Q2 2021 iQIYI Inc Earnings Call
One on your telephone.
Today's conference is being recorded.
Now I'd like to hand, the conference over to MS. Fun at all kept them bucket of Ice's Covid. The opening remarks, you Safe Harbor statement. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining <unk> second quarter 'twenty 'twenty, One earnings conference call.
Companies without all released today and are available on the company's Investor Relations website at IR at <unk> Dot com.
On the call today are Mr. Hugo our founder director and CEO.
Although long hours Baffle me special way long, our SEC deal Transcultural officer, and Amit <unk>, our CTO Chief Technology Officer.
Mr Hall will give a brief overview of the company's business operations and highlights followed by Aldo who will go through the financials and guidance.
After their prepared remarks, Shockwave and Wenzel will join Mr. Ghosn and the Shadows in the Q&A session.
Before we proceed. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC.
I T E.
Undertake any obligation to update any forward looking statement, except as required under applicable law.
I will now turn the call over to Mr. Ghosn. Please go ahead.
Hello, everyone for the effect on the cover.
The wearable momentum around the corner with total revenue of poultry of.
All through.
Got it.
Our operating loss narrowed for the Florida back to color on that.
Yeah over in Europe as well.
Effective cost.
Expense control.
During the quarter, we continue to remove the market multiple upgrades operating back.
According to a third party data we've left it as a part of the long beautiful and we do it.
In terms of mobile.
My balance.
The home user timestamp.
First.
With our membership business.
As of June.
Our total number of subscribers reached 100.
Hugs to Munich.
This represented.
We are not really nice sequential it.
As part of the heightened uncertainty comes in lumpy.
Well, if I can call her.
Our membership growth.
It's mainly due to three factors one our Permian content the freshmen drama.
From the Bell <unk>.
We've helped to drive the number of subscribers we increase.
For example, drama lunched into including by Dr. Gandini.
I hope I don't view that.
We bow hunting.
Well well received by all of them Yeah. The Asia films batch of a few.
Factors, China, Tom Sweet.
Soon the document.
Do you.
Also did well.
We saw strong membership growth on T V.
This.
I'll post summer location.
See we have further.
Dependent all over.
Sure.
But driven by our premium content.
Ah patient operation, we are continuing to improve as our commercial.
A subscriber.
The number of overseas subscriber revenue.
End of <unk> 1 million.
<unk> bring on domestic producers of content to the overseas user we also booked soon.
The local or no comment.
Dunhill, we launched our first <unk> bone throughout Dromos area My roommate.
Coming up in May which was remarkable success.
Sure.
Return on sales was the launch though for the first time in over one.
We're pleased with market.
Thank you Tom.
Pace is.
Message of Delta.
No.
Proving the attention of course to take user cohorts.
Sequence.
IRA first bank covenant.
Thus the likelihood is the crucial decline of membership revenue.
Revenue was mainly due to the well.
<unk> here.
However, number around the corner.
Which was mainly a true.
Attributable to.
Wow.
Of blockbuster.
We will continue the popularity of on Q1 with coffee.
While our pillars here.
Remember, particularly in the first half of Q2.
Through the late launch of premium content to the end of Q2.
At this time.
The activity of our membership.
Yes.
Nice.
<unk> average monthly or saw.
A high single digit growth year over year during the quarter, mainly due to the price adjustments, we launched in November of last year.
With more premium on the diversified content to.
To be launched.
Second half of the year, we remain confident in our meat on the long term subscribers.
Rose.
Furthermore.
We also put in new market per se.
Paid online videos.
Around the corner, we have launched our own.
Cloud being above revenue.
The brand includes three major categories.
So article movies launched under our <unk> mode.
Absolutely.
By movies.
Our original.
The revenue sharing ratio of <unk> movies to content partners increased to 42%.
It's higher than adequate relief.
By doing this we hope to explore new areas for growth.
<unk>, our new online distribution ecosystem where movie.
Moving over to our advertising business.
Total advertising revenue increased by 15% year over year.
Climb lightweight hardware of corner.
The year of the Europe growth was mainly attributable.
Attributable to the Q3.
Food and beverage advertising, partially offset.
Bye.
In revenue.
To our company.
Pat.
We expect both brand and performance as we increased in the third quarter due to.
And England.
Chris.
More vacation.
Brian the App recorded significant growth year over year during the quarter, mainly due to improvement in our.
A major E commerce during the contract.
Our loss.
Llama.
Joshua.
The label.
Might be our guidance.
Got it.
Performed about in terms of popularity.
Were off market deals.
Deals, which helps to drive our clients.
To the peak level over the past.
Yes.
Performance at Rick guidance year over year growth during the quarter, mainly driven by the contribution of key industries, such as Internet movie E Commerce platform.
Internet service.
We also enhanced our.
Monetization comparability it is.
<unk> products.
Margie.
<unk> helped to significantly improve.
The effective CPM.
Meanwhile, new resources from connected Tvs and.
Our lives both performed well.
Moving over to the continent.
Although the current year.
Parents firsthand the challenges in continent gambling gathering.
Something called her way.
Maintained our leading position in terms of total number we do view of top content across categories from dramas and variety shows.
Patients in the children's content.
According to third party data video views of our drummer.
Sure.
104, nearly 48% and the over 30%.
It's accurate.
Overall market.
Right.
Our animation content, including children's cartoon.
Over 40% market share.
During the quarter, we launched.
Of classic titles, the constant currency factor that caters to a user demand on the further sell.
Reliance <unk>.
Innovation of ICU.
To give you some examples.
For dramas, we launched the <unk>.
Tycho the available which was a heat among a wider range of users.
Drama Toughed, a number of writing Linzess in phase launch and.
Bridget eight pumps suite on average by over 200, <unk> hundred thousand comp.
Obama eliminate user user leading platform.
Others exclusive dramas, such as the landmark might be archiving my entire Iraq and the other is well received.
In addition, a lot for the landmark.
Also our <unk> eight.
The Dragon TV, which helps to attract a lot of television audience back to the platform.
Following the success of it.
We continue to broaden our content offering.
Intermodal.
Working to meet that work with one of your currently.
The new model enhancing.
Our user impairment well tracking faster in each segment in.
In May we launched three new home sales you mentioned worldwide.
One pimples under that they will become a.
The success and popularity.
Our off months.
Well, we're I think shows it.
Continue to evaluate new original content across.
Gyros.
No tangible such as that.
Factive adventure.
Or not.
Is the hard work so you can see.
Working months, so some melanoma.
Asher hubs shows jamba called her sweet for animation.
Also produce animation.
Multiple eamonn V shape.
100 <unk>.
Maintained as popularity is through answer of hardware other title launch and growth include no tie up to between Earth.
Our sulfur produced a cartoon.
Hill.
Of bonds are a key part of international law.
For online movies in April.
It simply relates to rate.
You should read it.
No. It's part of it is about to break RMB.
Certainly meeting and well received by audience.
For oil field.
Further assumes that that means a stoppage.
<unk>, which was produced by our GP Trust was released in cell towers during the quarter.
The accumulated two bumps to August.
RMB 400 are moving so far.
It has received a great.
We built in our commercial return.
And at the same time another two movies produced achieved peak truck stop it's shocking in effect in the corner.
Another four in post production.
Our data to be released soon.
Alicia <unk> automobiles has 14 field.
It will augment.
For the second half over the year, we'll have a better pipeline.
The first half of the year or the second half last year in terms of numbers of Idaho pilot.
Meanwhile, we will continue to push to launch all scheduled content on time.
Second half Pedro <unk>.
Including transitional dramas with regular number of episodes.
As to.
<unk> Harper Jay.
The idea here.
Each Android phone and the phone.
<unk> as well as political sales and our brands such as <unk>.
Model.
<unk> planning.
And ovarian.
<unk>.
Mr.
For variety shows we are focused on.
On developing innovative new content across a number of things.
Such as the already launched game of shock.
G tube workshop.
The new generation of hip hop protests upgrade hips worsening of the rap of China as well.
What's your name.
403 tons.
Awesome.
Well I'm in Asia in the children's covenants, well expanding our content library. We are also in the area of in House production. A couple of <unk> 19, HEICO included already released itself, Brazil, three D animation in multiple of the overlap H.
When you open.
<unk> Army.
And the two men five yes.
The Asia <unk> content.
After successful broadcasting the Euro 2010.
We are present.
Combinations of Permian leap for the next flu season.
On may.
2022, FIFA World Cup qualification games in Asia as well.
The GAAP.
Other topics.
Moving over.
Moving over pool technology advanced technology is the cornerstone of our business.
Among the other thing and allows us to continue on.
In a way to content enhanced income.
<unk> and <unk>.
Improved operating efficiency.
During the quarter.
Pleased to see that.
Lacked that had pockets user in low tier cities half roughly of the pickup the peak period.
103 meeting.
The average user time spent his babies.
The same metric.
And T mobile apps.
The number is.
At the end of last corner.
In terms of demographics users.
Light come mainly of elder on young people groups that tended to have more time, mainly in low tier cities into the.
The overlap between <unk> and <unk>.
And our main app.
It's around 7%.
In addition, we.
In continental and work hard to improve the technology.
The commendation engine that users.
You factor level matched with our most.
Appreciate its content from our collaborators.
We believe from the early.
70% of all the while.
Driven by our content elaborate during the second quarter.
<unk>.
<unk> also made progress in.
Industrialization of video production by utilizing our intelligence production with that.
No.
Currently in the lab.
The production business intelligence system.
Pete PBF Pete.
Internally.
B.
If a professional.
Data system for our content production team.
As a b C.
Business imperative product designs.
Well after centering content producers.
B.
Ofer peripheral serve one stop data.
Inquiry.
Ours visa analyst.
Evaluations with the pulse of their decision making.
The first day of our launch.
Producers trying to try it out.
Out of the system.
Future Pete.
Well widely promoted economics under the cover all.
Our in house.
Leasing a year promoting.
Industrial at least of video production, we have seen it.
As well as in our partner ecosystem.
In general waiver.
Warehouse.
In early stage of industrialization of video production the supply of high quality content is pass related of Heath vertical content needs to be applied funds.
I'll call continent strategy is to focus on.
High quality of companies across elective.
But it goes well.
Providing more premium market.
So that we can optimize profit.
The penetration on the convention.
It means that there is still lacks GAAP between us and our global peers.
Altra, leveraging our deep understanding of users are highly innovative in house production team as well.
Advanced technologies or industrialization production, we believe we are well positioned to address companys challenge to narrow that gap.
With our <unk>.
Global PR and capture future market opportunities.
Lisa.
Ill turn it over to Michelle.
Ill offer naturals.
Good evening, everyone. Let me review, our key financial highlights for the second quarter.
Total revenue reached RMB seven 6 billion membership business continued to be our largest pillar accounting for 62% of our total revenues our advertising business continued to rebound with a 15% increase on a year over year basis, our other revenues.
Achieved a 20% growth on year over year basis, Although we continue to diversify our monetization channels. Our cost of revenues was flat compared with the same period of last year, among which content cost would also remain stable our operating loss margin on a GAAP basis narrow down.
So 15% from 17% the same period last year and our net loss narrowed for the fifth consecutive quarters on a year over year basis.
By our disciplined investment strategy as of June 32021, the company had cash cash equivalents fixed cash and short term investments of RMB 12, 3 billion for detailed financial data. Please refer to our press release.
Our web site.
The third quarter of 2021.
Total revenue to be between RMB 762 billion and RMB eight 5 billion, a 6% to 12% increase year over year. This forecast reflects <unk> current and preliminary view of just what changed.
I will now open the floor for Q&A. Thank you.
As a reminder to ask a question you will need to press star one on your typhoon to read your question Mr. Paul <unk>.
Ask your questions in Chinese first and then to answer your questions into English participants are requested.
Can you speak to one question each time.
And by while we compile the Q&A Boston.
Your first question comes from NRG <unk> from China Renaissance. Please ask your question.
Alright. Thank you. Thank you for taking my question.
Yeah. My question is actually.
Last Q.
Yeah go ahead John.
What guidance.
Well I think that question Dan.
Sure.
No no no.
I think you said that.
So I think that guidance.
Okay.
So my first question is yes.
So management is good.
Elaborate on the nature of the regulatory environment, especially in the overall direction regarding their content. Thank you.
Yes, yes.
But I did want to give a full year.
When Jim Glut.
<unk> sure, Yes, Obama uniformly ensure tumblr yield washer Namal <unk> CEO Jin Guan.
Although again the ultimate <unk>.
Sure.
No more <unk>.
A chunk of the younger ones, yet, it's an Iot and we'll have some highlights in Q1.
Sure Bob.
But then you jumblatt no one's year insurer begins.
And then the convertible.
Jimmie blotter.
Sure one block.
<unk> achieved or quarter, KBR Changsha Xian yet.
Yes.
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Schindler bulk lines.
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Neil.
Pathological and Michelle.
While the.
The Gen. One Quentin you Shuja untracked, O&M that Jim what ICU chunky.
Thanks, Tom Rutledge Hall.
Actually on Black Fox.
One 1 billion.
But he is actually again, Jonathan Jon Russell.
On the Magellan downtown Columbia.
They don't want me.
Georgia <unk> bye.
Yes.
In about January again unchanged here.
And some of the new charges.
Jim.
Johnny will drive.
Yes.
Sure.
Paul.
A cool way.
Well in Shanghai and Tianjin.
<unk> common shareholders.
Great.
Yes.
So welcome thoughts you have on yet.
To ensure that seemingly a bulk question Shaun.
Thank you Sean.
Hello, Ana so its content.
One major pod, so firstly, because we are leaving our platform.
On the content censorship.
Aaron.
So actually I and then the basic principle is content content censorship hasnt been changed.
Changed over the past several years so for this year.
Because let's see.
And the July 1st key events there is heightened.
Censorship environments.
Second quarter after that it will actually be a return to normalized.
Relation pace.
And the second area is actually we see the tightened regulation for the overall Internet in Australia, not only for us.
So.
Many folks out to part out.
One is that Amgen monopoly.
Recreation and that's for US the video industry, particularly for the long haul.
<unk> is actually a fully can.
Catholic health industry, So, we actually see a limited impact from the <unk>.
Anti monopoly recollection.
And it's true.
Second part is on the data security. So we observed that the government has.
Implemented more titles and specific.
As a guideline for this part.
Internally, we are already enhanced our.
Management, and also technology patch to both delays in implementation and more specific.
<unk>.
Yeah.
And last one for the education because this is a.
And we have people asking in Africa.
Adaptation is not ours.
Men.
And we have business area, we are looking at them, but just because of the tightened our deca.
Regulation.
This area, we foresee that the students are the key Hassan.
It might have more time.
And other things a pass on that.
The study.
And the entertainment is one of the key.
Thanks Lynn.
As animals.
Thank you.
Yeah.
Yeah, well it works that way.
Yeah, Yeah, okay.
I think our nowadays.
Yeah.
Sure Jonathan.
Okay.
Hum.
Okay.
Don't forget that the higher connection.
I actually see it.
And I think some things today.
Now quickly I think.
To take down the income shipping hardware back is that right.
Does that sound.
Ghansham.
So just a quick a follow up.
Does that in your account.
Because we have income.
Rather through interactions regarding the short video industry back there.
Promoting more poverty.
Yes.
Uh huh.
Content.
Just wonder if that could also.
Now from video content in both the canola as well.
Alright, thank you.
Yeah.
Thanks.
Second one just to take them.
Uh huh.
Yes, I'm sure later on I'm sure if they don't obviously they made it all will ensure yourself.
Sure.
And.
I've got two quick Carnival, and I think that.
She room, yeah bulk goods.
We didn't call each year.
Sure.
Okay.
So ive talked to you I am sure nasal intrusion.
Yes.
In the June quarter.
John look easy.
Now you'd be at younger.
Through central Chile.
Yes.
Some of it's like a subpoena yep yep.
Your line job.
I'm sure you've got full bathroom those waters.
Yeah, Yeah, sure theaters, Shanghai Beijing Guangzhou.
What is your what eight are the highest.
Youre welcome.
Sure.
<unk>.
Yes.
Hello. This is although I think.
Probably you.
You mentioned like Arista loop staggered is the regulation.
Regarding the you can kind of sensitive on the short shelf on videos I think Dr. Tony just said for long form videos, we have always been kind of approach for us further.
If anything.
Like seem director or directly impacted our business should it be positive because those short form videos they haven't disclosed through all this.
Profit before now I think.
Kind of where we are almost in fact right now we have more experience.
All of this we have.
And let's see where that goes through all of these kind of statements for past decade SEC.
<unk>.
Okay. Okay. Thank you. Thank you yeah.
Thank you for taking my question. So if I may I have a second ago with adding.
The like machine.
Why do you can you should do that.
Please go back that guidance.
I think there was just a.
And I think that's the caveat.
It shouldn't be a crazy question and one that I think two things.
I gotcha.
And secondly, if somebody does.
So could management elaborate.
Our recent progress.
I can your life.
So with that said I feel like.
I guess, a quite an impressive user growth.
Thank you.
Well Shannon shortly our antibody to shield our home video lymphoma.
And between shop.
It's either achieved useful.
So all up on your daughter's forget some of them will go throughout the year.
Oh sure Timna I E that we are in.
Nothing she of course, you shine yeah.
Well maybe.
Beyond <unk>, we are sure to move out to the binding wholesalers.
Financial Hungry man.
Each year.
Oh sure.
During the buying or doing Paul.
Yeah.
I'm coming up your sleeves schindel over here.
<unk> I'm sure you're going to change.
Sure.
She had a Shanghai zillow onshore shouldn't really change how you are I'm sure that we'll have the local sure Tom.
Fashion, <unk> home gyms, with Honda where quite sharp.
It was an issue.
I teach us a lot more.
Hi.
T mobile Archie.
Okay.
Hmm.
Tampa, you're buying ourselves.
And pulling back a few months.
Okay, I will introduce our like I E. Like a P. P. I briefly and then I'll turn it over to our CTO windfall.
I elaborate.
We have a democracy and like I E like 80 people around half of the year.
So behind the.
This progress we are actually trying to target and then.
No. There's no major argued as we are talking to right now so our core news is right now.
Actually that uses aging between a 2% at June 30.
Yes, the old users and we cover some.
Young generation and older people, but that is not enough.
Over the past.
Over the past a while three years recently.
We observed that more and more new users.
We're actually now to haven't formulated a habit to use I E <unk>.
We try to go back.
<unk> project that can target.
These kind of unusual and it.
Nope.
Thank you Mike this kind of the new units to use our product and to watch our content right now.
And the App satisfy our expectation so I will tell much of our thinking a little phone and to elaborate.
What I'd say is I'm sure you saw one sure.
Okay, Sachin Shah <unk> cause you Wanda shifting minerals and find a time when we can.
The whole south central homes within them so to speak.
Q1, more so <unk>.
Each homegrown E bike line that is a peak.
Hopefully that central App.
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Thank you Wilson.
Gotcha.
<unk> got Jim Hong Kong.
Okay.
Like ABB is a personalized and product targeting the lower tier city users since the launch we observed a very I felt like use it though.
As of the end of second quarter and the weak may be a news has surpassed one min 100, sorry 1 million milestone.
And the user overlap between like.
Like <unk> and <unk>.
GAAP.
It's extremely low.
Let me just mention.
And bad Signor.
Picower remarks, it's only 7% and this ratio continue to trickle down.
And we observe that the users for our I T like ATP preferred to consume more content.
Okay.
And in terms of the user tons bench performed.
Very well.
And we try to.
Why is the new users to asking advertising.
The challenge with relatively high penetration into lower tier cities and all the things. They can do their shopping approach and also we try to improve the user retention.
All lines recommendation and also the easy and convenient interaction and also improving the adoption capable of here actually I know foundational.
Smartphones.
Right now the user retention for our actually like a P. P. S O.
Good.
That with media to Shaw, who me country.
You go through an E mail.
The main room shown patients you doesn't care whether.
The other humana, you'll have to cut the cord.
How much you can Hong Kong, so I'm sure can <unk>.
Number one.
Truly income goes up.
Oh, you mean, you plan on doing plenty of insurers to Guatemala, joining in at all yet Ginger yeah.
Hum pretty income golf.
Drill hole lingo.
Sure Tom that Andrew Schaap, I'm sure, you'll some English washout hone <unk> Khan Foods, you, Jennifer John sure Xiang.
Oh sure.
Oh, Yeah, yeah yeah.
Hello, I'm <unk> doshi from <unk>.
Sure.
So our CEO and has something to add.
So this kind of initiatives I mean actually like a T. P is also consistent with our idea that we.
We believe they all would it be a consumption upgrades in terms of the content for the Chinese users. So basically we expect a loss kind of users are they previously they don't watch the TV drama on the field and in this kind of entertainment content.
They have a chance to access to the high quality entertainment content.
We'll be spending more time on is kind of the entertainment content.
<unk> from our initial data set I think that our thesis Scott.
Demonstrate it.
Through these kind of.
User retention rate and also the user growth.
Thank you.
Thank you.
Thank you Glenn.
Your next question comes from Eddie Leung from Bank of America Merrill Lynch. Please go ahead.
So we are in the long run.
Im.
Some more nickel Kuan yew knee.
That you can ship to them.
So I don't know China does that seem to lead to much on what and when that comes.
<unk> gets you to choose shoes.
She is now.
Well remember too long continues it'll be down probably saw Hopkins come from that Charlotte Wei Qing.
That sounds like a high issue.
So Jonathan alcohol light and so somebody can tell me when we went to at least hold my time, Jed J Gisela cheaper to do that.
You can have a clean sheet.
Yes.
Sure.
You can't do it all.
We appreciate.
The guidance.
Sure Jim.
Jim.
Sure. This is a hobby.
Can you talk about how did you shop John gave by line.
So my question is about content cost, we have seen a pretty good cost control in the parse out separately.
While the company has always been a pretty conservative guidance calls have been sold.
So I'm wondering when he looked at T. A.
Cost control content for example, in the past quarters, how much otherwise.
Due to the delay of some of the hot content and how much was coming from the benefits of no production and licensing.
Thank you.
This shuttle.
If you're talking about like one or two quarters come in and cause it to be caused by the delay of the <unk>.
And southern content, but if you look at the past few quarters numbers, you'll see that because that's it.
Optimize off content cause for which actually is more driven by the efficiency improvement of unencumbered content investment.
We see the prices stabilize.
Yeah. It was on the aging and are given the facts, we have more original content launched in the past few quarters. So basically we have more control on the quality and the.
Efficiency of the content investment.
But of course.
I don't think our connectivity is the right word here because even effect.
There's a category of our content investment, including Oregon, the movies in the oversea content, that's why we see.
We see the potential try to increase on a dollar amount of the content cost.
As a percentage of revenue it definitely I think you'll continue to see the optimize the trend in the next few quarters. Thank you.
Yeah.
As a reminder, please restrict to one question each time.
Your next question comes from Alicia Yap from Citigroup. Please go ahead.
Hi, Thank you Glen income washout.
What I can tell you Shakira shirvani trend they don't want to talk about kind of shipping yeah. There you got a talented team.
Cheetah, he got changing Osha Mike.
Tricia you know something about that yeah sure Guang Yang from Qualcomm.
Sure.
Dan quickly adoption yeah.
<unk> plans to make sure that name wrong.
Neil.
Neil shipping timing.
Absolutely. So you can't be games that beautiful Glenn you see call. It seemed like you come more sure do you realize that eagle will be quarter. Okay.
Chris you said that.
My question is.
Hi management.
Give us the longer term prospect offer long form video industry in China.
Current model between the membership subscriptions and advertising model remain in place any breakthroughs in terms of content production for a monetization model, especially I think management talking about the industrialization and the video productions, so how would that actually transform.
Future monetization model for the pizza industry. Thank you.
Oh sure.
Yes.
Two more countries to come to you with regard to Hong Kong.
You're going to want them, hoping bore only salvage Atlanta you are drilling.
Sure sure it won't be offering yet your older estrogen miserable drought.
So either you mean.
Young holding door to reshuffle that year on year to four two.
To kind of it for any other shares yeah, Tupperware I sure guidance page Thunder.
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I'm sure they will.
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Sure sure.
Sure.
The assembly of Sugar I got for you guys.
Sure.
So.
Sure.
So I just wanted to see what kind.
Yesterday.
That's useful.
I think our survey.
The whole thing.
Okay.
Regarding wholesale cultural.
Hum.
On commercial vignettes of Astra are but I'll refer to them.
Yeah.
How many people went to a commercial bank.
That's true.
Chelsea, we are comparable from working with them.
J J Watt Carla.
Okay.
Shana Laurie unusual with Chancellor.
Firstly, you've shown us.
I think Michel notary HIFU machine.
Cash inflows from the Uh huh.
Some of that now.
Yeah sure in China to have somebody else you unless you guys know how to answer it as you know.
I'm not sure they locations, yet, but what how much useful on Kashi.
Kashi suite.
Once you have the tradeoffs are actually open.
Sleep physician.
John Rudolf.
Okay.
So how do we have a phenomenal yeah.
So yes, they come down.
The whole point.
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As usual.
Sure.
So you should draw a Texas payroll revenue.
All right.
Alright, Jon Kubo machine.
Welcome to yet.
Even if somebody I'm sure to do.
Yeah.
<unk>.
Sure.
Okay.
How would you see it how they each of them.
I'll actually take a careful and offer a full agenda.
And I'll show you the job.
It's a hard phone off drip on Boulder.
Please go ahead ma'am.
Quarter for.
For our call even.
Awesome.
Sure.
Okay. So alicia.
But I actually have a very positive deal for.
For this industry I personally am my hypothesis is food out there.
It's two parts.
One is that in terms of the penetration.
We still have a very.
You'll have a very low penetration.
In terms of that option.
Our PE ratio paying ratio is also low.
So in China.
There is only as more people now.
Now they are willing to pay for in a professional and high end entertainment.
And now we are in fact that more and more people will actually join this kind of are talking to us is when we.
The churn of the consumption upgrade of the content, we just mentioned.
Before.
In terms of the monetization our right now our core users and the people aged between 20 to 40.
And but we don't have sufficient content.
For the people.
Aging higher than 14 years old old and also for the younger generation are we also didn't have a sufficiently and do the content for them. So right. Now we are trying to amplify our content supply and shoes that despite this kind of thing.
So based on that we.
In fact, the penetration ratio and also in our paying ratio, we're continuing to improve and.
And in terms of the monetization model.
For China in China for most of the gooseneck vertical.
When the new users.
Joining me are joining the platform.
Oftentimes.
Our free users how they will consume the advertising.
With there are with they are more and more into a content. It will start to pay for our content and then there would be no advertising for them, but at least kind of use as they're trying to convert into the high op. We do this.
Our membership package and also and that he bought matters.
Got it.
Sure It may want to Vodafone, you'll hartland, yet additional at all.
Yeah, Sheila you ship hold Abel Shang Chuang, we're getting cheap.
Sure sure.
Yeah, Joe sure or maybe cheaters from Bush's yet.
Doctor.
That should get us almost identical trauma Doctor Arabian shield.
Ghansham Shan Shan Shan.
I sure that he gets to work in the pipeline.
Pipeline goal plentiful.
We'll go water issues.
Thank you yeah.
Yeah sure Hey, once you woke me up on it.
It should be a good either.
One Kim Crawford.
Throughout the movie is wrong.
You go to war hazard.
So what about the whole.
Joel.
Good question.
Shall pool tables phones, yet you violent pick them.
Sure.
Sure Joe I'll home sure, yeah that shouldn't be telling me, but.
Whether Jason Yeah, Las Vegas truthfully.
Jason <unk> from Chile.
Obviously all of them yet.
Yeah.
Hi.
Yes.
Okay.
So I'm comfortable with that.
Good morning, Jay the Java LIBOR.
Total funding their sharp to manage.
For tier four commercial about <unk> four.
Sure I'm going to bundle them together.
Yeah.
Yeah.
Sure.
I can't I'm sure as you go through your bundling.
You got it.
As you have observed a we went through some kind of a.
Volatility or uncertainty in terms of the kind of launch I think that's the more fundamental reason behind that.
Is that we haven't been able to offer them sufficient.
Sufficient supply content supply and more diversified content supply.
So as we mentioned in the shareholder letter I in the past in the.
Last quarter.
We believe the industrialization of the C D a.
Our content production is the key to solve this issue.
The key thing is that we try to in house.
Forecast I E.
Most of them.
I'm sure you all are.
<unk> improved our forecast accuracy.
Accuracy and for the fourth cycle of the content protection, so that we can lower risk and lower our costs accordingly, and so from that.
For the first quarter.
We have in our investments.
This is kind of the industrialization of our video content protection.
We have mentioned previously.
This quarter, we start to roll out and then production business intelligence system T. G I F.
It's kind of a two count abell our producers twofold.
To forecast that Chuck is the traffic and monetization.
And.
For that project.
Yeah.
Yes.
Thank you.
Your last question comes from.
Huge <unk> from Goldman Sachs. Please go real I feel I should.
Thank you for taking my questions.
When I look at your content cost as an indication of how you are industrializing content production.
Our content spend was about.
Speak 84% of revenue and it's come down gradually and it's looking like it is about 67% of revenue.
The industrialization, whether that content spend come down to and how long do you think it is kind of come down through that trough level that you think it can get to.
My first question and related to that if I may.
You've got you've moved into ICU sports in a major way with the Epo and a price point that it looks like it's $19.20 renminbi per per month.
On a headline basis based on the price I've seen what has been the initial indication of demand for them for E. P O.
Your platform. Thank you.
Although I will come up but the question I think.
The industrialization of the content cost of content production is mainly two to increase the supply and the quality of the content.
Definitely.
We're continuing to contribute as a positive in fact because of the let's say a better monetizing the ability of this contact the bus.
Past few years the main driver of the content is more like the.
So I see an increase of the hit ratio under the quality of the content and the more diversified content.
The strategies like the Mr theatres in the solo.
But I think within the next three to five years definitely you will see a significant improvement on the efficiency of the content production given the progress we expect to.
Achieved up with industry industrialization of the content production.
And for the sports I'm not quite folio question regarding the CPR because sports is not like with charges of user directory for the for the non enterprise you saw on the or the west side actually it's more like a revenue share between you and Oh.
Our JV, who actually wrong the sports business. So it has very little impact.
The impact of the ARPA of the membership business or the revenue of <unk>, because there's always have.
I think a very very low percentage of the total.
Membership subscription business. Thank you.
This concludes the question and answer session I will now pass the line to management for closing remarks.
Thank you everyone for joining our call today. So please feel free if you have any questions. Please feel free to reach out.
Our next question. Thank you.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Good day, and thank you for standing by welcome to Itt's second Doug.
21 of these conference call at this time all participants are in their leases.
After the speaker's presentation, there will be a question and answer session to ask a question during this session.
Staff one food.
Today's conference is being recorded I would now.
Now I'd like to hand, the conference over to Ms <unk>.
At our capital market of ICD.
Opening these months Safe Harbor statement.
Hey.
Thank you operator.
To everyone and thank you for joining <unk> second quarter 2021 earnings conference call.
Companys results were released today and are available on the company's Investor Relations website at IR at <unk> Dot com.
The call today are Mr. Hugo our founder director and CEO.
Mr. Xiaodong, Wang our CFO, Mr. Shao, Wang our CEO Transcultural officer and.
O'neill, our CTO Chief Technology Officer.
<unk> will give a brief overview of the company's business operations and highlights followed by <unk>, who will go through the financials and guidance.
After their prepared remarks, shockwave and the window will join Mick to go and sell those in the Q&A session.
Before we proceed. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the US Private Securities Litigation Reform Act of 1990.
Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations potential.
Potential risks and uncertainties include but are not limited to those outlined in our public filings with SEC.
I T E.
Undertake any obligation to update any forward looking statement.
Except as required under applicable law is that I will now turn the call over to Mr. Paul. Please go ahead.
Hello, everyone for the second quarter.
<unk> 10 favorable momentum around the corner with total revenue of poultry.
All through it.
Yes.
Our operating loss narrowed for the flying back to conquer.
Year over year basis due to.
Effective cost.
Expense control.
During the quarter, we continue to lead the market in multiple operate operating impact.
According to third party data.
Correct.
Part of the long form video.
In terms of Bell may use.
<unk> total user time spent.
First.
Ill start with our membership business.
As of June.
Our total number of subscribers reached 100.
Big Hunks to Munich.
<unk> represented.
They are not nearly not added.
Sequential that is part of the heightened uncertainty all content launch during the second quarter.
Our membership growth.
It was mainly due to three factors one our Permian content the freshmen drama.
Performed well.
It helps will drive the number of subscribers as we increase.
Demo drama launched into including by Dr. Gandhi at Ashland.
Excellent.
The repo honeydew up.
Well well.
So by all of them.
Sure Phil Vachon F. The effective Chinatown suite.
So that definitely is helping.
Also did well.
We have looked strong membership growth on Pvp devices.
Post summer location.
Sweet.
It can depend.
Dependent or roughly.
Yeah.
Driven by our premium content.
<unk>.
The efficient operation, we are continuing to improve as our commercial all of subscribers.
A number of our overseas subscriber revenue.
End of <unk> one.
Meeting.
Apart from our domestic producers of content to the overseas user. We are also made in.
In the local original content for example, we launched our first Orange book throughout Dropbox area My roommate.
Paul.
Okay.
Rich.
Thanks Pat.
Sure.
Delta was the launch though for the first time in.
Overseas market.
Utah, keeping pace with domestic success of Delta.
Scouting mode improving retention.
Just to take user cohort.
Tyra Banks'.
Bank Covenant.
Thus the likely is the crucial decline of membership revenue was mainly due to the.
Volatility of.
Fiber number during the quarter.
Which was mainly.
Uh huh.
Attributable to.
That lack of blockbuster.
Who will continue the popularity of on Q1 with coffee.
While our pillars here.
Remember, particularly in the first half of Q2.
Through the late launch of premium content through the end of Q2.
It's part of the volatility of our membership.
Business.
<unk> grew nicely average monthly.
So.
High single digit growth year over year.
Mainly due to the price adjustments we launched.
For our last year.
We have more treatment.
<unk> content to be launched.
Second half of the year, we remain confident in our meat on the long term subscribers.
Growth.
Hello and welcome.
We also have this new market space.
Paid online videos.
The corner, we've launched are all <unk>.
<unk> seen a bump for us.
Brian includes three major categories.
So at home will be launched under our <unk> mode.
Please.
Owned by movies.
No.
The revenue sharing ratio <unk> movies to content partners increased to 42%.
It's higher than the actual quote relief.
By doing this.
<unk>.
All are new areas for growth.
Hum.
Online <unk> reveal.
The ocean ecosystem for movies.
Moving over to oil and.
And what happened in this.
Our total advertising revenue increased by 15% year over year profit.
Declined slightly.
Of course.
Europe growth was mainly a trip.
Be able to go to the.
While food and beverage advertising, partially offset.
Bye.
In revenue.
We're all confident that delay.
Pat.
We expect both Brian and the performance as we increase <unk>.
Hawker deal to all.
England, a rate increase somewhere else.
Mutation.
Brian the App recorded significant growth year over year, so called her mainly due to improvement in op.
Major commerce during their contract.
Our loss.
Llama.
Sure.
The ruble.
Might be our guidance.
Please.
Scott performed about in terms of popularity.
Water off mall.
<unk> latest helps to drive our clients.
<unk> will open about pasta.
Yes.
Performance at recurring year over year growth during the quarter, mainly driven by the contribution of key industries such as Internet.
E Commerce platform.
Internet service App.
Also in a minute.
Monetization comparability is if our products.
LNG.
Which helped to significantly improve our <unk>.
If you ask me.
Meanwhile, new default is strong.
<unk> Tvs.
Our lives both performed well.
Moving over to the continent.
Although the current year.
Brooklyn Italians in content.
<unk>.
Gathering during the coming quarters.
We have maintained our leading position in terms of total number of top content across categories from dramas and variety shows.
I'm not sure the content.
According to third party data, we do deals of Altamira already show.
Good Paul.
48% and the over 30%.
The impact of it.
Overall market real shape.
Animation content, including children at home.
Hi.
Fluffy, 8% market share.
During the call her relapsed.
Of classic titles.
Perfect.
Caters to a user demand on the book.
Sure.
<unk>.
Equipment in Dolby.
<unk>.
To give you some examples what for dramas, we launched the <unk>.
Tycho, the Louisville, which was five heat among a widening.
Of user.
The drama published a number of rapidly since launch.
Well with it.
Sweet.
Bye.
200, <unk> with confidence.
Why don't you.
The user meeting platform.
Others include a drama such as well.
Hi, Mark.
Hi, Rob.
Others well received.
Platform.
I lost the landmark.
<unk> eight.
And the Dragon TB, which helps to attract our local TV audience back to achieve platform.
Following the success of ultimately.
We continue to broaden our content offering.
Sales in a moment.
Working to meet that worked with Bob.
Youll.
So it's normal and healthy.
User impermanent.
Tracking the plan.
In each segment.
In May we.
The Delta you mentioned worldwide.
Pimples under that they will become a.
Successful at gaining popularity.
Our off months.
Continue to evaluate new original content across.
Our original titles such as that.
Effective adventure.
No.
Is the health work.
<unk>.
And looking month.
Our melanoma, well, especially hubs so during the call there.
Well our mission.
Our self produced and Mr. <unk>.
Multiple even this year.
101, <unk> U S.
Intend as popularity is throughout the quarter other title launch in growth include no tie up to between Earth.
Yes.
A couple of them.
The hills of.
One of our key Pars International law.
For online movies in April.
It simply as it relates to rate.
You should.
No its box office is about to break RMB.
And well received by audience.
Well overall field.
Further assumes that darkness southeast Youre, not which was produced by peak truck, What's released himself has called her.
The accumulated to August.
RMB 400 are moving so far.
It has received a great deal.
Built in our commercial return.
And then same time, another two mortgages per deal.
The trucking in the effects in the corner.
The other four.
E Postal protection.
We released soon.
Yes, Lisa Iga automobiles has 14 field.
Hello.
With a second hub over year, we'll have a better pipeline.
First of all how the over the year or the second half.
In terms of numbers of Idaho.
Got it.
Rose.
Meanwhile, we will continue to push to launch all Scott.
Content will.
It was affected in the hub a drummer include a transitional dramas.
That.
Number of episodes.
I have two.
<unk> Harper grid.
The idea here.
Each under Trump and the phone.
<unk>.
Well ask vertical sales are Brian.
With our model.
Gold panning out.
Under the Covid.
Pardon me.
In the us.
For <unk>, we are focused.
<unk>.
<unk> content across a number of things.
Such as.
We launched game of shock.
GE Joubert shop.
The new generation of hip hop projects.
Great work.
GAAP overtime as well.
What's your name.
Foreign to them.
Awesome.
And in Asia in the children's content.
Pending our contents elaborate we are also on the area of in house production. A couple of exciting titles included already released itself Purdue.
And in Asia.
Of the overlap H principal contract profit.
<unk> Army.
On the tank side.
The Asia health content after successful at broadcasting the Euro 2010 games.
For example, all combinations of Premier League within Mexico.
Hyundai.
2022, FIFA World Cup qualification up again in <unk>.
Shops as well.
The GAAP.
Other topics.
Moving over moving over pool technology advanced technology.
First of all give them.
Among the honesty.
Allows us to continue.
In Norway to content enhance value.
Paradigm.
All our regional operating efficiently.
During the quarter.
We are pleased to see.
Is that.
Lacked that in pockets users in low tier cities.
That's yet to come off the.
The peak.
100, <unk> kneeling.
And.
Yields are times that.
Please.
The matrix.
<unk> mobile apps.
The number is.
As of last quarter.
In terms of all the demographics yourselves.
Right.
Mainly of elder on young people groups that tended to have more time, mainly in low tier cities into the average.
Overlap between <unk> and <unk>.
And our main app.
It's around 7%.
Beyond Asia.
Nevertheless work hard to improve the technology of <unk>.
The combination of that user.
Back to deliver that match with some wholesale.
I appreciate its content from outlets to elaborate.
We believe that we are there.
70% of <unk>.
Driven by our company's elaborate during the second quarter.
We also made progress.
Industrialization of <unk>.
The oil production by utilizing our intelligence to production with that.
No.
The production business intelligence system peak Bbs Pete.
Income.
Hello.
Pete.
Professional.
Data system for all content production team.
Excuse.
Business imperative product design.
They will after centering content producers.
B.
Ofer peripheral sir.
Inquiry cars.
Cars these ship annually.
Asia towards the pulse of that decision making.
On the first day of all of that.
All producers.
Right.
It was kind of out of the system.
Fuel truck Pete.
Well they are promoting the income on that.
However, all.
Our in house.
We've seen a year promoting.
Industrial at least of video production, we have seen it.
As well as.
In our ecosystem.
In general we are all still.
In.
Of industrialization of video production the supply of high quality content in fashion related.
<unk> vertical content needs to be applied fives.
I'll call content the strategy is to focus on.
High quality content across elective.
What goes well.
And providing more premium market.
So that we can optimize.
Turning to Asia on the convention.
Underneath that.
It's still lacks GAAP between.
Our global peers.
Future leverage our deep understanding of users are highly innovative in house production teams as well as our advanced technologies industrialization protection.
Well, we are positioned to address the challenge to narrow that gap.
With <unk>.
Global PR capture future market opportunities.
With that.
I'll turn it over to Asia.
Ill offer naturals.
Good evening, everyone. Let me review, our key financial highlights for the second quarter.
Total revenue reached RMB seven 6 billion membership business continued to be our largest fitness pillar accounting for 62% of our total revenues our advertising business continued to rebound with a 15% increase on a year over year basis, our other revenues.
Pardon me a percentage growth on year over year basis, Although we continue to diversify our monetization channels. Our cost of revenues was flat compared with the same period of last year, among which content costs would also remain stable our operating loss margin on a GAAP basis narrow down to a 15% from 17.
For the same period last year, and our net loss narrowed for the fifth consecutive quarters on a year over year basis, driven by our disciplined investment strategy.
June 32021, the company had cash cash equivalents fixed cash and short term investments of RMB 12, 3 billion for detailed financial data as well.
Our press release.
Our website.
Third quarter of 2021, we expect total revenue to be between RMB 762 billion and RMB eight 5 billion, a 6% to 12% increase year over year. This forecast reflects <unk> current and preliminary view subject to change.
We'll now open the floor for Q&A. Thank you.
As a reminder to ask a question you will need to press star one on your Typhoon Joe Your question, that's the powerful hedge key.
Ask your questions in Chinese first and.
Then translate your questions into English participants are requested.
Stick to one question each time.
And by while we compile the Q&A Boston.
Your first question comes from GE from China Renaissance. Please ask your question.
Alright. Thank you. Thank you for taking my question.
So my question is actually.
Good luck to you.
No go ahead John.
What can I say I should say.
And does this mean one ship.
Sure.
Yesterday Neil.
So what is it that sounds.
Does that guidance.
Okay.
So my first question is yes and for management of Covid.
Library.
Let me take the regulatory environment.
Firstly.
Overall direction the guidance comment thank.
Thank you.
Yes, yes.
<unk> formula.
Thank you Jim.
<unk> surety on Colombia, you don't own the insurer Tumblr washer Namal comment again, what particular Jim.
Yes.
Although <unk> may ultimately be.
Thanks sure.
One more.
Please.
Chumbley younger and this year <unk> will have some pilots in.
Okay.
Box rollout.
But then you jump in here and Im sure the games.
The convertible bond.
Yes, Jeff what are you sure one block.
<unk> achieved or quarter, how should we yes.
Yes.
Yes.
Again.
Yes.
Senator bulk clients.
Yes.
Neil.
Pathological imager quarterly GAAP.
Garbage on one Glenn you Shuja Untread formula that somewhat.
ICU chunky each.
Thanks, Tom and Joel referenced role what are some blood.
Please begin.
Geez I should again, Jonathan Jon Russell.
From an agenda.
Downtown Columbia.
They don't want me.
Yes, Holly team.
One yet.
In January.
Joe and James yet.
And some of them can you tell you.
Jim.
Joey will drive.
Yes.
Well issue.
Kuo Wei Zhou.
Shanghai Shenzhen Joey that you have.
Sure sure.
Great.
Policy yet.
So welcome thoughts you have on yet.
Sure.
Bulk question Tom.
You saw the ticket.
Hello, Ana so its content.
A major part so firstly, because we are major platform.
The content censorship is.
When you look at.
So actually.
The basic principle is content content censorship hasnt been changed.
Changed over the past several years so for this year.
Because the key event and the July 5th key event there is heightened.
Censorship environment.
Second quarter after that it will actually return to normalized regulation pace.
And the second area is helpful actually we see the tightened regulation for the overall internet industry not only for us.
Many folks out and two parts one is the anti monopoly.
Recreation.
That's for US the video industry, particularly from our long form video industry is actually a fully competitive industry.
Industry, So we actually foresee a limited impact from the.
Anti monopoly regulation.
And it's true second part is on the data security. So we observe that the government has.
Implemented more titles and specific.
Our guidelines for this part.
Internally, we already enhanced our.
Benjamin and also technology park to both delays in implementation and the more specific.
<unk>.
Yeah.
And last one for the agile kitchen without sure because this is Tim.
And we have people asking a quick look like.
Adaptation.
Our.
Men and.
And we have business area, we are looking at but just because of the tightened.
<unk>.
This area.
We foresee that the students are the key Hasan.
Might have more time.
And.
Apart from that.
Study, so and the entertainment is one of the key.
Thanks Lee.
Anymore.
Thank you. Thank you.
Yeah.
Yeah, Yeah sure.
I think our nowadays.
Yeah.
She has done.
Thank you.
Yeah.
So just on the higher connection.
Yeah, two Mcf Thunder.
Southeast Asia Nagel.
Now quickly I think.
Good day, gentlemen shipping hardware.
No no.
Yes.
Gotcha.
Yeah.
So just a quick a follow up.
Does that in your account.
Because we have seen some.
On regulatory interactions regarding their shopping journey back.
We're promoting more positive.
Kind of yes.
Content.
Just wanted to explore that.
That could also affect the long form video content in both China as well.
Alright, thank you.
Okay.
And then second one just to take them.
Uh huh.
Yes, I'm sure later on I'm sure if they don't that'll probably be the nadir.
We're not sure that's helpful.
Sure.
And.
So I got to creep carnival and that means that shimon yeah bulk goods.
We didn't call each year, because they won't jump Glenn.
Okay.
Please turn to you, yes sure Nathan.
Sure.
Yes.
Cool.
Good quarter.
The outlook is driven.
Driven by you'd be at younger that's entirely true.
Central to that.
Yes.
Some of your flagship unit ship, yes.
In my job.
You've got <unk>.
European users.
Hey, Jim electrical.
What are you deal with it at the highest.
Youre welcome.
Sure.
With Atlas.
Hello This is Aldo.
Probably you mentioned or the like.
In the loop staggered east a regulation.
Regarding the you can kind of sensitive on the shut up shop on videos I think Dr. Tony just said for long form video, we have always been kind of approach for them.
If anything.
I have like indirectly or directly impacted our business should it be positive because those short form videos. They havent been go through all this kind of approach.
Profit before now I think kind of we are all the same track right now we have more experience on how to handle this and we have.
And let's see where that goes through all of these kind of statements for past decade. Thank you.
Okay. Okay. Thank you. Thank you yeah. Thank.
Thank you for asking that question.
So if I may I have a second ago regarding.
The light <unk> motion.
My name is Michelle.
I think we feel that that guidance.
I think what you're saying.
Because I think Amit.
It shouldn't be a crazy question exactly one that I think two things.
Got it.
Exactly.
So could management elaborate.
Our recent progress.
I feel like we do.
That's it.
Hi, Jeff.
Impressive user growth.
Thank you.
Was just wondering as you shifted a hall I'm the CTO lymphoma.
And between shop.
Either achieved Youtube.
Follow up on your daughter's forget some of them will go to Azure.
Boucher attempt to you that we are.
Sure.
<unk> yeah yeah.
Well, maybe I'll turn accretive.
We are sure.
Two more diluted to the binding holdings in the hall.
Guidance, you'll Hungary behind that net.
Sure.
Right.
Sure.
During the buying whole Julian Hall sensors.
Well I am coming up with your fleet Schindler behavior.
Sure.
Sure.
How much income Europe I'm sure sure and tell you I'm sure that we'll have the local sure Tom.
Fashion, <unk> home gyms, with Honda where quite sharp.
No question Ishi.
Igt's robot Minsheng cut Thunder.
T mobile Archie.
<unk>.
Okay.
On the financing.
Yeah.
Simply by Microsoft.
And pulling back.
Okay.
We'll introduce.
I'd like ADP briefly and then I'll turn it over.
Our CPL windfall.
I elaborate.
So we have a democracy like you'd like ADP for around half of the year.
So behind that.
This project, we are actually trying to target.
<unk>.
There's been no major argued as we are talking to right now so our core news is right now.
Actually that uses the aging between 2% at.
June 30.
Yes, the old users and we cover some.
Young generation and older people, but that is not enough.
So over the past.
Over the past a while three years recently.
We observed that more and more new users.
We note that haven't fully I'll make a habit to use.
So we try to goodbye.
New product that can target.
This kind of unusual and it.
Nope.
Thank you Mike this kind of the new units to use our product and to watch our content.
Why now.
Now the app satisfy our expectation so I will turn over to our CTO lymphomas and to elaborate.
Okay.
What I see is on a calendar shift.
Im sure you can pay cash interest at home.
Rachel Uganda cause you Wanda shifting from time to time, when we kind of wholesale change your whole deal was announced.
They jumped from Q on Q.
<unk>, you talk or EBIT line.
As a peak.
On top of that central App.
Now this will be <unk>.
<unk>, which one will continue.
Well done.
Thank you so much sounder vintage on the shelf they put a needle.
19 of shellfish on GAAP.
Can you go back through answer to tweak what that decent initiative for can sheet.
Put simply we don't call that you don't know.
Got it.
To finish up and.
Functionally approach.
But we will because you want to take him.
Ambient at Atlantic capital Puncture, EQT, EQM, Newcastle either shipping to meet him Tanya.
T SEC Wilson.
Gotcha.
We will need to see in Hong Kong.
Okay.
ABB is a personalized.
Product targeting the lower tier city users.
Launch.
The very I felt like use it Josh.
As of the end of second quarter and the weakening da use has surpassed 100, sorry 1 million milestone.
And the user overlap between <unk>.
Like <unk> and <unk>.
App.
Extremely low so as we just mentioned.
And as Neal.
Picower remarks, it's only eight 7% and this ratio continued to go down.
And we observed that the users for our IP like ATP preferred to consume more content.
Tableau, eight one and a new campaign.
And in terms of the user tons bench performed also very well.
And we try to acquire the new users.
You're asking advertising.
I will let channel with relatively high penetration into lower tier cities and all the things they can do their shopping.
And also we try to improve the user retention.
Personalized recommendation and also the easy and convenient traction and also improving.
The adoption capable up here actually no foundational.
Smartphones, so right now the user retention for our actually like ATV is very good.
With media pressure you.
Sure sure sure.
<unk> main room shelf patients you doesn't yet.
Sure.
Cool.
How much Hong Kong Flagships, and then they roll.
Number one.
Purely income Garda.
Her name.
Turning on to Guatemala.
Yes, <unk>, yes.
Hum.
Three income golf I'm sure they don't drill hall in Angola.
Sure Tom.
Yeah sure Andrew Schaap, I'm sure, you'll some English washout.
Sure sure.
Sure sure Yeah Yeah.
Oh sure.
Yes.
Clearly that in Tunisia Fisher from here.
Sure.
So our CEO and has something to add.
So this kind of like in Asia, I mean actually like ADP is also consistent with our idea of that.
We believe Vale would it be a consumption upgrade in terms of the content for the Chinese users. So basically we act.
Users they previously they don't watch.
TV drama on the field and in this kind of entertainment content.
Wednesday.
Charles to access to <unk>.
High quality entertainment content that we'll be spending more time on.
And it's kind of the entertainment content.
So from our initial data set I think that our thesis Scott.
As demonstrated.
Do these kind of.
User retention rate and also on the user growth.
Thank you. Thank you.
Thank you.
Please go ahead.
Your next question comes from Eddie Leung from Bank of America Merrill Lynch. Please go ahead.
So we've been working on.
Some when nickel Guan Jia.
You can't ship.
So I wonder does that seem totally the <unk>.
100, <unk> chew issue.
<unk>.
Because you have momentum to continue.
So it'll be down probably saw hopkins coming from Vishal This way.
Maybe on the come back because I'm high issue.
So Jonathan alcohol highlight some so you tell me when you went to kind of.
Jed J can be achieved.
You bet.
<unk>.
Yes.
Sure.
Sure you saw total knee.
Yes.
Can you please again.
Sure Jim.
Jim.
Sure. This is.
Hugo each order.
Sure John.
Right.
So my question is about content cost we have.
<unk> got pretty good cost control in the parse out separately.
While the company has always been a pretty conservative guidance calls going forward.
So I'm wondering when you look at the close.
Cost control is content for example in the past quarters how much.
Due to the delay of some of the hot content and how much was coming from the benefits of no production and licensing.
Thank you.
This shadow I think if you're talking about like one or two quarters cutline causes it to be caused by the delay of the <unk>.
And southern content, but if you look at the past few quarters numbers, you'll see that because after.
Optimize off content cause so which actually is more driven by the efficiency improvement of unencumbered content investment.
We see the prices stabilize.
This year 2018.
Given the effects, we have more original content launched in the past few quarters. So basically we have more control on the quality and the.
Efficiency of the content investment.
But of course.
I don't think because activity is the right word because even effect.
And as a category of our content investment, including over you know movies in the oversea content, that's why we see.
We see the potential slightly increase on the dollar amount of cost.
As a percentage of revenue it definitely I think you'll continue to see the optimized trend in the next few quarters. Thank you.
Yes.
As a reminder, please restrict to one question each time.
Your next question comes from Alicia Yap from Citigroup. Please go ahead.
Hi, Thank you Glen income washout.
What I can tell you charge your shirvani trend they don't want to talk about kind of shipping.
He got talent team.
Cheetah he got changing ocean.
Tricia you know something about that yeah sure Guang Yang.
Yes.
Sure.
Dan quick with option yeah.
Brian can you tease out what that took.
Wrong.
Neil.
Neil shipping.
That's at the <unk> BV exactly for sure Glenn you see call. It seemed like you come more sure.
The eagle will be quarter.
I appreciate that Mike.
My question is.
Can management.
Give us the longer term prospect offer long form video industry in China.
Current model between the membership subscriptions and advertising model remain in place.
Any breakthroughs in terms of content production for a monetization model, especially I think management talking about.
The industrialized nations in the video productions, so how would that actually shrunk from future monetization model for the pizza industry. Thank you.
I would say without.
Yes.
Two more countries to come to you with regard to trial cohort of take.
You're going to water pumping more bullish on page <unk> three.
<unk>.
Sure sure.
Sure.
Yeah sure Tim miserable drought.
So either you mean.
Gung Ho on guar.
I'll go back.
Two kind of a trend yet measures yet.
Hi sure.
Thunder.
I'm going to take a home yet.
Sure.
Or something more for Covid.
Sure.
The assembly of children.
Sure.
So I'm trying to get more.
Sure.
So.
What are those two items.
Sure.
Yesterday.
Alright.
I think our self interest.
The whole thing.
Okay.
For all of us regarding wholesale cultural Nike employee.
How much you pulled back on promotional base I'm not sure if at all.
Got it.
Yes.
How does that you will have to offer much of extra.
Sure.
Can be very profitable and working with them.
Okay.
Sure.
Yung.
John.
With that we all have shrunk.
Got it.
Hello, Mr Notary HIFU.
Cash inflow from the <unk>.
What are the particular come back so I'm not.
Shouldnt agenda to help <unk> population.
Honeywell Holland.
I'm not sure yet.
How much useful Colombia Kashi sleep.
Once you have the tradeoffs are actually open.
So you shouldn't.
John Rudolf.
No.
So she is having a phenomenal yeah sure yes, we can.
Bob.
As a whole.
Yeah.
Hometown heroes.
T J.
That's a global issue for dry eye syndrome GAAP payoff.
So <unk> got malathion chemo machines.
Welcome to yet.
You guys probably have more to go.
Yeah.
Okay.
Sure.
Okay.
<unk>, thanks for taking a careful and offer a full agenda.
And artificial Hayden job extra profit actually after controller.
Please go ahead.
Okay.
Sure call, even drop Washington D E Shaw.
Okay. So alisha.
My my I actually have a very positive view.
All of this industry I personally am I apologize.
Now this.
This two part.
One is that in terms of the penetration.
We still have a very.
You'll have a very low penetration.
In terms of that option.
Our PE ratio paying ratio is also now so in China.
There is only as more people now.
They are willing to pay for in a professional and high end entertainment.
And now we are at.
The fact that more and more people will actually join this kind of the target users when.
With the change of the consumption upgrade of the content, we just mentioned.
Before.
In terms of the monetization our right now our core users and the people aged between 20 to 40.
And but we don't have sufficient calkins.
For the people.
Aging.
<unk> 14 years old and also for the younger generation.
<unk> doesn't have a sufficiently.
The content for them. So right now we are trying to amplify our content supply and to satisfy this kind of thing.
So based on that.
The penetration ratio and also in our paying ratio, we're continuing to improve and in terms of the monetization model.
For.
China in China for most of the world to match them pretty close.
When the new users joined they joined the platform they oftentimes.
And I'll bring you this holiday will consume the advertising.
With there.
I'm more and more.
Two eight hour of content it will start to pay for our content and then there will be no advertising.
But these kind of we use it we are trying to convert into the high op. We do this.
Our membership package and also and that he bought.
<unk>.
Got it.
Sure.
No problem.
Additionally, though.
Yeah, Sheila Egf's hold payroll Shang Chuang will get achieved.
Sure Sean.
Yes, sure or maybe cheetos bushard yet.
Doctor.
It should get us entre income trauma Doctor reiterate again.
Sure Ghansham.
Sure.
Actual mitigates looking at the pipeline the goal.
Neil will go quarter to issue the peanuts.
I think to yet.
Sure.
Hey, guys.
Should get better.
Sure.
Once you offered.
Throughout the movie is wrong.
You got to look.
Types of profile about this whole or part.
Joel.
Good question.
Shortfall capable phones.
Are you finding that Jacob.
Shelf stable.
Sure Joe.
Sure.
Tony.
Whether it goes up.
Las Vegas truthful.
Jason <unk> from Keybanc.
I've answered all of them yet.
We look forward to it.
Okay.
Yes.
John.
So I'm comfortable with that.
Good morning Jacob.
Before I put the last whole offloading their sharp to match.
For tier four commercial other pure core.
Sure I'm going to do it.
<unk> bundled together.
You can swap here.
Yeah.
Sure.
<unk>.
Kevin.
What do you bundle.
Got it.
As you have observed.
Went through some kind of.
Oh I'm.
Secondly in terms of the kind of launch I think that's the more fundamental reason behind that.
Is that we haven't been able to offer sufficient.
Sufficient supply content supply and more diversified content supply.
So as we mentioned in the shareholder letter.
Last quarter.
We believe the industrialization of <unk>.
Our cultural production.
Key to southeast Asia.
T.
Is that we try to.
And the forecast are in house.
Certainly.
Hi, improve the forecast.
Accuracy for the fourth cycle of the content protection, so that we can lower the risk and lowering our costs accordingly.
So from that.
For the first quarter.
We have Irene.
Our investments.
This is kind of the industrialization of the video content protection.
I mentioned previously.
This quarter, we start to roll out and the production business intelligence system PB I S.
Kind of the two.
Abel our producers to.
<unk> forecast that Chuck is the traffic and monetization.
Need.
For that project.
Yeah.
Thank you.
Sure.
Thank you.
Your last question comes from.
Huge <unk> from Goldman Sachs. Please go <unk>.
I should.
Thank you for taking my questions.
When I look at your content cost as an indication of how you are industrializing content production.
Our content spend was about.
84% of revenue and it's come down gradually and it's looking like it was about 67% of revenue.
With the industrialization, where does that content spend come down to and how long do you think of those kind of come down to that trough level that you think it can get to that's my first question and related to that if I may.
You've got you've moved into sports in a major way with the Epo and a price point that it looks like it's 19% to 20 renminbi per month.
On a headline basis based on the price I've seen.
What has been the initial indication of demand for for Epo.
On your platform. Thank you.
Although I will come a real quick question.
Actualization of the content the content production is mainly to increase the supply and the quality of the content.
Definitely as a percentage of the.
It will continue to contribute.
Positive in fact, because of the let's say better monetizing the ability of this content, but I think in the past few years. The main driver of the content is more like the slides.
Slightly increase of the hit ratio and the quality of the content and more diversified content.
The strategies like the Mr theatres in the solo.
But I think within the next three to five years definitely you will see a significant improvement on the efficiency of the content production given the progress we expect to achieve therefore, the industry industrialization of the content production.
For the sports I'm not quite folio question regarding the CPR because sports is not like with charges of user directory for the for the non enterprise you saw.
The web site.
Really it's more like a revenue share beating IGN.
Our JV, who actually wrong.
<unk> business. So it has very little.
The impact of the pool of the membership business or the revenue of <unk> because they normally have.
Our SEC.
Very very low percentage of the total.
The membership subscription business. Thank you.
This concludes the question and answer session I will now pass the line to management for closing remarks.
Thank you everyone for joining our call today. So please feel free if you have any questions. Please feel free to reach out.
Let's speak next quarter. Thank you.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.