue to play a very important role in our content ecosystem. For example League of Legends strategy. And is that with the bouncer off on the LPS green 2020 also built up owner of kids who runs a second in the western division of the kpl screen 20/20 this top off the team delivered outstanding performance and helped to contribute additional premium is both content our platform in a quarter.

Also continue to deepen our collaboration with game developers and Publishers, especially in terms of online baseball tournament and that will related partnership with a quarter we broadcast is over $15 scale baseball tournament including LPS green 2020 and 2020 at the same time. I used over full take baseball tournament. So either in-house production or joint development with external Partners. Plays the collaborated close language owner of Kings for Jack team. And so John participation from both dreamers and users were able to significantly boost. Our user participation rate wage engagement level to a streamer user interaction.

this effort

Have helped us create additional value along the a sport value chain, which energized hour is World community and will also contribute our explorations of potential issue since model in the future to further solidify our counter ecosystem continue to analyze our do dreamer management model of combined direct management. Fever and Joint management of meteor, long tail streamers with with talent agencies, especially on the live streaming of new game titles front where able to click re-establish a high-quality content system by leveraging our own business know-how and employing combinations of channeling high-quality streamers to the new game settlements took a new game new streamers through the Partnerships with the talent agencies as a result. We are able to augment our industry leadership in the live streaming.

New game of our extensive user base and leading content ecosystem remove light streaking drivers to accelerate our Revenue growth June 1st. We continue to refine an upgrade our interactive feature to stimulate user stream engagement possibility user paying habits. And in fact total revenue our collaboration with other agencies to increase our efficiency and solidify our supply of high quality streams will have favorable mind condition characteristics and help to attract a broader range of users.

Before the developed our transaction driven event system through which we are building of a surgical consistent process as a result. No, I will call too late paying users increased by 26.2% year-over-year to sell for 6minutes imply and paying ratio of 4.8% compared to 3.8% in a very year. Also who increased by 23.7% year-over-year to be 206 in the first quarter the addition actually respond our operating tactics tailored for each continent segment. Both our main tradition rates and mishaps with income improved noticeably going forward to plan to explore new user features and functionalities and device Innovative marketing initiatives dead.

Those to the overall operating efficiency of our platform. We also depends our collaboration with both dreamers and talent agencies enhance our operations and changing a month position with across all segments in the quarter to Upland our content monitoring efficiency. They committed additional results to the research and development of our I apologize in Tampa Bay in this state-of-the-art technology. We can automatically flight pieces of the copyrighted music movies events and other content in advance that significantly improving of the city and the current state of our content monitoring Pro side.

O clock gaming we continue to explore.

A new method of improving users gaming experience. For example, we reached initial Cooperative agreements with a number of game developers in a quarter-page ad the beta version of new games directly onto our platform that enable users to try out new games without the need to download any additional application long. As we provided user was convenient gaming experience. We're able to increase our users business and boost our platform traffic going off remain in the development of our clocking improve our advertising advocacy and exploring new games distribution model.

I didn't shoot. I was somatic success in China. We maintained the rapid growth trajectory of our Japan is live streaming Plattsburgh. Mehldau to further solidify our patients Japan considering Japan scroll the base of Gamers and excellent user payment habits are quite optimistic about our prospects of January a statue return on investment in the Japanese Market.

Replaced with our financial and operational achievements in the first quarter. Look ahead with the continuing to build a Sports Centre content Community for younger generation deploy resources of dream and downstream throughout the East Coast valuation enhance our operational requirements and investment.

Optimize our user experience continuously also seem to improve our platforms one position and operational efficiency through effective product development team member management and contents operation as the comments are variances for Centrex ecosystem. We are confident that we should be able to suggest our platform grown in our financial performance and deliver a lasting volume to our shareholders of the long-term. What's that? I will now turn the call to our wives President of Finance Mister Mom how to go through the detail of our financial performance in the first quarter.

Okay, Hello, either one. I'm very excited to announce that our total revenues in the first quarter of 2020 increased by 53% mm to a ceiling from R&B 1.49 billion same period of 2019 exceeding the high end of our previous guidance Rams in addition during the summer quarter of 2020 for the margin expanded to 21.3% from 13.6% in the same. 2019 Voltz income increased to R&B 254.5 million from R&B 18.2 million in same period of 2019 and a judge in income increased R&B 296.9 million from 1 B 35.3 million is same. 2019.

Please allow me to provide you with a more details regarding of key financial metrics.

Total net revenues in the first quarter of 2020 increased by 53% per year to R&B 2.28 billion with armed be 2.1. In live streaming revenues as well as R&B 165 million advertising and other revenues like scream in revenues in the first quarter of 2020 increased by 56% to RMB 2.1 1 billion from R&D 1.35 billion in the same period of 2019 just increase was attributable to our ongoing optimization of interactive transform features, which helped to further increase user streamer injections as well as stimulate both the users willingness to pay and payment frequency as a result of paying users in the first quarter of 2028.

Bass by 26.2% to 7.6 million from 6 million in same period of last year

You know Edition continues requirement of Partnerships and even mechanisms as a further boosted Revenue contribution from our home stadium operations for the more the implementation of our operational requirements strategy for different segments also helped improve organizational efficiency wage across the gaming and non-gaming segments and the further increased media streamers income.

advertising and other revenues in the first quarter of 2020 increased by 22.2% to R&B 165 million from I'm be 135 meeting the same period of 2019 just increase was mainly driven by broadening brand awareness and across Bonnie increased demand money from game heiser's

Oh Rodney was in the first quarter of 2020 increased by 39.4% R&B 1.79 billion from 1.29. The same period of 2019 more specifically revenue-sharing fees and the content cost in the first quarter of 2020 increased by 47.5% R&B 1.57 billion from R&B 1.07 billion in the same period of 2019. This increase was primarily explain its first increased Revenue share fees, which is basically grew in line with the increases in total net revenues second thoughts be Westmont in both related content rights and in-house content production.

New Edition

To a lower unit first price and improved kind of ways utilization decisions resulting from the further implementation of self develops t2t, and I'm kind of Base cost during the first quarter of 2020 decreased slightly by 5.8% to arm the 152.9 - 162.3 in the same period of 2019.

In the first quarter of 2020 increased by 139.2% to RMB 185 point nine million from Thursday would be 203.1 million same period of 2019 goes marching in the first quarter of 2020 expanded to 21.3% off from 17.6% in the same period of 2019 such expansion was mainly driven by our continuous improvements to manipulation walk across and find a waste utilization efficiency as well as our improved operating leverage as a result of the companies increasing economies of scale.

No, I need operating expenses.

Sales and marketing expenses in the first quarter of 2020 decreased by 13.1% R&D 107.1 million from 123.6 million in the same period of 2019 mainly due to the exemption of government-mandated social security contribution and the reduced office travel and Welfare expenses during the work from home. After covid-19 operate.

Research and development expenses in the first quarter of 2020 increased by 17% to R&B 92.9 million from Thursday nine point four million same period of 2019. This increase was primarily driven by increased investment in technological innovations, as wage is higher shelf space conversation to relevant employees partially offset by example exemption of government-mandated social security contribution and reduced office off travel and expenses during the work from home. After covid-19 outbreak.

And the major expenses in the first quarter of 2020 increased by 33.3% to RMB 84.6 million compared with sixty three point five million in same period of 2019 mainly as a result of higher service compensation expenses actually offset by choice of government-mandated social security contribution and a reduced office travel and expenses during the work from home. After covid-19. Okay?

Stupid conversation expenses allocated to operating expenses in the first quarter and the 20 were on beef 41.9 million as compared to Seventeen point five million in the first quarter of 2019 and 17.4 million in the first quarter of 2019.

In the first quarter of 2020 increased by 11.4% R&B 16.6 from 46.9 million in the same. 2019.

Just get operating income in the first quarter of 2020 which excludes show based compensation expenses was armed 259.5 million month come out to adjust the operating loss of R&B 30.6 meter in same period of 2019.

Income in the first quarter of 2020 improved to R&B 254.5 minute from R&B 18.2 in the same period of time nineteen adjusted net income in the first quarter of 2020 which excludes stock-based compensation expenses Shuffle laws in place an impairment loss of investment improved to our least two hundred ninety six point nine million from R&B 35.3 million in the same. 19 apply and adjusting that margin of 13% for the first quarter of 2020.

For the first quarter of a 10:20 basic and diluted net income for IDs R&B point and R&B 579 respectively off while adjusting basic and diluted net income test warm big point nine five and R&B 5.95 respectively.

In the coming months, we remain focused on improving our manipulation capabilities and efficiencies as well as further utilizing or operating life to pursue the sustainable development of our platform. We expect our total net revenues for the second quarter of 2020 to be in the range of MB 2.36. Two Army 2.41 billion this forecast reflects our current and a preliminary views on the market wage operational conditions, which are subject to change.

This concludes our prepared remarks, but today operator. We are now ready to take questions.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing keys to withdraw your question, please press star then to where the interests of all participants on the line. Please ask your question in Chinese first and then please repeat your question in English off at this time. We will pause momentarily to assemble the roster.

And the first question today comes from Bank of America Securities, please go ahead.

Hi Ronnie so much. Give me 1 minute. And my first question about new. Can you give us more color on a recent user related to and fro the people resuming work and secondly, wondering the covid-19 impact to our game and Duncan content. Thank you.

I have to go into Iraq had a new way to walk home. We you keep in your hobby with you think you'll be good when you do away from the that you can you know, I'm looking to our team can do the human poop. You should show it doesn't even log.

You suck suck suck.

Hi Nathan, the oppression I would not have translate about the answers actually in terms of your first classroom, according to the data from our plan for two thousand and the average daily time spent by age active users have remained stable without any significant reduction since we're the were consumption of in China emerge in particular our mobile and we use and the user engagement were maintained at a high level. This is because users have firmed good working off using have everything our platform than the years of our platforms operation and also the development and in terms of your second question, although the first quarter, it's kind of track season. We implemented productive Garland to encourage more quality streamers, which helped to augment the total live streaming birth.

Actually increase the amount of quality content. Our prefer more users retracted to our platform, especially from the mobile end.

The user engagement level further increased as well for our gaming segments the academic results in overall improvements of the user traffic in game industry driven the growth of users for all popular games segments. And also the new Blockbuster Games doctors on our platform during the periods actually during the first quarter. I'll give me live streaming segment accounted for about 80% of the total viewership revenue generated from the team like swimming also maintain growth trajectory in terms of non-gaming segments after users and also total viewership have remained relatively stable in general during this wage though ensure that offended into production of high-quality content across all segments and satisfied users billion refers to active operational. Yep.

This also helped us increase the user engagement engagement our confirm. Thank you better place address and that's classroom.

The next question comes from Brian Kong of Citigroup. Please go ahead and get you to translate myself for taking my question cock conditions for the solid results and management shared the updates of view of the competitive landscape Lincoln loud scream industry and it changed on the competition from billion questions. Thanks.

Well, that's a nice how they goes to each each other do a total team at each you use refreshing the minimum wage. Should you turn the juncos? Welcome to cancel the account. The pressure engine has individual individual Choice. Did you enjoy the occasion? So I'm going to do do you know module that remote control you're looking at Thursday?

How long is it illegal to shoot me get down on the single month should be insulated rotation and tribute.

Thanks. Your question is the first quarter the industry's competitive landscape have not changed significantly as a little game live streaming platform. So continue to build our games and his little sister and the drive our is called community and explore other related areas such as game shocked shocked. I'm waiting since quite sure. I'm really entered into the game live stream industry both use the traffic and also the user traction control paid, which also helped to raise the entire game live streaming Market filling and benefited the industry's development from completion project him since the Forbidden of trimmer switching between confirm the industry has remained the healthy competitive landscape on top of the hour.

Table and resources to help us create strong content Barrel. Therefore they have more Advantage Advantage Advantage when competing with them existing players and also the new players in the industry. We also take advantage of our professional products premium content to increase our mobile user traffic and the increase of a Competitive Edge.

Yeah, thank you. I'll be there face address next question.

The next question comes from Thomas Chong of Japanese, please. Go ahead.

Home office management speaking. My question. My question is about the revenue as well as the test practice in driving Revenue growth. Thank you. I'll look at $800 a month to month to month.

Yes. It's just to go woman and coach and lab to go here. So long since your passion the quarter or quarter increased in our live streaming Revenue resulted from our ongoing Improvement choice to interactive features, which will made to increase user and also streamers interactions. Also, the users will need to pay and the U age

payment frequency

In the first quarter of 2020 our clothes maintain users increased by 4.1% to 7.6 billion from 7.3 million in the first quarter of 2019 approval also achieved around 7% quarter-over-quarter increase our refinement of Life across segments help to improve each segment monetization efficiency. We also enhance our development of live streaming contents diversification the name of the man tradition efficiency and the revenue contribution of our gaming segment. We increased our interactive functions such as the streamer Pick A system that they also aim to improve the monetization efficiency of our material streamers our development of monetization activities help to increase. Yep.

I'm new from the Australian event our platform also. Okay. Thank you greater could help us address the next question. Thank you.

The next question comes from Alex Boone of Morgan Stanley, please. Go ahead.

And let me tell me how can I change it to something just translate my questions. My question is related to the game is first of all, can you show us the the risk of concentration of your top streamers and second is can you share with us your divorce and strategy for game streamers in the future and Sir is about how can we raise the monetization efficiency of

The middle layer streamers. Thank you very much.

More chance you down for that for years to become an email throughout the house didn't use that up with something like coming home teaching adults. You need a signal bulb.

Do you want to choose?

Comes with a trigger. Thursday we mentioned before we have signed of three to five years our culture with the top 100 swimmers already. That's there will be a stable situation in the top streamers our camper. I'm over we still keep the strategy which is the top swimmers contributing significantly to the premium content and the overall leadership while media and long tail streamers have us diversify our content offering and improve the monetization efficiency by cultivating streamer Credit Agencies and will continuously provide volleyball streamer results as to our confirm. They have also taken several measures to improve our ma'am.

Visual efficiency of material streamers we kept updating our related functions to enhance our monetization capabilities according to our efforts number and I am calling Taste of our meats here streamers Katie increasing during the first quarter. For example, the total numbers of dreamers was Revenue above 10 km reporter had reached around 40% year-over-year growth. Okay. Thank you for your place address next question.

The next question comes from Daniel Chen of JPMorgan, please go ahead and put you on and then if you do the PC to you you you kind of Tom vehicle Palm Beach is it took the whole month on the PCM? So PCM seems to be declining on every year and sequential basis in the first quarter. I'm not sure if it's related to the covid-19 or is there some other reasons for the decline and how should we look at the PCM mobile user grows in the next few quarters? Yep.

When the work resume, thank you.

Need you know when she needs to go to other, you know, actually how long they going to handle it also took off when I when you say $20 other couldn't get you off cannily leave off.

When you see him the question.

Jonathan and legal. See you Thursday. I mean, I don't think the thing but I'm able to come back in the office.

Thank you. Y'all past ruin our PCM a you declined a in the first quarter which was mainly due to the closure of the internet package paid the in the academic causing are actually causing a reduction in Internet cafe place a user's also some internet cafe this Thursday. We have looked at zero chance your billing preference to personal computers or the mobile mobile phones during this period the strength. So our PCM a used have been raising our experimentation on the other hand. We actually maintained rapid growth in the mobile m a used during the fourth quarter that's gross actually was manager and by the increase in streaming hours the launch of New Quality games and also our club

videos deepen cooperation with game developers

actually, if we look at about from the second quarter, actually we continued dressing of operation has a long way to maintain the stable mobile meu growth look at has within that we will continue to focus on rapid growing. Our mobile users will also believe that in general mobile users actually have a higher level of Engagement and also the pay ratio and the mobile segment of the market off within who will be still have a large growth potential wage to the long part to improve our pension and penetration rate. Okay. So thank you operator that to address the next question.

Certainly. Again. If you have a question, please press * then 1 the next question is from Alex of China Renaissance, please go ahead.

This is Juanita off shoulder took the gross margin friend up pretty well in the first quarter of 2020. How should we think about the trend of Revenue sharing common costs and bandwidth costs down the road. Thank you.

It took a long time to get you to the boss said that she spoke when she ordered her new daughter-in-law she's dead.

You go you go to the doctor also.

Yes, since your question I will maintain our Revenue sharing party at half half days between Bedford and also swimmer and tap agency. We also offer certain insensitive to streamers and also the talent agency during the promotional period and therefore actually took over around you sharing visual May fluctuate a slightly shorter or closer as a game Centric live streaming platform. We will continue to bring back more in content related to a sports games and also the potential Blockbuster game, especially in the top baseball tournament and self-produced premium content. We also invest more on the overseas drummers and the new potential customers with the new game type of birth.

Overall the constant calls to will show up work in absolutely value, but it will keep a gradually decreasing Trend as the home page of the total revenue. And also if you look at about the Beltway cost actually as mainly due to the user growth, uh, we should see if we looking forward actually the family cost will increase as a absolutely value, but it will still keep up with whether a decreasing Trend as a percentage of the total revenue. Okay. Thanks for your question.

There are no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Okay, so thank you for joining our call today, but looking forward to speaking with Max corner.

A conference is now concluded. Thank you for attending today's presentation. You may now disconnect.