Q3 2020 HUYA Inc Earnings Call
[music].
2023rd quarter earnings conference call for Yaki I.
At this time all participants are in a listen only mode. <unk> Today's conference call is being recorded I will now turn the call over to Mr. may not.
Company Investor Relations. Please go ahead.
Well I for one I'll welcome took whereas 2023rd quarter earnings conference call, the company's financial and operational results for each Oh, there today and I will say that line.
So where are the earnings press release by visiting the IR website at IR docs that upon a replay of the call will be available on the IR website in a few hours, but it depends on todays call will be Mr. loans, you don't Chief Executive Officer LC and.
And Ms. Catherine wheel, Chief Financial Officer management will begin with prepared remarks, and the call will conclude the situation may session. Before we can see now. Please note that today's discussion will contain forward looking statements made under the safe Harbor provisions that private security litigation reform access 1995.
Forward looking statements involve inherent risks and uncertainties as such the common as results may be materially different from the wheels. It's question today.
Further information regarding these and other risks and uncertainties is included in the Companys prospects shows and other public filings that shoplifting U.S. FCC. The company does not assume any obligation to update any forward looking statements, except as required under applicable law.
So please also note that we have earnings press release and this conference call include discussions of holidays hit GAAP financial information as well as our base and non-GAAP financial measures <unk> press release contains a reconciliation of the I'll now they've had non-GAAP measures till they all have they can most directly comparable GAAP measures.
I will now turn the call over to our CEO Mr. don't you don't please go ahead.
Oh no it didn't.
Thank you for joining all conference call today.
We are not you don't fall into those fees quota and excitingly.
Investments, we have made in Compton, well done and that business is continuing to drive that growth. How did you mean that in the U.S.
Older communities.
In June.
Total revenues grew by 10 basis looking year over year, and B, who on three building Wow <unk> gross profit equally by 50% year over year to RMB 50, 671 million T Dmone.
<unk> strong position to fund, our future growth and capture the opportunities.
During the day.
Despite the relatively shorter summer occasionally, but I'd, rather do Tuesday, you booked Oh, we feel the RV 90 in China. So I never heard you immediately Oh, we online.
Feels the need to.
Good.
So in theory city Midtown he killed city.
And defeating all over 4 million down from last quarter and up 18.
18% year over year.
If you marry on energy all over.
I'm very familiar on users each month during the quarter were to occur we.
We are learning humane calm things across the 10 cents and a husband so the palisades breadcrumbs yeah.
Nearly double locked the quarter well.
Well together, we provided that Hong Kong I'm fairly confident that into close to our average Oh.
200 200.
They don't use Oh, we're going to move in fuel should be a growth wouldn't most most trade driven five equally useful pulling them and that's where the deeper cooperation with Tencent. He used to be our largest you mean component was brought a copy of the <unk> campaign well.
ER products, such as it would kill to mobile we again, we checked and center.
Oh good.
But physically Oh, I love to see me compensation related accruals that gives you.
Liberty well stocked woman a church here there are a large number of yoga was going to be on the mobile.
Amo borrow and mail Oh, we are like.
Sure Dan Salmon before thing, so a million being killed city, presenting a year over year growth of 15%, but.
But the Sarthree ROA, then last quarter because of the relatively shorter summer locations that are out there and a higher base.
For the first half of the year due to the impact that we feel will be I'd 19, Oh.
I have Oh are we on life, we have the next month, the Tennessee Raisa continuously stabilized at the old 70% in Q3.
Our success in delivering solid financial results and the continuous user growth underscores our capabilities into living most.
Most monetize aging and the user engagement Oh, that's driving coming there they reflect a lot of team continuous efforts along with deeper cooperation with Tencent freezing rich content and the maker all our products and services.
More innovative and attractive they're voting, even greater there too premature to supervise youre, saying stay around.
In September we end up at the upper great to hear that off we are likely to happen for the bonds that they are little washing featuring novel from machine, such as largely events or incentive played spec homes.
On that but I'd be deal collapse.
Generation and their shopping.
Hey, I skipped sensor and the real time monitoring panel.
With these new somebody gave you that allows them to choose.
And they've specific I'm comfortable living a life streaming events up to the plate Mark as a youth sports event highlights and the generator, we deal with us, but I'm like gene to share with friends. Furthermore, they aren't you as a smoker fit and.
Oh go ahead.
Joining me on it and they both of them into X gene two intense users.
Viewing it's down around.
Meanwhile, all on technology cooperation with Tencent also allowed us to create a real time.
It's a ring panel for youth Sports tournament broadcasting.
Well this new panel.
A lot harder cool you are caught up but then more information on the tournament and the better analyzing the game playing status.
We believe these are great. The threat, then I exciting operate opportunity to innovate for.
Why the new in Savannah for our users and the girl audio space.
Hold on we formed a joint venture with Tencent that food Peralta giant technology assets.
<unk>, whereas fields, such as a right because they are pacing.
Irregular active but they did Turkey beta fish security and that data.
And the tasting we've.
We believe that we can work together to improve right you're living come.
I'm fine on that path for them and they improve the health of the industry.
Since we launched the <unk> open platform for third parties at the Beijing They work.
In November last year, we had even par that outgoing them, but also the party. They wanted us to do up to us to be use the inquiry on products mainly to improve in capturing the chain broke out the us and they use us it's been almost a year now.
And though we are data sets and there has been a wrong there well hunger that dictates world they weren't part of it and the over 300000, a broadcast Oh, we used to see to close by.
And I'll kill city.
We are confident Oh, <unk> open platform will give up.
Interacting with the chamber all concepts and they use us with it you know they too and that dynamic feature.
During the most recent the L O works.
2010, two sets of was it can grow theater, and though a lot of people that we introduced the new features and functions to help make the parent.
Broadcasting we are more innovative in warfare and the game in Great Theater.
In addition to our separated that they want to zero and.
We also provide the users hi.
Furnishing and latency free Wheeling, if they're already in full pay we introduced though I would to broadcast the fully to impact there was a real person broadcasters and the view us who improve if they're right.
We also launched the 10th and supported them as if they're not your passport.
Having seen the AUR.
Sportster users will be able to have been awarded to purchase gain access or ray I've done all games skiing within L. Oil wells. They have competed asserting in government activities they already tournament varying.
Yeah.
She has offending, but Chad well told gifting or youre the only time.
Lastly, I would like to share some how my thoughts on the ongoing merger what do we have to have a celeb 2000 that something we announced though with Dolby sets we entered.
Into a merger agreement.
We plan to acquire all the outstanding shares of solely through a stock for stock merger. Once the merger is the effective each ordinary share. Although he will be expenses you there for 7.38 ordinary shares.
And even though you a there will be a change either fall they are open to.
Seven Street, we ideas.
If the merger is completed so shareholder.
Yeah, and it's doing well each holder Oh perfect military Phil.
<unk> paper center all the shots.
The combined company on a fully diluted basis.
Thanks, Colin concurrent with the merger. So you will buy 10, John you spoke from Tencent for.
500, the U.S. dollar a minute on U.S. dollar.
We believe that with some potential come financing will allow us to deal with that how long complex.
Mental rate strength is achieved significant.
In that case, and a great more value by joining together with Doe and it can Jones professional team we are falling defying all our dedication to the huge how counter constructing a comprehensive online guest.
Estimating full game and they used sports related content.
With that I will now turn the call over to our CFO transferring through shopper insights on the operating metrics and the financial details concerning please go ahead.
Thank you Mr., Don and Hello, everyone. Following Mr. Tom's remarks, I will start from the updates on constant enrichment and diversification Inc.
In Q3, we broadcast at 119 third party esports tournament amount.
Knowledge the top tournaments included our 2020, LPL 2020, somewhere Oh, Okay World champion Cod, LC, K and K P. L. Fall 2020 total viewership for this tournament reached a historical high of Iraq.
785 million in the third quarter, representing 40% year over year growth.
On the sum of our self produced content, we organize the 34 E sports tournaments and entertainment shows.
We generated total viewership of 100 million, representing 32% year over year growth.
Following its success last quarter, we ask that you cut season, seven maintained its growth momentum and brought him more users than last season.
Additionally, we are all dark Hot Summer 2020 also performed well built itself a signature event for peacekeeper in like Ria platform.
On the entertainment PTC show side got like he's inside a long standing well wealth game show all the idle Academy a talent show and we are comfortable kind of all season to a mixed martial arts competition, where the top performing shows.
As we continued our dedicated staff in the non gaming Entertainment Thompson.
Talking about the topic in this quarter.
Rick any use increased about 18% year over year to a record high of $173 million and average mobile and they use which are.
74 million, representing an increase of 16% year over year.
The paying users spok realize increased by 13% year over year to 6 million in third quarter, but decreased slightly compared with 6.2 million in the second quarter. The number of our paying users is typically directly associated with the number of our mobile and they use.
Fluctuation in our mobile and they use this quarter, which was due to the shortened summer vacation period.
19 impact resulted in a quarterly fluctuations in our PC users.
I like to see me revenue per paying user for the Allied remain strong and increased both year over year and quarter over quarter.
Well I'll overseas business, we achieved over 39 and they use in the third quarter.
The better than expected growth was mostly because we introduced a more useful tournament attracted more broadcasters and deepen our relationship with local game developers.
Next I will walk you through our financial highlights.
In Q3, our total net revenues grew by 24% year over year.
Yes.
Over RMB 2.8 billion.
Our lives streaming revenues increased by 23% year over year to close to RMB 2.7 times in Q3.
The girls was probably due to the increased the number of paying users and an increase in revenue per paying user both of which have expended.
Advertising and other revenues increased by 45% year over year to close to RMB 158 million in the third quarter Prime.
Primarily driven by the increasing and diversifying number of advertisers.
Our profitability continued to improve this quarter given the leverage we have in bandwidth cost and our operational efficiency.
Our non-GAAP gross margin improved to 22.7%.
Compared with 18.2% in Q3 2019.
Non-GAAP operating margin was 11.8% compared with 6.5% in Q3 last year.
And our non-GAAP net margin was 12.8% compared with 9.1%.
In Q3 last year.
Now, let me move on to our financial details.
Cost of revenues increased by 18% to RMB 2.2 billion for Q3, primarily attributable to the increase in revenue sharing fees and content costs as well as personnel related costs.
Revenue sharing fees and content costs increased by 21% to RMB 1.8 billion in the third quarter, primarily due to the increase in revenue sharing fees in relation to hire like streams and.
And increase the spending in content creators E sports and self produced content.
The year over year increase was partially offset by benefits from economies of scale.
Endless costs decreased by 1.4% to RMB 208 million.
For the third quarter, primarily due to improved management bandwidth cost and continued technology enhancements effort.
Gross profit increased by 63% to RMB 621 million for the third quarter and gross margin increased to 22%, let's just.
[noise] research and development expenses increased by 35% to RMB 183 million for the third quarter, mainly attributable to increased personnel related expenses.
Selling and marketing expenses increased by 18% to RMB 144 million for the third quarter. The increase was primarily attributable to the increase in marketing expenses in the summer to promote the company's content.
That services and brand name as well as increased personnel related expenses.
General and administrative expenses increased by 23% to RMB 119 minutes in the third quarter now.
Mainly due to the increase of professional fees associated with the Companys ongoing merger process. So.
Operating income increased by.
249% to RMB 223 million for the quarter and operating margin increased to 7.9%.
The quarter.
Non-GAAP operating income, which excludes share based compensation expenses.
I used to buy 125% to RMB 331 million for the third quarter.
On a non-GAAP operating margin increased to 11.8%.
Income tax expenses increased by 82% to RMB $51 million for the third quarter.
Net income attributable to gradually increase the by 105% to RMB 253 million for the third quarter.
Non-GAAP net income attributable to me, which.
Which exclude share based compensation expenses increased by 75% to RMB 361 million for Q3.
Diluted net income per Hds was RMB 1.0 site and non-GAAP diluted net income per.
Yes was RMB 1.5 in the third quarter.
As of September Thirtyth 2020.
Company had cash and cash equivalents short term deposits and short term investment arms, the 10.8 billion.
Along with the merger announcement, Mr. Dawn mentioned earlier, our board of Directors also approved a cash dividend in the aggregate amount of U.S. dollar 200 million to be paid on or around the date of the closing of the merger to the holders of ordinary shares.
Yeah, including the holders of 88.
Yes holders.
As of the business as of the close of business on certain record date after the date.
When the required at the shareholder approval is obtained and prior to the closing of the merger.
I suffered dates and payment dates well be definitely make it like we have authorized officer, Andy will be announced in due course.
Here's another update that just happened today, we attended the usage light today to a piece of land with an area of approximately 29000 and 258 square meters in bullish on city, Guangdong province through a public auction.
The company's means that price was approximately RMB 310 million the company intends to develop office space on the land in order to accommodate future work force expansion and to reduce the long term operating costs and expenses.
With that I would now like to open the call to your questions.
Thank you very much Beatty sent gentlemen, without became the question and answer session to ask a question. Please press star one on your telephone.
For a name to be announced can you kind of press the pound or hash key for the benefit of all participants on today's call. If you wish to ask a question to manage one in Chinese place immediately repeat your question in English.
And our first question comes from the line off Thomas Chong of Jefferies. Please go ahead.
Well somehow, especially on each home Jay Shah with you at all but it wouldn't eat well sure one you're earning a young man Wow.
What do you think of your <unk> you saw ruble situation going to Sue Sogou higher degree if I'm in a woman study man, they really cheap or by type we see certainly young.
Oh sure woman can swing component.
Saudi told John No problem in that yet are you Uh huh.
Thanks management for taking my questions. My question is more about the trendy trendy one oh look in public cloud himself the user growth a weapon, Neil and profitability trends as well as a hobby should bring about the synergies over time.
So.
Oh Oh.
If there's any color at this stage I. Thank you.
HM two at home.
I will answer questions. As currently we are still in the process of the ongoing merger and that we expected the merger couldn't be possibly completed in the first half of next year.
So at this stage, it's still too early for us to tell the quantitative impact of some merger. So I think you know, we probably would not be able to give you a quantitative measures on this.
But ER for the big direction are we still intend to grow our users and explore new monetization opportunities and grow revenues and also improve our operational efficiencies.
In terms of the potential synergies.
With stone and dependable in we seek you know there are several directions that could generate synergies such as leveraging our content over a larger user base to attract new users and are also too.
New products and Ah together explore a new monetization opportunities and also to achieve some operational efficiencies.
Thank you.
Thank you.
Thank you for the questions next questions comes from the line haul Vincent do all Miss him and Paul. Please go ahead.
Thank you measure.
HM.
First question is about the content strategy, how should we think about it we are concentrated strategies going forward, especially after the merger or will we see a shift well not called concurrence of gaming.
In the past and independence.
Our content offering.
Second question is on the user is willing to pay 'em. We are wondering what do you see any change at all our top paying user cohorts or afford the user cohort in different categories like gaming and its or other pen or is the same as heavily.
Well.
Are you seeing any change to that considering the Colgate has most of the like.
Only China Oh.
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Although he or she time zone is she's going to survive today bulk or these are good. So good to book Homeware and go no go through there is no time they'll come down we can't do that.
[laughter].
Oh, Okay, I want to say formats I felt like I don't know if that's cost trend up for our kind of try to gain access here actually.
Yes back to talk about first Hawaiian and that's what we are aiming to heal currently as flow at hill and constructed a one stop shopping how's that for a building out a formal how kind of well into the family portal not only to what aware, but at the same lives training, but also.
Quote and videos and that same community and former waiting until all that all totaled show our content services, although as possible so that more as a whole. This can have a one stop shopping experience on our platform.
Secondly is pathetically, Oh video strategy, a lot yeah, I'm actually helping bring our own research and <unk> role in that pool for the video business.
And we have confidence that.
Oh, Yes, and then after two years well make the whole they're both of our radio business to a considerable level and a lot the point about the potential combination and its impact on to our content strategy is that.
Actually that's a platform introduced them to Alan has a laredo pool, subcom kind of quality and other content are actually a couple of matter way, putting together a actually a interfast has its own competitive advantages and the it was a year of about 20.
Finally, while what we are targeting at S., so better consolidate the content offerings are each platform and allowing the quality content to better serve.
Hum to better assess the things I love her the broadcast to the talent and assets as well as they were this so still that same livestream all can play a better role across the industry value chain.
So thats for your first question.
I will listen I will answer your second question in terms of paying users as you can see in the third quarter, our paying users ARPU has increased both year over year and quarter over quarter.
Generally we are.
Her in from the call after the COVID-19, a patent on it.
We will still continue to enrich our content and the improved monetization opportunities are to.
To increase our ARPU, but of course as you mentioned you know different content categories have different approaches and also there is a seasonality for our ARPU. So generally in the first quarter, our ARPU, whether it be a relatively lower due to the us.
Rufus Festival and in the fourth quarter typically the ARPU would be higher given the annual a monetization event.
Hope hope I answered questions [noise].
[noise] yeah. Thank you.
Thank you for the question next questions will come from the line haul Binnie Wong pitch SBC. Please go ahead.
[noise], how long can you give any management all my questions actually on the overseas right overseas users on the new TV and then if you look at this quarter right. This is last quarter. You also at the scene in which I think it's actually achieving that but a million taka quoted earlier than you might expect [laughter].
If we look at it this way what type of things. That's on maybe what are some of the strategies or a use acquisitions that you have done this quarter to achieve this 30 million I phones and also what are some of the synergies that you might see the stole you also see in the future. Thank you.
How long ago, one of them or whatever it is you know just to just to talk about a month ago, how others are going with it then got to give good. So good times are John too just on what was going to say the downfall, you mentioned, where you highlight show imaging and it's a race.
Endorse you own and go to a source of isn't part of the answer gets a good guys that you sort of saw your father to get to that to the consumer.
You know she's still imaging she's a high one of the biggest she does have a lot to shaking if we'll do based on that though this engine and for listening in either you've done domain, Cindy again, they're going to do it. So I think she got off the decision as to when I show me kind of immune to the vendor which are the scissor Hudson. It doesn't mean, we'll meet person sitting there too so.
She wants to know about us insight into an advantage or is it good servier here, we didn't know.
Hey, just a phone however, there's a purchase on its own how does 1 billion here going into two things it could serve in a high swung Kumamoto, who came with the corridor, where most wanting me to go down and without US is about to go to cigarettes. A day today, we should be able to get some parts of the woman's group. We also highlighted.
Send a dog is I now resumed our union inside depends on Jay the well, making currently holding in call. It seems a little high wide open theaters without investment to stage three women couldn't just to kind of win I just ER. So they're doing a bunch of the tone to encourage every day to go sometimes it can compete he who they didn't.
Tom Cruise on me.
But oh, sorry to see you couldn't do you know do you wait time Segun just people buying the right. So.
Oh, yeah, well I mean, she's a highlight will maintain those we also see either through a real woman on jobs and moved to the to the Hertwo, Yeah, Dougherty things and see what it does just a ruble could be whole woman. We offer though is a high level of deal with Samsung and culturally in Russia. The quick take on some time.
[laughter].
Okay, I will translate for him I sat down with our more fresh question Alethia overseas yeah. It S analysis of all that our office I mean ill.
The quality and this quarter, it's actually quite outstanding I actually spoke last time in the Iranians call. What do we are focusing on and they almost as Mark has a this year and to better improve the Apple Cisco and the CIL.
Cultivated better monetization model, so as Liz sell lots in your strategy or what we are doing this year is that why the channel by acquiring users. We are actually cutting down the cost to fly that so given that the Talbot has been cutting down.
Oh, we still achieved scale considerable user growth for the Oasis business is actually approved to our strategy to build out a apples just tend to be effective.
So going forward, what will or what will so typically focus it's not only just to focus on a a substantial yield as well as to why that way, but more photos all Chile. They went up a anna constructed a healthy a healthy Apple says tennis.
Oh, absolutely have to have a 30 year four parts to their offering over assessments and though we are starting to get that in the South Hill honest and how we can better food opposite there's nothing there or such markets.
So what we will focusing on filter is some more oh on constructing a holiday Apple assessed and and also improve our financial status Oh. It this business.
Oh, so regarding your second question or what potential synergies. So its combination, especially on the ortho Smartboard Oh, I think right now Oh, whether it's with only a waterfall for Oh, yeah. The two parties are actually in a very early stage in terms of its Paul here or is this market. So.
Well it will well lived anymore right now is to focus more on the collaboration rather than so consistent with each other so I was always a potential combination will create it finishing the oversteps business thus far.
Sorry can I just ask a very quick follow up here. If you look at the mountain bike right like how does he oversees when and the second point that could become more comfortable and longer time at a steady state how you see the overseas [laughter] margins compared to domestically.
[noise] sort.
For your question I think in October we start to see a one single country to achieve sort of relatively breakeven.
Operating margin side, but we think for the entire overseas business, we probably still need to invest for the next few years.
Because of different countries have different or I would say user behavior in some countries.
The pay rates or would it be higher than the other countries.
So we think that in the next few years it will still be a an investment stage, but I stopped mr.. Don just mentioned, we will be focusing on building the equals the healthy ecosystem.
Each country by each country.
Thank you.
Thank you.
Thank you for the questions next question comes from the line haul Billy Lynn's of high Tony International. Please go ahead.
According to the how long is it just so what because she went away or going T. Nickel. Once you said, one woman said God knows she's eight o'clock calls gaming or go [laughter] clinical care franchise, how women Zika costumes anything there. That's a good father are there going to be so on your warmer incentive to try that it seems like it's hunting for that.
What.
Yeah, Chris I said, taking there to pay once it's gotten caught your most Americans thinkers and show how what does a fine yourself like America for taking my questions I have two questions. The first one is related to al Gore cloud gaming progress can management share any color on our latest developments this up.
And the second question is on now though to the new speech. So this became companion can management share any latest developments here as well. Thank you.
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Because if we are doing is here and good are the keys to the whole time it goes to the gym fathers day.
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HM.
[laughter] everybody else was Oh, Yeah first question I'll talk I mean.
Actually what we want to highlight here is that the technology platform of this call gaming platform rollout is completely to allow us to buy our own R&D personnel and though we have been spending a lot of time and green and yellow has made a CIL or we can sell later.
Age and also optimize user experience while they are all playing them all a play in the PC portals damage to our mobile the lipid throw hours or walking platform.
Actually it wasn't only yesterday that we have officially launch this you'll walk cropping impossible after almost a four miles for beta testing on it that way have think how oh as much as they asked a holiday shift for titles right now and Oh.
What we are trying to achieve is that I'm sure also Elias users switching exco and play them co relate a little space shame that so that they can better play, let Jan San Westlake, and that's mostly astro hour across their platform and optimize their use.
<unk> expenses Oh.
Oh I thought Oh, yeah, that's why I say, we're probably in a platform, which only on better test, which is a way that is oh, we didn't elect to match a chill on her promotion to this call came in platform last one out there that it has been officially launched and there can be it's all there so.
Any app stores, a way, we'll try to better promote rule clogging platform and see it.
If the market is ready for the user base to experience this cutting edge technology, which is quite good.
Oh, well if there is a a huge opportunity that's why they had to weigh those all game business and Oh.
We will take every effort to realize they are creating opportunities for our own business.
Sure Tyler <unk>, probably we'll just wait for Oh, the time to see if the users are ready so Alaska clay alteration of their expenses and its a try this probably platforms to play games.
And the castle will pick up on that question.
And for your second question regarding team companion business outlook in companion business is still experiencing a faster growth.
Especially for our ATP.
He won so we think it's.
It's relatively a solid growth for the game and a companion business Oh I rode into companion business because the revenue recognition policies are different from our virtual getting a we're only recognizing net revenues for game companion business. So even.
So the the charge of the skin companion business is pretty significant and then the revenue contribution is still relatively small but on the from the accounting perspective. The game companion business has a much higher margins.
And then the.
Virtual getting from pure GAAP accounting perspective.
Okay I hope this answers your question.
Next.
Thank you for the question. So the next question comes from the line of.
[noise] [noise] right.
We have lost Yada yada request.
Proceed to take the next question is from Daniel Chen of JP Morgan. Please go ahead.
Or was all countries, where number one or two that the warranties, requiring you take or or for your body. What do you do a woman, it's kind of where you always see a third support whatever door subpoenas around the Oh here, where much of that that will add to that I.
I think Brian how is our pension plan to Darcy with summer for our children and here's why things are sort of going of course or BB Tomorrow No. Josh has a EUR two cohorts are going quite a hot or cold my bunch and they're quite obvious no causal how much and I only on you sound like Youre should support a menu to hear so poleksic are riskier socialistic.
ER urge parents what holds it existing because I went out with the more kinds of or a woman somebody at home and that you could think of yours.
I have two questions. The first one year or more is on the tumor.
The management thing are the key opportunities game stream at a show video industry in the next two to three years in the ER product side and also on the monetization side. The second one is on the competition. So what's our key corporate <unk> competitive advantage against quite.
Quite sure in a b to B. That's both of them are quite aggressive in obtaining top holes public agencies are game broadcasting rights and also cars or has rich or over 200 meter came to me I mean, you are which is quite large and also very aggressive.
Investment.
Thank you.
[laughter].
The school to allow for that.
Yeah.
Sure.
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You guys with a good thing.
And there's a decent young when it comes to the one that just is there going to be only cigarettes are taking positions. We usually don't go through a jersey managers doing down at least one too soon.
I also need to kind of figure he's a man linear and then kind of just a.
Just to say she's the loosening <unk> either.
They hung it it comes he didn't know downtown and then I'm done media and her team have begun to I'm sure we aren't easy to acquire so as I, usually do listen there's some heat attendance down considerably.
Hey, just a.
Today, you will hear devoted a there's a hung in how does it get everything thing can time sitting at home you would see some conservatism and should you know you didn't do she did to me that in.
To get to the new launches don't me.
They typically do not always down quite as it was in the juices and can directly though we believe they would you didnt give unconvincing yeah. That's a good she's intrusions or that you found I sort of on any kind of just a reality that woman segun <unk> waiver keyboards again as it relates to name them use liquidity views.
There's just a woman easily they know the two good to go to get close them and those are the two hotels or that she is unclear.
Linda surveys here so good she wanted to know.
They put on student who <unk>, who daily show you some of the Saudi indicate to the to the LG to they get something.
He has always get a dog I do this year.
Everybody how question how that compares health plans get setting there actions have felt quite show and pull up only I will start with saying competition was our only I think for the liberal and sell the gross profit.
Fine and transform all their meet your neighbors chills. The bulk has true that's already a common show and which is why when saying Oh, it's on track to tell their traditional players telephones and live streaming that's true as quite limited.
And the same thing.
Competition, that's quite show I think from what they have monitored and turn away a especially only year over year growth I think there are impacts to list them. All eyes training business is also now so bad, especially thinking about that.
Yes of course, there are huge but.
Ah, but they are intact and as their relevance as quite is quite different.
Sure Kodiak coin the fishing this crisis competition, what we are doing right now, especially I'll, let him live streaming side as a right way, although some more I will make content Oh building up their content library pro active play well.
Oh quite show their short form business kind of <unk> operations are.
Focusing more constructing a communities kinda ACO says that they have they are essential life [laughter] hollysys whore running the operations. So historically or what we are good at is that a whole, yeah, hi, sale and I'm very.
The alliance with me another trip players such as the talent agency had another block has changed and it has an hour long pitches same thing, especially if they seem quite shows competition I always know loudly, there's kind of a collaboration with industry players tool.
To improve the operating efficiency to drive the growth and that should improve our monetization capabilities. That's it.
Thank you for the question.
In terms of time, our last question comes from the line haul.
Hey Chang.
I got my Bank. Please go ahead.
Hi, Bonnie sound like the hospices this or that she wants Hello, Glenn keeps you for your question Richard Goodman assets without a woman.
[laughter], it's months, an actual g. core you sure hi, all.
Oh sure. She can answer the killed off platform and the gross margin impact so.
Koller K gates on the whole jug once you kind of <unk>.
What you can talk to that.
This is not one thing that Jim do them. They don't Yoshi Shukarno should reward I think with the dual nobody else your potential impact.
I would make no.
Thanks management for taking my question. My first question is about the only got lots and I 10, Okay sure Oh I need.
Color on <unk>.
They call you guys mentioned, Oh to our platform and Oh.
Dr., Robert Gulfmarks fourth quarter on second delay on Iraq, you laid out a record.
Inflation.
Especially on.
Nice to meet you do an impact you can share with us. Thank you.
Oh.
Thank you ladies it's to be [laughter], Oh, we have noticed that the.
Sort of [noise] or abroad.
As Terry compared to last year has increased but then the incremental I think the growth.
In this year, which is relatively lower compared to last year and Ah for attend because most of the attend workload in the fourth quarter. So the because of all the 10 would be mostly recognized in the fourth quarter.
Oh.
Well have some impact on our gross margins compared to the third quarter.
And to your second question in terms of C authorities policies or guidelines are we are we are cooperating with the government and Oh, we understand some oh for trees or government or are.
Our trying to implements new guideline or we are actively discussing with the government and of course when the actual guideline is going to be issued we will see a cooperating and or be in compliance with.
The guideline so we see if the guidelines is going to be issued and we want them value the impact of the business at that time, but we believe that the government or 13 are trying to help the light broadcasting to.
Let her role in the long term. So we don't think the impact for our business for the long term.
Thank you.
Thank you very much I would like to turn the call back over to the company for closing remarks.
All right. Thanks for attending our earnings conference call today, and if you have further questions feel free to reach out to the IR at where they'll come in and we look forward to speaking with you and then at quarter end count that I.
Ladies and gentlemen. This concludes today's conference call you May now disconnect. Your line. Thank you.
[music].
[music].
[music].
Hello, Ladies and gentlemen, thank you for standing by for the 2023rd quarter earnings Conference call for Yashi.
At this time all participants are in a listen only mode. Today's conference call is being recorded I'll now turn the call over to Mr. notch.
Company Investor Relations. Please go ahead.
Well I for one and welcome to Holly as 2020, <unk> third quarter earnings Conference call. The company's financial and operational results were issued earlier today and are posted online you can although the earnings press release by visiting the IR website at <unk> I heard on Colorado Palm.
The call will be available on the IR website in a few hours participants on today's call will be mr. loans at Dawn, Chief Executive Officer and.
Unless catch my meal, Chief Financial Officer management will begin with prepared remarks and at a call. We'll conclude the situation may session, but all I can say now. Please note that today's discussion will contain forward looking statements under the safe Harbor provisions blast private Security Litigation Reform Act of 19 edifices.
Forward looking statements involve inherent risks and uncertainties assessed the common aes results may be materially different from the wheels, it's questionable.
Further information regarding these and other risks and uncertainties is included in the Companys prospects shows and other public filings as let's say U.S. SCC. The comedy does not assume any obligation to update any forward looking statements, except as required under applicable law [laughter] [noise].
So it's awful lot back last earnings press release, and this conference call include discussions just on holiday pit GAAP financial information as well as all based on non-GAAP financial measures <unk> press release contains a reconciliation of the all in all they have had non-GAAP measures till they all have they love directly comparable GAAP measures.
I will now turn the call over to our CEO Mr. don't they don't please go ahead.
Hello, everyone. Thank you all for joining our conference call today.
We are too with a solid result, she's quota and excitingly, saying vestments, we haven't made up in content products and the services are continuing to drive that growth, how we are dealing with it and the user communities.
In Q3, Oh, Oh total revenues grew by 10, Paypal, then yeah, well, yeah. So RMB 2.3 billion, while our gross profit increased by 53% year over year to RMB 50.
610, they wouldn't milliamp, keeping a strong position to fund our future growth and the capture so I'll turn it off.
Opportunities ahead.
Despite our relatively shorter summer occasionally, but I'd rather go to the impact Oh, we feel the RV 90 in China, the allergy and maybe Oh, we are like.
We'll go to.
Well 107.
78 city Midtown hidden Jewel city.
After deducting all over 4 million down from last quarter and up 18% year over year.
Additionally, on every all over when they bought Midtown you'll does each month during the quarter what should we.
We are the largest human constant across the town center and the Hamzah So the topic Brad Cooke.
Double lots of quarter.
Well together, we provided that Hans come fairly content and to close to on average you all.
200 200.
Now use Oh, we're going to move in fuel should be so growth will most most already driven bargaining. Please E sports pulling them and that's where the deeper cooperation with Tencent. It used to be our largest you mean component was broad cost here the <unk> campaign well.
Products, such as QQ mobile, we gave we checked game center.
Oh good.
But physically online gimi component related to the appeal.
Larry Bird they look back one a month a church here there are a large number of yoga was going to be on the mobile.
Amo borrow and males. All we all like.
Sure, Doug Aron Facebook thing, so a million utility to presenting of year over year growth of 15%, but the Sarthree ROA then last quarter, because all the relatively shorter summer location got router and a higher base.
For the fourth about half of the year utilization that Oh, we feel be I'd 90. However, all out we are not at that.
Next month, the dancing right continuously stabilized at the old demonstrates centene curiosity hog.
Our success in delivering solid financial results and the continuous user growth underscores our capabilities, including.
Most monetize aging and the user engagement are driving coming there. They reflect our teams continue our efforts along with deeper cooperation with Tencent sleeping rich content and the maker all our products and the thought of it that.
More innovative and attractive they're voting even greater than two leading sure so supervisor yields they stay around.
In September we end up at the upper great to hear that off we are like where he was a it's boring, but they are all watching featuring mobile phone machine such as largely a denser instant played spec homes.
On that but I'd be deal collapse.
Generation and the CRB.
Hey, I'll skip the answer and a real time monitoring panel.
With these new somebody gave you that allow them to choose.
And they've specific time inc. ago living a life gimi event that to that right Mark the used book event highlights and the generator, we deal NFS bomb Lars Jean Hu.
To share with friends. Furthermore, they don't give that much fit on top of all that featuring AI and they both it impacts gene leading fast.
Uh huh.
Viewing it's down around.
Meanwhile, on technology cooperating with everything also allowed us to correct a real time.
If a rank I know for you spoke tournament broadcasting where.
Well, if new panel a lot harder cool you are caught up but then more information on the tournament and the better analyzing some game ratings data. We believe these are great. The threat then I exciting operate opportunity too you know.
It's for why the new it's about a full our yields us and the girl audio space.
In October we formed a joint venture with Tencent that food Peralta giant technology assets.
Yeah, well, Rob fields, such as a right to go they are producing.
Irregular active but they get that she safer food security and that data.
The Beijing.
We believe that we can work together pooling Blue light you live in Com.
I'm fine.
Got that boom and they improve the house housing industry.
Since we launched the open platform for so the poly that's crazy they work.
In November last year, we had a we MPOG outgoing them, but always sort of policy. They love us to do as a tool to be used to you. We are brought up mainly to improve in catching itching broke concepts and they use us.
Being almost a year now and though we are bad debts as they are it will be a wrong there well hunger that get paid flows do airport and the over 300000, a broadcaster a wheel that fit to us by Endo kill city we.
We are confident Oh <unk> open platform will give up some encouraging pitching baroque process and they use a was it you know they too and that dynamic feature.
The always on most of the reason the L O works.
Who saw than that then but that's a was it can grow theater and though oh fuel that we introduced new features and functions to help make the S band.
Broadcasting we are more innovative in workday and the game in the Great Theater.
In addition to block up a great is it I wonder, though as well.
We also provide the yields are high.
Furnishing and late safely yielding if they're already using full pay we introduced I would kill for the cost of 42 in Pakistan, where they will go up and broke out does the viewers who improve its founder.
We also launched a there's been supportive of that.
And they're not your passport.
Having Steve.
Okay.
Passbook users Oh, well, we'll be able to day award via the fed Civ game accessory I've done all games games within oil would say if I were computed the filter in busy month activities. He already tournament varying.
We are.
Such as Sandy, but Chad well, Joe Dempsey, all youre the only time.
Lastly, I would like to share some calls my thoughts on the ongoing Georgia was totally <unk> silver slipper.
2000 that something we announced that we don't need that we entered into a merger agreement, where we plan to acquire all the outstanding shares of three so on so forth. So Morgan once the merger is the effective.
Ordinary she Oh go you will be expenses you that for 7.38.
Hey, ordinary Oh, yeah, and he told me a there will be a change either for several months.
Seven should lead we are ideas.
If the merger you completed the shareholder Oh.
Oh, yeah, and it's doing well he told that Oh profit misery.
Bill pay per cent Oh this yes.
The combined companies on a fully diluted basis.
Hey, Colin concurrent with the merger. So you will by then John you spoke from Terror event for.
500, the U.S. dollar net around U.S. dollar.
We believe the potential come by and he or she will allow us to build up on Hong Kong.
Menthol right Jonathan.
Two significant concern.
In that case, and a great more value by joining together that way, though you and they can just perfect. You know team we are.
Defying all our dedication to the the huge Oh counter constructing a comprehensive line, if it's making full game and they used sports related content.
With that I will now turn the call over to our CFO calculating flu shot cooling sites, along the operating metrics and the financial details.
<unk>. Please go ahead.
Thank you Mr. Dong and Hello, everyone. Following Mr. Don's remarks, I will start from the updates on content enrichment and diversification.
In Q3, we broadcast at 119 third party esports tournament.
On which the top tournaments included Oh, Oh words 2020, L.P.L. She was on 20 somewhere.
Okay World Champion Cat, Oh, he K and K P. L. Fall 2020 total viewership for this tournament reached a historical high of around 785 million in the third quarter, representing 40% year over year growth.
On the success of our self produced content, we organize the 34 eat for tournaments and entertainment shows and generated a total viewership of 100 million, representing 32% year over year growth.
Following its success last quarter, we ask that you cut off season, seven maintained its growth momentum and brucie more users than last season. Additionally, we are all dotcom summer choose on twin he also performed well and built itself a signature event.
Or peacekeeper in like Ria platform.
On the entertainment P.D.C. show side caught like I see them fight a longstanding World War game show all the idle Academy a talent show and we are comfortable kind of all season to meet.
Nick the martial arts competition were the top performing shows as.
As we continued our dedicated staff.
The non gaming Entertainment Thompson.
Talking about the topic in this quarter, our average any use increased about 18% year over year to a record high of $173 million and average mobile I may use which over 74 million, representing an increase of 16% year over year.
Here.
The paying users spok realize increased by 13% year over year to $6 million in third quarter, but decreased slightly compared with 6.2 million in the second quarter. The number of our paying users is typically directly associated with the number of our mobile and they use.
The fluctuation you know mobile and they use this quarter, which was due to the shortened summer vacation period.
Hobbies 19 impact resulted in a quarterly fluctuation you know paying users.
The light creamy revenue per paying user for their life remains strong and increased both year over year and quarter over quarter.
Well I'll overseas business, we achieved over 39 and they use in the third quarter.
The better than expected growth was mostly because we introduced a more useful tournament attracted more broadcasters and deepen our relationship with local game developers.
Next I will walk you through our financial highlights.
In Q3, our total net revenues grew by 24%.
Yes.
Over RMB 2.8 billion.
Oh like streaming revenues increased by 23% year over year to close to RMB 2.7 billion in Q3.
The growth was primarily due to the increased the number of paying users and an increase in revenue per paying user both of which have expended.
Advertising and other revenues increased by 45% year over year to close to RMB 158 million in the third quarter.
Primarily driven by the increasing and diversifying number of advertisers.
Our profitability continued to improve this quarter given the leverage we have in bandwidth cost and our operational efficiency.
Our non-GAAP gross margin improved to 22.7%.
Compared with 18.2% in Q.
We 2019 or.
Non-GAAP operating margin was 11.8% compared with 6.5% Q3 last year.
And our non-GAAP net margin was 12.8% compared with 9.1% in Q3 last year.
Now, let me move on to our financial details.
Cost of revenues increased by 18% to RMB 2.2 billion for Q3, primarily attributable to the increase in revenue sharing fees and content costs as well as personnel related costs.
Revenue sharing fees and content costs increased by 21% to RMB 1.8 billion in the third quarter, primarily due to the increase in revenue sharing fees.
Relation to hire like streams and an increase the spending in content creators useful and self produced content.
A year over year increase was partially offset by benefits from economies of scale.
Then this cost decreased by 1.4% to RMB 208 million for the third quarter.
Finally, due to improved management bandwidth cost and continued technology enhancements effort.
Gross profit increased by 53% to RMB 621 million for the third quarter and gross margin increased to 22%.
[noise] research and development expenses increased by 35% to RMB 183 million for the third quarter, mainly attributable to increased personnel related expenses.
Sales and marketing expenses increased by 18% to RMB 144 million for the third quarter. The increase was primarily attributable to the increase in marketing expenses in the summer to promote the company's content product services and brand name as well as increased personnel.
<unk> expenses.
General and administrative expenses increased by 23% to RMB 119 million in the third quarter mainly.
Mainly due to the increase of professional fees associated with the Companys ongoing merger process. So.
Operating income increased by.
249% to RMB 223 million for the quarter and operating margin increased to 7.9% for the third quarter.
Non-GAAP operating income, which excludes share based compensation expenses.
I used to buy 125% to RMB 331 million for the third quarter.
On a non-GAAP operating margin increased to 11.8%.
Income tax expenses increased by 82%.
On the $51 million for the third quarter.
Net income attributable to rising increased by 105% to RMB $253 million for the third quarter.
Non-GAAP net income attributable to <unk>, which.
Which exclude share based compensation expenses increased by 75% to RMB 361 million for Q3.
Diluted net income per ATM was RMB 1.0, PPI and non-GAAP diluted net income per.
Yes was RMB 1.5 in the third quarter.
As of September Thirtyth 2020.
Company had cash and cash equivalents short term deposits and short term investment arms, the 10.8 billion.
Along with the merger announcement, Mr. Dawn mentioned earlier, our board of Directors also approved a cash dividend in the aggregate amount of U.S. dollar $200 million to be paid on or around the date of the closing of the merger so to holders of ordinary shares.
Yeah, including the holder of 88.
E.S. holders.
As of the business as of the close of business on certain record date after the date.
When the required at the shareholder approval is obtained and prior to the closing of the merger.
Suckered dates and payment dates well be definitely make it like we are authorized officer and will be announced in due course.
Here's another update that just happened today, we attend the usage light today to a piece of men with an area of approximately 29000 and 258 square meters in bullish on city, Guangdong province through a public auction.
The company's means that price was approximately RMB 310 million the company intends to develop office space on the land in order to accommodate future work expansion and they reduced the long term operating costs and expenses.
With that I would now like to open the call to your questions.
Thank you very much Beatty sent gentlemen, we would all became the question and also session to ask a question. Please press star one on your telephone.
For a name to be announced can you kind of across the pound or hash key for the benefit of all participants on today's call. If you wish to ask your question to manage money in Chinese leasing immediately repeat your question in English.
And our first question comes from July on PAMA Chang of Jefferies. Please go ahead.
One somehow, especially on each home Jewish or that he went oh, well there wouldn't eat well sure one you're earning a young man they didn't want us.
What did you agree if it doesn't mean you saw Google sheets will shoot Sogou, how you'll get me if I'm in a woman assuming then they really cheap sidecar Oh, we should certainly young.
Oh sure woman shouldn't unfold.
That's it from Saudi told John No problem in that yet he oh because.
Oh first management for taking my questions. My question is more about the trends Etwenty, one Oh look in public cloud comes off the user growth a weapon, Neil and profitability trends as well as to how we should think about the synergies are over 10.
Tens or.
Oh, Oh, if there's any color on that list.
H I. Thank you.
HM two at home I I will answer questions. As currently we are still in the process of the ongoing merger.
And that we expected the merger could be possibly completed in the first half of next year at this stage, it's still too early for us to tell the quantitative impact of some merger. So I think you know, we probably would not be able to.
Give you quantitative measures on this but ER for the big direction are we still intend to grow our users and explore new monetization opportunities and grow revenues and also improve our operational efficiencies.
In terms of the potential synergies a was stolen and pencil in we seek you know there are several directions that could generate synergies such as leveraging our content over a larger user base to attract new users.
And are also too.
You called out.
And together explore a new monetization opportunities and also to achieve some operational efficiencies.
Thank you.
Thank you.
Thank you for the questions next question comes from the line haul Vincent do Paul let him and Paul. Please go ahead.
Thank you Bob mentioned my question. This person is about the content strategy, how should we think about it we are concentrated strategies going forward, especially after the merger or will we see a shift from coal coke currency.
They have the same as a.
Content offering second question is on the user is willing to pay on that we are wondering what do you see any change at all our top paying user cohorts or afford the user cohort in different categories like gaming and other and the interest payments.
We do.
Okay. So are you seeing any change after considering the cold it has most of the.
On the China, Oh, we're just.
The team is doing a solution this is Nick.
When we talk to the other two Goldman she nailed it feels.
Would you say.
Looking to the to go but looking at your whole woman quick woman subject with me on the to the she goes I mean, you definitely consulate yeltsin's on Yoshida.
You go to form in fact, it was used to fund that.
Youre going to see Shibani woman. She said, we will do so.
60, those who do not usual take a tremendous foolish to say on that this year.
Geologic world.
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I mean in the meeting included attrition among your chicken feed and on the issue.
I'm familiar with it it's a good Josh on your sheet places he or she can help them down to which you know its a shame what it was.
The board did not change the way, we manage long and nobody is shipping a thesis your obligation made here music on Tuesday this year.
So none of those were.
It's good to see the Utica young.
I don't know just sort of timescale donaghy ishijima women should he taking do they want to have noticed again say he engages being equal tend to the woman don't either way how to be always thinking then it goes I guess on a on engineered Joshi keeping today they could have been issued on June.
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Got a horse no no just a minute given they when they get to the use of wage on data or do you see anything amnesia cannot will match the issues are booked at hungry.
So accordingly, but usually you get them from going into any time you start here at home.
I thought you'd always rise or minchey alone weighs just gaining anguish long ago by governments that they they are you assuming from the state.
No no and then go there and then go to the legal and detailed Humanaone EGD on bigger ticket Cookie Wholl give out free mukundan meaningful and go away. It can go to <unk> to go to get to get treated bubble Yoshi time zone is she's going to give a two day bulk or these are games to be too bullish on where it goes.
My goal today to mingle time, they'll come down with Johnson rice.
[laughter].
Oh, Okay, I will jump I formats, I felt like I don't know if that's cost trend for our clients try to gain access here actually.
Just back to talk about first away at that what we are aiming to heal currently as flow actually hill and constructed a one stop shopping tell effect for a building out a formal contents related family pocket not only to what aware, but at the same lives training, but also through.
Quote and radios.
Same community and then related to adding back all totaled show our content services, although as possible so that lawyers and the whole S.K. half a one stop shopping experience on our platform.
Secondly, it's but typically on the video strategy a lot yeah, Axalta way, how things are in our own research and a long road map for the video business.
And we have confidence that until years and they lack the two years well make the user base of our radio business to a considerable level and my wife, the point about the potential combination and its impact to our.
Contest strata is that.
Hello, that's real crop will introduce them to our <unk> as.
Okay, Larry the pool, Subcom kind of quality and other content, our actually our complimentary to each other athletes its how fast has its own competitive advantages and the era a year about 2020, why or what we are targeting at it's still better kind of falling.
The content offerings out each platform and allowing the quality content to better serve.
Hum Tibet ourself that things that allow the purchase the broadcast to the talent and assets as well as they use it. So so that in livestream, all can play a better role across the industry value chain.
So thats for your first question.
[music].
I will listen I will answer the second question in terms of paying users as you can see in the third quarter, our paying users ARPU has increased both year over year and quarter over quarter.
Generally we are.
Everything from the call after the COVID-19, a patent rights in China, We will still continue to enrich our content and the impact on Monday night position opportunities Ah two.
To increase our ARPU, but of course as you mentioned you know different content categories have different who and also there is a seasonality for our ARPU. So generally in the first quarter, our ARPU, whether it be a relatively lower due to the us.
Rufus Festival and in the fourth quarter typically the ARPU would it be higher given the annual a monetization event.
Hope I answered questions [noise].
[noise] yeah. Thank you.
Thank you for the question next question.
Will come from the line haul Binnie Wong pitch SBC. Please go ahead.
[noise], how long can you give any management all my questions actually on the overseas right overseas users on the new TV and then if you look at this quarter right. There's a soft quarter. You also at the scene nearly in all which I think is actually achieving that 30 million taka quarter, albeit then my expense.
If we look at it this way what type of things that's Oh, maybe what are some of the strategies or a use acquisitions that you have done this quarter to achieve this 30 million I phones and also what are some of the synergies that you might see the stole you also see in the future. Thank you.
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How long ago, one of them or whatever you guys you.
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On gold medalist Lindsey again, they're going to do it. So I think she got powerful decision is from when I show Me Hello Neutralism.
Well, Joe does just a husband and doesn't mean, we'll meet person sitting there too. So she wants to know about us insight into an advantage or is it good to hear everything there's no.
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What do women on drugs image of it took us a tool yeah, probably things and see what it does is a rule book would be whole woman. We also don't use the high one of the video with hands on management, who joined gossip with big launch in time.
[laughter].
Okay, I was kind of platform I sat down and regarding your first question Alethia overseas yeah. It S and all types of all that our office I mean ill.
We'll go out and this quarter, it's actually quite outstanding I actually spoke last time in the last call. What do we are focusing on all the Olympus My pants, a this year and to better improve the echo system and that chill.
Relatively better monetization model, so as Liz sell lots to your strategy at all what we are doing this is that why the channel by acquiring Ilya. This we are actually cutting down the cost to fly that so given that the towel by has been cutting down.
We still it she is considerable here the gross for the Oasis business is actually approved to our strategy to build out a apple says tend to be effective.
So going forward what role will Ah what will typically focused on it's not only just chill focus a substantial yield as well as to why that way, but more for his chilled me without a anna constructed a healthy healthy apophis huh.
Apple has over 30 years or so they're well aware if this person asked another way are starting to get the sad tale on a set of how we can better food opposite there's nothing there oh assess market and what away will focusing on filter is sell more.
Oh on constructing a holiday Apple assessed and and also and pro forma financial status of the Oasis.
Oh, so regarding your second question or what potential synergies so its combination, especially on there or it's just market.
Well I think right now Oh leather exports only it will fall for Oh, Yeah. That's your clients are actually in a very early stage in terms of its Paul here or is this market. So.
What will well lived anymore right now as to focus more out of the collaboration rather than so consistent with each other so I was always a potential combination will create sanitizing. They always says business thus far.
Sorry can I just ask a very quick follow up here. If you look at the margin bought right like how does he oversees win at a certain point that could.
Could become more comfortable and longer time at a steady state how can we see the overseas the gross margins compared to domestically.
For your question I think in October we start to see.
One single country to achieve sort of relatively breakeven.
Operating margin side, but we think for the entire overseas business, we'd probably still need to invest for the next few years because of different countries have different I would say user behavior in some countries obsolete or to pay.
The race or would it be higher than the other countries.
So we think that in the next few years it would still be at a at investment stage Mr.. Don just mentioned, we will be focusing on building the equals the healthy ecosystem each country by each country.
Thank you.
Thank you.
Thank you for the questions next question comes from the line haul really Lewis of high told International. Please go ahead.
According to the how on the victory. So what's a good she went away or is that going to be a nickel once he's upon your woman that God knows she bigger cloud gaming Oh go [laughter] clinical care franchise, how women Zika crossing into things that take a father are there going to be so on your warmer it's intended to try that assumes that the tuck ins.
The poor acoustic as such I didn't get a pay once it's gotten caught your most Americans thinkers and show what does a fine yourself or they can monitor for taking my questions I've two questions. The first one is related to the cloud gaming progress can management share any color on our latest developments this Bob.
And the second question is on now though to the new speech. So this game companions.
Can management share any latest developments here as well thank you.
Or whatever that we got jogging issue.
'cause it hopefully I'm getting is here and go to do that usually the whole time. It goes to the gym father, the origins of it couldn't hear concentrator. Yeah. So you know just a woman. She is everything from me and just a follow up on this again, but it should be and so there's.
So to the diode rule could say so he's on should pay out and then when he will MACI to adopt and to reopen your thought on doing this as you say.
Well interesting say 30 inches and as it does on him to just sit and O. women's or go to the machine is not going to be by doing this.
That all woman Connie.
Yes. So this will GE GE is you know who the good although T. I knew she took a show or did it.
Then retain oblivious email shelf with what has been a harder.
Oh, so the answer to you is usually you want us to do they need to do a matching year ago can deliver to the table.
I will make a new Jersey city.
Today, you guys to gain new England's houses are there any other people say just to say.
So the kind of guy and he's a good.
It is it is sometimes she uses a dog gone through minimum do it either way I can see me Ricky so good to do so when I see the same on topic cheaper than it does to New York on she knows how to get there is no who is superseding begins on their own.
HM.
[laughter], they're about half was Oh, Yeah first question I'll call.
Actually what we want to highlight here is that the technology platform assess Qualcomm platform rollout is completely to allow us to buy our own R&D personnel.
Well, we have been spending a lot of time and a great now that has made a chill I was just at a later age and also optimize user experience. While they are all playing the role play into the PC portal gannett's to our mobile the life anthro hours, you're walking off one.
That's the way it wasn't only yesterday that we have officially launch this you'll walk kalkan impossible. After almost a four miles for beta testing on it that way have think howard or as much as they as a hobby her to hit the high dose right now and Oh.
What we are trying to achieve is that I'm sure also Elias users switching to explore as a way of alcohol willing and loss ratio. That's all they had a better play let Jan San Juan play and that's mostly Astro hour call being a platform.
Oh, yeah optimize their user experiences.
Oh, Oh, that's not all that that's why I say, we're probably in a platform or what's the only on better test, which is a way that is oh, we didn't elect to match all chill promoting this call came in platform Lastly, now that it has been officially launched and that he is all there so.
Got a app stores, a way, we'll try to better promote rule qual game platform and see if.
If the market is ready for the new her best to experience its cutting edge technology, which is quite against al.
Well if there is a a huge opportunity that's why they had its way those all game business.
Yeah.
Oh, when we look at every efforts to realize they are creating opportunities for our own business I am not sure tire well, probably we'll just have to wait for Oh, the time to see if the users are ready to Alaska clay alteration of their expenses.
So and its a try this problem and platforms to quicken.
And the castle will pick up on that question.
And the part of the second question regarding came companion business outlook in companion business is still experiencing a faster growth.
Especially for our ATP.
He won so we think it's.
It's relatively a solid growth for the game and a companion business Ah I wrote in companion business because the revenue recognition policies are different from our virtual getting a we're only recognizing net revenues for king companion business. So even.
So the the charge of the.
Skin companion business is pretty significant and then the revenue contribution is still relatively small but on the from the accounting perspective. The game companion business has a much higher margin.
And then the.
What you're getting from pure GAAP accounting perspective.
Okay I hope this answers your question.
Next.
Thank you for the question. So next question comes from the line of.
[noise] [noise] right.
[laughter], we have lost yada yada request.
Force you to take the next question is from Daniel Chen of JP Morgan. Please go ahead.
It was all countries her world younger ones are to go deeper warranties, requiring taker for sure for your body, where do you draw on it's kinda doesn't really always shoot a third to the fourth quarter with us for teams around the Oh here, which are that that will occur.
I think Brian how does the pension drugs without your horses for.
All the other ones, you're scratching donor sort of hard to grow your course or BD tomorrow, no Josh has or trouble horseshoe cohorts or go my budget, there quite a bit and of course, all from Halcyon dialed down you sound like it was his appointment you to hear so polarized figure a riskier because as it goes.
Habitual holds it just seemed to don't wake up from a car or a woman somebody at how many good things I mean those.
I have two questions. The first one there are more or less on the what the management thing are the key opportunities Gamestreamer on a short video industry in the next two to three years in the ER products are and also on the monetization side. The second wise on the competition so what's the hour.
<unk> competitive advantage against quite sure in a bit of BT. That's both of them are quite aggressive in obtaining top holes public agencies are game broadcasting rights and also cars will host rich or over 200 meter came to me I mean, you are which is quite large and also very aggressively and.
The investment.
Thank you.
[laughter].
The school operators.
Yeah.
To some.
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Mhm disaster design change today, she's a boon ways. Its a good security bookings you can you just.
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Okay great.
The younger ones are the one or two soon to be only two digit taking positions. We usually don't words, what is the mix issue on down and he's going to ship.
I also need to kind of to do okay. Sure and then in income, though just to say.
Just to say it wishes that goes on in <unk> either.
They hung it it comes he didn't know downtown and then I'm done either.
And Sue I'm sure we allocated to acquire so the issues are those on this when he'd attendance and you suddenly.
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We'll go to the issues in order to do that how good how does it get you wishing thing and so things are going hungry, which isn't quite as those isn't paying should you know how are you thinking that she did.
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Andy We believe you know John classes in the juices and can directly though quickly. They were just going to give duncan issues that it gets you to three times or the developers who have on any kinda, though just to really hit a woman Saipan, whom quaver keyboards again as it relates to named <unk> liquidity views.
The interest will immediately.
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She wants Linda surveys here, but it's a good she wanted to you usually see.
<unk> expenses include GE, who daily show you some of the Saudi indicated a target Yaki said they get something.
Says he didn't actually shows you the dog I do this year.
Everybody I'll catch on how they compare that's helpful. Scott settings, where actions have felt quite show and pull up only I will start with saying competition was the only I think for billable and sell the gross profit.
Routes fight and transform all their nature, where children bulk has true that's already a common show and which is why were saying the trouble is on track to tell their traditional players telephones and live streaming that's true.
As quite limited and the same thing.
Competition, that's quite show I think from what they have monitored and turn away, a especially I mean year over year growth I think there are impacts to lithium all eyes training business is also now so bad, especially thinking about right yes.
Of course, there are huge but.
Ah, but the impact that and is there a lot of this is quite is quite different.
[laughter] Kodiak quieter facing a this crisis competition, what we are doing right now, especially I'll, let him live streaming side and that way, although some or all of their content Oh building up their content library pro active quite well.
Quite a show their short form, but that's kind of how operations are.
Focusing more constructing a communities kinda Atlas, it's kinda they have thier essential life.
Hollysys whore running the operations.
So historically Ah what were good at is that a whole yeah, hi sale.
Yeah, Larry Alliance will see another trip players such as the talent and the same.
The bulk has changed and it did have an hour long pitch. It same thing, especially if they seem quite shows competition I always tell if there's kind of a collaboration with LSW trade players.
To better improve the operating efficiency to drive the growth and that should improve our monetization capabilities.
Okay.
Thank you for the questions in the interest of time, our last question comes from the line haul.
[noise] Chang.
Hi, Greg. Please go ahead.
Hi, Glenn you sound like a hospice is this all that she wants Hello, Glenn keeps you for your question Richard Goodman timeline.
A woman.
[laughter].
My answer to your car you Sherri Hi, all.
Oh sure got you know she can answer that killed off platform and our gross margin impact. So you always see a collar case I'm not hold jagodzinski partnership you want you can talk to that.
She's not least admitting that Jim do something without Yoshi Shukarno should reward I think waiting dual nobody else your potential impact.
I would put it in that.
Thanks management for taking my question. My first question is about legal action I 10, Okay sure any.
Color on <unk>.
They call you guys mentioned, Oh to our platform and Oh.
Jives, Robert Gulfmarks fourth quarter on second delay on Iraq feel like a record.
Inflation.
Especially on.
Nice to meet you do an impact you can share with us. Thank you.
<unk>.
Thank you ladies as to the Oh, we have noticed that the.
Sort of a broad.
I asked him.
Her two lots here has increased uncertainty incremental I think the growth.
In this year, which is relatively lower compared to last year and Ah for and because most of the attend workload in the fourth quarter or so really Uh huh.
For the 10 would be mostly recognized in the fourth quarter, which will have some impact on our gross margin compared to the third quarter and to your second question in terms of C authorities policies or guideline.
Thanks.
We are we are cooperating with the government and Oh, we understand some for retirees or government or are or I'm trying to implement new guideline or we are actively discussing with the government and oh.
Of course, when the actual guideline is going to be issued we will see a cooperating and be incompliance with the guideline.
And so we see if the guidelines is going to be issued and we want them value the impact of the business at that time, but we believe that the government or 13 are trying to help the lightbox testing to a better role in the long term.
Ah So we don't think the impact for our business with the long term.
Thank you.
Thank you very much I would like to turn the call back over to the company for closing remarks.
All right. Thanks, all for attending our analyst conference call today, and if you have further questions feel free to reach out to the IR at <unk> Dot Com and we look forward to speaking with you in that quarter and count that I.
Ladies and gentlemen. This concludes today's conference call you May now disconnect your line.