Q3 2022 Lizhi Inc Earnings Call
Hello, Ladies and gentlemen, thank you for standing by for <unk>, Inc. Third quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. After management's remarks, there'll be a question and answer session.
Today's conference call is being recorded I will now turn the call over to your host Effie Kung head of capital markets for the company. Please go ahead.
Thank you very much Hello, everyone and welcome to the Inc. Third quarter.
Earnings Conference call for at least all financial and operating results.
Wire services earlier today and they.
Variable life.
Today's call will include our founder and CEO , Mr. Michael Oh seal only starts all only an hour after the staff only sham found it.
Mr. Li Yang Lu will begin with prepared remarks, and the call will conclude with a Q&A session.
Minder This conference is being recorded.
In addition, I guess highlights presentation and a webcast replay of this conference call will be available all the IR section of our website at IR. So I'll leave it at that.
Before we continue please note that today's discussion contains forward looking statements made under the safe Harbor provision of the U S. Private So creaky litigation Reform Act of 1995.
Payments tactically contain words, such as May we'll expect target estimate intend believe potential continue or other similar expressions.
Looking statement, but we won't have any risks and uncertainties.
Accuracy of these statements may be impacted by a number of business.
And uncertainties that could cause actual results to differ materially from those projected or anticipated many of which factors are beyond our control.
The company is something that our advisor representatives and underwriter do not undertake any obligation to update these forward looking information, except as required under the applicable law.
Please also note that leave just the earnings press release and this conference call include discussion of an RTD, Jack financial measure as well as unaudited non-GAAP financial measures.
Please refer to any interest earnings press release for reconciliation of our non-GAAP measure to all digits Appalachia I will now turn the call over to our CFO . Mr. <unk>. Please go ahead.
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Thank you Jonathan.
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Hello, everyone. Thank you for joining our third quarter 'twenty to 'twenty two earnings conference call.
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The <unk> product.
In the third quarter of 'twenty, two we continue to do that without Europe . He loved shows of interactive entertainment path logic based social networking business.
Maintained a steady growth in our overall business development, while achieving new highs in both revenue and net income.
In the third quarter, our total average mobile and they use totaled $49 7 million.
Monthly paying users amounted to 477 fold.
And the revenue reached RMB 565 minutes upheld per ton year over year, and 10% quarter over quarter.
Also make great strides to optimize our product and operational strategies, while promoting the development of our core technology and boosting organizational efficiencies across our global business.
Thanks to these efforts, we achieved our fourth consecutive quarter of net income or GAAP basis, which drove 5% quarter over quarter to RMB 19, 8 million in the third quarter.
Amidst the current macro conditions, our Sally business school and continue the profitability a strong testament to our market competitiveness and the sustainability of our business model.
I'd like to share more details regarding our business development in the third.
Quarter.
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So in terms of the all joins dependent business, we continue to cultivate our audio community ecosystem.
All told our matrix and enhancing product competitiveness, so creates a highly active and engaged in interactive audio entertainment coming at you.
The unlocking commercialization potential of our audio entertainment business.
Well that that work product features and functions in the third quarter. So out of it the user experience, notably based on our original interactive entertainment ecosystem, we launched our shot audio content module, okay, enabling users to enjoying with mirth is lessening and producing short audio content.
Meanwhile, leverage a broad area of audio activities and I'll pass on to birthday interactivity within our community will encourage the users to explore the innovative and interactive format.
Buying a shot audio content with audio based search social networking.
In addition to further strengthen user's thickness and engagement, we optimized our user management mechanism to achieve dynamic upgrading user services and ensuring user experiences.
In the third quarter, the average mobile and the use of our interactive all joined dependent business grew to $9 5 million with a user.
User penetration rates climbing to 19, 1% of company the bilingual treatment and the average spend per paying user.
Contributing to our audio entertainment revenue growth.
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In terms of our content creator ecosystem with a focus on developing need in the long tail content creatures.
Upgraded all created a support policies.
The creation of high quality content.
We continue to actual value creation tools in the functions.
Audio clip synchronization and noise reduction and CGM reception to enhance the overall Croatia exterior.
For example, we rolled out one minutes Frito recording two O soybean immersive audio filter and other features and the newly launched the Chateau audio content module.
These features are flexible and easy to use the audio creation language.
Tracking more creators to produce and ship high quality audio content to all <unk>.
In addition to a targeted operational activities, we generated Edwards life streaming topic and launched a variety of contacts and event well upgrading and innovation a greater competition system to motivate the creators and drive their enthusiasm.
We also launched a new functions.
The range of innovative customized the mutual 15 auction.
To help create or generate income.
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Regarding our global development, we have pivoted and focused on enhancing our globalization capabilities. As a result, we further advanced our global team building and continue the exploring overseas market opportunities and then refining our product matrix ecosystem.
On the product and we continue to optimize the features of our global social product Jia App by integrating real time interactions and online entertainment as part.
It's all about continuous efforts to build our interactive online space and a well rounded product system.
The integration of our social tools together, we've simplified the user pass it enables users to answer their personal life space with one click and call them. Their friends are interacting real time, and Theyre Popick audio space has improving use it it's real time social networking experience.
A result, he has he was their engagement and activity grew further and both the new user interaction rates and average time spent per user maintained upward trend.
In the third quarter. The average daily time spent per user increased by 34% year over year and the monthly average user group participation rate, 94% year over year.
At the end of September the number of parents of France connection grew by 56% compared with the same period last year.
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In terms of global team building and then cause a Belgian improvement we continue to expand our global talent pool and core business region cooperating with international colleges and attracting local talent.
And to enhance our globalization capabilities.
<unk> talent cultivation and proper operation to a technology advancement in order to achieve breakthroughs in our international business.
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Our squad technology development since unveiling our in house hybrid cloud computing platform, what's called in August we have continued to integrate core technologies and the services at the same time, we have promoted whites calls that vacation tomorrows fits in a second.
To boost our business backend and needle platform support.
Waiting the automation capabilities of our past and cap ons.
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Testing efficiency and shorten the entire process from research and development to product launch. In addition, we have been ramping up the technical capabilities of our self developed RTP real time audio and video streaming technology platform don't let me and he's kind of messaging platform.
Our initiatives include expanding their business scope.
Noting that application that work scenarios.
The state is taking the continuous innovation of audio product in the arts Courtney empowering all business.
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Our long standing philosophy is to prioritize I'll use this notion and strive to create value for them, while developing a global business. We have placed a significant emphasize all user data security and privacy protection.
We have also been actively working on obtaining the certification of ISO to seventh it was they were one the standard for information security management system and I am. So two 771, one the standard for privacy information management systems.
Continuously improving I'll pass on the data protection system, we are committed to complying with the highest international standards and data security and privacy to fully protect user thrives in interest and debt Portuguese a relationship of trust with our users.
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Ted just nice anniversary and announced all brand new mission and vision to be the worst speaking as the audio platform.
They saw him to make people feel closer and live happier.
And by our mission and vision, we will actively promote our strategic development without unveiling afterwards to advance globalization pursue excellence and create greater value for all users and the first time at large.
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Okay.
Thank you with that I'll now turn the call over to our after the CFO Ms <unk> Li.
Who will discuss our financial results in more detail.
Okay. Thank you so long and Hello, everyone. Our third quarter results are a testament to our strategic execution ability with court did your revenues growing by 12% year over year, and 10% called ever culture to a new record high of RMB 565.2 minutes.
We are choosing to endeavor to optimize our operational efficiency, we achieved a profit for the fourth consecutive culture, our GAAP basis in third quarter of 'twenty to 'twenty two.
With net income growing 5% sequentially to RMB $19 8 million.
Going forward, we aim to continuously develop our.
Production metrics strengthening cortical illogical capabilities at all at least all commercialization potential to achieve sustainable growth off the long term.
Now I'd like to provide a brief overview of our financial results for the third quarter of 2022.
In the third quarter. Our total net revenues were RMB five hunter at $65 2 million, representing an increase of 12% year over year, primarily due to Joe's in average user spending Oh audio entertainment product.
Cost of revenue was RMB $376 2 million third quarter up 2022, representing an increase of 6% year over year, primarily due to an increase in the revenue sharing fees to our content creators and the company's revenue and.
Partially offset by decreases in our salary and welfare benefits expenses related to decreases in our operational headcount and share based compensation expenses.
Gross profit was RMB 100.
$9 1 million third quarter opportunity 22, representing an increase of 25% year over year.
non-GAAP gross profit was RMB Weyerhaeuser already point to 8 million third quarter of 2022, representing an increase of 24% year over year.
Gross margin for the third quarter up 222 increased to 33% from 30% in third quarter up anytime you want.
non-GAAP gross margin for the third quarter up 2022 grew to 34% from 31% you know third quarter up anytime you want.
Operating expenses were RMB, $176 6 million third quarter up to need to need to compare to your weyerhaeuser and let your $1 3 million third quarter opportunity when you want.
Research and development expenses were RMB $78 3 million third quarter of 2022, representing a year over year increase of 7%.
Increase was primarily due to the higher salary and welfare benefits expenses and rental expenses.
Selling and marketing expenses were RMB 71, 2 million third quarter of 2022.
Two RMB 88.2, midnight you circled up 2021, primarily due to the decrease in branding and marketing expenses, partially offset by the increased salary and welfare benefits expenses.
The company will evaluate a just a marketing strategy and budget based on the company's performance operational needs and market conditions.
General and administrative expenses.
Expenses were RMB 27.21 billion in the third quarter of 2022 compared to RMB $29 7 million. So caught up 'twenty 'twenty 1 billion driven by a decrease in share based compensation expenses and other miscellaneous expenses.
Operating income was RMB 12 point to find below you know so called up 'twenty to 'twenty two.
At a loss of RMB 42, 1 million in your third quarter opportunity to do what.
non-GAAP operating income was RMB 22 million, so called up 2022 compared to a loss of RMB 31 million circled up 2021.
Net income was RMB 19.8 mandate you know third quarter was 2022 compared to a net loss of RMB $37 1 million circled up to and you're saying you want.
And non-GAAP net income was RMB 27, 5 million compared to a non-GAAP net loss of RMB $27 2 million, yet caught up to anytime you want.
Basic and diluted net income per eds were RMB 38 cents, so called up to and you need to come back compared to a basic and diluted loss per 80 S of RMB 73 cents in the third quarter of 2021.
non-GAAP basic and diluted net income per M. D. S were RMB 53 cents in the third quarter up 2022, compared to long GAAP basic and diluted net loss of RMB 54 cents in third quarter up anytime you want.
As of September 32022, we had cash cash equivalents short term investments and restricted cash of RMB $623 one minute.
Okay. This concludes our prepared remarks today I will now open the call to questions. Operator. Please go ahead. Thank you ladies and gentlemen, we will now begin the question and answer session to ask a question from the phone. Please press star one one and wait for a name to be announced.
If I can call participants on today's call. If you wish to ask questions to management to Chinese police immediately repeat your questions in English for the sake of clarity and older. Please ask one question at the time management will respond to that.
Feel free to follow up with your next question.
Again to ask a question. Please press star one one.
There'll be a shock silos what questions are being conducted.
<unk> do you feel like to ask question. Please press star one one on your telephone.
I'm on for the first question.
We have a question from the liability away from Citi. Please proceed.
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Thanks management for taking my questions I have two questions. The first one is with management share some color about the overseas business development as well as the amount of investment has been my second question is with management share some color about your fault, so when domestic product profitability.
<unk> potential in the longer term amid slowing growth and challenging macro conditions. Thank you.
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The first question is answered by Marco and I will translate for him.
First question is about the overseas business development and investment expense.
For the development of our overseas business, we actually have many focused on three FX <unk> Doc technology and the team in terms of product development, we are incubating new products targeting different overseas markets and focusing on our diversified product matrix that the strategy.
And we are and the to leverage our core technology capabilities and experiences mean product operation to achieve breakthroughs in our international business. So.
So for the U S market, we are also continuously optimizing and integrating the Ti app.
To improve user experience of real time interaction and the online social networking and we are seeing that in the third quarter. The user interaction rates and average time spent per user continued a very good upward trend.
Thank you for the questions must wait till you have any follow up questions.
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<unk>.
We'll answer the questions that we'll continue key anchors.
As Keith mentioned about the technology and product and the Chin.
So next I I can share more insights about that technology. So on the technology front, we actually further strengthen the application of our new hybrid cloud computing platform called the voice calls.
Different business segments, and we also expanded our business scope as mentioned by our CFO Mrs.
To me earlier and throughout continuously unleashing the technical potential we actually achieved more innovation more voice technology and we have also promoted we find in the customer customize the adjustments and the integration for our overseas product.
And this has improved the user experience.
In the quarter that good business development.
Edition and regarding the Tin building, Michael had mentioned and talent churning our overseas market. We actually have continued to focus on the target market to actively expand our local teams and ensure our operational capabilities in both the international and the local fronts.
This has actually laid a solid foundation for our globalization strategy.
In terms of the actual investment expense in the third quarter, our overall investment overseas operations accounted for no.
No more than 10% of that total operating expenses, but.
It includes the expenses related to sales and marketing and local office operations and.
And the International team building example for overall, we make long term plan for risotto location and based on different stages of business development.
This has balanced dollar inputs and outputs.
We also strictly control and dynamically adjust the investment scale and including the timing and the specific alt strategies up the investment to ultimately maximize the operational efficiency.
And in the future, we hope that our overseas business will bring us more diversified revenue sources and improve the overall profitability of the group and achieved solid business development.
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I will translate for Michael for the second question.
During the third quarter, we reached a very good performance.
Performance and new record highs for both total revenues and net income and achieved a profit for the fourth consecutive quarter.
The audio entertainment business is actually a relatively mature segments within our group and under the current macro environment, we are able to make timely and quick adjustment to our strategy based on how you're sizing the market environment.
And in terms of the product function. We are focused on meeting the core needs of our users and.
And in terms of the operation Wise, we continue to refine our management of the users' entire lifecycle and the content creator ecosystem.
Strategic adjustment also helped us improve operational efficiency and increase the profitability effectively.
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In the mid to long term the domestic business still has tremendous growth potential and with the increase in the user penetration rate of the origin and the chairman of the growth. The market scale is also further expanding and in the future. We will continue to expand our core user group.
And the odds are independent sector and increased users' willingness to pay.
<unk> diversified operational activities and innovative function.
And ultimately promoting the growth of paying user conversion rates and our overall revenue.
And in terms of our cost and expense structure. We will also dynamically adjusted based on market feedback at different stages and continue to refine our user acquisition strategy and.
And we improved overall operational efficiency help us achieve sustainable profitability in the domestic business.
The only thing I saw was very well known gave with Aberdeen issued a hard answer.
Sure.
Thank you Ms Lindsay.
Overall, we are very confident about the stable growth and the sustainable development in the future. Thank you.
Thank you this concludes our answer.
Thank you very much.
No further questions now I would like to turn the call back over to the company for closing remarks.
Well. Thank you once again, everyone for joining us today.
Do you have any further questions. Please feel free to contact the company and our Investor relations through the contact information provided on our IR website at IR <unk> FM are the P&G group Investor Relations. Thank you.
This concludes the conference call you May now disconnect your lines. Thank you.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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