Q3 2021 iQIYI Inc Earnings Call
Good day, and thank you for standing by welcome to the I T E third quarter 2021 earnings conference.
Each call at this time, all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand the conference.
OTC kept today, Mr. Chang you I or retrofit company. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining <unk> third quarter, two the 2021 earnings conference call.
Company's results were released state and are available on the company's Investor Relations website.
What is that and I are the ITE dot com.
On the call today are Mr. <unk>, Zhang our founder director and CEO, Mr. Xiaodong, Wang our CFO Mr. Yourself, we want our C. C O Chief content officer, Mr. Wisdom, Neal our CTO Chief technology.
Officer and Mr. Shanghai Young senior Vice President of our membership business Mr.
Mr. Kum will give a brief overview of the company's business operations and highlights followed by <unk>.
Who will go through the financial and the guidance.
After their prepared remarks.
And somebody will join Mr Ghosn and subtle in the Q&A session.
Before we proceed. Please note that the discussion today will contain forward looking statements made under the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking.
And 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 the SEC.
ITE does not undertake any obligation.
To update any forward looking statement, except as required under applicable law.
With that I will now turn the call over to Mr. Ghosn. Please go ahead.
Hello, everyone and thank you for joining us today.
So we are.
Just a lot of volatility as we are now.
Got it.
So our particular challenged operating environment.
The current uncertainty in terms of content of gallery.
The adoption resulted in cellphone softer than <unk>.
Top line performance.
Despite the short term.
Hello.
We are delighted to see encouraging signs of housing multiple operate operating battery.
Our leading market position.
In fact, as we continue to exact number what and where yields are metrics. According to third party data.
We formerly and believe there are a couple of <unk>, Inc.
Inc.
Eternal truth.
To entertainment well firstly.
Is that all of them.
Among the high quality entertainment content, such as movies dramas.
Secondly.
I can answer that create her hub infinity potential to develop excellent material.
With this market.
The Nymex in mind, we think we have a tremendous space for growth.
Development.
During the quarter.
We continue talking half the production comparability of our small content explore gyros to diversify into.
And our user base by refining our products.
<unk> you've heard at.
Meanwhile, we have been driving.
<unk>.
Industrial.
Industrial life leash of video production.
Prove the efficiency of our operation.
We believe all of these developments will enable us to macro rates assumed short term challenge.
And.
On the right path.
To achieve long term success.
Now, let's go through the performance of our business segments in the corner.
Stop the memberships.
During the quarter, our membership services revenue grow both annually.
Sequentially.
Our whole strategy.
If toolkit her up to the demands of <unk> user segment that worked at convent and continuously improve membership.
Four months.
Benefit.
That the enhanced member variance and driving new member sign ups on that Youll start.
Retention.
As at the same time.
We are focused on reaching our.
Improving the long term minded Felicia on membership the list.
Lockheed.
Innovative new business models, adopting our price point.
Lemonade.
In effective give comps portions.
Our operation in nature.
However, as I mentioned earlier.
The uncertainty of outcome in this gallery.
Flat to Asian in terms of subscriber numbers in the future.
We will continually enhance our library of content across different genres.
Threat or ability of tool with the risks related to content in the sky.
In the so called membership service revenue grew by 8%.
Year over year, mainly due to the success of key drivers such as one and only totaled.
And for ever and ever.
Sure.
Well.
In the stockholder as well as the continued interest in drama launch that answer that.
If I can call them, such as Mike <unk> got it.
Excellent.
Under the.
Rapid rebel Pedro.
As of September 30.
The total number of subscribers was 100 and the suite six maybe.
The sequential flat.
So Asia was mainly due to delays in the release of some highly anticipated content mini mill. The major content, that's basically as it relates to the email smaller less diversified in terms of gyros is part of the soft performance.
Happy.
To see that.
Subscriber growth on television devices on the floor.
Or is this.
Maintain Dakota moment.
We'll be looking at that higher power.
Russia of users on TV devices on the continued expansion of our fleet overseas.
Youll surpassed.
Significant drivers.
Future subscriber growth world.
On the other hand off.
Recall that both annual and <unk>.
Sequential rate growth.
The annual growth rate of 10% was mainly due to the southwest.
Yes.
Adjusted.
So that would go out last November.
The.
Membership business will continue to improve going forward driven by our content.
Multiple operating initiatives.
The member experience.
One of the most thing important subjects that we.
Focus on.
For us.
Paul actively cancel the paid upfront.
Aldo.
Yeah.
Hi.
Yes.
This will further help.
<unk> improved the number.
If terrorists.
So part of subscriber growth and retention.
They are solid.
Asia for the long term monetization of our platform.
The Asia, we continue to enhance member benefits plan.
Platform.
Operation with top industry partners.
In terms of new services in your business model one of our key focuses is to promote the development of cloud cinema.
<unk> across three content categories.
Our ash goldfield.
<unk> films gets rebuilt it well.
Mode.
<unk> model.
Premium field only distributor hands.
Our online platform and the Iga automobiles.
Since 2010, there so article release of future field.
Field have been hit significantly.
By the COVID-19 pandemic.
The cinema.
Well, we deal with LIFO online video platform.
Yes.
Actual.
<unk> also enables.
Users to what's new fields.
After their offline will be able to add.
A price that is cheaper than our traditional movie ticket with.
Further maximize the monetization potential of each field.
During the call we had witnessed.
New life as usual.
<unk>.
But.
Could you sure.
Sure.
More loopnet.
And they're all call. It cinema model this films for different gyros, namely committed extra step.
These counts towards 35 35 miles of a different cohort.
Yes.
Our first original cumulative deal.
North eastern rather.
<unk> was launched in October and received positive user feedback.
Mark.
In terms of hours.
Function.
We were able to significantly expand.
You will surpass.
Increasing.
Sequential number of southeast Asia countries.
Download.
No.
The.
We have made on top of the chart across regions.
In regions.
Number one in Thailand.
Ben.
Forecastle lap.
Yes.
<unk>.
Alright.
Arthur.
Domestic.
I'll continue on the growth.
Or is revenue.
<unk> kicked off the development of <unk>.
Our fleets are no drama, including for carrying on the tool Philippine originals.
Yes, Asia, we continue to weaken spun off cooperation with local partners, including.
Multiple media platform and the operators.
Thailand, Singapore May also answer all assets.
The annual collaboration framework agreement.
With Newmar.
Numerous otherwise Hesse in FX.
First of all there is patent data.
Local sponsorship for suite sales.
Moving on to <unk>.
Advertising.
During the call there.
Tightening revenue.
Revenue.
Soft.
Mainly due to a drop in Brian.
Neil.
The decline was mainly due to the delay of key content, including Dr. Mark <unk>.
Hey, Charles.
We continue.
Work on developing.
No detail Neil.
Arthur shops.
We are doing to that work.
They fly all content on the day rates, obviously from content the scowling uncertainty.
So we are still refining on the fine tuning some of this production.
It's going to.
We've taken some time to win over and what time Sir.
Simulator projects with Neil Gyros.
The softness of our brand advertising demand.
It's also due to the overall challenging macro economic environment in China.
Revenue from procurement as increased.
Both year over year on a sequential that during the call there.
Lite App, what's the main driver behind this.
As a poster.
Our main apps.
Mainline <unk> focus.
Low carefully here.
Low overlap with our main app, which mainly focus on brand apps.
<unk> Lite.
To be upgrades compliment that are drivers and yield growth.
Edwards has given them that.
Yes.
Year over year growth of procurements as also benefits from.
Improvement in monetization capabilities, driven by our technology on a true contribution from key sectors, including Internet and E Commerce.
The sequential.
Growth was also partially driven by load growth.
Inventory at some of our location.
Looking forward to the fourth quarter.
Sure.
Some slowdown in China as the overall macro economy.
Negatively impacted.
Our advertising business.
Nonetheless.
Ill, let Matt.
We are proactively adapting ourselves to the environment.
Minimize our potential partial.
Moving over to covenant.
Pardon.
Increased uncertainty in terms of.
Content, the scouting and create long content approval.
<unk> profile since our last earnings call.
Adult.
Powered.
Rich slate of content during the call there are some of the.
Pulse drama nowhere on the initial.
Our top line.
In our pipeline is.
Launch delays going to war to offset the types of risk we are looking to further expand.
Rich.
That worsening of our content in the portfolio.
To explore new different categories and deepen user.
Diversified content offerings.
In effort to.
Obviously, a strong cognizant Scott.
The field trial.
The Asia.
Active actelion.
To capitalize.
By the.
Government authority to promote that helps.
Entertainment and online media industries.
We believe these actions will further with both lung is leaving province in the index.
Australia.
Which should help us to further optimize content cost.
Eliminate.
Chaos in content in the production on the promotion.
I would agree with you.
Rational industry a combination.
Overall.
These changes should be beneficial.
For supporting the healthy development of the industry over the long term.
I will.
I will also like to highlight all kind of in that strategy.
Efficiency in content.
The production and the operation has always been the.
Our primary targets that will.
Slide four and we are now putting.
But more focus on it.
Paul actively.
Taking initiatives to improve the efficiency of our.
Our operation.
In effective investments in content by.
Cutting projects that.
Our data to generate low ROI.
The online video industry has rapidly developed over the past.
Decades.
We have gotten to a point well continental <unk> and <unk>.
Efficient.
Sure.
We're happy to see the continue of the resolve of our progress.
Optimized content cost driven by our enhanced.
<unk> has a protection comparability.
Display and content spending and the improved operation.
An important metric we use to track.
Track.
<unk> of our content spending.
Content related cost ratio.
Simply speaking this metric is calculated by dividing the total cost related to our title.
<unk> revenue generate right.
Based on this measurement.
We can see the operating efficiency of our overall content in 2021.
Improved.
Tens of VAT.
From last year.
We continue we will continue to use.
This metric.
The effective tool in managing the efficiency of our investments in content and operate ships.
For example.
And IRA.
<unk> two.
Dry land.
Sure.
This two titles.
Well definitely as a problem.
Which create hit it sooner.
As of IP and <unk>.
In the retail in terms of both content creation.
On the forecasting models also this two titles.
All the examples.
<unk>.
Increased efficiency.
Income from operation.
Content related costs the ratio the performance.
And the only one.
13 percentage point improvement.
And then lastly, yes drama drama.
Carter shop features.
<unk> actually a pillar in the.
Gyros.
We will also liked will show some highlights on the performance of our vertical content.
Net sales are modeled.
<unk> strategy, we have always been the industry a pioneer in terms of confidence in.
On the operation of <unk>.
Sales of our model and our strategy.
One of our successful attempts.
This model helps us to build the combination.
Okay.
What types of different genres.
In which beneficial for extracting new user.
Driving app user retention and offer us better.
Sure.
It brings the synergies among different titles.
We think the.
Themed content genres.
And then.
What's more flak safety lead in working with advertisers.
For example, we have observed.
That the at least in the forecast.
Okay.
Under the restructuring.
Both.
Looked at the ownership of the first of these titles.
Sure.
And the daily.
We do feel.
On the user.
I know youll just transparent for the Iot.
Chris the by more than two times.
We'll see.
I mean thats out there what's lapsed.
Looking forward to the fourth quarter although.
Critical to that.
Well remain in the market.
Well continue to execute to all that were say five content strategy.
Issue to the north.
Youll see the.
Mr sales are largely in the first color. Other key titles include the drop of Cerro <unk> Young adult variety show so fast casual.
You told US you got that.
The accident.
However.
And.
Its content such as well.
And the proof in store I mean.
First capsule pre mine.
Pretty minor.
<unk>.
Sure.
The show was high.
The show was highly acclaimed by.
<unk>.
Solid.
Market leadership in <unk>.
Charles.
Moving on to technology.
Other one technology as the foundation.
<unk> of our business.
We are constantly.
Developing new technology.
Yes.
To improve yields.
User experience increase yields our penetration.
Developed in Norway, new content formats.
Enhanced content and the production efficiency of our operation.
And at same time had any call innovation.
Two the industrialization of video production.
In the England.
Industry.
It's will be greatly.
Beneficial for improving.
Our population health platform.
Cruising or.
Simplify the protection.
If a ship management process.
Reducing production costs.
And the existing.
<unk> experience.
We continue to make progress in terms of user penetration the user scale of <unk> Lite grew rapidly.
Production at <unk> increased by nearly two sequential and user retention.
Alicia has also improved.
In terms of user profile as I mentioned earlier <unk> Lite.
It's mainly mainly.
Our focus on low tier cities.
Both our growth we are seeing.
This speaks to our success.
<unk> into this region.
In terms of content production and the efficiency improvements, we continue to apply AI technology to effectively.
With your production cost during the quarter for example, operating costs can be effectively reduced.
With our.
Prior to re intelligent that translation tools, we have.
Have fully replace the manual translation with ultimately it.
Asia for B level grammars Boeing.
Going forward once we have fully adopt this technology.
It will save hundreds of millions of RMB in translation cost industrial truck.
In terms of.
Industrial isolation of video.
We have launched.
Multiple technology and the products that all comes into production.
It should reduce the production cost increase.
Efficiency improved.
Yes.
Prior to array of multi video capture.
As an example of tortured y'all.
So that should yet.
The system significantly shortens the shopping time.
What level of.
Manual work.
Pulse the full.
Production process from <unk>.
<unk> deployment.
Sharp regional shopping.
Total production may content production more efficient.
Other intelligent tools leverage the include a script, so whether supervisor management.
The product, which can be used in the mid stage.
Production process.
Core that has a plan to fix.
Hey, Hey shows, including some of the extra notebooks being production.
Also our management.
Perfect.
Production editing process has been used to define number of post.
Production companies in the corner improving.
Transcoding efficiency by three pumps separate times.
In summary.
Paul actively adapting ourselves.
With the current environment, we continue to be a pioneer.
To content innovation on the operation.
Well, we are seeing a promising growth Jack.
Section.
Sure.
Sure Jack.
For any extra.
Such as.
Lite on overseas.
Our original content is faster than our sales.
Multiple content.
Highlight the Congress by users.
What has us we will continue to take the lead in going out.
Our technologies and the tools for intelligent in the production and the driving in the <unk>.
Alicia for that long form video production profile, which should help.
We will further optimize all operating efficiency.
We have built along with that.
In the online video market over the past decade.
Scott Mennen safe we have.
Two minutes.
All <unk>.
In line with.
The industry is heading.
Our current accounting.
Crude Allison learning opportunity.
We continue to believe that weather does not feel to us makes us stronger.
With that.
And <unk>, which are pulled.
<unk> got lot of naturals.
Good morning, and good evening, everyone. Let me review our keep.
Key financial highlights for the third quarter. Our total revenue reached RMB seven 6 billion membership service business continue to be our largest business pillar with revenue increased 8% year over year.
And accounted for 57% of our total revenue.
Advertising revenue decreased 10% year over year, primarily.
Due to less premium content launched during the quarter and the challenging macroeconomic environment in China, our content distribution revenue achieved a 60% growth.
<unk> basis.
Although we distributed more content titles to other platform during the quarter, our cost of revenues increased 10%.
In the same period last year, among which content cost increased 13% from the same period in 2020, the increase in content costs were mainly due to the more investment you origin of content during the quarter, our operating loss margin on GAAP basis was 18% remained largely flat compared to the same period of last year.
We're driven by our disciplined investments gesture.
September 30.
21, the company had a cash cash equivalents restrict cash and short term investment of RMB 11 billion for detailed financial data. Please refer to our press release on our website for the first quarter of 2008.
On the front.
We expect total net revenue to be between RMB seven eight.
Point, <unk> 8 billion.
RMB 753 billion, representing a 5% decrease to 1% increase year over year.
This forecast reflects the current and preliminary view, which may be.
I will now open the floor for Q&A. Thank you.
Yes.
Hmm.
Operator.
Please open.
Subject to the floor to questions.
Certainly.
Ask your question you will need to press star one on your telephone to withdraw your question press the pound hash key for the benefit of all participants in today's call. If you wish to ask a question to management.
Please immediately repeat your question in English please limit your questions to one at this time, if you wish to have follow up questions. Please rejoin the queue. It star followed by one to ask your question. Your first question comes from the line of allergy from China Renaissance. Please go.
In China, all right. Thank you.
When you go no go ahead no go.
Thank you.
All right.
Okay.
Sure.
Right.
Thank you Josh it's Alex here.
Keytruda Tim Guy.
Amy.
Hi, Scott.
Yeah.
Yeah, I'm going to shoot but anyway, yes.
Jonathan I think when you see us doing they can change their township.
I was actually with me.
Well I think so.
Okay.
Hi, Sheila.
We'll talk again.
Yes.
Alright.
Hey.
Oh sure.
Right.
If you take the nausea.
Okay.
Hey, guys.
Got it.
Definitely not.
Yes.
Yeah, Hi.
Hey, Jack.
Sure Tim.
Thank you.
Sure.
Yes exactly.
Secondly, if I may.
That comes from.
Thanks, Jeff and myself.
Exactly.
Yes.
Hey, guys. Good luck.
Oh, yes.
So first a question relating to the recent.
Increment plus.
So you had a local province government I, just wonder how is that going to affect our future business our second.
Okay.
And to the future member ship growth potential just wonder.
In the future membership is it going to be mainly from lower tier cities all still from the major tier two days from the re activate.
The members.
So the question is.
Just wonder what is.
Could management share the amazing new exciting or promising relating to the variety shows going forward. Thank you.
Uh huh.
That's our goal.
Sure sure sure so yes it.
So im not sure im very challenging year shipment pattern.
Okay.
Thanks, guys.
<unk> sure.
Our balance sheet, you have heard coming throughout the year.
Jeff.
Yes.
All I can tell you that local Levi yes.
Could you be a woman Jacob.
What.
Idol noteworthy here, yet youll hopefully chip here.
Paul.
EMEA each year to a profit.
<unk>.
Yeah sure sure.
True.
Jimmy I would share with us.
Sure So let's hold for now.
Sure.
Is there some of them will tell you more.
Sure.
Hi, Shar.
Jacob.
Yeah.
I'm, sorry, I'm not sure I'm trying to answer either.
Okay.
Sure.
Xiaomi Moshe shrugging trough.
How has that been challenging in Q2.
Sure.
Garland Gila.
Sure.
We have some extra time to ensure.
We actually.
I'm going to shift from pure play actually.
You talked about.
Alright, it's useful one.
<unk> yeah.
The key change I'm sure part of that.
Yes.
Safeway.
How.
Sure sure Nathan.
Yeah sure from what I saw.
I still think.
So we won't until Jan on the moisture.
Alrighty twofold hydro.
Earth yet.
Sure.
Yes, Steve.
I see that.
Yes.
John.
It's useful bond Plaza in San Antonio last week.
Hi, Sean.
Sure Yes.
Any hall.
That's helpful. Jim.
Sure.
What you're in control question Nathan.
Okay.
Hugo.
Okay got you.
Have you started yet.
Translating this terrific feedback.
For the first one.
In terms of your question regarding the consumer counsel. So does this kind of applies to the full industry players. So our feedback comes from the.
Capex.
One is that part of that.
So we've been the first one comes from that product design and the second one comes from.
The flow of the product. So the first one for product design of waiting also communicating with.
Consumer Council also.
To collecting feedback from our customer service Department.
So our goal is to increase the user experience I'm trying to lower the.
Occidental click of any unnecessary steps. So so overall the user experience will be increased.
And from Thunder business model perspective.
We've been also communicating with.
Consumers also in terms of also the user agreement to make sure all the messages are communicated.
Clearly with the users.
And the first question regarding the consumer Council.
Good question and the second one is our.
Penetration into the different tiers of cities. So for now for our penetration in different regions for the high high tier city in the first and second tier cities the penetration is high.
So that and for the lower tier city penetration is relatively low for this point and our ITE.
<unk>.
The main act that target user demographics, so for ITE Lite.
Now we offered a lot of the free content. So the user consumes a free content.
Hi, and then they'd be actually will see the advertisement for that so so right now on the advertising side for ITE Lite.
Performance App has a high percentage of revenue contribution so.
I think of going forward.
Lite means one.
Content years for improvement and for vote and.
We'll keep working on this application and for our main.
At that.
That's still going to be our main.
Target for elevating our operations optimize user.
Experience optimize product and optimize.
The product features.
That would get you home industrials question quickly.
Yes.
So there's no question.
Switching over to RCC also answer the question.
Okay.
One or two months.
Without this I'm glad you did go astray.
So we rely on that here.
I'll be going on too.
Talk to you again.
Youll see a.
Frank Chen with what I'm doing ship without a huge difference.
Thunder.
Go ahead should handle assured though.
<unk> idol.
Uhm tissue.
Sure.
Thanks, a lot.
It's either a feet on that one.
Sure.
Sure.
<unk>.
Women's what's useful.
But we will come out of India.
For omission second Ghansham Kinder.
In April should you thought that yes, when you go.
Julie either changeover anymore.
I assume that you'll use adoption.
How that's going to teach them the leash.
Excuse me you sound again youll for the tender.
<unk> <unk> from <unk> Suisse.
Sure helpful at EWC.
Okay.
Sure.
Daniel.
Yeah.
<unk>.
So just wanted to get more bulkley that'd be like Chee Koon border.
Sure.
Okay.
<unk> responded to.
The talent show question.
So.
Because of the.
Couch her that's been.
Existing in this entertainment sector.
For a long time.
So it does have some impact on the variety shows segment.
So for now the Korean.
Based our Korean style talent show that prohibited in in the video space, but however, there is still a lot of.
Sure.
Growth in terms of variety shows.
Simple.
From we can't focus on the areas that.
For Dara.
That's like comedy emotional and also some talent.
So, but that's not relatively to the Korean style.
And we also launched our new.
Comedy variety show called in Yankee since you got that.
Super sketch show, which is the new new content genre that we innovated.
Originally so based on his first feedback since its launch we have seen promising user fee.
And dealership from the shell so our variety show performance is back to number one position in the market so going forward, especially in the fourth quarter, well still launched innovate innovative.
So content for example, like we mentioned in the opening remarks.
Feed back in action and that's also an innovative a variety show that will be introduced to the users.
Yeah.
Thank you very much.
Thank you.
Once again due to time constraint.
Please limit your questions to one at a time if you wish to have follow up questions. Please rejoin the queue. Please limit your questions to one at a time.
Your next question comes from the line of Alicia Yap from Citigroup. Please go ahead.
Hi.
Great. Thank you and Glen anytime wash on hot he said that he wants a.
When do you see why even go how happy they are to shoot just hung in there you've got a changing I guess is how shipping how he had no change.
2000, and Glenn Eaton Sunshine country, we put out for at home he got to Japan.
Hi, Jordan.
Okay.
Sure Dan.
You may taking she says.
Jim Guerra rationalize additional TCE.
Yes, my tone woman Neil.
Stifel.
At this time.
Yes.
Sure Neal.
Hello, Dan.
Can you say power plant.
<unk> done that.
Now I'll hold you to the tower shipping Meanwhile shirt.
No.
Portugal Quinn.
One pound of more sure.
You'll not see assume washer should create pintado.
Well, it's a funding gap.
Thanks for taking my question. So my question is related to the overall longer term outlook for the long form video industry would there be any change of the strategy for yourself develop like self developed content.
Overall the content genre.
England you know.
For example, the type of the lineup the drama series the type of the panel that you plan to produce in addition.
Ken long form video monetization model break out beyond the current membership subscriptions and advertising if so what could be the new.
Thank you.
Youll see in our media.
Jim I Wonder if I can tell you to get this wrong.
Sure.
Hum.
<unk> wealth.
<unk> clients.
Clients.
Yes.
Your model.
Gotcha.
Unusual go home yet.
Beautiful each younger that together.
Your leverage or a woman chimbonda assumption.
Shan Shan beyond where you are in you Julien.
The computer you bought it.
There's a whole ton of them.
Okay.
Yes.
BB Consol ammonia door.
Some of them.
The.
The other international markets.
Julien I think.
Hello.
John Boucher.
Yes, sure Sean yet Archie assumptions hold true here.
Bobby here to our call.
So.
Just one for you.
Andre.
Maybe one more.
You mentioned you don't bother with.
Uh huh.
J J.
We're human.
Barack or whether you're in Washington for sure.
<unk> bought $2 equivalent.
Sure.
I think we'll show you more for sure.
Sure So I'm not sure again, we should <unk>.
For sure.
But either way the shortfall.
Sure punctured of women.
Yes sure.
<unk>, sorry rail truck International a major launch of one of our IP.
<unk>, how about home bookings you insure you for leverage off what Jim I've been home again.
Yes.
Yes.
Uh huh.
If you short term tone.
On the short term.
Okay.
Okay.
And you thought you summed up to hit some question.
Overall.
Xiaomi or traditional.
Okay.
Sure.
Our top water.
Yes.
Jake Australia more fruit.
But Jim College I will take.
So at this juncture yet.
At him.
We'll see you at ICU.
Go ahead Walter.
Uh huh.
Sure Thunder.
Okay.
So for right now I think.
The biggest problem in that.
For the online video space.
Supply shortage contributed from various reasons. The first one is of course the biggest one the COVID-19. So for example, the number of <unk>.
<unk> launched.
Since COVID-19.
It's only less than half, 50% of 2019 level and therefore, a traditional satellite TV series.
The quantity is only one third of the past and for the new format.
Internet theory is the web series.
We experienced a major delay because of the stronger censorship and even though the.
Thompson was launched.
The quality was got taken a discount or Theres Some inc.
Less less less promising.
From the quality. So so theoretically speaking these are the reasons that contributed to the supply shortage for the video content and also if you're taking that.
Short short form video.
Reason.
<unk> also contributed to this because it's also taking the user time spent and that's it.
It's one of the biggest I guess, a factor that that that contributes to user behaviors.
And for your questions about monetization models I think we have been.
That are working on taking the full process of the entire <unk>. He chuang. So for example, if we have a good IP, whether it's from the strip level, whether it's from the story level. We wanted to take this whole entire process of the IP lifecycle.
Ben we can develop.
This into it you know television series movies games.
Also franchise products et cetera, So I think going forward, if you're looking at the long term perspective of this industry.
Healthy model will be you know the advertising revenue cluster.
Switching revenue plus the <unk> model.
Altogether.
It's better than the our investment level, so that will be our anvil.
And we think it's a sustainable model going forward in the long term prospect of the online video industry.
Yeah.
Hi, Bill.
Consumer ours, you're pointing to the union before.
Grupo <unk> shall uranium production block.
Onshore branch.
That's useful thank Sean Dodge.
Sure Jim Volk for Hologic.
We can do.
Sure.
Ghansham as usual.
Yes, sure a hull Aida.
Are there any volume yet equal com.
Sure.
Hey, Jay.
Surety that you couldnt be at yet.
How does that look.
Yes.
So you all build out.
My father sure your homegrown tools actually become younger yet.
Either label.
So you figure.
Trigger.
So the challenge with you, yes, we are.
Sure sure neighborhood of.
Sure Tom.
One rep measure yada yada.
What we see on that Josh.
Again, the Shanghai, though when you plot.
Hello.
Huge Florida, Jacob Naval Massachusetts.
Okay.
Okay.
So I think if you look at the.
Overall Grand picture of the online or actually the entertainment.
Space <unk> started.
26 years ago or about 100, I guess at the end.
We believe the consumer demand the user demand for premium high quality premium content is internal and also the creative talent.
For this area is continuous.
All of these it just needs time to.
To grow this space. So I think for online video space. We believe we strongly believe there is ample room for growth in the future is just now that we are proactively adapting ourselves.
So the new environment to embrace all of the changes in the environment, but we think we are the very experienced team with expertise in this industry.
That will enable us to face all the challenges and.
A successful player in the industry.
Cautious yep. Thank you.
She said going into them.
Okay.
Thank you.
The next question comes from the line of Thomas Chong from Jefferies. Please go ahead.
Well I think all I can say Bonnie Jay it's all about the T.
Are you in a whatever it is just when you say why new woman a high why that you guys got a gun gun.
What are you telling me a T shirt, but you only take our AI, it's you'll hold times trying to stay shut in on ebay yeah. It should pay each other Hutton you fishing.
Well somebody you saw a woman die right.
And so I know, it's a Honda well most of them are kind of.
Tell me about what is that Oh, they've got competition Oh, he sees them, but yeah, well many times right Oh, Paul will do the right deal I don't walk way our dry powder.
Management novel, but taking my questions I have a question.
It shouldn't be guarding our overseas competition.
We have just I'll talk about using technology and achieve efficiencies through the transformation process I just wanted to get some understanding of how we think about the competitive landscape in different market.
And we will be step up the investment and overseas are going forward. Thank you.
Okay.
So that one we're still young all went up without humans.
Great moment.
As you saw we also see when they want me to do.
Hum.
And then you can put up Catastrophizing in Japan.
Anthony we sometimes you find somebody said to me, but we've done so enrollments at cousins childrens action Socgen woman someone they know we shouldn't shooting ship.
Yeah.
Okay.
But when you have all the things you find out what's happening with the answer you will find this shoe we tend to find in this enzyme choice to buy off the shelf.
Okay.
Our our senior Vice President in charge of the membership service will answer this question.
For our call.
All of our overseas.
Our.
Hi, Michael is to export.
Original content to various regions around the world.
The first.
Situation World Country of course is the translation.
Saturation, so and also different region.
You have different cultures different backgrounds. So our Gulf initially was to find countries with similar tougher background. So for example, the conscious in the Southeast Asia region and also for North America. It is there a lot of the Chinese.
So in that area. So we also introduced some.
A lot of content in that region as well.
Oh really.
And we'll move hybrid shoot Bakken beautiful momentum in Tucson.
Some of them and they don't produce the shrink.
Surely the ocean leader, so I assume that some of you.
Tony This is Jim.
You mentioned that you should see.
However.
And so finding.
Bruce.
However, your one time really honest with one hand this is Jim.
Samsung someone to choose you have minimum okay. So of quest going forward. It will continue to bring more premium content until the overseas.
And based on our internal data.
We know that a lot of our period.
Very welcomed by the young young audiences in the overseas area region.
Thank you.
Thank you.
Thank you.
Due to time constraint that was the last question and I would like to hand, the call back to management for any closing remarks.
Paul.
Mainland, but now you're going to go through.
Yeah.
The Jordan Omega lingers.
Sure Matt.
Thanks Sheila.
Shan Wang from Florida.
A firewall.
Cheaper too Jeff.
Xiaomi for June.
Do you have left.
And then you got to the one that you thought do you do that.
Walnut tritium RPM tone with inventory.
Just Ron Garland.
I see that San Antonio, Google and Yahoo to her journey.
Now the counter tongue.
Drove higher engineering rollout Honduras.
The general partnership with charter.
Dr Downhole good shot in the Philippines.
Tom you want to.
The natural attrition.
Yeah.
Well that was in July okay.
I will summarize our short term goals and also the long term goal for our company. So as you guys.
Note that in our opening remarks, we mentioned.
We are facing a lot of challenges in the short term related.
The government.
Regulatory environment, However, we've been proactively adapting ourselves.
To this.
Is that new environment.
Yeah.
Impairment of situation. So we expect for the next one or two quarters, we think the regulatory environment.
To become the new norm and is stable and our main goal.
Going forward first is to reduce our reduce our loss and we will further optimize our content costs based on.
Our industrial life.
Initiatives.
<unk> video of industrialization and also we will to execute strongly according to our strategy and we will eliminate our job the content that doesn't fall in line with the policy and so at the same time, we will also explore new monitors.
Monetization.
Opportunities. So that's our overall strategy for the short term and also mid to long term.
Thank you.
So thank you everyone for joining us feel free to reach out to us. If you have any questions and we'll talk next quarter. Thank you.
Thank you.
Hi.
Thank you that concludes our conference today. Thank you for participating you may own it.
Well thank you all.
[music].
[music].
[music].
[music].
Good day, and thank you for standing by welcome to the.
<unk> third quarter 2021 earnings conference call at this time, all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please.
Please press Star Zero I would now like to hand, the conference <unk> today.
Thank you I, our retro of company. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining <unk> third quarter, two that 2021 any conference call.
These results were released today.
And are available on the company's Investor Relations website at IR, the ITE Dot com.
The call today are Mr. <unk>, Zhang our founder director and CEO, Mr. Xiaodong, Wang our CFO, Mr Song, Wang RCC Oh, Chief.
Chief content Officer, Mr. Wang.
<unk> Neal.
Oh, Chief Technology Officer, and Mr. <unk> Yang senior.
Vice President of our membership business.
Mr. Gong 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.
Windfall and sandbox will join Mr Ghosn and subtle in the Q&A session.
Before we proceed. Please note that the discussion today will contain forward looking statements made under the safe Harbor provision of the U S Private Securities Litigation Reform Act.
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.
Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC.
ITE does not undertake any obligation to update any forward looking statement, except as required under applicable law with that I will now turn the call over to Mr. Ghosn. Please go ahead.
Hello, everyone and thank you for joining us today.
In the so called her we have faced a lot of.
While our agility as we pivoted.
So our particular challenged operating environment.
The current uncertainty in terms of content, that's gathering, which the golfing revolving in sulfur.
Softer than you had at the top line performance.
It's part of the fourth quarter.
While until it hey.
<unk> to see encouraging signs of housing multiple operate operating matches.
Our leading market position remains intact as we continue to exact number what and where yields.
Countries are putting towards third party data, we formulate and believe there are a couple of <unk>.
Inc.
Eternal truth as it comes.
To entertainment.
Firstly, if if at all.
<unk> among high quality entertainment content.
So as mortgage on a dry mill and the second is that tariffs habits infinity, a potential to develop excellent material.
With this market.
Dynamics in mind.
We have a tremendous space for growth.
Develop.
Scott.
During the call. Her we continue to have the production copper pillar enhance or LOL content explore new gyro tool.
Diversify into.
And expand our user base by refining our products and the overall user experience.
Meanwhile, we have been driving the industrial.
Industrial life leash.
Of video production.
<unk> efficiency of operations.
We believe all of these developments will enable us to macro rates assumed short term challenge.
And we are.
On the right path to achieve long term success.
Now, let's go through the performance of our business segments in the corner.
Let's start our membership.
During the quarter, our membership services revenue grew both annually.
Sequentially.
Our whole strategy is to keep her up to the demands of <unk> user segments with that work with content.
Continue our fleet improve membership.
In Peru.
Benefit.
That enhance the member experience and driving new member sign ups.
On the user retention.
How does that impact.
I'll focus on reaching our.
Improving the long term minded Felicia on membership events by locking.
Innovative business models.
In our private client.
Yeah.
18.
<unk> effective give comps pushing on their operation in nature.
However, as I mentioned earlier.
The uncertainty of outcome in this gallery pasta Flack, two Asian in terms of subscriber number.
A few ultra low power continue enhance our library of content across different genres.
Yes.
<unk> ability to withstand risks related to content in the sky.
And the membership services revenue growth.
Number 8% year over year, mainly due to the effect of keith's dramas, such as one and only children.
And forever and ever.
Sure.
Which well launch in the corner as well as the continued interest in drama launch.
I'll answer that.
The second quarter, such as my actual.
Actual total view.
Rebel Tanya drop.
As of September the total number of subscribers was 100 and the suite pump six maybe.
The crew.
Daryl.
Jack to Asia was mainly due to delays in the release of some highly anticipated content mini mill the major content that relates to the email Stockholm less diversified in terms of gyros is part of the fall.
<unk> permit we are happy to see that.
Subscriber growth on television devices on the floor or if it is.
Maintain Dakota moment.
Well, if you look at that higher power.
Russia of users on TV device based on the continued expansion of our fleet.
Overseas user base will be a significant driver of future subsequent growth world.
On the other hand.
Our recorded both annual and.
Sequential rate growth.
The annual growth rate of 10% was mainly due to the southwest.
But first floor.
Adjustments that would roll out lots of November.
Pat.
Our membership business will continue to improve going forward driven by all content.
Multiple operating in insurance groups.
The member inherent if one of the most important subjects that.
<unk> focus on.
For us.
<unk> activity.
Actively cancel the paid upfront.
Model.
<unk> get ahead.
Hello.
Prs.
Further help improve without member.
If terrorists.
So part of subscriber growth and retention.
They are solid.
Asia for the long term foundation of our platform.
The Asia, we continue to enhance member benefits.
So our platform.
Operation with top industry partners.
In terms of new services in your business model one of our key focuses is to promote.
Element of cloud cinema.
<unk> across three content categories.
They are ash Grove films gets rebuilt it will <unk>.
Mode.
<unk> model cream.
Premium field, only distribute hands well online platform.
Ikea automobiles.
Since 2010, there so article release.
All future films have been hit significantly.
By about call it 19 pandemic.
The cinema model well reduce the reliance of online video platform.
Yes.
Michael.
Films also.
<unk> enables users to watch new fields.
After their offline.
A price that is cheaper than our traditional movie ticket, which further maximize the monetization potential of each film.
During the call we had witnessed.
Our new life as usual.
<unk>.
But could you shrunk.
Sure.
More loopnet.
And they're all cloud cinema model these films.
Gyros, namely comedy extra unnecessary.
This counts towards 35 75 months of different yields cost yes.
<unk>, our first original cumulative appeal.
North eastern rather.
<unk> was launched in October and received positive user feedback.
Mark.
In terms of overseas expansion.
We were able to significantly expand.
Youll surveys.
<unk>.
Increasing.
Sequential number of southeast Asia countries.
Also the App.
Remain on top of that.
Across the <unk>.
Yes.
In ranked number one in Thailand, Malaysia.
Forecastle laugh.
Yes.
<unk>.
Alright.
Right.
Other.
Domestic blockbuster drove continued growth or is revenue. We also recently kicked off the development of six oversees our remote dramas, including for carrying on the tool Philippine Orange Knowles.
Looking at Asia, where continued weakness.
Dan.
Cooperation with local partners, including.
Multiple media platform operators.
Thailand, Singapore, We also launched all access system side of annual collaboration framework agreement.
With.
Numerous otherwise hesse and effects of that.
First of all there is patent data.
Local sponsorship for our suite sale tomorrow.
Moving onto <unk>.
Advertising during the quarter.
Our pricing revenue.
Mansell.
<unk>.
Mainly due to a drop in Brian.
The.
Was mainly due to the delay of key content, including <unk> and <unk>.
Hey, Charles.
We continue.
Work on developing.
No we have new shops, which we are doing too.
Diversify our content on the day rates, albeit from content discounting on certain days.
So we are still refining on the fine tuning some of this production.
It's going to.
Revenue some tightened to win over and what time Sir.
Stimulate our projects with Neil Gyros.
The softness of our brand advertising demand was also due to the overall challenging macro economy environment in China.
Daniel from procurement as increased.
Both year over year on a sequential air during the call there.
Lite App was a main driver behind this.
As opposed to our main apps.
Mainly focus focus is.
Take care Steve here.
Low overlap with our main app, which mainly focus on brand apps.
<unk> Lite.
To be upgrades compliment that with drivers and yield growth.
And what has been good.
Yes.
Year over year growth of procurements.
Also benefits from.
Improvement in monetization comparability is driven by our technology on a true contribution from key sectors, including Internet service and E Commerce.
The sequential.
Growth was also partially driven by load growth.
Inventory.
Some of our location.
Looking forward to the fourth quarter, we are.
Some slowdown in China as the overall macro economy.
Macro tape lane impact.
Our advertising business.
Nonetheless.
Loopnet.
We are proactive.
Actively adapting ourselves to the environment to meet.
Minimize our potential if Paul shop.
Moving over to comment.
<unk>.
Increased uncertainty in terms of.
Content Scouting and appreciate loan content approval.
Proceeds with clean Earth.
Earnings call although.
Per powered.
Slate of content during our call center some of those.
Top dramas nowhere on his shows.
Our top line.
In our pipeline.
Launch delays.
For war to offset the types of risk we are looking to further expand and enrich.
Sure.
<unk> of our content in the portfolio.
To explore new and different categories, and deepen user awareness of our diversified content offerings.
In.
To Derisk, our business from continental gathering.
A few ultra.
The Asia.
Back to you actually.
Responded to capitalize if you want to buy them.
Government authority to promote that helps.
Entertainment and online media industries.
We believe these actions will further be solved lung leading province in the industry.
Which should help us to further optimize content costs.
Eliminate.
Chaos in content the production on the promotion.
And that with you.
Rational industry a combination.
Overall.
These changes should be beneficial.
Supporting the healthy development of the industry over the long term.
I will.
Also like to highlight all come in that strategy.
Efficiency in the production operation has always been the primary and targets that will.
Slide four and we are now putting.
Even more focus on it.
Paul actively.
Taking initiatives to improve the efficiency of our.
Our operation.
In effective investments in content by.
Cutting protests that.
Our data to generate low ROI.
The online video industry has rapidly evolved over the past.
Second and I know, we've gotten to a pump well content is king and that.
Efficient.
Sure.
We're happy to see that continue the resolve of our progress.
Optimized content cost driven by our.
<unk> has a protection comparability.
Displaying the content spending and the improved operation.
An important metric we use to track.
Efficiency of our content spending.
Content related cost ratio.
Simply speaking this metric is calculated by dividing the total cost.
Two our title pilot.
<unk> revenue generate right.
Based on this measurement.
We can see the operating efficiency of our overall content in 2020 mile.
Improved.
Turning away from.
Strong last year.
We continue we will continue to use.
This metric.
Effective tool in managing the efficiency of our investments in content and all operate ships.
For example, one.
Okay.
And IRA.
<unk> two.
Dry land.
Sure.
This two titles.
Well definitely from the noble which created an advance in terms of IP and <unk>.
Right.
Retail in terms of both content.
On the forecasting models also this two titles.
Examples.
Demonstrate.
Our increased efficiency.
Income from operations as measured by the content related cost the ratio of the performance.
And the only one.
13 percentage point improvement.
Then lastly year drama.
Laura.
Okay.
Shop, which features.
Leading actually belong in the <unk>.
Gyros.
We will also like to show some highlights on the performance of our vertical content.
Net sales are modeled.
<unk> strategy, we have always been the industry a pioneer in terms of content and innovation on the operation.
Our model and our strategy.
One of our successful attempts.
This model helps us to build the company Asia.
Okay.
What types of different Gyros, Inc.
In which beneficial for attracting new users.
Driving app user retention and offer a better bank.
Our.
It brings the synergies.
Titles.
We think the.
Themed content genres.
And then.
<unk> more flagship delayed in working with <unk>.
For example, we have observed.
That.
A broadcast of the programming.
Okay.
Under the law.
Well booked.
Looked at the ownership of Mr. Salter.
First a seasoned titles.
Sure.
And the daily.
We do feel.
On the user.
And the user time spent a further increased.
Increased by more than two times.
You'll see.
<unk> of the Minister was.
What's lapsed.
Looking for work.
Qualcomm although.
Predict to that.
It will remain in the market, we will continue to execute.
That was a five comes into the strategy the issue to the new.
Yeah.
The sales are largely in the first call. Her other key titles include drop months Arrow foreseeable young adult variety show surplus cash flow.
You told US you got that.
Excellent.
Have have again.
And.
Youll see that content such as well.
And the proof in store.
So first capsule pre mine.
Pretty minor.
<unk>.
I'll cover the show was high.
The show was highly acclaimed by all that.
Yes.
Solid.
Market leadership in Shoals.
Moving on to technology.
Other one technology is the foundation of our business.
We are constantly.
Developing new technology.
To improve.
User experience increase yields our penetration.
Developed in Norway.
And the format.
In house content production.
<unk> of our operation.
Same time haven't you call innovation.
Pete.
Industrialization of video production.
In the in the.
Industry.
It will be great.
April improving.
Our population health platform, increasing our worldwide.
Simplifying the pre.
Production management process.
Reducing production costs.
And the existing.
<unk> experienced.
We continue to make progress in terms of user penetration the user scale of <unk> Lite grew rapidly.
<unk> increased by nearly two sequential and user retention and monetization has also improved.
In terms of user profile as I mentioned earlier.
It's mainly mainly focus on low Trc Nguyen.
Both our growth we are seeing.
This speaks to our success.
<unk> into this region.
In terms of content production and the efficiency improvements, we continue to apply AI technology at <unk>.
<unk>.
Reduced production costs during the corner for example, operating costs can be effectively reduced.
With our.
Our proprietary intelligent that translation tools, we have fully replaced the manual translation with ultra mandate.
<unk>.
Question for B level drivers.
Boeing for once we have fully adopt this technology.
This is bill.
It will save us.
So.
RMB translation costs fuel trucks.
In terms of.
Industrialization of reveal.
We have launched.
The multiple technology and the products that all comes into production.
It should reduce the production cost increase.
Efficiency.
Improved user experience.
Okay.
Prior to array of multi viral capture.
As an example.
Y'all pressure horizontal that should yet.
It's significant.
<unk> the shopping time left what level of <unk>.
Manual work.
The full.
Production process from camera deployment we.
We do show regional shopping tool.
<unk> production may content production more efficient.
Other intelligent tools lapsed.
Script, so whether supervisor management.
Product, which can be used in the mid stage.
Production process.
Product has been.
That's for.
Shows, including some of the extra notebooks being production.
Also a management fee for the wholesale.
Production editing process has been used to define number of posts.
Production companies in the corner improving trends.
Transcoding efficiency by three pumps seven times.
In summary, we are.
Paul activity.
<unk> ourselves.
With the current environment, we continue to view.
Pioneer.
To content innovation and operation.
Well, we are seeing a promising growth.
Action.
Sure.
Sure Jack.
For our new and near shore.
Such as ICU lite on the overseas.
Our original content, especially our sales model.
Mobile content.
Highly recognized by users.
Either what handlers.
We are continue to take the lead in going out.
Our technology and the tools for intelligent in the production and driving in the <unk>.
<unk> for the long form video production process, which should help.
We will further optimize operating efficiency.
We have evolved along with that.
Okay.
In the online video market over the past decade.
<unk> we have.
Two minutes.
Ill ask work you've done.
In line with.
The industry is heading.
Our current accounting.
Allison learning opportunity.
We continue to believe that weather does not feel to us make us stronger.
With that.
And <unk>, which are picked up out of naturals.
Good morning, and good evening, everyone. Let me review our people.
Key financial highlights for the third quarter. Our total revenue reached RMB seven 6 billion membership service business continue to be our largest biggest pillar with revenue increased 8% year over year and accounted for 57% of our total revenue.
Advertising revenue decreased 10% year over year, primarily.
Due to less premium content launched during the quarter and the challenging macroeconomic environment in China, our content distribution revenue achieved a 60% growth on a year over year basis.
Although we distribute more content titles to other platform during the quarter our cost of revenues increased 10%.
In the same period last year, among which content costs increased 13% from the same period in 2020, the increase in content costs were mainly due to the more investment oriented content during the quarter. Our operating loss margin on GAAP basis was 18% remained largely flat compared to the same period of last year.
We're driven by our disciplined investment strategy.
September 30.
Plenty of only one the company had a cash cash equivalents restrict cash and short term investment of RMB 11 billion for detailed financial data. Please refer to our press release on our website for the first quarter of 2008.
101.
We expect total net revenue to be between RMB seven eight of some point 8 billion RMB.
RMB seven $5 3 billion, representing a 5% decrease to 1% increase year over year.
This forecast reflects <unk> current and preliminary view, which is.
Subsequent to charge I will now open the floor for Q&A. Thank you.
Please open the floor to questions.
Certainly.
Ask your question you will need to press star one on your telephone to withdraw your question press the pound or hash key.
<unk> the benefit of all participants in today's call. If you wish to ask a question to management in Chinese. Please immediately repeat your question in English. Please limit your questions to one at a time if you wish to have follow up questions. Please rejoin the queue. It star followed by one to ask a question.
The first question comes from the line of LNG from China Renaissance. Please go ahead.
Alright, thank you.
Uh huh.
If you go that way.
Are you going to negotiate.
T y.
Thinking going through.
So keytruda Tim.
Yes, Jamie.
Jonathan will talk about <unk>.
Yeah.
Yeah, I'm going to issue.
Yes.
Jonathan I think when you see it.
Sure.
She does actually Rishi.
Well I think so.
Thank you.
So it is interesting.
Okay.
Got.
Yeah.
She goes as you know call it though.
Oh sure.
Life Science.
If you take on Russia.
This young patient health and Oh, so let's.
So, let's say if I make that keep teens, absolutely not Jonathan.
There's only one guy.
She tell exactly when she wants it quicker.
Tony do you want them a demo that Gleeson will fund me Johann.
That kind of ship from Asia, and myself, John and see exactly.
He'll kind of woman gosh, it they can see Rhonda.
Yeah. Thanks, So first a question relating to the recent.
Improvement plans are.
So you had a.
Local province government I, just wonder how is that going to affect our future business. My second question is relating to the future member ship growth potential just wonder there.
Regarding the future membership is it going to be.
<unk> <unk> from lower tier cities, all still from the major tier cities from the reactivity of the older members.
So the question is.
Just wonder what is.
The.
Management of share the anything new or exciting.
Promising relating to the variety shows going forward. Thank you.
I don't know if you want to ask the doctor or globally.
Sure sure sure Joe here domestically.
I'm not sure long term virtual home year shipment pattern.
Okay. Good luck guys.
Hmm.
<unk> hundred <unk> sure sure.
Yes, the balance sheet, you have heard coming throughout the year.
<unk>, yes.
All I can tell you that locals in Dubai.
Can you be a woman.
What will pop idol noteworthy here.
That's what you should look at here.
Welcome Paul.
EMEA each year to a profit comment the EC awards yet.
Sure sure.
Sure.
Jimmy I would share with us.
Sure so let's hold water.
Sure.
Sure Sean.
It was probably a more sure.
Hi, Shar.
Jacob.
Yes.
I'm not sure I'm trying to answer either.
Okay.
Sure.
Xiaomi and ultra shrugging trough.
I think in Chelsea and tissue.
Garland.
Okay.
I am not sure ghansham to ensure.
I should note we had some volume shift didn't come true play actually.
On the tissue.
Many of <unk> key useful.
No Tien tsin.
I'm sure part of that.
Yes.
Yes.
Safeway.
Yes.
Come on come through other short haul lanes.
Home sure from what I saw.
Okay.
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Yes.
So you've got central insured.
Sure.
You started yet.
I'll translate Mr Combs.
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So for the first one.
In terms of your question regarding.
Regarding the consumer counsel. So does this kind of applies to the floor.
Industry players so our feedback comes from the two aspects.
One is the product.
To sign it so we have been the first one comes from the product design and the second one comes from the floor.
Sure the product so the first one for product design of waiting also communicating with.
<unk> also collecting feedbacks from our customer service Department.
Our goal is to increase the user experience I'm trying to lower it.
The Occidental clicks of any unnecessary steps. So so overall the user experience will be increased and improved and from from the business model perspective.
We've been also communicating with consumers also in terms of also the user agreement.
And two to make sure all the messages are communicated.
Early with the users.
So that's the first question regarding the consumer Council.
Question and the second one is our.
Penetration into the different tiers of cities so for now.
For our penetration in different regions for the high high tier city in the first and second tier cities. The penetration is high and for the lower tier city penetration is relatively low for this point and our I T.
It's the main act that targets this user demographic.
So for ITE Lite.
Right now we offers a lot of the free content. So the user consumes a free content.
And then they actually will see the advertisement for that so so right now on the advertising side for ITE light performance App has.
A high percentage of revenue contribution so.
I think going forward.
He liked it means one or two years for improvement and for growth and we will keep working on this application and for our main I E up that's.
Still going to be our main.
Target for elevating our operation, but optimize user experience optimized product and optimize the product features due from them with your home I'm not sure. If you remember when we launched.
So the third question I'll switch over to celebrate our C O to answer the question.
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<unk> responded to.
The talent show question.
So.
Because of the.
How true that spin.
Existing in this entertainment sector for a long time.
So it does have some impact on the variety show segment.
So for now the Korean.
Based our Korean style.
So that's.
Prohibited in in the video space.
However, there is still a lot of ample room for growth in terms of variety shows example.
From we can't focus on the areas that come for.
<unk>, that's that's like comedy.
Emotional and also some talent.
So, but that's not relatively to the Korean style and we also launched our new.
Comedy variety show called in Yankee since you got that.
Super sketch show, which is the new new content genre that we innovated.
Calibrations.
Based on its first feedback since its launch we have seen promising user feedback and viewership from the shelf. So our variety show performance is back to number one position in the market so going forward, especially in the fourth quarter will still.
<unk> launched innovate innovative.
Alrighty show content genre for example, like we mentioned in the opening remarks.
About Yang action. That's also an innovative a variety show that will be introduced to the users.
Thank you.
Thank.
Still very much.
Thank you.
Once again due to time constraints. Please limit your questions to one at a time if you wish to have follow up questions. Please rejoin the queue. Please limit your questions to one at a time.
Your next question comes from the line of Alicia Yap from Citigroup. Please go ahead.
Hi, Thank you and Glen anytime washout Hot she says that he wants.
One when do you see declines in golf, how happy they are to shoot.
Just hung in the Eagle are changing.
I guess, just how shipping how he had no change.
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I want to assure you gave me two patent that know how to tell shipping me more ships are known for.
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Once they finally yep.
For taking my question. So my question is related to the overall <unk>.
Longer term outlook for the long form video industry would there be any change of the strategy.
These for yourself develop like self developed content.
Overall, the content genre in England.
For example, the type of the lineup the drama series the type of the panel that you plan to produce.
In addition.
Ken long form video monetize.
Hi station model break out beyond the current membership subscriptions and advertising if so what could be the new model. Thank you.
How do you go and Youll forgive me.
Sure.
Jim I Wonder if I'll tell you too as well.
Sure.
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Yes sure from ship earlier, so I'm hearing you hold sure yeah, Yeah, Bobby here to our call.
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Just what are shorter.
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Tom you want to.
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Long term.
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On the short term.
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Overall bump.
Xiaomi or hold true.
Yes.
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Some question of a showroom.
Our top water to enabling that.
Jacob Cheyenne, we're through two ways to go but given the same color Johnny Walker Jacobs.
So at this juncture yet.
At him.
Yeah.
Yes.
Yes.
Okay.
So for right now I think the biggest problem in the.
For the online video space as the supply shortage contributed from various reasons. The first one is of course the.
<unk> the COVID-19. So for example, the number of movies launched.
COVID-19 has only less than half, 50% of 2019 level and for a traditional satellite TV series.
The quantity is only one startup.
Of the past.
And for the new format.
Internet theory is the web series.
Third we experienced a major delay because of the stronger censorship and even though.
The content was launched by the quality was.
The biggest taken a discount are theirs.
Some inc.
Less less less promising feedback from the quality. So so theoretically speaking these are the reasons that contributed to the supply shortage for the video.
Got it and also if you are taking on the short our short form video.
Reason that also contributed to this because it's also taking the user time spent and that's one of the biggest I guess.
Factor that that that that.
Countries to user behaviors.
And for your questions about monetization models I think we have been working on taking the full process of the entire IP Chang. So for example, if we have a good IP whether it is from the strip level.
Whether it's from the story level, we wanted to take this through the whole entire process of the Ikea lifecycle, we can develop.
In this into a TV series movies games.
Also franchise products et cetera, so I think that going forward.
If you're looking at the long term perspective of this industry.
The model will be the advertising revenue plus the subscription revenue plus the <unk> model.
Altogether.
It's better than the our investment level, so that will be our anvil.
And we think it's a sustainable model going forward in the long term prospect of the online video industry.
Yes.
Jim Sheehan or zero point in terms of the union for to assure opinion through firm either RSV Audiencia Illumina just from the hydro bullhorn showing again you don't.
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Sure Tom Baltimore whole idea comes with demand to who can thumbs up.
Sure.
Functions you Joel.
Yes, sure a hull Aida.
And if I'm, yet equal comp how should.
You heard the name change.
Surety that you couldnt be at yet.
How is that.
Do you have anything yet.
So what are you doing should again the <unk> sure you how we've handled that Jacob.
Yes.
Either label.
Jacob.
Tom.
Yes, we are.
Sure sure not enrolling <unk>, one rep measure yada yada.
Some of that to Australia, and Shanghai, though.
While lite toll road.
We'll shoot for that.
Naval I shouldn't that efficiency.
Okay.
Okay.
So I think if you look at the overall Grand picture of the online or actually the entertainment space movie. It started 126 years ago or about 100 years ago and we believe.
The consumer demand the user demand for.
Premium high quality premium content is internal and also the creative talent for this area is continuous so all of these it just needs time.
To grow this space. So I think for online video space, we believe with film.
Strongly believes there is ample room for growth in the future is just now that we are proactively adapting ourselves to the new environment to embrace all the changes in the environment, but we think we are the a very experienced team with expertise in the industry.
That will enable us to face all the challenges and be a successful player in the in the industry.
Thank you.
Terrific.
Thank you.
The next question comes from the line.
Thomas Chong from Jefferies. Please go ahead.
Well it sounds all I can say one eight days.
<unk> would've been pieces island, when you signed one new enrollment right that you guys got Nevada, Camden Washingtonian T about <unk>, but you only take a AI.
I just want this they shouldn't on ebay yeah sure each other highly efficient.
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Right.
John Lewis well.
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The competition, we see somebody young woman sorry, right.
Paul.
Alright, well I don't walk.
Vance management novel.
My questions I have a question regarding the overseas competition.
Just talk about using technology and.
Chip efficiencies for the transportation cost.
I just want to get some understanding of how we think about the competitive landscape in different market and will be step up the investment and overseas are going forward. Thank you.
Yes.
For example, we're still young all went up without humans.
That's great.
Sure.
However, we also see what we do.
Kind of advanced <unk> zooming on and you can put up quite as fast as you can see.
Anthony.
Finally, let me say, some but we've been so enrollment.
Kevin So there's actions.
When you go moment, so let me know.
So we shouldn't see these shifts.
Yes.
Miami <unk> lenses.
I hope that you found out what type of user pay mei onto you'll fund that shoe Omega upon them sometime here to buy off the shelf.
Okay.
Our our senior Vice President in charge of the membership service will answer this question.
So for our golf are overseas.
Our.
Primarily to export.
Original content to various regions around the world.
The first.
Situation World Country of course is the translation.
Situations, so and also different regions have different cultures different backgrounds. So are both initially it was to find countries with similar tougher background. So for example.
In the Southeast Asia region.
And also for North America, because they are a lot of the Chinese.
So in that area. So we're also introduced some of the content in that region as well.
Yeah.
Meanwhile, we'll move to shoot Bakken beautiful women in Tucson.
Yeah.
Some of them.
Surely the ocean rig <unk>.
How many of these GTT dimension of it.
And so finding.
Bruce.
However, a one time really honest with one hand. This is Jim since you got Samsung someone to choose you have movement, okay. So of quest going forward.
We'll continue to bring more premium content to the overseas business and based on our internal data, we know that a lot of our a serious are very welcomed by the young so young audiences in the overseas area region.
Thank you.
Thank you.
Thank you.
Due to time constraint that was the last question and I would like to hand, the call back to management for any closing remarks.
Paul.
Mainland, but now you're going to schedule sure.
The Jordan Omega lingers through online.
The truth of economy of that venture loan.
<unk> Chen Huang from Florida.
Fabulous.
Chiba.
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Bear in mind that you got in that you're doing that you don't have to be met.
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Tom.
You bet.
Marshall.
Traditional cycle.
The 11th of July Okay.
I will summarize our short term goal and also the long term goal for our company. So as you guys.
Note that in our opening remarks, we mentioned.
We are facing a lot of challenges in the.
Related to the government.
Ventilatory environment. However, we have been proactively adapting ourselves to.
To this.
This new environment.
Yes.
Environmental situation. So we expect for the next one or two quarters, we think the regulatory.
Short term that will become the new norm and is stable and our main goal.
Going forward it first is to reduce.
<unk> reduced our law and we will further optimize our content based.
Based on.
Our industrial Lite.
Tori initiative for a video of industrialization and also we will to execute strongly according to our strategy and we will eliminate or drop the content that doesn't fall in line with the policy and so at the same time, we will also explore.
Monotype monetization.
Opportunities so that our overall strategy for the short term and also mid to long term.
Thank you.
Yeah.
So thank you everyone for joining us.
Free to reach out to us if you have any questions and we'll talk next.
Thank you.
Thank you bye bye.
Yeah.
Thank you.
The conference today. Thank you for participating you may all disconnect.
Well thank you all.