Q2 2022 iQIYI Inc Earnings Call
Okay.
Okay.
Yes.
Yes.
Yeah.
[noise], Thank you for standing by.
And welcome to the <unk> quarter 2022 earnings Conference call.
All participants are in listen only mode.
There'll be a presentation, followed by a question and answer session.
I wanted to ask a question you will need to press the star key followed by the number one on your thoughts on the keypad.
I'd like to turn the conference over to MS. Shang you Investor Relations director.
Hum.
Yeah.
Yeah.
Yeah.
Yeah.
MS Yu. Please proceed.
Thank you operator, Hello, everyone and thank you for joining <unk> second quarter 2022 earnings conference call.
All right at least today and available on the company's Investor Relations website at IR E arc com.
Call today are Mr. Yu Gong, our founder Alright.
Mr. Wang our CFO Mr C.
Our CTO Chief content officer, Mr. Wen from Blue C.
C G O Chief Technology Officer, and yes, maybe Antoine our CMO, Chief Marketing Officer, Mr. Doyle Senior Vice President of our membership business.
And Mr Yourself, Yeah, our senior Vice President of movies overseas business.
Well good overview of the company's operation.
Although by Q4.
After our prepared remarks.
We like them.
Yeah, well trained.
And there's plenty of mission.
Before we proceed. Please note that the discussion today will contain forward looking statements made under the safe Harbor reservations of the U S have a securities litigation baseball caps with 1995.
The statements are subject to risks and <unk>.
Certainties I mean, absolutely.
Materially from our current expectations potentially.
Certainly.
Now limited to those outlined in our public filings if he got to see I E does not undertake any obligation to update any forward looking statement, except as required under applicable law.
I'll now turn the call over to Mr.
Please go ahead.
Hello, everyone.
These opportunities to them.
Uh huh.
Hum.
More importantly shell.
On the future.
In my own company.
Okay.
Well I.
As well.
BELBUCA.
Call you commented on the call.
In Q2.
Hi.
In person.
Most of all media companies.
As part of that is.
The challenging environment.
You've made a few minutes.
So U S patents.
Right.
Membership business continues to grow year over year.
Cool.
non-GAAP operating profit for two consecutive quarters.
<unk> achieved a.
Hey, crystal growth into two.
C.
All cash flow improved significantly.
<unk> achieved a positive operating.
Cash flow.
But right first time.
Well what.
We had thought of strong ex location.
Oh the tragedy.
Hum.
Uhm.
The improvement.
Our strong results also demonstrated that.
We've seen it all.
Yes.
In fact, you'll Congress.
Oh operational cocky as well.
That's right.
Improved.
So in Mexico.
In April .
Fifth our changing market environments.
So that is a permanent use.
Walter demonstrated Ikea has completed its itself technical nature.
So not ours.
But sell alcohol.
It also gives us.
The comprehensive tool upgrades, all Scott Darling formed a phone call.
So corner this year.
G H.
Well see all of you.
It's growth and improve our financial health.
Hi.
My flu cartridge the con call.
Nothing.
Has the following features.
Wow.
To pursue growth, but not after that.
Hence it depends you pen.
Often they needed the cash for us.
We will all be caught up.
The growth.
Yes.
Investment cycle.
Hi, Patrick.
Investment.
Right.
We will have to play in.
And back to mortgage.
Yes.
The project will be a hierarchy.
All of a sudden pain harmful.
Half of our blocks.
[noise], who pursue gross profit.
Yeah.
Profits grew faster than revenue.
It might be revenue growth opportunities well nordstroms in hydro.
Hi, Christine.
Hi.
We will maintain the parents.
Okay.
Okay.
So no structure in greater China.
Passion and improve operational efficiencies.
Yeah.
See the value provided to the users and the customers.
However, our posture.
It will produce.
More than ever premium content.
We'll quit.
Great.
Well, our users and customers.
If a nice return.
Sure.
Dot Com go out strategy as well.
Okay.
Hum.
Right.
I'll yield for us customers and stakeholders.
Stakeholders.
Wholesale dot.
Common core with strategy and how will that improve the health of RP.
Yes.
Our profit.
Growth in our field trial.
Now, let's go through the performance of each business segment not that the new contract.
Yeah.
We have a number on it.
Membership.
Most of the important.
That's what we are.
The term mines will go out strategy is located.
We support them.
The convenience business grows.
Second contract.
Membership revenue.
Well I'll be.
Understood.
A 7% year over year.
I mean is it may not work.
Yeah.
Of total subscribing members for the second quarter was 19.
Pardon me.
I'm sad.
What I do.
Deep <unk>.
<unk> pumps.
C.
A person year over year.
<unk> maintained a healthy and well Smith.
About 8%.
Constructive coffers.
The positive.
Most countries billions.
It launched a membership package targeting PD.
Hum.
And at worst defined premium.
Content offerings.
I know that in fact confusion of refining the operating strategy.
Great.
And patient.
Our members.
First.
Accumulated 12 acquisition of <unk>.
New members.
She buys it.
Packaging as well.
Demand on PV yourselves.
We announced the play.
And then membership.
And if it's on TV side.
So that's the number.
Hernias.
TV is the months of actual numbers.
TV is likely increase.
We increased our loan.
15% annually in the second.
Segment.
I'll have to refine our operating strategy.
References to grid.
Arbitration that was November rose and they'll be back to us.
Another driver.
I'll start with the premium.
As we continue to diversify.
Diversity of thought and high quality content.
To.
The amount of difference will serve us well.
Some home all generated resonate.
How do you help sorry about that.
Daily life.
Great.
Wow.
And silver space.
The drama.
Hi.
Alright.
Positive public access as well as revenue from it.
Talk to us about.
Well domestic ecommerce in the first half.
That's a new tool.
Score of eight figures.
We are generating the highest membership trends.
Okay.
It's broke husky.
Hum exclusive content.
Gotcha.
Or access.
Basel members, we have not stopped.
Our regional multi sees that it's foreseeable variety show called China with all of them and that's a.
A new tool.
Tom Gibson baking that.
In late June numbers.
Given that discriminates alright FX.
Sure. So first I tried to over 1000 members.
Okay.
Yeah.
Yeah, we won't be sweating membership.
No benefits in addition to.
Scraping.
That's fair enough.
Hmm.
The election.
Income tax.
Number of benefits.
So far from that.
Uh huh.
While providing members with various benefits I met fields.
Why.
Alright.
Eva affecting a partner or not.
Yes.
Yeah Omar.
610, many times.
Looking ahead, we will continue those good.
High quality premium content.
Two nine south terminal.
Hum.
<unk>.
Yeah.
Back to my Rage wherever else comes into the promotion channels Saatchi art.
Who is that each of them.
Permian content. Meanwhile, we will continue to improve.
Well, we have some infrastructure to increase number.
Alright.
Brian .
Yes.
No not really.
We continue to improve that experience.
In addition, herpes.
<unk> suites.
Moving on to content.
We provide.
While yields on these high quality names.
Things that caters to.
You can change it.
A few remarks.
Improving operating efficiency efforts.
Because it would become more streamlined.
Streamlines T Wars.
The initiatives.
All content pipeline towards that.
Have a premium content.
It makes the ops.
I think all of us.
Yeah.
During the second quarter, we maintained our leadership.
Leadership position across key.
She and matches.
Hum.
It's fun.
Turning to craft.
And while they are.
Not a lot.
Meanwhile, our company's management.
Hum.
Cool.
And in my opinion.
We'll maintain.
Michelle format drama.
In terms of in.
Tons of effect.
At this time with a number of utilities.
Elsewhere in the market.
Much of the shelf Education, Inc.
Including sugar and visa.
Also.
First in the industry.
Meanwhile.
Two months from our.
Commitments for premium content.
High quality content libraries continue to show positive.
In fact at the dealership.
Market share of library content also has a number of mines is upstream.
That's right.
I am pleased that we received from you.
And engagement.
Uh huh.
Supply of high quality content.
Well improve the company's related costs. It really shows four key content categories.
Well a lot from it.
So in the nation and the children's content channels.
<unk>.
Annual basis sequentially.
Yeah, it was affecting them.
You spoke about recruiting.
Our house Keith's arrows.
Our claim.
On camera included.
Included older nucleus richness.
That's the Princess Twitchy com.
Thank you.
Thanks, Paul.
No it will be met.
H well over about 106.
Leaving.
Well I think it's one of the main contributor.
<unk> movie box office is affecting copper or children's content the sequel TWA.
And in Asia.
<unk>.
That's already.
Yes.
Maintenance.
Complication.
Membership in this.
For our internal compounds one of all key strategy appropriately.
Taking ammonia is a potent.
These conflicts.
It's not a matter.
Uh huh.
Ron.
You bet.
It looks strong.
Traction with it.
Titles.
And as I said from a partner.
Our popular artists of all varieties.
Yes.
Yes.
Including all time.
2022.
The test is adventurous.
Uh huh.
Okay.
Got you.
Among them all.
No real Big show, that's not all China with London.
School maintain as high.
Your language here from crude oil system.
Number of pumps.
So tough to have that.
Carve outs music platform.
Let's see.
Perfect.
Interest also that's the number.
Multi multiple.
Third party.
Platforms.
Yes.
Digital content sales.
Model conveniently to meet a deeper changes.
Not a lot of users push with union.
And there's a lot of ourselves were introduced.
No repurchase.
Interactive.
Sure.
That provides.
Mark.
Perfect.
Right.
Increased.
Turkey the paycheck.
It's so fast.
700 pumps model.
Seven.
Yes.
Beatrice.
Isn't until time near term.
In two weeks.
Fine chemicals that is fine.
Preference of downtime or external audits done somewhat on vacation.
Over the years, we have.
Definitely internet speed.
Movement in the quality of our premium content offerings.
Yeah.
Hum.
Popularity and back it.
Tori shoal mantra that indicate the popularity of our content.
And I think animals with over 10000 popular landscape index call.
They are blockbusters, such measure if pilot comed.
Industrial users.
Our content offering now.
Well high schools.
That's dropped the 10th.
Okay index call on that score.
What.
While our lobster this year.
Somewhat.
Lifelong journey.
Hey, Matt.
Isn't it more.
<unk>.
But troll audience growth.
The other one is August .
So orange electronic lost.
Between salary and.
Steve.
LNG upfronts on sales growth a trend towards young generations. This dropdown.
First off obviously, both cloud backup.
Such landmarks.
Got it.
Demonstrating the exceptional.
The quality of our.
Highly Comcast bye.
We are now.
More confidence with our small comes into production.
Yes.
The future pipeline is Petrobras.
Heidelberg.
We have looked for growth with burden.
Worse.
Hi.
Volume for us.
For the second quarter of <unk>.
Thank you.
It's fast credit for that summer season.
And the pipeline for example.
If funding cost.
How screen young generation August well maintain premium.
For midstream audience.
This improves.
The hot.
Jim.
Youre live on seasons.
Sure.
Yes.
Sales reps become true.
True.
That's wrong.
Okay.
Okay.
Well the trends in the first quarter.
Well, we're already shows because they are.
Hi.
Tom Ridge.
Hi, Keith.
Continuing to.
No way.
And Youll gyro from that second half ultimately here.
A number of brand new shows.
The comparable pool.
Part of the year, including original sow cost caps show in any of those.
Yes.
Let's see.
Got it.
And our folks.
Neil.
And in Asia.
Tubing pumping it well.
That's cool.
Adversity.
IP and monetize it.
Gotcha.
And also on labor at all.
Also our pencils well.
Are you there.
During our summer season also matched.
<unk> works for them.
Not between salary.
No.
This was.
You too.
<unk>.
A lot of capacity.
Hi.
Restaurant row as promised strong one for us.
Perfect.
<unk>.
Apart from that.
We have ceded RP panel.
In the overall.
Sue Murphy months.
Must be the vehicles.
In a moment we are convenient.
Summer demand.
No.
Our consumer demand.
Pete.
Michael.
Moving onto advertising.
Backhaul Boston.
That makes it budgets in.
<unk> <unk>.
Shanghai and Beijing further pressure on the overall business.
Our press release.
Brian .
All the players in the market.
Assuming all of our tenants.
However.
Great.
Pushing for one.
Ah <unk> program.
Prasad observation visits begin to consume more.
And more costly.
So our predictions.
John .
Manage this will grow.
No <unk> right.
53% a sequential basis.
Actually we're challenging environment.
Performance.
Increased supply.
Kristen annually with our clients.
Clients.
This was mainly an immediate bump.
Our currencies.
Identification of EBITDA growth.
Fine.
Our solutions for key accounts.
How do you know.
Alicia.
Among our core values.
Technical innovation makes it possible to bring on the floor.
That's what a user.
Our collaborations between our companies.
Perfect.
<unk>.
Production of Brian .
Is that accurate.
I suppose.
The launch of <unk>.
That's it.
We always have.
Great.
Alright.
Salary each format.
That sounds good.
Our engagement.
Average time to spend with us.
Active episodes increased 20% compounded tour.
Washington.
Any thoughts.
Moving on slide <unk>.
Business and that presents both.
No.
Overseas.
Right.
Maintained solid momentum.
Continuously increase the outcome.
Our long term value.
Enrich our.
Ecosystem.
The overseas membership revenue recorded annual growth.
From a nice increase in paid subscribers.
We have watched us keeps casuals.
Kim.
But so yes.
Our strong outlook.
Hi, Ray.
Hi, Sean.
Yep.
This is Pedro upheld.
Upheld.
Hum.
Such fees.
Attracted a large number of yours.
Okay.
Panthers.
Especially in China.
Itself.
So as I said in the hospital for this year, we will look to expand the user base.
In addition, carpathia.
We see both of those.
Market conditions in key markets.
Right right.
And so that is a annual growth in both membership and revenue.
Yes.
Uh huh.
For the second quarter was over 5 million.
And the user engagement.
Increased.
On a sequential rate actually utilized Fortunately no <unk> to date.
Sure.
Surveys of our main.
The overlap between <unk> and <unk>.
Our main app.
At a very low level.
Second quarter.
Overlap that's then for Christian.
With this team.
Okay.
T K.
Yes.
And consumption behavior revenue model.
Elias.
As a great company.
Complete them.
We've got major apps.
We expect it to be great.
And potentially in a field trial.
Yeah.
As you know, we announced that comes in that lessening of competition.
In July engage with us.
Select countries to adopt.
That enables distribute unmet need.
Okay.
And content.
<unk>.
Yes.
Working collectively to create.
Paul.
Thank you Sir.
Thank you.
And the second group.
Yes.
More importantly, though.
Harvey show showcasing.
The value the culmination of all of them.
Thanks, Sean.
Now comes in the public cloud as well.
Got it.
Right.
No Jeremy.
Okay.
Our premium long form video content.
And we are unlocking new opportunities to do that.
Uh huh.
Hi.
Penetrates.
In total we ask you to date basis.
Enrich the.
Ecosystem.
Wow.
Asia optimism.
The increased value of our IP.
On the call.
Our prediction from both products.
Thanks.
You could see.
Overall.
Results in the second quarter, we had a certain way engaging encouraging.
In the face of a factual.
In the case of the special challenges.
From the macro environment.
Significantly improved.
The mitral valves over a smooth and effective Congress maintain.
Industry, leading position.
Our results.
Strong professionalism.
Tim.
Unmet infected patients.
As our strategy openness.
The combination of efficiency improvements and the field trial.
Hum.
<unk> strategy.
And to generate sustainable growth of non-GAAP operating profit.
Comedians in Hawaii.
Incumbents 'twenty gives us.
That is fine.
The growing.
Pretty strong.
Culture is it months.
Driving company and creating long term value.
Yeah.
Okay.
Yes.
No.
Thank you.
Thanks to Michigan and Hello, everyone. This is June two.
To start the financial section I would like to highlight four key items that we have delivered.
First it's the.
Profit growth.
Second it's the operating cash flow breakeven Sara.
Upon the rating.
It's the optimistic growth outlook based on our com.
Strategy as Mr. <unk> just mentioned.
Now these items in mind I would like to what we show the details.
In the second quarter, we booked R&D at $6 7 billion revenues in RMB $844 million non-GAAP operating profit.
At the same time achieved quarterly operating cash flow breakeven.
As mentioned, Mr. Hu mentioned.
Remarkable without cause we fight against the gravity of macro downturns throughout the quarter.
For the revenue line no damage if service revenue was RMB four 3 billion up 7% year over year, mainly driven by an average revenue per membership.
The solid performance of membership revenues was partially offset by the weaker non membership service revenues is a challenging macro environment.
Let's now move to the cost of expenses.
In the second quarter cost of revenues was RMB five 2 billion.
Annual cost saving of RMB, one 6 billion down 34% annually and 12% sequentially.
The common cost a significant component of cost of revenue decreased 24% year over year.
Delayed several top shows the first quarter.
And there was other staff.
Gross profit margin reached 21% in the second quarter and the.
And it in the past quarters, namely.
7% to 12% to 18% than to the one person in the latest quarter.
I like to believe in all lines of our company.
Meanwhile, we kept our spending discipline and stabilize the total operating expenses in the second quarter.
No.
And at the gross margin and disciplined expense control combined contributed non-GAAP profit tension.
Second quarter non-GAAP operating profit was RMB $844 million.
5% quarter over quarter.
At the end of the second quarter.
Company had a cash.
Cash cash equivalents restricted cash and short term investment of RMB $4 9 million compared with RMB five 2 billion estimate for each quarter.
We managed our operating cash flow, while achieving operating cash flow breakeven for the first time in the second quarter.
Today, we also entered into an agreement with ph.
The leading less in <unk>.
It's a bit too late.
The convertible bond issuance.
We would like to thank our meeting at this time and.
And we are confident of our future performance.
Scott Amy.
Aiming to achieve both revenue and profit growth and healthier.
At the same time, and we will continue to pay the value to all stakeholders.
In summary again.
Recap bucket a result that we have presented that.
Sure.
The first day of the profit growth the second is operating cash flow breakeven.
At the same formulation and a fourth one is the opposite.
Flip back.
All of them based on what.
Gotcha.
Detailed financial information.
First of all our press release.
Thanks.
Now we will open up for Q&A.
Thank you.
If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
Please ask your question in Chinese first and then translate your question into English.
We ask you please limit yourself to one question at a time after which you may then rejoin the queue.
Today's first question comes from Alicia Yap with Citigroup. Please go ahead.
Thank you.
Sure.
So that should be bringing home.
<unk> took a simple yes it.
What I wanted to tee shirts, and Oh, yeah, yeah yeah.
Yeah, Bonnie Bao.
That woman is putting this out there.
Sure.
Yeah.
Thank you too.
Yes.
Sure.
My whole body China.
Is that a woman will not come back.
Yeah.
So basically yes.
Got it.
Thanks management and good evening My question is related to the membership.
Can management elaborate a bit.
More of a trend that we have seen for the second quarter in terms of the membership.
And how a membership subscription and the revenue trends.
At quarter and also can management share your thoughts on how you view the membership business longer and what are your future strategy. Thank you.
Okay.
Okay.
We are improving margins.
Arguably some growth.
Yeah.
R&D due to.
People see that.
Sure sure.
The key to us.
In Q2.
Got it.
That's clear.
Sure.
We were able to earn through.
Okay.
<unk>.
Steve mentioned.
Our diesel fuel.
Thank you.
<unk> true.
<unk> argument, if you do not yet voucher.
<unk> net income.
These assumptions to Tom Schall garbage.
Yes.
3%.
Sure Sean.
At this time.
Yes.
Actually more.
In Asia.
Okay.
Finally, let's move on.
Hotline.
Sure.
And on top of these.
The whole darn sure.
Thank you.
Hi.
Thank you Manuel.
And ballpark and night event Bob.
I'll remind you that a lot.
Okay.
Thank you.
We initially assumed.
We have excellent income this year.
Okay.
Thanks Robert.
Okay. Let me answer the question into two parts first I would like to see a trend of membership basis.
First of all for Q2 overall revenue performance.
Our expectation now.
For our members.
So in the past quarters. However, there is some.
Absolutely.
Cyber Monday.
So our expectation Yep excuse me again excellent.
Actual outcomes first.
Hello, Steven.
Even for the year.
Second she.
It was offset through them.
There are limited theatrical release, our revenue online, which triggered a lower number of loyalty and we can broadcast platform.
Ed.
And there are some.
On balance it's a constant debate.
Right.
Operating on that platform.
Also contributed to the second quarter.
Yeah.
China.
And entering into Q3 or is seeing a significant improvement in the membership business.
Because it's very expeditiously.
Additionally.
Summer peak season.
Starting from August .
We've seen a lot of the major titles.
Released online.
In the heart of Kenya, and very blockbuster.
Okay.
A lot between aerie and depth.
Currently overall, we are optimistic.
Is that any of the funding for it.
Hey.
As far as the absolutes.
Subscriber base.
You can see it.
Same to you.
If somebody would try to through.
Probably in the car.
Each measure.
<unk>.
<unk> got an imbalance uva they strongly.
Good luck.
Many annually.
Uhm.
Yes.
A key element in Chamonix.
Batch yet.
That's generally true but.
<unk>.
For the quarter.
Thanks sure.
To be a key metric.
Okay.
Yes.
The only pattern.
Tom.
And then one for you.
Based on the top line.
Okay.
The truth.
Hi, again.
Okay.
Yes.
<unk>.
Yes.
So you've got shrunk.
Indonesia.
Weather challenges.
Donald <unk>.
So choppy choppy.
Yeah.
Youll see that.
Julian.
<unk>.
Sure.
Yeah.
Okay.
Good afternoon.
And you see here at home.
Yes, hi.
User mutual combined.
And as we said like Hong Kong.
<unk> energy.
Pardon.
Yes.
Uh huh.
Gentlemen, anchored.
Jugal.
Just wait for that.
So at some point.
<unk>, yes.
<unk>.
And so you are women.
In Q2.
Hum.
Sure.
Gotcha.
Sure.
And the power to say, yes.
Let me see.
Experience.
Actually one of the foremost.
Because of the Covid situation in China.
Short term debt.
There were some positive impact for example, we have seen.
Separate incidents.
Because of that rebate that is.
That situation, how long it will last us for that carry a ton.
Thank you very much.
I think that situation.
The negative side of it.
Yes.
Take care of Chili's, App and one more.
Thank you Alex.
And healthy development of the test.
And finally with the operation of <unk>.
For the terms of our pricing we have seen that also negatively impacted of our content offerings.
In the last two.
Ah yes.
Yeah.
Approval process of our content business also has some impact as well and also the fulfillment pending installation, but also impacted.
Okay.
<unk>.
And negative impact.
The environment overall.
Okay great.
I will summarize the capture yet.
More on the negative side.
Got it and I'll set aside for our membership.
But currently because of the whole pandemic takes place.
Especially including and.
And.
In the negative impact is flexibility.
Okay.
Sure, Yes special.
Specialty <unk>.
A significant pick up in the consumption of that consumer spending.
Thank you made a positive impact.
So overall speaking.
Net the downturn of our membership business, we are still very optimistic.
Our membership business.
Thanks Sheila.
She is the phone.
Siobhan.
Thanks.
They lag.
Thanks again for.
Thanks again.
Senders, roughly one pressure some hot Hong Kong.
Fair enough.
Yes.
Dws.
Sure.
Sure.
For goodness sake somewhat.
And John I'm sure down the yard.
Sure.
The $2 2 million.
I am sure of that.
Fisher.
Through it all.
Kurt Tjaden scope therefore.
J T shirt.
Sure.
Okay.
Earlier I touched on the negative impact Australia because of that and then fixation.
In the past years, starting in <unk>.
The second half of Q3.
Okay.
Our future we are seeing.
And that's a decrease of the negative impact because of Covid and the rates.
And the overall.
For our membership.
There are two points.
And we anticipate.
It will continue to grow.
And secondly for our arm.
We continue to attack the cancer.
At quarter's end, we anticipate this positive trend will continue in the future.
Thank you.
Okay.
Thank you.
And our next question today comes from Thomas Chong of Jefferies. Please go ahead.
So I think that what they told me they saw what I see right alongside how about that.
Yes.
Okay.
So neither of those fall out.
Some of them.
A couple of pilot.
Thanks management.
My pleasure.
That's not in the prepared remarks.
Our common goals.
One is that our public float will be faster.
Good afternoon.
Thank you.
Yeah.
Yes.
Whereas the documents.
Total single banking.
Sure.
<unk>, starting with Australia.
Hello, everyone.
And you can kind of national.
Cool.
Nonetheless.
Hi.
Our kids.
Okay.
Jean Marc.
Sure.
<unk>.
Sure Mark.
Number one the family.
Yeah.
For the year.
You don't have any capital funding and liquidity issues.
So please.
We decided on the coupon shop, one thing here.
Hi, Charlie.
Yeah, Sean.
Sure.
What's in guidance yet.
The poll on 17.
All of them.
Oh sure with box here.
Yes.
Okay.
Sure.
Should that come down a little bit.
Small shop for fashion point of view from someone yet on that.
Yet you'll have growth Jacob J Columbia.
Yes.
Based on all the potential we have fontana coming down but some.
Got it.
Hum.
Hum.
Adult learners.
Yes sure.
The agenda.
Sure It opens up a new controller.
Yes. The answer is its sharp golf today, Yeah of course, you should get caught Alaska.
Lastly.
Yeah.
When you.
Michelle.
Yes.
For the throughput Savi, let me explain.
How we arrived to the strategy.
Towards the end of last year without adding capacity that will increase R&D.
Sure.
And optimize costs.
We built out the different measures and.
To execute this strategy after the past two quarters.
First for you.
Got it got it out.
What minimum that we intended to achieve.
That's resolved.
We also see it in house.
And that will.
Enabled us to achieve better efficiency and improvement in the in China for example.
Now coming out.
After we have seen.
Yes.
Investments in some of the content that will generate higher <unk> than our positive lead to a higher mark.
Our margin growth, but topic.
Because we've seen a lot of investment that we can gain from the past experiences we know the content with Roy.
Is that in our product the same result, or even better results.
So that's why we think overall is important.
My topic.
Faster and better yield.
And also I think.
This loss amount of investment that we are.
That process even further.
And looking back at the first half of this year.
Actually I.
So some of our investments in content and we also.
Also see some fluctuation in the euro that negative.
Each of these.
And going forward they know it.
The investments.
The industrial area.
<unk> gains higher return.
In the future, which means a waiver.
Again higher efficiency.
Any of the investment.
Going forward.
Thank you. Thank you.
Thank you and our next question today comes from Sean Please.
<unk>. Please go ahead.
Do you have any.
Transition like you say Oh gosh consensus.
I'm not going to go on that ship in the second column, where PHA ghansham.
Okay.
19 subsequently turned towards things that initiation.
But this.
This is not firm yet when I want monthly Oh go ahead.
And now I will translate myself. Thanks.
Management for taking my question and congratulations on Nasdaq's, John cortex, and today, we have now.
That's a 500 million dollar private placement of Congress come out okay.
So could management share more detail with the holidays and in terms of financing activities.
Thank you.
Okay.
Alright, Thanks, Jason This is Sharon so.
So think of it in time for the elegance to respond.
In English.
As mentioned this optum naturally the company hit.
As announced to enter into that agreement with PHP $500 million comfortably assurance and as you know PHA leading.
You mentioned.
In Asia Pacific.
Approximately I think $50 billion.
And accumulated investment with <unk> and they are very active very seasoned investors with unique knowhow in the digital media space towards shrunk.
Historically Chuck electorate.
This is the general background I think this financing illustrates that pag's recognition on companies to improve the fundamentals and we do have improved competitiveness. We have margin expansion, we have been prudent financial healthiness.
Without being said I think.
Most importantly at both sides have conviction that.
Media business still have future has had great future I think growth potential and this is one of the most importantly.
And then another kind of basis I will say that between two parties.
<unk> has been heavily under estimated in one of the catalysts for value recovery.
Probably is the stock is to find a way to solve the current debt overhand is market pick up.
Is it 500 in financing it.
She joined cooperation I think the first step.
Companies to liability management, although it's not enough to solve all the problems.
It will all clear that $500 million.
Only that study, yes, we still have a journey to go to cell phone problems.
During this process, we do need collaboration and efforts from all the partners, including the company, including our employees, including the company's stakeholders in most holders as well.
And with.
With the completion, obviously with the signing of this 100 million of financing.
We are still not in a position to sit back and relax mode.
Particularly true.
Yeah.
Of course, we are very confident that we can solve the technical issues with our collaboration from all parties. If we can recover the companies.
Or does that unlock can help the investors.
As I have the company can help meet investors to gain.
I will say.
I will say.
<unk> reward and returns.
Sure.
So this is all then I will share regarding the.
Our private placement to us the feature some of your future thinking.
Thank you.
Thank you and our next question today comes from Lincoln Korn with Goldman Sachs. Please go ahead.
Alright.
Patricia Smith.
Smith.
How many samples switching.
Yes.
Now when you come out at some point.
<unk> got some particular nuance share so Chuck first of all I mean at.
Mount Yourself, which took a wheel I couldn't petrochemicals.
You too.
Sure.
On the <unk>.
So let me just shift by chance.
Took a 10 year clearly we like the Cheyenne hydrogen for two o'clock.
Sure.
Ownership share control.
So the question I asked about Teekay Corporation with OEM.
Since we have signed the agreement on the company.
That would be two concepts. So how should we think about the future potential collaboration formats and how would the calpine.
In terms of sort of a user acquisition copyright distribution and other potential.
So efforts.
To our financials.
Sure.
A lot of internal data.
Q1, being a <unk>.
Believe me.
But it is absolutely true.
Loans from Brookwood in Colombia.
<unk> com.
How are you sure.
Jerome will be all.
The last few quarters.
Uh huh.
Susan.
<unk>.
Okay.
Sure.
Sure.
Ginger.
Gentlemen, the floor as heat up the tools this is John .
Someone momentum shows that.
T K.
Unusual mentioned.
We want to.
Our plants.
With encore.
Jason <unk>.
So the main country remains nothing.
Nothing.
Yes.
Yes.
Sure.
Sure.
You bet.
Yes.
Should we model that.
We don't untrue.
Yes.
Cool.
Yeah and Keith.
Each year.
Jim neutral now.
Too.
<unk> sure.
Okay.
But when they leave.
Yes.
And Susan coming from Indonesia.
One of this year.
University Commons Chen with <unk> Suisse.
Thank you.
Thank you.
Great.
Yes for sure.
Yes.
DSO in Q.
You too.
Hum.
Thank you Sean.
Okay.
Let me explain or elaborate a little bit more on the <unk> collaboration.
One thing that negotiation process.
Last month, and both parties, who are very who cares and we wanted to create a win win situation.
<unk> ecosystem.
Video space.
It probably won't go too much into the details of the process.
Our steel aspect I wanted to share with you guys first.
Within Amdocs collaboration I E.
Two.
Upright so instead he has some of that.
Content that that would have to license right to distribute.
Using.
Creation of Sawtooth videos, but within that framework, we had a specific event.
Jorge.
Alright pump, which means our preparation for disruption.
Okay.
Permit that we won't take that long form video viewing experience.
For this collaboration.
Which also means that we can use it.
Collaboration.
Many of our very high quality premium content to a beach a broader audience.
Which also means.
We utilized the short form video to <unk> traffic in Q2.
E platforms like long form video and that's one aspect.
And after that it's we're getting the I guess, what the trends are for this collaboration.
That'd be calcium with C R.
Quarter of this year and it.
It had a positive impact from that any of them as far as profit as well as cash flow positive impact because of the collaboration and uncertainty. We also will collaborate in other operational expense.
<unk>.
Potash technology.
With daily operations.
Platform, because we just signed.
Agreement in Q3 in July .
We are getting aims.
<unk> worked out.
No doubt.
And also content.
Starting from I would say yes.
Towards the end of Q3, so you would anticipate more.
And content related to this cooperation outlet.
Starting from that period.
Between 2020.
He has done a nice job.
Sure.
Digital only.
Sure Phil.
Uh huh.
John .
And can you talk.
How much if you could go through that.
EMEA.
Yeah.
That is true.
Sure Jonathan.
EMEA too little.
It's a group of them will be offered.
Within 12 months.
Premiums.
No.
EMEA someplace.
<unk> mentioned in the deck upon yet unknown goal and launching a turnkey partner.
So John you mentioned bulk maybe Peter.
Yes.
Okay.
Hello.
Excellent.
In the future as well.
Sure.
They have homework to Cuba.
From that.
Sure Nathan sure transfer a minute.
With some positive future fluctuations.
Yes.
Could that change.
Right.
On the.
Tom you want to do.
<unk> Com <unk>.
<unk> mentioned encore.
Shop each year.
Okay.
On June two to shareholders.
No.
Right.
Just your.
Intranasal chunky captured a combatant hernia.
Okay.
You heard it from Dr Drew <unk>.
For the Obama Lithia tissue media.
Thank you.
Shiva Shanghai Cleveland from sure.
Of course.
Keith.
Okay.
Right.
And so at one time.
Yeah.
Yeah.
And talking about this year.
Okay. Thank you.
Sure some of the mid to long term views of this collaboration.
First I will share from the industry perspective.
First of all because.
And so both the leading players in the market lineups for smartphones and when it's a long partner. So under this collaboration and very importantly, we're setting rules for the industry and creating a win win collaboration.
But the pipeline.
Basically that demonstrate the very positive.
Painful and symbolic nature of the video business in a long time, which is very beneficial for both <unk> and also for the users.
As for the ecosystem.
And second.
Our creators and the industry.
Waiting to vary.
I will say events are better.
IP solutions, which will push.
The IP protection.
As well as the legal enforcement of our premium long form content and also it will.
To some extent and E T.
Talking about <unk>.
Investment situations short form videos.
And also very importantly, Creator's perspective, I will say and you have more time now.
Trading and more dedicated to framework created.
Okay.
At least our creative talent to be more positive and high quality content to our users and this will also be very beneficial for a guy like.
License photos as.
As well.
Above, whereas the positive impact of course, the video industry and I will share some of the deals for Ice's first of all I would say.
This collaboration and demonstrated the very premium content of ICU.
That night.
History as well as our users.
So demonstrate the monetization potential of our high quality premium content in the future.
Second.
They're just collaboration it will help.
Hi premium content to reach a broader group of.
Users in.
On page six.
The impact of our content.
Also to our increase in number of users as well as members of the platform.
Thank you thank.
Thank you.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mr. Yu for closing remarks.
Thanks to everyone for joining the call. Please contact us if you have any sort of thing.
Within the next quarter. Thank you bye bye.
Your body.
Thank you. This concludes today's conference.
Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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Thank you for standing by.
And welcome to the quarter 2022 earnings conference call.
All participants are in listen only mode.
There will be a presentation, followed by a question and answer session.
If you wish to ask a question you will need to press the star key followed by the number one undergoing from heap pad.
I'd now like to turn the conference over to MS. Shang you Investor Relations director.
Yeah.
Yeah.
Okay.
Yes.
MS Yu. Please proceed.
Thank you operator, Hello, everyone and thank you for joining <unk> second quarter 2022 earnings conference call.
Companies pick off Britney leased today and available on the company's Investor Relations website.
ITE Dot com.
On the call today are Mr. Yu Gong, our founder and director and CEO , Mr. <unk>, Wang our CFO Mr. Hu our.
Our CTO Chief content officer, Mr Wen from Blue.
CTO, Chief Technology Officer, and Nick maybe Antoine our CMO, Chief Marketing Officer, Mr. Doyle Senior Vice President of our membership business and Mr. Young.
Our senior Vice President of movies and overseas business.
So don't look at it.
Of the Companys operation.
Hello, Hi, Keith who will go through the financials after our prepared remarks Kathleen welcome Bill.
Our system well trained.
And the Q&A session.
Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S.
Securities Litigation Reform Act of 19.
But we're looking statements are subject to risks and uncertainties that may cause absolutely.
Differed materially from our current expectations potential risks and uncertainties.
And now limited to those outlined in our public filings if you get to see it.
<unk> does not undertake any obligation to update any forward looking statement, except as required under applicable law with that I'll now turn the call over to Mr. Bob.
Yes.
Hello, everyone.
Very pleased with.
This opportunity again to the pump.
Move outs in the second contract.
But more importantly shell.
On the future.
In the second contract some company Bruce soon thanks.
Okay.
As well.
As we all know.
There'll be some might call you commented on the call.
In Q2.
Impact of most of their company.
This.
It should make a challenging environment.
Still made achievements in the fall.
C aspects.
Our membership business continues to grow year over year.
We generated non-GAAP operating profit for two consecutive quarters.
<unk> achieved sequential growth in Q2.
C.
All cash flow improved significantly.
We achieved a positive operating cash flow for the.
Right first time.
Yes.
The result of strong brokerage ship.
The strategy that centers are.
The cost of some inflation.
The improvement.
Such strong results also demonstrated.
<unk> of our business.
Kentucky of Congress.
Uh huh.
Our operational targets.
Sigma.
Improve.
For natural health.
It will cause us to fit our changing market environment.
While still in the permanent use of our second quarter demonstrated that Ikea have completed it.
Some technical nature.
Great.
Ours.
Don.
Paul.
It also gives us the confidence to upgrades of strategy.
From the fourth.
Longer this year.
<unk> reached.
Will fuel our business growth and the improved off of mental health.
Hi.
Michael <unk>.
Come across.
Last thing from me.
It has the following features.
One.
To pursue growth, but not at the handset.
That's it.
<unk> offer significant cash flow.
We will face culture.
Our growth opportunities.
<unk> investment.
Investment cycle.
Cash and investments rather.
Most to play in.
Back to more of that in <unk>.
Yes.
The project will be a higher degree of certainty.
Half of our blocks.
True.
<unk> growth.
Profit and revenue.
Profits should grow faster than revenue.
It might be revenue growth opportunities now to reduction in hydro operation.
Great.
We will maintain the current bidding.
The bad news is overdone.
Okay.
No structure in.
China and India.
With passion.
Operation more efficient.
See the value provided to the users and the customers.
Whoa ever faster than the properties, we will produce more.
More than ever premium content.
Great memory.
Our users and our customers.
Nitro returns.
Sure.
Dot com.
Last year.
Multibank.
Based on us.
The increase of.
Youll see us customers.
Stakeholders with hopes that dot com growth strategy.
Will that improve the health of our business.
Turning to our profit and revenue growth fueled trucks.
Now, let's go through the performance of each business segment second contract.
Yes.
Something with numbers.
Yes.
Membership is the most important.
Plus.
The term mines will go out strategies.
Locate the focus.
Pulp and <unk>.
The continuous business.
Business growth.
Second contract.
Membership revenue.
RMB, one 3 billion.
7% year over year.
No.
Right now in the World.
Of total subscribing members for the second quarter was.
It's part of the season in a.
Month to date.
Was RMB.
14 pumps.
I see.
As a person.
A year.
Uh huh.
<unk> maintains a healthy.
Growth rates.
8%.
For consecutive quarters.
But positive.
<unk> was.
Contributing to our new it launched a membership package targeting PD.
Consistent.
Diversified premium.
Content offerings.
In fact, the future of our refined operating strategy that to increase the amount of orders and patient.
Members.
First.
We are actively 12 acquisition of new members.
Devices.
Packaging as well.
On TV users.
We adopt.
Please union membership playing in rate per se.
These benefits on TV side.
Throughout the member.
There is no value on <unk>.
TV is the months of axiom of numbers on <unk>.
<unk> increased 15.
15% annually.
Yes.
Segment.
We continue to refine our operating strategy.
And the pain references.
Great.
For the pension revenue number growth underpinning that Trump users.
Another driver during the quarter with premium absolutely.
As we continue to.
Diversified and high quality content.
Who knows.
The amount of different will serve us well.
For example.
And the rate resonate.
And how do we help sorry about the.
David.
Great.
Wow.
And numerous ways.
The drama harvest phase.
Alright.
Positive reaction as well as revenue are permanent.
It is a top priority.
Got it.
Domestic ecommerce in the first half of 2020.
A new tool with a score of eight figures.
I will generate the highest membership.
Oh, sorry.
At broadcasting.
As Tom cruise live content.
Obviously, it's up.
Sure.
Access.
For members we have matched.
Our regional multi receiver at wholesale provide useful, but let's hope China.
And that's a new tool.
Given that you know in late June numbers.
Given discriminate FX.
Perfect.
Sure successfully attract over one 3 million members.
Okay.
In addition to.
To strengthen membership.
No benefits in addition to.
Greetings.
Fair enough.
Alright.
The largest.
Marketing campaigns, such as <unk>.
Number of benefits.
Super.
Okay.
Corrado provide members with the various benefits in that field.
Costs are wider.
Whereas for us.
In the second quarter number.
Yeah.
Over six times.
Hi.
Looking ahead.
We will continue to work with.
High quality of premium content.
Two nights itself terminal.
Hum.
Perfect.
Okay.
Back to your leverage whereas content promotion channels that you have.
Yes.
<unk> expenses.
Our premium content. Meanwhile, we will continue to improve.
Our recent initiatives.
<unk> truly increase number.
Value.
Right.
From.
Yes.
No not now.
That continues to improve.
On the monetization.
<unk> suites.
Moving on to content.
We insist on.
Why the yields are high quality premium content.
Caters to.
Differentiated.
Remarks.
Improving operating efficiency efforts.
The quality has become more streamlined.
<unk> key words.
The initiatives.
Our content pipeline through that.
Have a premium content.
It makes us.
I think youll related.
During the second quarter, we maintained all year.
Our ship Felicia our costs keep our creative team and matches.
Our topic swaps I'll come to.
Yes.
And what they are.
Number one.
St.
We are confident we are making.
The measures for each group.
Thank you Mike.
We maintained the highest.
Shell flowback drama.
In terms of the in terms of effective.
Despite the number of visits.
Well in the market.
Our modular shelf wear applications.
Moving to the animation.
Also question first.
Yes.
Meanwhile.
Two months from now.
Demand for premium content.
High quality content libraries continue to show positive effects.
Sure.
Market share of library content also number of marketing.
Yes.
I'm pleased that we received from you.
Engagement.
Perfect.
Apply of high quality content.
Our improved.
<unk> related cost shows four key content categories.
A lot of permanent book number where it is so in addition on the children's content channel.
Improved annual.
Sequentially.
Secondly, we.
We are continuously creating original content across key areas.
Claims.
Included in that.
Rich mix.
The Princess twitching.
Thank you.
Okay.
No it will be on the edge well over.
About 158.
Leaving.
We are.
It's one of the main contributor.
Maybe bulk opiates.
Quarter, four treatments and content.
Wow.
And in Asia.
True.
Yes.
Yes.
Maintenance.
Compensation.
Membership business.
For context, one of our key strategy appropriately.
Taking a month as opposed to <unk>.
<unk> strategy is to drive.
Hello.
Building on the.
Throughout the season.
This works comfortably whatnot.
Traction with this we obtain titles.
During the second of partner.
Our popular already small variety shows.
Our lithium EBIT.
Including China.
China too.
'twenty two.
Husky's adventurer.
Uh huh.
And then.
Thank you.
Among these.
So that's not of China with London.
We maintained a high popularity of from crude oil shipments.
Number of pumps.
So talk to us.
Carlyle's.
One reflection of FIFA ultimate team.
Adventurous also.
Robot on.
Multi multiple.
Third party.
Performance.
Vertical content.
Our model continues to meet a deeper.
13 months.
Of users push with Union.
From now on.
Telstra introduced.
No repurchase.
<unk> interactive.
<unk>.
<unk> provides.
Mark.
Yes.
Rob.
Increased audits.
Turkey the paycheck.
Yeah.
It's still possible.
Wow.
Seven.
Interactive features.
Until mid 2018.
We did find new vessels.
It's fine.
Preference of downtime or extra audit.
Someone on vacation.
All of the years, we have.
Revenues are there.
The improvement in the quality of our premium content offerings.
Paul.
So popular.
Popularity back.
In storage, so macro indicators the popularity of our content.
I think cosmos.
Gross.
Popular landscape impacts call.
Faster.
Mandela Highway the Congress.
Industrial users.
Among our content offering now.
Hi folks.
That drop 10 following.
Following up on your levers yet index call on that.
Sure.
Yes.
While our loss for this year.
Sure.
As long term.
Taylor.
You bet.
Sure.
Troll audience growth.
The other one is August .
So both John and Mark.
Now between salary.
Steve.
LNG from Sweden on sales growth a trend towards younger affiliations disrupt first a reasonable framework.
Such landmark.
Scott.
Demonstrating the exceptional.
The quality of offers.
All of our content.
Highlighting the Comcast by users.
We are now even more confident with.
Our small comes into production.
Affiliate fee.
Our pipeline is Pennsylvania, Florida are resolved.
Great.
Look for us to bring that worse selection of high quality volume.
Volume for us.
For the second quarter of two volume.
And then it's fast credit for that.
Isn't it.
Okay.
Thanks will.
Okay.
Okay.
Got country Young generation August well maintain premium mainstream audience.
This improves.
The harvest of tumors.
Thanks, Bob.
Yes.
Youre live on seasons.
Sure.
Yes.
Hum.
You too.
That's wrong.
Is the new CFO of the meter.
Well the trends in the first quarter.
Well, we're already shows because they are.
Hi.
Publish Iq.
Continuing to.
No.
And Youll gyros from a second half ultimate.
Great.
A number of brand new shows the comparable pool.
Of the year, including original sow cost cap so any decision.
Yes.
Susan.
Yeah.
And our folks.
Neil.
And initiative.
Tubing pumping.
The U S.
Okay.
IP and monetize it.
Capacity.
Unlike many of our popular painful.
There you will see.
During our summer season.
Understood.
<unk> works for them.
Not between salary.
Sure.
This was due.
It's in process.
That's number one.
Hi.
Restaurant growth.
Also prompts to long run.
Perfect.
Sure.
Apart from that.
We have seen with the RP panel.
Overall.
Sue Murphy months during the summer season.
In a moment we are convenient.
As the summer demand.
Doug.
Our consumer demand.
Pete.
Mammals.
Moving onto advertising.
Backhaul Boston.
Visits.
In top tier cities, including Shanghai Beijing.
Further pressure on the overall business.
Harsha.
Brian .
All of our competitors.
In our markets.
A similar trend.
However.
Right.
These games.
Pushing for one.
So progress.
Perfect.
So again too soon.
No more costly.
So our predictions.
John .
Manage this will grow.
All of our initial plan.
53% sequential rate is challenging.
Challenging environments.
Performance.
Increased accounts Kristen.
The covenants.
This was mainly in the disease.
Occurrences.
Identification of user growth.
Right.
Our solutions for key accounts.
How do you post election.
Our core values.
Technical innovation makes it possible to bring wonderful building.
Based upon our user.
Yes.
Evolution between our companies.
Perfect.
<unk>.
Production of Brian you opened in.
<unk>.
I suppose what drama the loan.
With us.
Yes.
Innovative.
Alright, Tony format.
Right.
The average.
Well that axiom axles increased 20% compounded <unk>.
Washington.
Any thoughts.
Mainly the onslaught of new.
And that permits both.
Thanks.
OFC.
Right.
Maintained its solid momentum.
Continue to increase the odds.
Our long term value global English equal.
Ecosystem.
The overseas membership revenue recorded annual.
Annual growth.
From a nice increase in paid subscribers.
Yes.
We've watched Keith title.
Kim.
<unk>.
So Steve Armstrong County.
And southern Ontario.
Armstrong match.
Yep.
This is Carlos upheld.
Due to a pub such fees.
Attracted a large number of yours.
Advertisers.
Especially in China.
Itself.
So the second half of this year.
We will look to expand.
The user base.
Each in commerce.
We see both growth.
Market position.
Markets.
Right right.
So rapidly to annual growth in both membership and revenue.
Revenue.
For the second quarter was over five.
Okay.
The user engagement.
Chris.
On a sequential rate Archie lives.
No chair Cps to.
Appreciate it from the user base.
The overlap between <unk> and.
Oh.
Our main app.
Barrett.
At low level.
Connor.
We're not less than 4%.
With this team.
Okay.
Okay.
Consumption behavior.
Revenue model.
Elias.
Great.
Completely.
We've got major apps.
Packaged tour.
Great.
And potentially in the future.
Yeah.
As you know, we announced that comes in and the lessening of competition.
In July engage with us.
Select comes in between.
That enables distribute unmet need.
Okay.
Content is demonstrated both time.
Working collectively to create.
Both of those.
Sir.
Thank you.
And the second group for the industry.
Great.
<unk> sarcastic.
The value of the combination.
Sure.
Now come from that as well.
Yes.
Thanks.
Now Jonathan.
Our premium long form video content.
<unk>.
We are unlocking new opportunities against that.
Hi.
Carriage fees.
In total the absolute basis.
Rich the ecosystem.
Brought in.
Optimism.
Increased biodiesel.
With our new oncology.
Core operating strength from both products.
Thanks.
Starting to see.
Overall.
Results in the second quarter with SMA engaging encouraging.
Yes.
Actual.
In the case of structural challenges from the macro environment.
You can think of it improve from.
The mitral valves over excluded incentive covenants maintain.
Industry, leading position.
The result.
Resolved.
Our strong professionalism.
The team.
Exactly.
Sure.
As well as.
Our strategy focused on cost of the combination.
The improvement.
The old truck.
Upgrade unit comp.
Growth strategy.
To generate sustainable growth.
non-GAAP operating profit.
Comedians in provide more premium content to 'twenty gives us frankly.
That is the goal.
<unk>.
Pretty neutral.
Culture is it months.
Having comfort with that level.
Accretion bump Trump.
Okay.
Yes.
No.
Thank you.
Thanks to Mexico.
Hello, everyone. This is June .
To start the financial section I would like to highlight four key items that we have delivered.
First.
Profit growth.
Second it's the operating cash flow breakeven sure.
Upon the rating.
It's the optimistic growth outlook based on our comp strategy as Mr. <unk> just mentioned.
Now with these four items in mind I would like to move into the details.
In the second quarter.
R&D at $6 7 billion revenues and RMB $344 million non-GAAP operating profit.
At the same time achieved quarterly operating cash flow breakeven.
Yes.
Mr. Hu mentioned this is remarkable without because we fight against the gravity of macro downturns throughout the quarter.
For the revenue line no damage of service revenue was RMB, four 3 billion up 7% year over year, mainly driven by arm <unk> average revenue per membership.
Solid performance on the ambition for revenues was partially offset by the weaker non membership service revenues due to the challenging macro environment.
Let's now move to the cost of expenses.
In the second quarter cost of revenues was RMB five 2 billion.
Daniel cost saving of RMB, one 6 billion down 34% annually and 12% sequentially.
The common cost a significant component of cost of revenue.
24% year over year.
Delayed several top shelf for the first quarter.
And it was obvious that our gross profit margin reached 21% in the second quarter in the cockpit.
In the past quarters, namely.
7% to 12% to 18% then it actually.
One person in the latest quarter were selecting functionally.
Our line of our company.
Meanwhile, we kept our spending discipline and stabilize the total operating expenses in the second quarter.
No.
And at the gross margin and disciplined expense control.
<unk> contributed <unk> <unk>.
Profit tension.
For the second quarter non-GAAP operating profit was RMB $844 million.
5% quarter over quarter.
At the end of the second quarter the company had a cash.
Current restricted cash and short term investment of RMB, $4 9 million compared with RMB five 2 billion this quarter.
Manage our operating cash flow, while achieving operating cash flow breakeven for the first and second quarter.
Today, we also entered into an agreement with the leading less in Asia Pacific.
500 million convertible bond assurance.
We would like to thank our many investors.
And we are confident of our future performance.
Scott.
To achieve both revenue and profit growth and healthier.
At the same time.
We will continue to play the battery to.
To all the stakeholders.
In summary, again, we.
Cap book at a result that we have presented to investors.
Firstly of the profit growth.
Operating cash flow breakeven.
Third is the former rating in the footwall of the lift that well.
All of them based on what strategy.
But our detailed financial information.
First of all our press release.
Thanks.
Now we will open up for Q&A.
Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
Please ask your question in Chinese first and then translate your question into English.
We ask you please limit yourself to one question at a time afterwards, you may then rejoin the queue.
Today's first question comes from Alicia Yap with Citigroup. Please go ahead.
Thank you Sean.
Sure Betsy bringing home.
Took a simple yes it.
What I wanted to shift things about yeah yeah.
Well, you'll find out for sure Dan Gladney time.
That woman swing factor.
She should anything yet.
So it sounds to me too.
Sure.
A whole bunch of Ana Paula.
Well they will not come back.
Yes.
Thanks Suzanne.
Yes.
Yeah.
Hum.
Our management good evening My question is related to the membership.
Can management elaborate a little bit more of a trend that we have seen for the second quarter and comes up the membership.
And how a membership subscription and the revenue trends in the quarter and also can management share your thoughts on how you view the membership business longer term and what are your future strategy. Thank you.
Hello.
Got it.
We are pleased with margin.
Arguably some people.
R&D tool.
To vote for them.
So sometimes you see that.
In Q2 over Q2.
That's clear.
<unk>.
<unk>.
Okay.
These are.
Our diesel fuel.
Thank you Dr <unk>.
Do you assume for argument economic boom voucher mentioned income due to assumptions to Tom Schall garbage.
Yes.
Nutrition shop.
At this time.
Actually more.
More.
In Asia.
Okay.
Infrastructure.
Thank you Melissa.
Good luck.
Sure.
Thank you.
The whole darn sure.
Thank you.
Hi.
Okay.
Transient Manuel and thank you Bob.
Operator.
Thank you.
We initially assumed.
We are just working through.
Okay.
Hey, Sean.
Okay. Let me answer the question into two parts first I would like to see playing defense of membership business.
First of all for Q2 overall revenue performance.
Our expectations are for our members.
So in the past quarters, however, there's some reality.
And the estimate.
Cyber Monday our.
Our expectation yep physically again excellent outcome.
Outcomes first.
Get to the low season for the year.
Second.
And then there are limited.
For Moody's.
Our online which triggered no.
One example of how we can broadcast platform.
At this time.
And there are some relatively constant debate.
Sure.
Updates on that.
Also contributed to the second.
Yes.
China.
Entering into Q3 or is seeing a significant improvement in the membership business also because.
Additionally.
Summer peak season, so starting from August .
We've seen a lot of the major titles.
Believed online.
In the heart of Kenya, and very blockbuster.
Online sales are.
The lost between Aerie and depth.
Currently overall, we are optimistic.
And your performance.
Hey, Scott.
Absolutely.
Subscriber base.
We can see.
Okay.
Two three.
Probably in the country to country.
But in fact, we have.
And Bunge Uva is strongest.
Good luck.
Mainly annually.
Our EBM quota.
A key element in Chamonix.
Batch yet.
Rockies, yet, but generally June <unk>.
For <unk>.
Thanks, Chris.
To be a key divestiture.
Okay.
We are.
The only thought I hope.
Got it.
Please go ahead.
Yes.
We will take some time.
Okay.
But.
The truth.
Okay.
And then suddenly a fault.
Yes.
Yes.
So you got it.
Maybe a new job.
Charlie.
Yes.
For.
Sulfate choppy choppy right shops.
Yeah.
When do you see you will see that.
Okay.
Jim.
Jimmy the actuals.
No.
So I think yes.
Yeah.
Thank you Gilles.
Yes, yes, yes.
Meantime, mutual combined.
And as we said like Hong Kong.
Call ended.
Amit.
Yes.
Uh huh.
Accurate.
So we pulled up.
It's obviously a topic on <unk> yet.
<unk>.
Paul.
Women that can come to you too.
Hum.
Sure.
Sure.
The power to stay.
Yes.
That makes sense.
Yes.
One of the foremost.
Because of the Covid situation in China.
Short term speaking there were some positive impact for example, we have seen.
Separate incidents.
Because of the profile.
That situation, probably will not carry a ton from.
Anticipate much.
Overall speaking I think that what that situation.
Right.
Yes.
That figure to ask one more.
Amy pretty balanced.
And healthy development of the <unk>.
Yes.
And finally with the operational side.
Or are things we have seen that has also negatively impacted our content offerings.
Then in the last two or three years.
As.
Approval process.
The business.
Also has some impact as well.
Consumer spending modulation, but also impacted.
Okay.
Dana.
The negative impact of macro environment.
Outlet.
Okay great.
To summarize the caf two or three years out.
More on the negative side.
Got it and I'll set aside for our membership.
But certainly.
Because of the pandemic.
Specialty including and.
In that negative impact is approximately six eight over that.
At the same period.
Specialty somewhere with Hulu.
We've got a significant pick up in the consumption of the consumer spending.
Okay, that's fine.
So overall speaking less downtime of our membership business, we are still very optimistic.
Our membership business.
Sure.
She is the phone.
Siobhan.
Thanks.
All right.
Thanks again for that agenda.
Send virtual sleep architecture itself the wholesale fiber.
Yes.
Dws.
Just for clarity.
Sure.
Hum.
Yeah.
Hi, John .
But they are true.
Sure.
Thank you.
Yeah.
But I'm sure that some people.
Future bump it.
They are all doing.
Therefore.
To its future.
Thanks Shirley.
Okay.
Earlier I touched on the negative impact Australia because of that equation.
In the past years, starting in <unk>.
Half of Q3.
If you check in.
That's a decrease of the negative pretax because it's so big and the rate.
And the overall.
As for our membership.
There too.
And we anticipate continuing to grow.
And secondly for our armed.
That continues to adapt continues to grow.
Borders and we anticipate this positive trend will continue.
That's fine.
Thank you.
Thank you.
And our next question today comes from Thomas Chong of Jefferies. Please go ahead.
Well I think I'll take.
Or are they totally based on what I see right now.
Hi, Bob.
Yes.
So neither of those fall out.
But there was still a couple of quieter.
Thanks, Mike.
My pleasure.
Not in the prepared remarks.
A common goal.
One is that our public float will be faster than our revenues.
Sure.
Yeah.
Yes.
However, as the documents.
So the single button.
T shirts union.
With a full year.
It was true.
All corners combat Natura.
Sure.
Yes.
<unk> got plenty of quarters for sure.
Yes.
Campbell.
Two more.
Sure Todd.
Sure.
Sure Mark.
No.
Yeah.
Sure.
Young Pascal inhibitor.
Liquidity issues.
So please.
So independent of coupons out one thing here.
Hi, Charles <unk> Colvard.
Yeah, Sean.
No guidance yet I.
I think on the whole on 17.
Yes sure.
Sure.
Okay.
So often times don't answer correctly.
Albeit small shop deals.
So that's important therefore someone yet and that May go wrong.
You'll have growth Jacob J got Colombia.
On the call.
Essentially what we are far from done.
Got it.
Hum.
Hum.
Adults.
Yes sure.
Actually the suggest that hurdle.
Yeah.
Total Ethernet.
Now I'll take a shot at golf today Ken.
Of course, you should get a cargo.
Yes.
Lastly in.
Okay.
As with prior years.
We closed up shop.
For the proof of our strategy.
How we arrived to the strategy.
<unk>.
Towards the end of last year without adding capacity that will increase our efficiency and optimize costs.
We filled out the different measures.
To execute this strategy.
After the past two quarters, we've successfully kind of figure it out.
What is the minimum that we can get to.
<unk> achieved.
They stopped.
And we also get an out of China.
Hi Tech enabled us to achieve better efficiency and improvement in the future for example.
We now can go.
After we have it.
Hey.
Investments in some of the content that will generate higher ROI than our positive.
Chile is a higher margin.
<unk> gross profit.
Because we've seen a lot of the investment.
We can gain from the past experiences we know the content ROI.
Hi.
Is that in our product the same results or even better results.
So that's why we think overall, it's always been my profit will grow faster than revenue.
And also I think.
A reasonable amount of investment.
That process even further.
And looking back there.
First half of this year, we actually.
Some of our investments in content and also see some fluctuation in the euro.
That negative.
Hum.
It is such a big day.
Going forward they know it.
The investments.
The industrial area.
Gains higher return.
In the future, which means I'll leave it there.
Again higher efficiency.
Any of the investment.
Going forward.
Thank you. Thank you.
Thank you and our next question today comes from Sean <unk> with <unk>. Please go ahead.
Do you have any transition like he may have gone from sensus.
I'm not going to go on that ship home second gala, where PHA ghansham.
No no no.
19 subsequently turned towards things that initiation.
And I said that in Chicago, when our monthly L.
I'd now like to translate myself, Thanks management for taking my question and congratulations on Nasdaq's John Cutback.
We have announced.
The foundry and then you'll have some of the private placement of Congress come.
Okay.
So could management share more details.
And in terms of financing activities.
Thank you.
Yes.
Okay.
Alright, Thank Justin this is Jim so.
So think of it in time for them to expand.
In English.
As mentioned this optum naturally the company.
<unk> announced two entered into the agreement with P&G upwards of $500 million competitively assurance and as you know phe is leading.
You mentioned that in Asia Pacific.
Approximately I think $50 billion.
And accumulated investment that you're going to get in and they.
Very active very seasoned investors with unique knowhow in the digital media space towards strong.
Strong historical track record. So this is the general background I think this financing illustrates key recommendation on companies to improve the fundamentals and we do have to improve competitiveness. We have margin expansion, we have improved our financial healthiness.
With all that being said.
Seth I think most importantly at both sides have conviction that.
<unk> media business still have future I guess.
Great future.
I think growth potential and this is one of the most important thing.
Another company <unk> I will say that the two parties.
<unk> has been heavily under estimated in one of the catalysts for value recovery.
Italy is the stock is to find a way to solve the current debt overhand is market pick up.
This 500 financing yet a joint cooperation I think the first step.
The liability management.
It's not enough to solve all the problems.
It will all clear that $500 million.
Yes.
Yes, we still have a journey to go to a cell phone problems and during this process.
Do you need a collaboration and efforts.
All the partners, including the company, including our employees, including our company's stakeholders in most holders as well.
With the completion I will say with the signing of this 500 million financing we have.
Still not in a position to sit back and relax mode. We are strictly true what how does that.
Of course, we are very confident that we can solve the technical issues with our collaborations from all parties.
We can't recover the companies.
All of that is unlocked can help the investors who ever kept the company can help investors to gain.
I will say.
I will say fifth Paiute reward and return.
Great.
So this is all that I will share regarding the <unk>.
Our private placement to us the future some of your future thinking.
Thank you.
Thank you and our next question today comes from Warrington Korn with Goldman Sachs. Please go ahead.
Alright.
Official would explain.
When you shop on switching.
Sure.
Kinetic.
<unk>, particularly the new ones, so tonnage share switch on switch off.
The amount you show, which took a wheel I couldnt petrochemicals.
Sure Thomas hopefully around the bush.
So let me just hit that you took the time to close.
We like the selling Johan <unk> to acquire <unk>.
Sure no pre ownership I mean, if you're comfortable.
So the question is about <unk>.
Question with OEM.
Since we have signed the agreement the company around video conference. So how should we think about what the future potential collaboration formats and how would it help us.
In terms of the user acquisition copyright distribution and other potential.
<unk> efforts.
To our financials.
Sure.
A lot of its mobility.
Q1, being a fully believing.
Believe me.
But.
It was absolutely true.
Sure.
From Brookwood in Colombia.
How are you sure.
Some children with you all.
Handle a few quarters ago.
Hum.
Please go ahead.
<unk>.
Okay.
Sure Jay.
Sure Peter.
Jim.
Sure.
Japan is one of the tools this is John .
Will someone move.
Sure.
Can you comment on.
Unusual mentioned autonomy.
Chippewa plant arc.
With encore.
Dave Bloom.
The main factor the main nothing.
Okay.
Yes.
Sure.
Sure.
You bet.
Yes, it was actually made that top medical we don't Im.
Sure.
Yes.
Cool.
Roughly yes.
Yes.
Each year is unchanged.
No no.
Well no.
Sure sure.
Okay.
But when they leave.
Yes.
And Susan coming from Indonesia.
I don't want this year.
Users can share with you all.
E E.
Thank you.
With the science.
Sonny.
Yes for sure.
What we do.
Dsos in Q.
You too.
Thank you Sean.
Okay.
Let me explain or elaborate a little bit more on that so in cooperation.
We went through the negotiation process in the past month and both parties were very courage and wanted to create a win win situation for.
<unk>.
Our system has bought four video space.
It probably won't go too much into the details of the process.
Our steel aspect I wanted to share with you guys first.
Within Amdocs collaboration I E.
Operator.
Uh huh.
Upright so instead he has some of that.
Content that has a license right. So it just should be.
The other thing but.
Creation of fluctuate videos, but within that framework, we have specific I think Jorge alright.
Alright, chunk, which means our reputation for excellence.
Fox Sports one.
And the permit that we won't take that.
That long form video viewing experience.
For this collaboration.
Which also means that we can use it.
Our collaboration for many of our very high quality premium content to reach a broader audience, which also means.
The short form video to <unk> traffic in Q2, I E platforms like long form video.
And so that's one aspect.
And I've been asked that we're getting the I guess, what the terms are.
This collaboration.
That'd be south you would see.
Third quarter of this year.
Had a positive impact for revenue as far as profit as well as cash flow positive impact because of the collaboration and certainly also will collaborate in.
Other operational front for example.
<unk> technology.
With daily operations.
The platform because we just signed.
Agreement in Q3 in July .
We are getting.
<unk> worked out.
<unk>.
Vote out product and also content starting from I would say.
Towards the end of Q3, so you will anticipate some more.
And content related to this cooperation.
Starting from that period.
Between 2000.
<unk> economy.
Let's see.
Yes.
Sure.
Yes.
Perfect.
Uh huh.
John .
And can you talk.
How much would you go through that.
On the other.
Yeah.
We're working through.
Sure sure.
Yes.
Please.
A group of them will be offered within 12 months.
No.
EMEA say someplace in the deck upon yet unknown goal and launching a turnkey partner.
So tremendous financial but maybe you can kind of.
Okay.
Hello Hello.
Excellent.
The key as well.
Notably our number two or three.
Hum.
Q1 was a clear trend from that.
Sure Nathan.
Sure.
Hum.
Cloud based on <unk>.
Dr <unk>.
Yes.
We can achieve.
Downstream.
Yes.
Tom you want to do both.
Absolutely.
<unk> metrics.
Shop each year.
License.
Due to the shelf often spun off.
Right.
Yes.
Sure sure intranasal chunky charter to compare.
Okay.
You heard it in <unk>.
Thank you.
Yes.
Thank you.
Yes.
Shiva Shanghai Cleveland funds.
The name <unk>.
Yes.
Okay.
Right.
In Q1.
Push off net.
I'm talking about.
Yes.
Okay, Let me share some of the mid to long term views of this collaboration.
First I will share some industry perspective.
First of all because.
And talking about the leading players in the market <unk> for a smartphone and wellness partner. So under this collaboration and very importantly, we're setting rules for the industry and creating a win win collaboration.
For the platform.
Basically that demonstrate the very positive.
Painful unsurpassed image of the video business.
Which is very beneficial for both <unk> and also for the user as well as for the ecosystem.
And second.
For creators and industry.
Waiting to vary.
I will say events are better.
IP solutions, which will push.
The IP protection.
As well as a legal enforcement of our premium content and also to.
To some extent and deep team.
I was talking.
You're backing in.
Investment situations short.
Corporate videos.
And also very importantly, forget Creator's perspective, I will say they have more time now.
Okay, and more dedicated to bringing more creative.
And at least our creative talent to be more positive and high quality content to our users and this will also be very beneficial for a license.
License holders as.
As well.
Above, whereas the positive impact of the video industry and I will share some of the ideas for Ice's first of all I will say.
This collaboration has demonstrated a very premium content of H E R.
Nice.
History as well as our users.
So it demonstrate the monetization potential of our high quality premium content in the future.
Second.
It was just collaboration.
Hi premium content to reach a broader group of users.
Great.
Bigger impact of our content.
Data will also drop in number of users as well as members of the platform.
Thank you thank.
Thank you.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to MS. Yu for closing remarks.
Thanks to everyone for joining the call. Please contact us if you have any sort of.
So the next credit cycle.
Yeah.
Thank you. This concludes today's conference.
Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.