Q2 2019 Earnings Call
Please note. This conference is being recorded today no like they had the causes or would you say speaker today Ms. Cathy Peng Keith. Please go ahead.
Thank you operator.
Hello, everyone and thank you for joining us today for a moment second quarter 2019 earnings conference call.
The company's results were released earlier today and are available on the Companys IR website.
On the call today from more more are Mr. Tong Yan co founder Chairman and Chief Executive Officer.
Mr., Li President and Chief operating Officer, Mr., Liu founder and Chief Executive Officer of content.
And Mr., Jonathan Jones, Chief Financial Officer.
They will discuss the company's business operations and highlights as well as the financials and guidance.
They will all be available to answer your questions during the Q and a session that follows.
Before we begin I would like to remind you that.
This call may contain forward looking statements made under the safe Harbor provisions.
Of the private Securities Litigation Reform Act of 995.
Such statements.
Are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the company's control.
Which may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements.
Further information regarding these and other risks uncertainties and factors is included in the Companys filings with the US Securities and Exchange Commission.
The company does not undertake any obligation to update any forward looking statement as a result of new information future events or otherwise.
Except as required under law I will now pass the call over to Mr., Tom I will translate for him Mr. Humphrey.
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Good morning, and good evening, everyone. Thank you for joining our conference call. Today Q2 was a good quarter. Despite the challenges caused by the homepage suspension. The team was able to navigate through them with solid executions and come out and came out stronger and poised for further growth in a healthier shape.
At the same time I'm proud that we still delivered strong financial results and meet those challenges.
Now my team and I will take you through the details.
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Firstly, an overview of the financial performance.
For the second quarter 2019.
Total revenue reached $4.15 billion up 32% year over year.
Adjusted operating income for the quarter was 1.45 billion RMB, representing a 35 adjusted operating margin.
Excluding times financial impact core more modest adjusted operating income for the quarter was 1.5 billion reminbi, representing a 39% adjusted operating margin up from 35% from the same period last year.
Consistent record of profit growth, coupled with a strong operating cash flow from the core Momar business positioned the company well to continue to deliver returns for our shareholders.
While making investments to build long term growth drivers.
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We are so you have one of the user posting on the home page new seat update since the beginning of May the number of active users on core Momar solid saw a downward trend in may and the first half of June .
As a posting on the news our basic social infrastructures on the platform. Many users rate rely on these features to make discovery of new relationships and building interactions with their connections.
Therefore, the suspension of the posting function and the news feed update had caused the user engagement to decrease more than the overall active user count did.
For the month of June total user time spend decreased by 12% from the month of March.
After moments posting suspension was lifted on June 21, we undertook a major campaign to call back the users.
By me by mid August Diego has gone back to the level that we saw before the inspection period.
The gap between the current time event and the daily average time spent in March has narrowed to low single digit percentage.
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Third our paying users for the core Momo platform was was $8.6 million in Q2 2009.
Fell by 400 K. from the previous quarter due to the significant decrease in the number of memberships and sweaters on the core Momo.
For those who are not quite familiar with Walmart pay features the fee.
Person premium features.
The second and.
The third groups of paying users are those who pay for virtual gifting.
And thats running businesses respectively.
Since the beginning of 2017, we have shifted the focus of that business more toward virtual gifting and that the membership subscription business has now grown much since then.
One of the key premium features offered to paying subscribers hinges upon user posting function, which was suspended in may and most part of June .
In addition, due to the suspension. We have also seeks to run promotions around the membership subscription. These factors have caused a number of subscription members to decrease significantly in the second quarter.
The number.
As for virtual gifting business and Allied broker live streaming business also saw some negative impact from the self inspection. However, paying users for these two businesses still southeastern sequential growth in the second quarter as the impact from the suspension got largely absorbed by the natural growth month growth momentum of these two businesses.
In summary, the decrease in the paying users in the second quarter solely came from the decline in the paying member accounts, which we view as a non issue as far as more much core fundamentals and future growth prospects are concerned.
We have plan to gradually convert leads turn paying subscription members, whose ARPU was extremely low in the past into higher ARPU ARPU that paying users going forward.
With the issue around the homepage to expansion behind US we are confident that a total number of paying users on the core Momo, we'll get back on the growth track from Q3 onwards.
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Now turning to 10 times due to the download suspension and the related in that purchase ban on iPhone users conference paying users decreased to $3.2 million for the quarter.
Panel download and payment service had been fully restored by mid July .
Since then we've we started to see a strong rebound in all the core metrics, including the number of active users paying subscribers as well as the daily grossing by August 25th.
The paying users already won back to $4.1 million.
The robustness of the robustness of contents recovery demonstrated the strong demand for online dating service in China and contents irreplaceable position in the sector.
There are hundreds of millions of millennials and the so called Gen Z in China on like the Western World.
Unlike in the Western World in Asian Culture people do not have as many offline options. When it comes to discovering new relationship, making internet dating service and more important source for romantic discoveries.
At the same time, we also noted that a stigma attached to online dating is gradually fading away among younger generations.
These factors make us believe that has ample room to drive further growth in China.
On top of the addressable market domestically. We are now also seeing huge growth opportunities in the oversea market.
The team will continue to penetrate into these addressable market through product and marketing endeavors.
Our goal is to build Stanton into an important driver of the company in the coming year.
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For your question I have is having been through June 30 year to date on almost all your Washington.
As we put the temporary disruption behind us and started the second half of the year I went through the ups and optimization of existing premium features and the introduction of new pain experience.
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I'm glad that we made good progress is across all these priority areas during the past quarter Im going to elaborate a little bit more on a first priority, which is primarily related to user growth and product innovation Rami will cover the second and the third which are Mormons Angie I'll do so just wondering if we're right.
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Clarity in the second quarter due to continuous upgrades and optimization.
These two experiences enabling users to break the ice and indirect non synchronoss three year mini game experiences.
For example, with the parking lot experience, if you do not feel comfortable with it with directly saying high to a person nearby you can park your car in her backyard draw attention and potentially.
And potentially start a conversation or you can issue a ticket to the users who have on jewelry park into a backyard. Alternatively, if you want to show a nice gesture you can send a virtual car as a gift as well.
The firm experience largely works under the same logic.
The commercial community nurses allow the users to establish virtual identities and interact with other people in a less pressured way.
Today over 40% of our users connect with others. We are these two virtual community experiences each day and the team have already started to build value added services elements into the parking lot experience.
These are interesting new experiments on the core Momo platform. If we continue our success in these experiences they can make meaningful contributions to both user engagement and monetization.
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In addition to the progresses, we made on the product side in the second quarter. We also took strides in mix of our business and stronger and building new growth drivers that can continuously pump gas into the engine.
Now here's why only to give you a detailed review on those assets.
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What kind of data. So we can do a second quarter solid growth coming pretty much across the board from both the middle and the top vendors the rig reacceleration in live streaming business growth shows the effectiveness of our strategy to apply different product and operational efforts to drive spending from different cohorts of users.
For the middle layer, we continue to leverage the interactive Keith to drive the spending.
In the second quarter, we launched a couple of new interactive experiences similar to the team with which have been well received by the users a few weeks ago, we launched a new interactive gift card snowball fight.
This new experience is fully integrated with billions in PK feature which means one to one broadcaster noncomp match.
With connected channels.
The broadcasters can organize a team offense to battle against the enemy camp in a snowball fight like the single like experience whereby the users prima pretty much play on Standalone basis. The snowball fight allows the users to enjoy the interactive experience in a teamwork environment. So that users can have stronger feeling about being part of the show.
We will continue to go down that path in order to provide better entertaining in interactive experience for the minerals.
Longer tail users.
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As I mentioned on our last earnings call, although the top vendors spending Perry grew on a year over year basis. In Q1, we actually believe that LIBOR casting business still has plenty of growth opportunities within the wealthier class. If we can come up with the effective promotional like streaming show is a unique entertaining experience to me then turn out to be more successful than we originally anticipated. Therefore, we had a second line in June in Toronto, with Yen Province, and a third one in Chengdu two days ago. The purpose of the offer music to our is to enhance the top spenders experience experience as well as to expand the pool of high paying users and glad that the tours have proven to be effective in achieving these goals.
Other than the offline tours, we also rolled out the long awaited nobility system in late June as many investors now one of the key issues with our old user ranking system is that it lasted demoting mechanism, which is crucial in keeping the paying users, especially new ones motivated.
In the new system.
We solve that issue by assigning different titles to the hardcore users based on their spending levels.
The titles and their attach privileges need to be Redetermined, our monthly basis based on users spending level. The nobility system almost immediately started to take effect, giving a boost to the spending from the top of the pyramid paying user.
In the third quarter, we will continue to optimize the new ranking system and plan to further connected with the competition experience to make it more compelling.
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Due to these concerted effort to improve the experience from different layers are paying users we were able to achieve a reacceleration of LIBOR casting business, whether it wasn't John boomer to optimize yield.
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So no. We are do you see him who typically seemingly Omar auto enhanced mobile Vas revenue was $663.6 million would be a 106% increase from last year. Despite the headwind from the posting suspension and associated decline in traffic.
Thats revenue ex Tac and still grew by 9% from the previous quarter.
As the regulatory impact had have largely being absorbed by the robust growth and momentum of the virtual gifting business as well as the new product and operational initiatives that the team has taken.
In the second quarter, the referral gifting revenue in the traditional social experiences, including interest groups greetings and I am traveling continue its rapid ramp with a sequential growth rate of over 20%.
The growth was mostly driven by an operational event card the romance car that we ran in the triggers we are currently working on some optimizations and intend to repeat experience in Q3.
In addition to the growth from the traditional use cases, a quick chat and party experience also contributed meaningfully to the growth of virtual gifting business.
Further the chat room experience in Q2, we open up more traffic to the monetization testing. So there has been a decent ramp.
Decent ramp up in revenue. However, at this point chat room remains a test at a testing phase and small in terms of overall revenue contribution. So how you got lot of loan pushing with you.
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Total revenues were four who converted machine you tissue mentality and does appeal to a new cohort cohort of users. This is a new ground that we are falling into and the team will continue to explore different possibilities here as I mentioned earlier, if our success continues in this area in this new area. It can open up new opportunities for both engagement growth and monetization growth.
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Yes, those are two new people to the hotel volume low without additional turned on the timing for your financing costs. After review of the key business lines now, let me hand over to Mr. longest review Hudson's product and business development Mr. Walkley.
Thanks.
So let me briefly review handles operational this is lower than in the past quarter economics.
First on user growth.
Due to the removal of the download service from all the China App store since late April in the second quarter, we experienced a substantially down sequentially.
As a result, the number of paying users decrease more number of that uses that.
Because the majority of existing iPhone paying users were unable to renew those assumptions used in the purchase.
Thank you.
The result in the second quarter, we had 3.2 million paying users compared to 5 million a quarter ago.
By mid July .
Couple download and payment service had been fully restored at all official stores in China.
After you assumption, we have significantly stepped up the marketing efforts to make up for losses. During the inspection period Im happy to see a rapid recovery trajectory across all the major operating and revenue metrics.
By August 25th number of paying users has already rebounded to approximately.
4.1 million.
Now I'll briefly on financials.
Total revenue for the second quarter was.
284 thoughts.
8 million RMB.
A 4% decrease from previous quarters.
Due to the deferred revenue in connection with the subscriptions from multiple on Theres a lag between the change in total gross grossing trajectory in the change in revenue trajectory.
For the second quarter, despite the 4% sequential decrease in revenue was a result of.
24% decrease in total dropping and the revenue rolled in from deferred revenues of pre prior periods.
The decline in polo dropping in the second quarter was roughly in line with a decrease in average paying user accounts for the quarter.
Due to the above mentioned lagging effect controlled Russell and revenue recognition, we expect Q3 revenue to rebound to a less degree and in total Rockwell will such effect has been reflected in our Q3 revenue estimate accordingly.
Next I'm going to briefly review, what we've done and our future plans against our strategic priorities.
Our top priority is to expand the size of moving through product innovations and marketing efforts first and foremost we have to make sure.
That automotive grows in a healthy and sustainable margins.
During the second quarter, we devoted substantial resources into strengthening our cobble reviewing and expenses.
We made significant investments in human resources technology is its volatile infrastructures to build the multilayer cotton review and monitoring mechanism.
Which is ensure that harmful accountants and spamming activities are captured and removed in power.
As a result of these efforts and the users can now enjoy our products and services in a much healthier than mine.
Other than the others.
Endeavors in the second quarter, we also took initiatives to enhance the social experiences for our users. We continue to push forward with our real photo verification process in Q2, we focused on improving the accuracy rate of diversification and made good progress we also.
We are also working with a mobile team to leverage their face recognition technology in order to further improve the accuracy verification lowered the cost associated with the disease real photo verification has improved dating experience for our users were meaningful way at the same time also substantially increased the top.
Uh-huh conducted expanding into these onto the platform.
In Q2, we also made encouraging progress with a few experimental product experiences that we've been testing the core performance indicators around these new features are improving and we plan to gradually roll them out to larger user base of users in Q3. We believe these new features will alone pumping users to discover indirect with new connections in diversified ways with much more fun together as they also provide richer community experience to users on top of the swiping and shopping experience.
Enriching the product experience is important we're taught them for appeal to new users and drive user engagement.
Moreover, the richer consumer experiences, we also opened up doors to future monetization opportunities.
Now a quick quick update on our second priority, which is to drive monetization through the optimization of existing features and introduction of new thing experiences. During the dollar suspension period. Our team continues with our effort to test the optimization of the VIP and see features thanks to their focus and effort. We now have a few readily available optimizations in the pipeline, we're going to roll them out in a methodical way to drive continuous revenue growth in the remainder of the year.
Other than these optimizations. We have also been testing new paid features that could potentially become future revenue drivers. Some of these are description base and some of them will move beyond subscription model to break the RBC.
As I mentioned in previous calls having good Allah part paying experience is crucially important not only to unleash the monetization potential but also to provide greater experience to users who are willing to spend more on the.
We're currently making strides with the project and looking to test launch test larger service.
With a small user base in Q4.
Lastly, I would like to take a few minutes talking about compounds overseas development, and it's becoming increasingly clear that.
That there are huge growth opportunities for these services.
Oversea markets.
We've been working on this area for a while in the recent several months, we made impressive progress in user growth product improvements as well as driving market ROI.
We our approach in overseas markets centered heavily upon return on investment it means that when tapping into new markets, we will evaluate ROI by comparing the user acquisition costs within monetization opportunities. We have if we have the choice that the cost can be recovered within a reasonable period of time, we will get more aggressive on the marketing front office.
Otherwise, we'll pull back from that specific market to try to find other alternative markets that make better sense.
In terms of the ROI.
Now with quite a few crew and successful cases and getting into new markets in the first half of this year.
We now feel well poised to pursue the oversea opportunities in the big bigger way.
As of now approximately 15% of our active users come from overseas market.
Currently the revenue contribution jewelry than that percentage has already user base is still under monetized with.
Good opportunities that we're currently seeing in our assessment of the advantages that tandem views.
First I am confident that the oversea market will become a much more meaningful revenue and profit contributor in three years.
With that I am passing the call to Mr., John come down for a financial review John .
Thank you Hello, everyone. Thank you for joining our conference call today.
Now let me briefly take you through the financial review.
Our total revenue for the second quarter 2019 was 4.15 billion RMB up 32% year on year and exceeding the high end of our revenue guidance.
non-GAAP net income attributable to Momo was 1.24 billion RMB compared to 893.2 million RMB for the same period, 2018, or 39% increase year over year.
Let me theoretically you jump into the review of costs and expenses items.
As revenue line items have been covered comprehensively.
Hi, Wally and one year earlier.
Our non-GAAP cost of revenue for the second quarter 2019 was.
2.04 billion RMB compared to $1.71 billion for the same cared a lot here.
non-GAAP cost of revenue as a percentage of total revenue was 49.1%.
A decrease from 54.2% for the second quarter 2018.
non-GAAP cost of revenue for the second quarter 2018 included the production cost of fantasy, which was a 158 million RMB.
Excluding the center city impact non-GAAP gross margin for the second quarter 2019.
We remain.
Stable over the same period.
On a quarter over quarter basis, the non-GAAP gross margin for the quarter improved slightly by one percentage due to the layer a lower payout ratio from both live broadcasting and the vast businesses.
The lower payout ratio for live broadcasting business was from the fact that there was no quarter end tournament event in the second quarter and fast.
Some savings on the promotional costs.
In the second quarter of 2019.
A vast service team continued to scale back from the promotional costs.
Efforts around the virtual gifting business. Therefore, the margins for mass business also improved on a sequential basis.
non-GAAP R&D expenses for the second quarter was 204.8 million RMB compared to 116.1 million RMB for the same period last year.
Representing 4.9% and 3.7% of total revenue respectively.
The year over year increase reflected our strategy to invest in R&D area throughout 2018, mainly to recruit additional engineering talent to support our various.
Product innovation initiatives.
As well as a full quarter consolidation of 10 times in 2000.
Second quarter 2019 versus only truly month.
For the second quarter 2018.
We ended the quarter with it.
2075 total employees.
Of which.
528 are from Panama.
The R&D person now as a percentage of total employees for the group was 54% compared to.
45% in Q2 last year.
non-GAAP sales and marketing expenses for the second quarter was 500.
And 2.3 million RMB or 12.1% of total revenue compared to.
Three O 8.9 million.
RMB or 9.8% of total revenue for the same period last year on a year over year basis, the increase in the sales and marketing expenses as a percentage of revenue was due to the full quarter consolidation Atlanta, while the core mall non-GAAP sales and marketing expenses as a percentage of.
Total revenue remained.
Stable.
Our non-GAAP DNA expenses was 119.4 million RMB for the second quarter 2019, compared to 78.6 million RMB for the same quarter last year, representing 2.9% and 2.5% of total net revenue respectively.
The GAAP DNA expenses was 507.
500.7 million RMB for the quarter compared to.
127.7 million RMB for the second quarter last year.
The company recognized a TNF related share based compensation of RMB 381.3.
In the second quarter 2019 compared to.
49.1 million RMB in the second quarter 2018, the big jump in the share based compensation expense was due to the same one off events that we discussed on our last earnings conference call.
Let me give a quick recap here.
As we disclosed in our 2018 2000, yes.
In August 2018 tons are limited.
Granted.
3 million.
578208 shares options to its founders with a four year vesting period.
Representing 12% of common shares on a fully diluted basis.
Divesting can be accelerated based on achievement of certain performance conditions.
According to a relevant U.S. GAAP literature, a share based compensation expense of 466.9 million RMB was amortized in the first quarter 2019 based on the progress of achievement of the performance conditions.
As of March 30, Onest 2019.
During the second quarter of 2019, the performance conditions or fully Matt and accordingly, we recognize.
A share based compensation expense of.
323.7 million RMB in connection with the above mentioned option grant.
The amortization of the share based compensation.
Expense in connection with this option grant will have no future impact from Q3 hours.
non-GAAP operating income was 1.45.
Billion, RMB, representing 35% non-GAAP operating margin for the quarter.
Excluding excluding onetime consolidation impact.
The core home on adjusted operating income for the second quarter 2019.
Would have been 1.5 billion RMB or 39%.
non-GAAP operating margin.
Now turning to the balance sheet and cash flow items as of June 32019.
Almost cash cash equivalents term deposits and short term investments totaled 12.5 billion RMB compared to.
11.3 billion RMB as of December 30, Onest 2018.
Net cash provided by operating activities in the second quarter was 1.4 billion RMB compared to 992.4 million R&D for the same quarter last year.
Lastly for the third quarter revenue guidance.
We estimated our third quarter revenue to come in the range from 4.25 billion RMB, two 4.35 billion RMB, representing an increase of.
17 tune.
19% year on year.
Excluding fantastic here revenue contribution in the third quarter 2018, our third quarter revenue guidance on an Apple to Apple basis represents a year on year increase of 22.
25%.
Please be mindful that the forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to changes.
That concludes our prepared portion of today's discussion with that let me turn call back to Kathy.
For QNX.
Yes, actually just one quick reminder, for those who can speak Chinese. Please ask your question in Chinese first followed by English translation by yourself, operator, we're ready for questions.
Thank you, ladies and gentlemen will now begin the question and answer session answer your questions. Please press star one on your telephone and way today to be announced to cancel the request. It is the pound hash key.
Once again it is star one to ask a question. Your first question comes from the line of Thomas Chong of Jefferies. Please go ahead.
Well I somehow check one each time, you guys or what have you and consequently, its on how the.
Well they wouldn't do it well suited Santander.
We saw a woman size up our name to highlight content on that project.
Bottom line the Harlow.
Yes, hi, guys, a Carla Wilmington, guys I see.
Democrats.
Uh huh.
Sure.
No I don't.
You taught out Ignyta cgmp trends management for taking my questions and congratulations on a solid set of results.
Question is about 10 times.
Can management give us some color about the revenue and the bottom line outlook or sometime in the second half and also if there any timing on profitability. Thank you.
Okay.
Okay.
So I spoken quite a lot about second half monetization strategies already the growth will be driven by both optimization of existing.
Premium features an intro of new ones.
Our quarter on quarter grafting increases actually.
Better than our expectations, it's around 30% to 40% as we can see right now, but since there is a lagging effect between grossing and revenue that we talked about earlier.
The revenue guidance assumes a sequential growth of around 10%.
Now this positive momentum we expected to extend into Q4.
In terms of profitability.
We expect to reach a domestic breakeven on a monthly basis somewhere around mid next year.
If we manage to do it on a.
You know a whole company basis, including domestic and overseas market dependent depend on how aggressive will be.
In the overseas expansion during this year.
Yeah.
Thank you.
Thank you.
Well I know.
Just a quick reminder, before we take that next person in a given the time constraint we may need to limit of one question to a one analyst please be mindful of that operator, we're ready for next.
Yes. The next question is from the line of Jialong Shi of Nomura.
Please go ahead.
Oh My God, one is I just wanted to learn a whole into one do you feel quite easy got turned on yet I think that you shared a memo mentioned how he would tell you. It's all going to be going on calling for a t. Neal Goldman John just short to go when you want to go Gung Ho needing male lag on a whole FICO, it's going to be in terms. The lesson that you hold she seemed to take a figure out you on coal blending to source it might happen scenario, what you're seeing in your horse again, they're going to be a non C. Well may have kind of what you're going through this and I shared by kind of take or do we need.
Sure. So let's try it out to go so we shot kind of shared outlook.
From time to time, and we were told to buy some almost China's internet peers that China's internet population is already saturated and therefore, it is increasingly difficult to acquire new users.
As a result, we saw some some of your peers are tiny MPR attention to lower tier.
Mark has where the internet penetration is relatively lower so I just wonder what will be more more strategy is to.
Cope with these industry wide challenges and what will be your target.
For mobile App by end of this year and where do you think the Phoenix for a moment may you in the long term and also I have a quick follow up on Pantene and I just wonder what are the key overseas markets for time time. Thank you.
[laughter].
Okay.
So this is new loans I'll first would be up answered the question on pump on so our primary user base and overseas are in southeast Asia in India.
And so.
We are doing quite well in terms of all the markets. We have tried out overseas.
We meet the primary competitors in all these markets, but the dating market has an appetite for a multiple apps. The so we don't think that's established players in new markets for us actually affect us that much in terms of our expansion potential.
Thank you.
Okay now.
Answer your question.
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To build a bullish sign.
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I'm not sure I'm not trying to hurt more.
Well each other it's not going to get presented under the servant leader.
Are you a little more Chen Panda, Yahoo, or the homepage suspension on the core Moema was lifted up till now are the user engagement metrics have been showing a very positive kind of trajectory and that give us the confidence that the Emmy you for the normal course should see continuous growth in the future at the same time, you know, we do see pretty ample but we do see huge growth within in the open social space and the broader entertainment space right. Now we are seeing many new emerging growth opportunities in China and.
Also in oversea market based on our rough estimation as specifically in the social space, China, plus Asia I should give us a total addressable market of somewhere around 600 million people for us to penetrate and if you look at the end of U.S. Moema and Tom Tom combined together, we probably represents somewhere around one fourth of that town.
At this point patent is going through a phase where its users and paying users our ascending very very rapidly. We believe that such hyper growth phase what component is going to continue in the coming couple of years.
On top of the core mobile App and time, we also have other deployment either through internal incubation were external cooperations. So continue to penetrate into that into that addressable market. So that's kind of my basic view on how more why the company is going to.
Continue to drive user growth in the in the in the future.
Operator next.
Yes. Thank you. Our next question comes from the line of Les Jang of Bank of America Merrill Lynch. Please go ahead.
Hi, Bonnie till I started initial if you Oh, what do once you feel has begun to someone the 17th so you sell them Oh Suraj. Our cure 10 appeal. There then Tom push to kind of <unk>. The ARPU would have been down for your home town see Youre really shift more to be at a theater club Jayco now I know when you got some on time SAP and yen all tied to that then John Crouch alive. So the take or pay you. There you go away food thing, John Hi, sure going to other slides, our puno honing gone tied to Dod or you see I seem to have featured omeros. The collar order should Oh commercial horse on this in a timing critical mass is nice Oh, what designs I bought my questions Meatball tend to.
In Q2, we actually spent much less than that.
We plan, so even though revenues decreased.
We ended up with a much smaller net loss in Q2 than than we projected.
And because of this.
We're making up for it by increasing marketing spending significantly in Q3.
So.
The three factors of our spending less in Q2.
US spending more in Q3 and also the there's a negative impact on revenues will make.
The net loss in Q3.
Widened significantly from Q2, but this is a short term factor so moving into Q4 as revenues continue to increase and marketing costs domestically can come down significantly we expect the net loss due to the increase.
Significantly from Q3.
Operator.
I read or not yet.
Yes. They go next question is from Ken Hill of T.H. Capital. Please go ahead.
Hi, Glenn it's so much a colleague of NT Joshi Kenyan actually on budget does say sure coach how Ah I don't even know Cheyenne, Tom that you see a peep chemo and to even come and deliver them be out that if you keep the outdoor seen a discipline to the vertical not good to talk to me a formula you know what your lead shot kind of kind of what was it a year. If you look at it just means that domain well number one machine you want.
She's just be warm and it did that would put you at that Ali the Butler Leila.
Youre really not there will be a yet Michelle will mix up young like tigger, they stick a young now what I say you shop.
So in the more wage up or if the beta and its you know youre a lesion is going to give you any negative impact and what's your strategy to cope or.
You know to the potential.
If there's any potential pressure thank you.
Uh huh.
Whatever that job.
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Susan This weight I was also made to that as illustrated in the term call appetite, yes essential woman the job well ahead of our original position available.
What's it all so Hudson good things about what how does she visits of Boston's on them quite into woman. This wasn't hatches journalism elsewhere.
Like we all went to the UN I mean, that's a good position to walk down to no. We don't kind of see the borders your time here. So just answers. It's about those are finished with that this is somebody going on let me. They are found out here or not.
So it was a month with as you know I'm wrong.
Sean Zhang and what is the timing of okay, sorry, I missed that.
Okay.
Pretty much.
A fair question I remembered ive answered or like how is fine.
In the past.
Every single time to or from the Investor point of view things may seem a little bit different but actually from our standpoint.
We haven't seen any substantial change in the competitive burn lately.
Our our observation is that the libra casting business from threshold and the whole.
Warehouse system.
Touching a growing very rapidly for.
Quite some time, but we really haven't seen any uh huh.
And even a serious threat Oh hi.
Players a week with regards to what kind of unique things about the product or whether you consider them a really help us to achieve a chief that I guess its importance or there's a lot of them, namely Oh.
Like I mean cost warm.
Ah you know for this platform last for me is really just a monetization feature attached to their respective core use case.
It's you want to understand what makes us unique what makes us a different from those tropichop lines you have to understand what's the difference between the core use case I'm always is a social use case and the core use case on on quite Rowan and told you. All I guess, that's a that's a very crucial for investors to understand what makes the live streaming services on more from the live streaming service I'm honored to be Troughing offline.
And.
You know about my view that the bigger players have not posted any threats to our ecosystem I think it's supported by hard data ice compared to second quarter data from paying user archive saw pretty.
For growth and on the high.
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During the last few quarters moments constant supply ecosystem have been strengthening for example, if you look at the number of professional broadcasters and compare the second quarter of 2019 with toward the end of 2017 before we rolled out the Taliban incentive program. The number of professional broadcaster during that period of time grew by 80% eight zero percent.
And if you look at the number of quality agencies, who can bring.
Sizable they must be grow things.
In the second quarter that number also grew somewhere around 50% on the revenue side. We also in the second quarter. We also saw a re acceleration in a light broadcasting why why gross rate.
And we achieved that during a time, where there was a homepage suspension on the core mall cop warm. So I really don't think that investors need to worry much about the competitive environment that we're in at this point.
So you know given.
Time, you know this will make this the last question of this earnings call. Thank you for joining US we will see you next quarter, operator ready to cope.
Thank you ladies and gentlemen, this will do the conference for today and thank you for participating you have now all disconnect.