Q3 2021 Qutoutiao Inc Earnings Call

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Hello, Ladies and gentlemen, thank you for standing by for the third quarter 2021 earnings conference call for Q Tokyo, Inc. At this time all participants are in a listen only mode. After management's remarks, there will be a question and answer session. Today's conference call is.

Being recorded I will now turn the call over to your host Angela Walk. These go ahead Angela.

Thank you very much welcome everyone to the third quarter of 2021 earnings conference call of two downtown Inc.

The company's financial and operational results were released why our newswire services earlier today and have been made available online.

You can also view the earnings press release by visiting the IR section of our website at IR <unk> total out on that.

Participants on today's call will include our CEO, Mr. Eric Tan and our CFO, Mr shallow too.

Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Probably the Securities Litigation Reform Act of 1995.

Forward looking statements involve inherent risks and uncertainties as such the company just went out may be materially different from the views expressed today.

Further information regarding these and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U S Securities and Exchange Commission.

The company does not assume any obligation to update any forward looking statements, except as required under applicable law.

Please note that shoot hotels earnings press release, and this conference call include discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures.

She'd hotels press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.

I will start by reading out Eric's commentary on the business.

Thank you and thanks, everyone for joining today's conference call.

So second half of the year has been difficult for us as we try to align our business lines into a more efficient structure, while many of our other ones, having customer facing the operating and the financial pressures of their own.

We continue to observe the negative effect on advertisers confidence in spending due to the economic headwinds and the regulatory actions in the advertising market and the overall internet sector.

It is the uncertainty or the lack of visibility going forward that has dictated that much of the advertising customer budgeting decisions.

We expect to the fourth quarter of the year and the next early next year to continue to be under pressure and there has not yet been signed off our streets a positive momentum.

For our business as we have stated in previous quarters, while we cant control is the why the industrial arrival, we focus on putting effort into improving operating efficiency.

We believe the foundation, we laid in 'twenty or 'twenty, one will be a solid step towards long term sustainable growth for choice hotels.

One of the brightest spot of our results in Q3 wasn't you do know well continue the Bronx in user expansion and content creation.

Me do steer you averaged around 11 minutes in the third quarter up from 10 million, we achieved in the second quarter and about 65% increase compared to the same period a year ago.

We continue to invest into building, a rich content offering and in a way to a format of interaction to rich user.

Most notably through our proprietary content creation platform and as a mini drama series.

In the meantime, we will also take a more disciplined approach in future quarters and to make sure. We do all of a stand alone basis can break even and turn cash flow positive all.

Operational basis in the second half of 'twenty to 'twenty two.

Excluding you do and it's not any impairment charges. The rest of the company is still on track to the first breakeven year since our IPO.

The result of 'twenty or 'twenty, one so far is not as solid as we have hoped at the beginning of the year, but as we implementing more cost control measures in the fourth quarter, we are going to have better operating efficiency and operating results for coming quarters, and a more solid foundation.

For the long term sustainable growth of truth Hotel.

Thank you very much.

This concludes Eric's remarks, and I will now turn the call over to our CFO shampoo.

Thank you Angela and again, thank you everyone for joining today's call. Our net revenues for the third quarter were RMB 90, 966 million with our pool of RMB 41 cents.

The average EUR 27 million.

119 million due.

Due to the tightening regulatory environment.

When budgets of all of them.

Advertisers.

Let's look at costs and expenses in more detail. Please note I'll be referring to non-GAAP measures, which exclude stock based compensation.

Cost of revenues were RMB 268 million, a decrease of 27% year on year due to more efficient budgeting with our it expenditures despite increasing content procurement costs.

We generated RMB 697 million gross profit.

72% gross margin gross margin improved year over year on the remains flattish sequentially.

Our sales and marketing expenditures for the second quarter totaled RMB 958 million increased by 41% year on year.

As a percentage of revenue it came to 99%, which represented 39 percentage point increase from a year ago due to a combination of lower revenue base and increased investment in growth the user base of me two novels.

Our R&D expenses were RMB $118 million during the quarter, which was 12% of revenue.

Greece by 4% compared to a year ago.

G&A expenses were RMB 151 minutes during the quarter, which was over 17% of revenues.

The decrease was mainly due to the increase was mainly due to the additional expected credit loss provision of RMB 134 million.

Crude that G&A expenses accounted for 3% of total revenues.

The credit loss was mainly resulted from the default of certain commercial deals issued by our advertising customers.

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Eric mentioned earlier, some of our advertising customers, especially those from the real estate sector and some of the online sector are facing great.

Breaking out the financial pressures in 2021 and the default was a result of that we have taken a careful approach towards these customers in 2021 and the lease credit losses.

Our results in the second half of 'twenty, one and we don't expect this will carryover into 2022.

We made an operating loss of around RMB $517 million in the third quarter and even the one.

After breakeven in Q4 last year, our year to date loss has been the result of a ramped up investment in me do novels.

Clothing me do the impairment charges for credit losses, we still expect the rest of the company to breakeven for the full year 'twenty is when you want them to be up.

As of September 30th 2021 the company had cash cash equivalents restricted cash and short term investments of RMB 862 million or U S dollar $134 million.

Compared to RMB 986 million as of December 31st 2020.

For the next quarter I E Q4 tons in the one we expect revenue to be ranging between RMB 850 million and RMB 900 million.

Thank you very much that concludes our prepared remarks, well now open for questions.

Operator. Please proceed.

Certainly sir.

Ladies and gentlemen, we will now begin the question and answer session.

If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request. Please press the pound go husky.

Note that might be a slight pause as we call it the questions.

Once again it is star one to ask questions.

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As there are no further questions at this moment now I'd like to turn the call back over to the company for closing remarks.

Thanks again for your time, if you have any further questions. Please do not hesitate to contact us have a good day.

Have a good day.

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Thank you. This concludes our conference call you may now disconnect your lines. Thank you.

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