Q3 2022 iQIYI Inc Earnings Call
Thank you for standing by and welcome to the I T E third quarter 2022 earnings Conference call.
All participants are in a 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 on your telephone keypad.
I would now like to hand, the conference over to MS. Shang you director of the company. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining <unk> third quarter 2022 earnings Conference call. The company's results were released today and are available on the company's Investor Relations website at IR E arc com.
For our call today, our CEO , Mr. <unk> will give a brief overview of the company's business operations and highlights followed by our CFO , Mr. Qian Wang who will go through the financials.
After the prepared remarks, the senior management team will join Mr Ghosn, and Jim and 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 statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Well control.
Uncertainties in food and not limited to those outlined in our public filings with the SEC.
<unk> does not undertake any obligation to update any forward looking statements, except as required under applicable law, but that I will now turn the call over to Mr. Kum.
Please go ahead.
Hello, everyone.
I'm very pleased to take this opportunity and we'll report on all programs.
So I'll call her on the shell all deals on the business.
Offers in the first three quarters this year he.
<unk> has completed a I call it.
Connie.
Got it wrong.
Given this performance by ECB the targets, we set at the beginning of this year.
There are two parts to this iconic are wrong.
We have been growing the non-GAAP operating profit for Falcon faster you haven't called her starting from Q4 of last year and for the first three quarters. This year.
Achieved RMB.
And the one 2 billion.
non-GAAP operating profit a sharp reversal from the operating loss of RMB, two pronged Y O y.
Her out last year.
non-GAAP operating profit in Q3 alone.
It is RMB 500 meeting.
Meanwhile, we generated positive operating cash flow for two conductive called her.
Yeah.
Second our market lead.
Market leadership remain unchallenged and our market share in September actually Keith historical.
Hi on the content side according to <unk> data.
We remain number one in terms of effective we do really well all equals <unk> drama.
More than all competitor in the second and third players combined.
Well the mobile user.
The mattress side.
Work also number one across called matrix, including user base user engagement and user stickiness.
All subscriber base has grown from 90 506, mainly.
So that hand tools 100.
Pond to mailing.
September .
We are presenting.
Sure.
Exceeding 10.
All right.
Cool for Nashville perform that well gain market.
Market share.
He is a long term commitment to always adult content.
Glad to see that the origins all content has become a main contributor to all companies that supply.
The drama.
We launched in Q3, 65%, where our original content.
If toric hi.
Meanwhile, Duffy the ratio of original content improved.
EBIT cut into that as many of you know she is the popularity index is influential indicator of content popularity.
That's six blockbuster drama.
Popularity in Jan.
Also over 10000 in our history, we had launched a fourth this year on a two in Q3.
Those are all just all original titles.
Hundreds of millions of users.
On the origin of the old contest blockbusters, which drive up drive user base and our market share and that translates into lost yield improvement in our financial result from loss to a major part of our policy.
Policy.
In a single year.
Behind the title is all Youll need folks who comes into production.
Accretion, which is I'll call them.
Competitive edge.
As such our iconic.
Iconic.
It's very difficult for others to replicate.
Since it has been all year so.
Park Hyatt <unk>.
It tends to have a library of original content.
Okay.
With our original content as a key to our success. We will continue to ask you all to all come growth strategy. This means thinking around new growth path.
<unk> overall operating efficiencies enhance the content investment.
Marketing spending.
Uh huh.
Our pulp grades manner.
This strategy, we will continue to provide users with appealing content.
So how rail services and further drive as a healthy development.
Oh goodness.
Now that schools will not detail the procurement of up in that segment.
Membership services.
Membership.
As it has always been our most important business segment.
Not too low all the strategies.
Oh, okay.
To support the continuous growth of our membership isn't it.
Average daily number of total subscribers in Q3 was 100 and the last meeting.
Net gain of two point, some muni compounds leaves Q2.
<unk> was strong in particular.
The number of subscribers and does that and also September .
106.
Six mailing.
Ooh by over 10 million compared to June <unk>.
And the over two 6 million compounded tool last September .
We are happy to see that even after a thorough locations added subscribers continue to grow in September for the first time in the past four years and the average the average daily subscribers of this September also reached its highest level.
Compounded tool owns that popped up some bars.
Oh, an atheist, that's awesome subscriber numbers that strong momentum continues.
Such success was mainly driven by premium content, indicating that youll still have strong I'd be tied in painful excellent historic talent.
Alcohol competitive age.
Along with our ability has tended to lag supply high quality content.
Cobre on deals.
Exceptional it original content.
Meanwhile, we track.
This attractive to collaborate.
Ever since the offering more privileges to members of all cross why dark content category.
Should lead to improved monetization.
<unk> of all subscriber base.
But the important part to note is that older metal content has become a major contributor to our membership revenue in Q3.
Revenue I'll come to deal to US we're all all original content [noise], Nevertheless, love between salary and a demo.
Two things on their current topic.
The heart of our Virginia, Kentucky Bond.
Multiply them alright, so the draft Oh, China 2020 tool also adapted Oh they are.
As for subscribers and <unk>.
Ranked among the top five revenue won't contribute to us before the call here.
On a separate note membership services revenue was slightly below.
Patients in the third quarter. This was mainly driven by three factors first the temporary.
Client and consumer sentiment in May June and July due to pandemic.
<unk>.
Yes.
The delay of certain key dromos.
Let's take a pay cut.
Reduction of marketing spending as part of our business our stress test.
<unk> from the second half of August .
That festival at the worst of that trend.
With us are real premium content releases, including lumped between salary and the Devil chasing.
The parent.
Solve than Europe for you Jim.
Also a reasonable increase in marketing spending on the recovery.
In consumer sentiment also contributed positively towards strong growth in subscriber numbers.
As a result.
September marked as our strongest September all this mean.
The strong performance of our membership business was not fully reflected in our Q3 results.
In Q3, a month of that.
<unk> continued to grow annually, but had a more steep sequential outlet.
We offer a promotional these calls.
Some more seamless to encourage more users.
Although he is at a relatively low price point.
He believes a lateral created by these subscribers will be reflected in a field trial.
Moving onto content this strategy under perform it.
I'll pass the call there.
<unk> achieved a cigarette.
Significant resolve improving both quality and efficiency.
So even though we had launched a fewer titles than last year.
Able to generate more premium works.
The performance of our dromos, what's understanding in Q3, especially for our original drama.
As we have been improvement in areas such as content the supply revenue contributor contribution.
That's right.
What are the off months.
One of the best debate well enough that they have.
Professor of content.
<unk>.
Our commitment to the R&R content strategy that we have set a long ago. So all affirm as John called her was not an accident.
And if they play football.
Investments in original content over the past year happy and productive.
Oh, sorry.
I'd like to show some data amount matriarch drama launch day in Q3, it all original dramas.
Only at 465% the highest email history.
Well that's that is our success rate for original content has also increased to Tamara brokers.
Popularity index of 10th of that in Q3 with two more dry months, breaking ninth I'll bet school old floor, while our original content.
This bogey swung in original content was driven by the unique and effective content methodology that we use.
Embellished, which restaurant process with.
With content creation and production to post up all the capacity.
All of the buys a strong team.
Profession knows and supported by a.
Material and the high efficient efficient operating in Canada.
For us we.
We are focused on improving the content creation and production quality.
All in all still deals we also have a sophisticated.
Supporting teams, we have highly experienced professionals across the different effects.
Okay.
So everyone's until for SaaS.
Okay.
Tablets are mature and highly efficient Canada ranks the whole.
Perfect.
Enabling high efficient decision, making a strict quality control and obviously have more content that's gallery.
Pete.
Because of its.
Profile.
Also the content and the industry as a whole based on dedicated often.
Experiments they've in India, Australia. This forms a high barrier that is half to Brooks, whom you can watch all the time.
Yeah.
In order to own content, how do we improve the overall call it info.
Although I'll come to it gave us.
Oh.
Absolutely.
Hum.
Fluid advantaged.
Industrial either in terms of market of shell in September if active deals autonomous ramped a number what we've thought through it is the leader in our history. In fact, he feels of all equals they've drama talk of absolute lead.
More than the sum of the dotcom penetration.
In the second and third.
The positions are cutting tool.
Patent.
In terms of popularity we have launched.
Your popularity index back in 2018, and it seems that only six titles received the last call about 10 fold. It under 22 titles received a score of <unk>.
Nice all of it in other words titles with the popularity index of all of our 10th all debt.
I'll see their potential from type titles and over 9000, a household a blockbuster among the public.
Popular dramas before well released this year and two in Q3 for the first time nine months, our total seven drummers broke ninth all of it.
All content all content has also received a great war off months users at a time.
Accumulate these costs right on that.
All content on social platforms on those third party platform don't Bartha column NIE of all drama launch date in Q3, we received a reach of over seven the Backstop College had performances in our history.
The performance was driven by all carefully refined the content and the salary based on all content.
So on the user demand.
For the two drama breaking in our popular index.
Hence all of that in Q3.
<unk> on the table.
Having to into the demand of young generation audience. The army last summer location, it's great to have start counting that.
Is that a part of our other titles on that Jack.
Achieving the current although the storyline is oriented to our relatively mature users about well lifestyle by a wider range of age groups.
Hi, Bill completes rate completion rate.
In addition to drama we met tandem Oh, the Pudong Permian comment in all categories footwear I T cells.
In fact, it deals of multi sensor initial drop off China 2022 was leading the online alrighty Shaw markets in Q3, the effect I don't see that often.
Casual has tracked the latest Oh, what other more testing body. It among that why are they so we launched this year.
Yeah. The Asia all original animated animations recorded solid growth in both the number of titles launched on the revenue.
During the call her Oh, I T phone class format.
Matt also achieved great performance, we announced both the original drama in the automation space.
Pete.
Love beauty and thorough in that demo.
Oh, great synergies.
<unk> revenue is.
Our indoor animations stained and number two on the animation channel.
Until summer Waukesha jumped up behind the jump in here.
Asia was PS.
Hi, Bob.
Entering into Q4, we will maintain the strong momentum of Q3 by launching a number of highly anticipated dramas, including new I've been changing with your child.
While the blue.
I shop future tough leading actress Jodie.
Chen Luo.
Fee charge Wankel, a deep affordable yet.
The leading up to her from a blockbuster drama now between Fireeye on the table.
Summer, we'll continue to explore new content.
Not a case where tool diversifying user demand such as AR algorithm today announced the dry months out with languish in targeting female audience places are also I think they paid it.
Doing a selection of bar shows children's animation and the movie slate for it really is.
Maria on through advertising.
Similar to our peers, we have bumped up against the macro headwinds.
The increased advertising revenue by 4% sequentially all that well.
Well right now as we're passing that revenue.
Colorado sequential that under the year over year decline narrowed compelling compound with lots of called her reflecting the attraction of his drama.
I think it shows in.
The peak summer vacation season, we saw a sequential recovery in a number of Bryan to add a client in Q suite as well as the recovery of the demand for National brand advertisers for performance at.
We saw revenue increases annually.
Secret for all that.
Heading into Q4.
Next year, we have.
In China. This is all all Prs as Q4 as our traditional off season for advertising and macro recovery and it takes time to be reflected in advertising budgets are currently current.
Passive continue our survey of sequential that.
Recovery in advertising business with few cool for Q4 for next year.
If macro economy recovers on a with a bet upset.
Pandemics such as Vishal.
Typically pegged to see Oh, Oh, Yeah, Oh, Yeah, Oh, Yeah, Oh, yeah.
However, it also.
Pattern you called in Alicia has always been part of <unk>.
Called out here.
Comedians to bring the best of entertainment that these parents wherever it goes after.
And at the same time, we are hoping to promote the industry travelers Lisa of long form video two drivers.
Robust development of the Chinese video industry.
These are being shipped.
Activity in our daily work as in Germany.
Our focus this I report docked detail.
Recent example of our approach towards her doctor improvement.
The often by leisure over the bully bullet chat call. It here on the distribution growth thing.
Which improved the user interaction and taking their.
Average daily number of users that are activating it but believe me it's hard to feed sharp increase year over year in Q3, and the daily average number of.
Related to chat interaction increased by 50% year over year.
We also continue to.
Utah in house development of different tools in pool content production efficiency. The video production men had mentioned mainly a tremendous system.
<unk> acts as an efficient tool to help production teams.
By the end of Q3.
I have been applying a two five year old who's long drama or in addition to improving efficiency and our protection content now season also safe.
And that effectively controlled studies.
For our overseas business in Q3, we saw healthy growth in membership revenue, both annual and sequential it with black jeans. The popularity of our premium content on the improved operating comparability to have premium content launch that during the call her how to salt Lake.
Both in terms of monetization.
One of my peers.
He is tenuous dramas on all domestic.
Also performed very well of our seat for that you're feeling a P value.
Lifestyle, a public drama and Oh, Sweet sells her brand, including the lumpy to empower the devil.
So then the ear for you how strong the performance.
Congress also drove.
Improvements in monetization for example, and what types of areas where colonized.
Sales of our mode on that.
We are attract partners such as Ah Ah Zadar and me as a sponsor for Sweden honestly Alterra in Thailand.
In the first of three called Earth of tools on the on the tonnage. We again demonstrated the powerful it exactly piece I bet ability is profession, no leaves us in a strong unity of arrow, while I see.
For suite construct to have called her we outperformed our continuously improving fundamentals demonstrating our value to everyone.
We achieved them.
Rose in market share well take it easy it come to that improving off of natural performance performance.
They have come down as I'll call. It 10 fleet.
We are confident that we will be able to de lever our blockbuster.
Well continue our business as we have worked out replaceable methodologies for both our original content production and operation.
Methodologies.
A solid foundation for healthy growth.
We believe that we have achieved with that.
Our Iconix China alone in contacts of.
Trimble that challenging my call environment this year.
<unk>.
We all continue to deliver close to users.
Loblaw all content on that stake holders, who are as confident as we are in the probes pack type.
Off of long form video.
No I, we all have or who want unit for financial details.
Thanks, So Mr Gao and Hello, everyone.
In Q3, we booked RMB 7 billion in total revenues up 12% sequentially.
Our non-GAAP operating profit reached RMB $524 million increased 53% sequentially.
While we have been generating positive operating cash flow for two consecutive quarters in the recorded nearly 200 million operating cash flow in the soda clutter.
These encouraging results demonstrated the resilience of our business under extremely challenging macro environment and the pandemic situations.
Within the revenue line, we recorded membership services revenue of RMB four 2 billion.
As Mr. Gao mentioned in his opening remarks, the performance of all of our membership businesses was Backloaded and current accuser results is not a full reflection of the strong momentum we all deserve.
During the quarter the number of subscribing members grew from $95 6 million as of June 32, It Anthony two 200, <unk> hundred $6 2 million.
<unk> 2022, representing a net addition of over 10 million during the quarter.
Yeah.
Now I'll move to the cost and expenses now southern part of cost of revenues was RMB five 7 billion, representing a cost savings of RMB, one 3 billion compared with the same period last year or down 19% annually.
The accounting costs.
A significant component of cost of revenues decreased 18% annually.
<unk> up 12% sequentially.
The sequential increase is the result of operational initiatives on they're all come growth strategy.
Launching more hits during the quarter, bringing more subscribers and generating more profits, which forms a virtuous cycle.
And our gross profit margin, which is a direct the matrix to reflect a lot of our content businesses.
Instantly expand it in the past four quarters and have reached a historical high of 24% in sort of the quarter compared with a seven quarter compared with 7% in the same period last year.
Meanwhile, well.
With a continuous optimization of our business operations, our total expenses operating expenses decreased by $470 million year over year.
Yeah.
The expanded gross margin and disciplined operating expenses combined contributed to our non-GAAP profit expansion.
Well Q3, non-GAAP operating profit was RMB $524 million compared with non-GAAP operating loss of RMB, One 1 billion for the same period last year.
And it's up 53% quarter over quarter.
At the end of the third quarter. The company had cash cash equivalents restricted cash and short term investments of RMB five <unk> billion compared with RMB four 9 billion in the previous quarter.
Operating cash flow reached 196 million during the quarter.
Going forward, we will continue to execute the comm growth strategy and our commitment to achieve healthy business growth remains unchanged we are confident.
Ability to generate revenue to generate value for our stakeholders in the long run.
For detailed financial data, please refer to our press release.
Website.
Now I will open the floor for Q&A.
Okay.
Thank you if you wish to ask a question. Please press.
Star then one on your telephone and wait for your name to be announced.
If you wish to cancel your request. Please press Star then two.
If you're on a speakerphone, please pick up your handset before pressing mckeith.
Participants are asked to please limit their questions to one per person to rejoin the queue to ask further questions.
Please also ask your question first in Chinese and English.
And the first question will come from Thomas Chong of Jefferies. Please go ahead.
Well I think let.
So what if you read what he said well you're going to end up at a.
A couple of great got it so your thoughts Joe Steinberg.
Oh, sorry.
So we'll let you know the truth on me that I wish you all well.
Yes.
Sure.
Got it.
Only if we are like you said Oh, Thanks management for taking my questions. My question is about the membership business a 10 minute Sherman.
It talks about the Kingsley overall membership business performance as well as.
Oh July but is it coming more from the long ball stops all up on the arm side and also what are the key drivers going forward. Thank you.
Oh, Yeah, Oh, yeah, well without eagleton are.
Sticking with you talked about California, I, just walked you will finally jbl's yet to fund.
So you mean share some two hours somebody got yet.
Because to me it sounds yeah.
Do you I mean, youre sure wheelchairs, but yeah.
I have to wash ammonia Aegean you.
Michelle I'm doctors tell me you answered John's young.
G E L F.
<unk> initial haul long.
Howard Rubel Nagel youngsters homes yet.
Oh I'm sure at all one that you'll see a corridor that affords you a lot should heart failure.
So your doctor.
So needle tool doctoral hall, chairman, Don Taylor, telling people have hall, that's sure.
So if a buyer of that.
A J the shelf you out, but you don't want to do.
John I'll take the NATO uphold rule I shared how about the whole room.
Our whole G. The Shanxi on the ne Lumia Rucci Sean's yellow E G. The lateral luckily none of them down and actually invest sure Piraeus Shashi Hall.
Oh, you got nothing.
Okay.
So did you do that so Tony Hankins young.
Ah Thanks sure Mail, one change at all or do you do.
I'll translate for Mr. Kam.
The slight decline in membership revenue was due to three factors.
The temporary decline in consumer sentiment, namely June and July due to the pandemic resurgence in the first half of the year.
Second the delay of stretching keeps on us during June and July and third is the significant reduction of marketing spending as part of our business stress test.
And starting from the second half of August we successfully reversed the trend with a series of premium sometimes releases.
Between theory and demo she's going under.
Chasing the undercurrent in thousand years for you.
And also they're reasonably unscathed in marketing spending and recovery in consumer sentiment also contributed positively to strong and continuous growth.
Subscribing members such a membership services revenue grew five allergists need lower base of desktop and Barry in July .
The strong subscriber number.
<unk> to pick up in August as a result.
Our membership business was back loaded.
It's just really so it's not a full reflection of the strong momentum of the upstream.
On Sunday, though some of them from the audience.
Sexual seadrome Youll see.
Yes.
Partial long enough for you.
So here you only use yeah sure Chi Tung.
How should we on the switch off old what 48, yeah with Doctor or I'm sure you'll be all short term both of you guys you have young.
Excuse me there are two miles or their summer vacation.
Our user base there are a large number of students in this.
Saying that they are the potential users for us. So therefore, we offered promotional discounts during the summer season.
More users to expand our San Francisco.
Relatively lower price points.
That's why in customer fluctuation.
All right.
Third quarter.
Do you have any language.
Come fast sure Oh.
Drill so we aren't true Oh shoot up food and food at home town.
Thank you Sheila.
Oh, Yeah in Florida, They got something done that's what we all should only be library from yet if I'm yeah sure Nate on that total high Eagle from me I'm sure sure.
And then on cool, we altered our sure total nailed that hurdle.
And just for them our entire.
Membership business going forward again, our main goal is to grow the membership services revenue.
While achieving healthy performance.
Subscriber numbers and in terms of throwing some numbers in the future and it comes from two aspects one is the continuous investment in content.
Namely, especially for it that it had to premium content and also the second point. It is continued investment in marketing spending.
Hum.
Oh, nothing timna wage or likelihood in food Eagle uniform Shonda <unk> young punchy.
Jacob push out after lunch I'm sure many of them yet can you find out that you can call us.
And that dealer to forget about Shanghai Colombo.
Hmm mm or whether I'm close it comes from to two reasons. One is that there's already a discount them in the past years and also that do crazy things other than price.
Okay.
Sure.
Thank you.
Yeah.
Yeah.
The next question comes from Alicia Yap of Citigroup. Please go ahead.
Hi, Thank you Glen and show why Shawn Hall judicial with it she wouldnt go see a photon counting but yet they are the ones you should not go up maybe I can get one woman and she can go and talk to each other.
Well Chi alcohol, you wonder how does.
Oh Gee why do you kind of know how woman Sunshine Sachin, what I shouldn't eat a jungle ship out.
So it's a way that it does show quite sure.
Oh Gee the needle.
Oh, Oh, Oh that took Oh pardon me.
Hmm.
So good morning, Thanks for taking my I mean, good evening, Thanks for taking my question.
And congrats on the strong results. My question is just related to the video content. So I Qi has successfully released a number of softball heat drama this quarter or this year that received very good feedback. So can management share with us how will I T and Shaw, our industrial child that you.
Well also have a very high hit ratio off all your drama. Thank you.
Oh, that's been going on here lately I would comment though once you know initials you name in Guam, I'm sure, we aligned with or without.
Hmm mm desktop asked this question is comes from related so I would invite our chief content Officer Shao Lee to answer this question.
Uh huh.
Oh, and I forgot to Davinci, Oh, Gee, that's just arent buying kcl schindler, rather what you needed to.
Bill just seems like it's holding up on when you're going through.
But would you pull on the bulk LNG.
She didn't know suitable and that we have that opinion.
On the onboard which we hadn't done a long courtship kills that tastes.
Swamy do you see the Gen 200 leap so donate on Trulia.
I T bolt I need them for regionally.
We launched the I T E popularity index back in 2018, and since then only six titles received a score of above 10000.
I want relief this year and two in Q3.
And this perfectly demonstrates that.
Our long term amendment or a major content and original content.
Come one of the main contributors to us.
First our content.
Some gigawatt that you thought.
Gotcha cellphone unions ultra low humidity on EBIT.
Sure.
Dina until her on the high school with yellow full deliberate way I'll try and tie to what we're trying to Hulu clicking.
Looking though you got a chunk of outlet centered on day.
Well sure that when it moves the needle not sure its E sometime don't bore holes that shallow water cooled hydrogen elite she won't let that eagle could you achieve the shallow you generally get a hold of it.
Okay bulk water falling some tie up all four shouldn't handoff broke off when a woman.
We closed the year with yellow to.
<unk> you won't go we push at that juncture.
This success was mainly contributed from three factors first was mainly attributable to the powerful production team that we haven't built.
Our in House studios, which contains highly experienced professionals with various created styles. We also have very sophisticated supporting teams across different functions to self fund. These studios that entire process, which runs through processes from creative ideas development.
Thompson production broadcasting and marketing.
And beautiful cheap Cubans wont be alert for me.
You called the training of the debt plentiful trying to eat chicken can get likelihood you bet, Jamie that more of a needle.
Keeping talented tissue that treaty that ball.
Oh, the needle Yo Yo holiday Trundled youthful.
At the Scripps level, we rely on the professional teams and get them relative.
Flexibility is painting, the creative I guess emphasize on polishing scripts, which built a solid foundation for the concentration process.
That'd be what's actually love them yet.
I don't call their phone what's useful it's all he bought it on your own payroll engine, the Ted you call it and.
I'll hope here, hopefully, Australia, falling henkel coke, so the whole back down closer to illustrate and vintage relations Melissa that we'll probably have yet to hit the ball.
I'm not sure she is a function of golf.
Sure.
At the production level.
Once we have the solid concentration foundation in place, we will followed by rigorous process, if what projects entering into the selling process.
In addition, well collaborate with highly professional creative and reliable partners and the production process select the most suitable actress based on our compelling and comprehensive casting mechanism all of them.
And Bob what safeguards to continuous creativeness and the high quality of our original projection.
Darryl if I'm gonna your initiatives or maintenance Sundar you'd hope you don't Trunkful goes how long you'd hall in Egypt, because you didn't quite in front of them. So in 'twenty.
Sometimes we'll hold a general tone.
I like your Gulf Coast LNG, that's all.
And Paul you can deal with it she told them what do you do.
Cheap highball needle.
On the highly churches that Neil Doyle.
So what you saw the Yankee candle inflation Yo Yo held up here, though.
Yeah.
The second.
Factoring in Wisconsin muted by we have established a mature and highly efficient mechanism right through it.
Our process from developing an idea into our original drama series broadcasting and marketing it.
This mechanism enable highly efficient decision making.
Quality control and optimal content gasoline.
User preferences and going forward, we will continue to seek an effective balance.
Embracing the diversity of content creators.
And the efficiency in the production process.
Decided with Humana.
So neutral to US you don't yet, but we can tell us what you that say you didn't hold it up a little bit volatile, but she goes shown though people that you'll either tissue.
The third effect is that our intelligent detection system is getting more sophisticated which also helped in terms of increasing the possibility of creating blockbuster content and improving efficiency.
Thank you.
Okay.
Yeah.
The next question comes from Lei Zhang of Bank of America Securities. Please go ahead.
Oh, Hi, Bonnie Paula.
I saw that you Oh.
Well the one zebra also glad you its hard for me and I'll, we'll make sure that people without means an email going to go free cash flow problem. You don't want me Oh, you'll be dummy weekend okay.
Yeah.
Free cash flow yeah, she felt forgotten solar.
So it sounds like what I need some coupons all the time too.
All that you're doing.
Yes, Hi, I'll take what you said.
So she doesn't want them, okay, well wait I E.
Thanks management for taking my question and no question, mainly regarding on cash flow notice that we have no meaningful improvement in free cash flow and operating cash flow with a positive free cash flow. This quarter. So can you give us more color on the Java Mackenzie and housekeeping.
Look at the trend going forward. Thank you.
So once you're in you're going to go into your one I hope we'd harbour.
Neither or whatever what did you say you saw tourists won't woman chopped all I kind of lost so cynthia equivalent tissue can download weird when I do shrink woman fees on the CIT team will take a tissue creech who's shipping tissue Cc cc pathologic with tier one.
No.
Liquids here on just local and then kind of who you saw one insourcing of a turnaround.
I'm glad that you've renewed with us in a while Ms. Cynthia will need cash or to cheat in tissue sure come true should jump. It soon shall shoot to dominate on the alloy sheet truthful woman that take to go to the congestion true potential and that she didn't know pushes sandwiches with tissue on aegis F shoot shoot.
Thanks, Sheila so dissented watershed whole women shooters chaconne, Donna ECM fees hung seemed to give them kind of as you have you have seen that you go to the pls yeah. So it does seem that doesn't ashish.
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That said, even though conducted telling them a kind of a shift to some console reach on that yeah, Neal Peru controller.
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Karla.
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We will Miss <unk> had on getting the tissue download you'd solution yes.
Asia derivatives revenue that you got from John .
Number two with Detroit Zhisheng.
Emily woman, who should have Cynthia show Ruud you'll.
Yoplait tenant leaving.
Here in <unk>. So you take what you will see your attention quite a number of <unk> current thoughts here on the two attention quite essential to them. They see detailed long suture that couldn't tell the encouraging yes, you will see some of that.
Probably I was just trying to translate for myself. So I think that to answer the second part of the question before so yes. We are very confident that this trend could continue in the future.
And behind that we do see if we can't reveal the entire process on their own if you will see that starting point other than the wrong, yes, a very disciplined expense management, it's a very ROI focused strategy and we continue to do that throughout the three quarters.
But on top of that in the quarter, we do see some new candidates coming this year, including a virtuous cycle, which starts with our investment in the content.
In our investment in content January more heads more hit titles.
In give users more value proposition, which in turn attract more members than creating possibility for generating revenues.
Then on top of that anyway, but it wont.
Convert into the profit that you can term bring us blur free cash flow and we will certainly continue to do that and we do believe this success is rapidly bowl, which support.
<unk> trend, which is supporting the positive free cash flow trend so discipline them alone.
Then on top of that I think I hope that you could see switches out how women hi sounds that CCAR chantelle either human contact tissue for question Quinton I should take.
So I always want to keep them on particular, such a neighbor island that Todd mentioned that Youll ship origin of content.
So Pedro why Mr. Hu <unk>.
You guys seem to have had a question Julie Tricia <unk>.
The Geneva artificially hoop at San Juan.
Sure Todd.
Cherish and uncle, Okay women Pan I can bore that Google push it to the Pimco Cheetos Elias do you guys have been I tell them that.
Yes, sure sure cutting machine answered only essential pension should call Steven Vida Sugar will you do.
Since you're kind of itchy top media conglomerate southeasterly Josh Uhm.
So on top of that we also need to come.
Common because we have been very much focused on larger content. As you guys have been asking questions around that now origen economy, IP value and the IP that who can generate.
Revenues with higher margin and this is consistent with our experience and observation of the media conglomerate.
So this if not if not this creates a whole new opportunities for the company in the future.
Okay.
Thank you.
The next question comes from Daniel Chen of Jpmorgan. Please go ahead.
Alright. So you said you saw what it went to what Joe Shan Wang from quite a win teachers acquiring zebra.
19, Wang from Goldman Giant John because it doesn't look quite as hot dog, Donna townsell being higher not chasing that because I knew Jim glad that she wants is yet.
Congratulate on a really solid result, my question is R&D.
Our content regulation.
Overall environment for the long form video could management share some color on this thank you.
Hum.
Uh-huh Junior young B.
Shan Nen, Tony I'm, not sure Jim to watch Huntington jumped.
The woman, who else required anthem bulk hormones and bought themselves to Highland Wolfgang pool.
I'm not sure Tom any chance for you to come to our younger Orla actually Jim <unk> Union.
Intra E harmony of young children, a similar time line, that's where you.
Male means yet.
Uh huh.
About two.
2021, which is the last year.
And Oh, I'm, sorry, 2021, and there are different authorities that build out different policies that kind of tightened that are holding back inventory environment as far as the online video space, but that's what I'm trying to into 2022 and tell them you know the regulatory environment.
Seems to be relatively stable and we haven't seen major changes.
The search process.
Do you feel as you all may long enough quota you Asher.
General food out he called Trulia doing.
Yeah, Yeah, Yeah, Tony I'm sure the Naval North Korea, yet Tony I'm sure to go trivial John before you all are.
Hum childhood I'm sure shouldn't that totaled over one 2 million.
Korea shop, Yeah sure Yeah, yeah.
Yes, I'll take the J code name Truvada food out higher naval known food Hugo trivial.
Are you following me Mad Dog for example.
The main focus for us is to increase quality and optimize content quantity.
Which not only is to us and our peers and we are glad to see that coincidentally.
So high as to the varied various government authorities.
And then they would vote out policies.
Actually positive to the search process.
Thank you Archie and ICR June guar somewhat towards your daughter.
Sure Yeah.
Thanks.
So you have the name on food Yeah Hello.
Sure Jim.
The nail on the T shirt home.
Shanghai adopt I'll, let Jay.
So should I take that.
Four years till you really aligns y'all Cologne Congo.
Come the Countrys, Utah, Nevada, where for example, they don't use them down the mobile.
After the three months three quarters of time for <unk>.
At <unk>, we now figure out.
Perfect balance between.
The frontier team that we show them for content.
Content and also the amount of marketing Spendings.
Market promote our content so going forward you know based on the success of our past eight quarters and I'm sorry to come growth strategy. We believe that we can have a healthy and sustainable growth for our business going forward. Thank you.
Yes.
There are no further questions at this time I'll now hand back to management for closing remarks.
Thank you everyone for joining our call today, please do not hesitate to contact the IR team part of Medicine. If you have further questions and see you next time. Thank you.
Thank you.
That does conclude our conference for today. Thank you for participating and you may now disconnect.
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