Ladies and gentlemen, thank you for standing by and welcome to the First Quarter of 2021 Momo Incorporated Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today. And I would like to hand the conference over to your first speaker today, Ms. Cathy Peng. Thank you. Please go ahead, ma’am..

Thank you, operator. Hello, everyone and thank you for joining us today for Momo’s first quarter 2021 earnings conference call. The company’s results were released earlier today and are available on the company’s IR website. On the call today from Momo are Mr. Wang Li, CEO of the company and Mr. Jonathan Zhang, CFO of the company.

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&A session that follows.

Before we begin, I would like to remind you that the call may contain forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

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 company’s filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise except as required under law.

I will now pass the call over to Mr. Wang. I will translate for him. Mr. Wang, please..

number one, further grow the core user base with limited marketing budget and improve the ROI versus last year; number two, bring the business back on to growth track; and number three, continue to enrich our product portfolio and push the boundaries beyond Momo and Tantan.

On the Tantan side, the single most important goal for the year is to deliver solid user growth by substantially improving the marketing efficiency as well as the coordinating experience. Next, I am going to take you through what we have done in the past quarter regarding each of the priorities.

First, I’d like to review the progresses we made in better serving the Momo community and drive user growth. One of the most important goals on the product side is to keep identifying the underserved user demand and figure out ways to effectively address them.

One obvious thing that we can do on that front is to take better care of female user social preferences. We have long been seeing social desire from female users on Momo. However, women’s social preferences can be quite different from that of men. Women tend to have stronger inclination to express their feelings.

Also, it takes longer for them to open up to strangers and get acquainted with others, especially those of opposite sex. The product and services we offered in the past were clearly more male user-friendly. Therefore, there was a mismatch between what the female users needed and what we empower them with.

In Q1, we started some new product experiments to bridge that gap. We test launched an audio social experience called [indiscernible] or [Foreign Language] in Chinese and a brand new news feed experience called the mini-verse, which allows users to post and interact with content without releasing their profile information.

Both of these two product experiments aim at encouraging the users to share their relationship stories and express their feelings, which caters to the part of user mentality that falls on the other side of the spectrum against what is commonly seen on Momo.

Our objective here is to improve female users’ engagement and retention by better serving them with what we didn’t do well before. If we can successfully do that, we can improve the engagement of the entire platform as well. This is a very important direction for our product team to explore this year.

Next, let me review the progresses that we have made against our priority of bringing the cash cow business back on to the growth track. Firstly, on live broadcasting, our objective for live broadcasting this year is to deliver a gradual and steady improvement at both revenue and gross profit level.

Here, I would like to underscore gross profit, because one commonly seen the steps in managing live streaming business is to drive top line growth at the expense of gross profit and long-term health of the ecosystem.

This year, we will be sticking to a more sustainable growth model by focusing on fostering the mid to long-tail content ecosystem and avoid applying strong revenue-oriented operational efforts, especially those aim at lifting RP2 for speedy recovery, which may cause centralization at the very top of the pyramid.

One imperative for healthy content ecosystem is to have a vibrant content supply system. This was particularly critical after taking a big step last year. At Q4, with the Golden broadcaster contract renewal project, we have successfully locked down the big majority of the existing high-grossing broadcasters.

In February, we moved on to addressing another issue that we had on the supply end, new talent recruitment and growth. Having a constant flow of high-quality new talent and the right mechanism to make sure they can surface from the bottom to the top is important for maintaining a good metabolic system.

As a social platform, this used to be one of our strong areas. However, during the past 2 years, Momo had not provided sufficient support and motivation to this vital part of the supply system. To address this issue, we made another adjustment to our incentive program to make it more appealing to the newcomers.

These two rounds of adjustments of the incentive program were very well received by the new broadcasters and agencies. This can be proven by the outperformance of the year end competition as well as better than expected trajectory post the Chinese New Year holiday.

I believe our current program provides adequate incentives and motivation to all kinds of broadcasters that we consider important through our content ecosystem. As expected on our last call, the two rounds of adjustments collectively had a 2.4% drag on the GP margin. We believe payout ratio should remain stable from Q1 onwards.

I am glad that our team was able to put together a well-rounded incentive program at a fairly manageable cost level. Besides more effective financial incentive, as another part of our effort to better support the entry level talent, we made adjustments to our algorithm to divert more traffic to the mid to long-tail.

Moreover, since the beginning of this year, we have also been holding monthly [indiscernible], where we sit down with different kinds of agencies and broadcasters, making sure their needs, challenges and suggestions are heard by the management.

Due to these concerted efforts to revive the content ecosystem, in Q1, we were able to see meaningful improvement in some of the important metrics that we use to gauge the healthiness of the ecosystem. These metrics include a number of in-channel DAUs, retention ratio and the number of average daily paying user.

As the overall company ecosystem continues to recover, the spending has also been showing steady and gradual improvement. So far into the second quarter, the non-event days daily grossing has fully come back from the trough around Chinese New Year and is now back to December’s level.

It sets a good foundation for the spending to continue to improve as the content ecosystem does in the second half of the year. Now, turning to VAS, value-added services, has been a real outperformer in Q1, growing against seasonality at 42% year-over-year, a significant acceleration from last year.

Among various experiences within VAS, chat room was the biggest growth contributor for the quarter. In comparison with other audio and video-based social entertainment experiences, chat room has a much larger user base and the paying user structure is also more long tail-driven.

Throughout last year, the team has been operating this business at a controlled pace and mainly focusing on introducing innovative products that drives organic growth. This will continue to be the way we grow this business this year. Last Q4, we introduced [Foreign Language], which means themed seasonal gifts.

It has proven to be a very effective – it has proven to be very effective in terms of driving revenue and engagement. In Q1, we reinvented it for Chinese New Year and Valentine’s Day, which enabled chat room to deliver an exceptional growth for the quarter.

We made this gift feature available in the interest group as well, which was also well received by the users there. In addition to the boost that we got from the themed seasonal gifts, the other thing that started to gain traction in Q1 was the matchmaking experience or [Foreign Language] in Chinese. Matchmaking is a moderated video dating experience.

It is particularly popular among lower tier city users. It started gaining traction in terms of retention and product experience in the second half of last year. Meanwhile, its revenue also began to ramp up steadily. The growth trend continued into Q1 and we expect it to become a meaningful revenue contributor heading into the second half.

Now, quickly on the new endeavors, both Hertz and Duidui continued to make progresses against our target, both in terms of user retention and user scale. Their revenues have been growing in line with user growth. We are clearly on track to reach ROI 2, which means generating enough revenue to cover both revenue sharing cost and marketing expenses.

Our goal is to hit ROI 2 target for both Hertz and Duidui in the coming few months. If we can fulfill that target, we then have plan to push the marketing button more aggressively in the second half of the year. As said on our last earnings call, this year our main focus will remain on product and user experience.

That said, we do expect their revenue to trend up and contribute further into the VAS business line as we head deeper into the year. To put things in a nutshell for the core business, live streaming business, after a very bumpy journey last year, is finally on a steady improving trend.

That, coupled with the growth opportunities we have in VAS, give us the confidence that the core Momo will continue to be a very productive and evolving cash cow business. This will leave us ample room to invest in new endeavors beyond Momo and Tantan in order to build longer term drivers.

Now, turning to Tantan, before I get into the business and strategies at Tantan, I’d like to talk about a major change for the Tantan team. In April, Tantan’s Founder and CEO Wang Yu, as well as COO, Pan Ying stepped down from their respective positions. They are no longer involved in Tantan’s daily execution.

As many of you know, Tantan encountered many challenges in the past couple of years. Mr. Wang and I have – have a consensus view that the biggest priority for Tantan is to make Tantan’s product and marketing efforts more effective and execution more efficient so that we can grab the great growth opportunities that we’re seeing.

However, in terms of what changes we need to – we need in order to move things forward more effectively, Mr. Wang and I had some major differences that are difficult to reconcile. Mr. Wang chose to respect my opinion and decided this is the time that Tantan needs a new leadership.

I’m now the acting CEO of Tantan and personally leading Tantan’s reforms, which is happening now as we speak. Going forward, Momo and Tantan teams will work closely together to move faster on the deeper level of collaboration. Wang Yu and Pan Ying have been valuable partners to our company.

I’d like to take this opportunity to thank them for their dedication and contribution to Tantan. On behalf of both Momo and Tantan teams, I wish them the very best in pursuing their new endeavors. Before I talk about the progresses we’ve made against our strategic goal, let me quickly review Tantan’s financial performance.

Total revenue for the first quarter was RMB568 million, up 49% year-on-year. The growth was driven by the increase in ARPPU, which was largely contributed by the live streaming service and, to a lesser degree, user shift toward higher-priced membership services.

On a sequential basis, revenue had strong seasonality this year due to the live streaming service. The big majority of Tantan’s live streaming revenue comes from long tail broadcasters who are difficult to manage.

Total broadcasting time and the number of active channels declined significantly during the winter holiday period, causing a deep dive in live streaming revenue and subsequent slow recovery. As a result, live streaming revenue dropped 38% sequentially to RMB251 million. VAS revenue decreased 6% from Q4 last year to RMB316 million.

The sequential decrease was due to the weak user trend in January and February as well as the higher female ratio in the newly acquired users.

Now turning to the most important part of my speech today, Tantan’s strategic priorities for the year and our plan on how to drive user growth more effectively and unleash the full potential of Tantan going forward. We have always believed that Tantan has the potential to grow bigger than where Momo is today.

This view is supported by the secular trends that we’re seeing in China’s dating space as well as the fact that Tantan is the most committed as well as the most effective product in connecting people for romantic purposes and off-line relationship conversions.

The reason why Tantan has not been growing as fast as they should was not because the opportunities are not there or somebody else is stronger than we are, but because there are important areas where we need to improve.

For quite a long period of time in the past, our marketing efforts have not been – have been ineffective and the product experience has a lot of room for improvement as well. The single large important goal for Tantan this year is to make sure that we deliver solid user growth by addressing the above-mentioned issues.

From April until now, my job has been putting together the right team to lead these efforts. I moved some of my best people from Momo on to this project so that we can hit the ground running. We spent the past 2 months combing through the key areas of focus and now have a plan to achieve our goal for this year.

Now let me walk you through the key steps of this plan. First, we need to significantly improve Tantan’s marketing efficiency. On that front, I’m afraid we have not been doing the right things during the past 2 years. After we took over in April, we’ve conducted a comprehensive review of Tantan’s marketing approaches.

The review, we confirmed our belief that Tantan should have ample room for user growth by reforming its user acquisition system. We have a standard playbook and Momo for the reform. And thus, we view it as a low-hanging fruit that we can pick.

Our job in Q1 would include building up a fully functioning marketing team, resetting and restarting the data management system and rising a new set of user acquisition programs, including targeting strategy and ad materials to completely replace the old ones.

The number of DAU were under some pressure in April and May, while we decreased the marketing spend in order to focus on rebuilding the team and reworking the system. We expect the user trend to start picking up again as the new system gains traction moving into Q1.

Another thing on the marketing side that we believe can contribute to the overall user growth is brand advertising. We hardly made any branding efforts in the past 3 to 4 years. However, Tantan, as a relatively younger brand, its brand awareness is far from the level where it needs to be.

There are many people who are not using Tantan because they have not heard of us before or yet to be fully aware of the core value that Tantan can provide or have some misconception about Tantan’s brand and services.

There is a huge opportunity for us to drive user awareness and enhance brand equity if we can clearly articulate the core value of Tantan to those who may need our service. We will invest more into branding when opportunity arises. It should be the right timing after we complete our next major product upgrade.

The second growth driver is product innovation. We need to make Tantan’s product experience more appealing. While Tantan is undoubtedly the most dedicated and effective dating app in China, we do have many opportunities to optimize so that we can do better in connecting the users for romantic purpose.

On the front end, we need to make the users interface more succinct and coordinating experience more prominent. On the back end, we need to make the swipe and match system more effective. Tantan is sitting on a gold mine of user data that we can mine and leverage to make more relevant recommendations.

This is where technology and big data mining can play very important roles. We have not been very effective in doing that during the past 3 to 4 years. We need to see real efforts made and concrete changes on that front as well. The goal is to improve user experience in a core swipe and match mechanism through more effective recommendations.

We need users to be able to feel these changes when they swipe through the cards and interact with matches. While continuing to strengthen our dating-related product offering, we are also going to keep exploring more diversified features and services to make the Tantan experience better fit into the Asian dating culture.

This in turn will further improve user engagement and retention which will translate into user growth. The third pillar of our Tantan plan is to drive more synergies between Momo and Tantan.

While Tantan will continue to maintain an independent organizational and operational structure, I believe there are many areas where Tantan and Momo can work together and drive significant synergies. This is especially true in the areas of marketing, technology and data collaboration. This is an area where we will definitely move faster in the future.

These are the things I’d like to cover on this call. Now let me pass the call over to Mr. Jonathan Zhang for financial Review. Jon, please..

number one, higher payout ratio from core Momo live broadcasting business; lower gross margin for Tantan at its live broadcasting business has become sizable; higher payout ratio from core Momo VAS business due to the robust growth coming from the audio/video-based social entertainment business, a big part of which involved third-party professional moderators; and lastly, certain fixed nature costs, such as headcount, impacted gross margin negatively as total revenue declined and these items represent a higher percentage of total net revenue.

On a sequential basis, the non-GAAP gross margin was down 2 percentage points compared to Q4 last year, which fell into the optimistic end of our original expectation. As mentioned on our last call, we had expected the new broadcaster-oriented incentive program adjustments to have 2 to 3 percentage adverse impact on gross margin from Q1 onwards.

I’m glad that the team was able to put together a well-rounded incentive program that is well received by the new broadcasters and agencies, at the same time, managed to control the cost structure at a fairly reasonable level.

We believe the current incentive program provides sufficient motivation to all kinds of broadcasters that we deem important to maintain a vibrant ecosystem. We expect the payout ratio to maintain stable level from Q1 onwards.

Non-GAAP R&D expenses for the first quarter was RMB244.1 million compared to RMB217 million for the same period last year, representing 7% and 6% of total net revenue, respectively. On a sequential basis, non-GAAP R&D expenses decreased 15% from RMB486.5 million in Q4 last year due to the year-end bonus expenses accrued at the year-end.

We ended the quarter with 2,333 total employees, of which 828 are from Tantan. R&D personnel, as a percentage of total employees for the group, was 57% compared to 56% in Q1 last year.

Non-GAAP sales and marketing expenses for the first quarter was RMB579.8 million or 16.7% of total revenue compared to RMB645.3 million or 18% of total revenue for the same period last year.

The year-over-year decrease in sales and marketing expenses, both in terms of RMB amount and in terms of as a percentage of total revenue was primarily due to less spending from core Momo as we postponed our live streaming year end gala event as a precaution or precautions against the pandemic and lower user acquisition investment from Tantan in the first half of the quarter to avoid channel competition while focusing on fixing the broken pieces in its user acquisition system.

Non-GAAP G&A expenses was RMB94.2 million for the first quarter 2021 compared to RMB105.5 million for the same quarter last year, representing 2.7% and 2.9% of total net revenue, respectively.

Non-GAAP operating income was RMB661.2 million, a decrease of 17% from Q1 2020, representing 19.1% non-GAAP operating margin for the first quarter, down 3.2% from the same period last year. Non-GAAP OpEx as a percentage of total revenue was 26.5%, a slight decrease from 26.9% from Q1 2020. Now briefly on income tax expenses.

For Q1, the company received a tax refund, which was resulted from additional expense deduction related to previous years. Without one-off refund, our estimated non-GAAP effective tax rate was around 19% for the first quarter. Now, turning to the balance sheet and cash flow items.

As of March 31, 2021, Momo’s cash, cash equivalents, short-term deposit, long-term deposit and restricted cash totaled RMB16.96 billion compared to RMB16.48 billion as of December 31, 2020. Net cash provided by operating activities in the first quarter 2021 was RMB502 million compared to RMB543 million in the same quarter last year.

Lastly, on the business outlook, we estimated our second quarter revenue to come in the range from RMB3.6 billion to RMB3.7 billion, representing a decrease of 6.9% to 4.3% year-on-year, but an increase of 3.7% to 6.6% quarter-over-quarter.

For Q2 2021, on a sequential basis, we expected the total revenue from core Momo to increase in the high-single percent.

The total revenue from Tantan is expected to decrease around 10% due to the following factors; number one, the decrease in paying users, especially in April and May due to the weak DAU performance caused by temporary disruption during the management transition period.

Number two, changes in gender ratio, the increase in female percentage in the new user acquired in recent periods adversely impacted paying conversion as women are much less likely to pay for value-added services in comparison with men.

Number three, the spin-off of 2 early stage businesses, which will have a slight negative impact on the number of paying users as well as total revenue, the business involved or loss-making at the point of spin-off and generated immaterial revenues in comparison with Tantan’s total revenue.

We will recognize 1 month revenue from these businesses in Q2 as the transition was completed in early May. The spin-off will have a full quarter impact on the top line in Q3. Please be mindful that this forecast represents the company’s current preliminary view on the market and operational conditions, which are subject to changes.

The other thing worth mentioning here is that up to this moment, we have paid a special cash dividend for the third year in a row. To replenish our U.S. dollar funding consumed, the company had repatriated RMB1.3 billion in total from our WFOE in China, our offshore entity in the second quarter.

In accordance with the respective taxation law in China, the company has paid 10% or RMB130 million withholding tax to the Chinese tax authorities. The tax – the withholding tax payments will be recorded as income tax expense for the company’s second quarter 2021. That concluded our prepared portion of today’s discussion.

With that, let me turn the call back to Cathy to start Q&A. Cathy, please..

Yes. Just a quick reminder, for those who can speak Chinese, can you please ask the question in Chinese first followed by English translation by yourself and also if you can limit the number of questions to two. And operator, ready for questions..

[Operator Instructions] First question comes from the line of Thomas Chong of Jefferies. Your line is open. Please go ahead..

[Foreign Language] I have two questions. The first one is about Tantan.

Can management share about our strategies on the user and the revenue trend in the second half after the management change? In addition, if Tantan focus on user growth this year, how we should think about the trend in sales and marketing expenses as well as our thoughts on Tantan profitability in 2021. My second question is about core Momo.

can management comment about the live streaming outlook in the second half? Thank you..

[Foreign Language].

Okay. Let me translate the first one first. We have fully taken over Tantan’s user acquisition effort for about a month. During that process, we have identified many broken windows that we need to fix.

That actually has given us a lot of confidence in the user growth prospects of Tantan because any past problems, if addressed with the right approaches, could be turned into future opportunities. And among the problems that we have identified, many of them are actually technical errors that are not difficult to fix.

So, our plan is to use the coming couple, 2 months to 3 months’ time to get all the problems fixed. Doing that alone should be able to bring in pretty considerable increase in the new registrations as well as improvement to the dating ecosystem. The goal that I have here is to see meaningful increase in the user base.

Currently, we are targeting a range between 20% to 35% growth. And more importantly, we also need to see a substantial improvement in the quality of new users that we acquire. For example, we obviously need more younger users and we also need a more balanced gender ratio in the new users..

[Foreign Language].

The second point on the user front is that when we get ready, we are going to start disclosing Tantan’s user data. Because right now, I am seeing pretty significant underestimate of Tantan’s user scale by some of the third-party data monitoring platform. I know a lot of you guys are relying on these third-party to gauge Tantan’s user performance.

I think we need to give investors more reliable and accurate data to do so. So, the plan is that after we have a fully functional data team and finishing coming through and integrating the back-end data system, we are going to start getting prepared for the disclosure.

I think investors can expect to have Tantan’s self-disclose user data some time later this year..

[Foreign Language].

On the revenue side, here are some points for you to sort of form some preliminary expectation about the second half. First point is the transition in the second quarter did cause some temporary disruption on the user acquisition front, which has led to a decrease in the number of new users, particularly in the month of April and May.

That is going to have some negative impact on revenues. But as user number starts picking up in the second half, revenue is going to grow as well. I do think that user growth is going to be the biggest revenue driver in the second half of the year..

[Foreign Language].

The second point is that while we combed through the problems that we had on the user front, on the product front, what we found out was that during the past quite long period of time, in order to meet some of the short-term targets in the number of paying users as well as the quarterly revenue targets, Tantan has made some very short-term oriented revenue efforts that were positive in driving up the paying conversion ratio, but could cause harm on the user experience and the healthiness of the dating ecosystem.

For example, we acquired way more male users than female users. And the paywalls were also designed more aggressively than we probably should have. So, the plan is that as we head into the second half of the year, we are going to remove some of the extremely short-term oriented efforts in order to take care of user experience and the dating ecosystem.

That is going to have some negative impact on the paying conversion. But long-term wise, we think this is definitely the right thing to do..

[Foreign Language].

The other point that is relevant in forming the revenue expectation is our view about Tantan’s live streaming. The way I think about Tantan’s live streaming is that, ultimately, it’s going to be only a supplementary experience that has a relatively lower DAU penetration.

This is in comparison with Momo’s live streaming, which is fairly mainstream sort of use case with a high level of DAU penetration. That’s the difference in penetration ratio is one thing different about Tantan’s live streaming.

The other uniqueness about Tantan’s live streaming is that the average paying capabilities of Tantan’s users is actually pretty high and it’s much more evenly distributed as opposed to Momo situation, where there is a wide disparity between the top and the bottom in terms of how much each individual is paying on the platform.

So, Tantan’s live streaming is able to maintain a pretty flattish structure and at the same time a very high level of ARPPU. So, my view is that, ultimately, Tantan’s live streaming is going to be a very profitable small use case within the application.

And our strategy is to keep it small, keep it flattish by not putting in very ARPPU oriented revenue efforts. And at the same time, we are going to be heavily leaning towards the core dating experience and further deemphasize live streaming in terms of product design..

[Foreign Language].

Overall, if you put all these different pieces together, we believe that as we move into the second half, the revenue on Tantan is going to grow, primarily driven by user growth. But because of some of the factors that I mentioned, we are going to take a few steps back in terms of how deep we monetize Tantan.

After we get to a satisfactory level in terms of product experience and get users on to a stable and rapid growth track, we are going to reactivate the monetization projects that we have been running, including the – as part of VAS feature that we have been testing.

Overall, we have full confidence in Tantan’s ability to bring in revenues and ultimately make a lot of profit. I don’t think investors really needs to have any doubt on that front. But for the coming few quarters, we are going to be solely and fully focused on the coordinating experience and doing the right thing on the user growth front.

Any other stuff, including monetization, the pursuit of profit will be subservient to that main goal. Such strategy will have some negative impact on both the top line and bottom line in the second half. And therefore, we have to forgo, I think we need to temporary forgo our previous target to reach breakeven point in the second half of the year.

But I believe for longer term good, this is definitely the right thing to do at this point in time..

[Foreign Language].

And now here is Jonathan to talk about the bottom line..

Hi everyone. Let me provide some specific color on what Wang Li just briefed. On the revenue side, to be specific, we currently, because we scaled back many monetization efforts on Tantan platform, we still target to achieve the revenue growth sequentially from Q2 level in the second half of the year.

However, for the full year, the lowered revenue target, we currently see will be most likely to be down by high-single percentage point from last year’s level for the full year. And also as we intend to continue to invest in the marketing channels to even better support the user growth, we expect the non-GAAP net loss will widen sequentially.

So, the total loss for the year could reach to RMB350 million to RMB450 million, which is higher than what we previously communicated less than RMB100 million net loss for the year target we set at the beginning of the year. So, that’s the – for Tantan..

Second question..

[Foreign Language].

On the revenue side of the core Momo, this is the second question, on the revenue side of the core Momo, I have actually shared a lot in the previous section. Maybe I will just try to sum up a little bit.

The revenue performance – the revenue performance on the core during the past few months has actually exceeded our expectation at the beginning of the year, which has given us full confidence to say that the core is still a very strong and productive cash cow business..

[Foreign Language].

If you look at the live streaming business from different aspects, whether it’s the health of the content supply system, the content ecosystem, the situation on the supply end or demand side, it’s on a stable recovery trend from all those different aspects.

In addition, we have also fully completed the adjustments that we needed in order to have a satisfactory and effective incentive program through the agency and broadcasters. So, payout ratio is going to stay at a stable level as well..

[Foreign Language].

On the VAS side, the team’s ability to continue to innovate on the product side is pushing the headroom for further revenue growth for VAS higher and higher. As you guys can see, the VAS on the core has accelerated from 30% something YoY growth last year to 40% something YoY growth during the first half of this year.

That has also exceeded our earlier expectations. But actually, I do not think we need to pursue the rate of growth that aggressively on VAS. So in the second half, I am hoping that the team can maybe control the pace of growth a little bit and shift part of the focus on to the product – product itself.

And the goal here is to build a longer runway for the future growth of VAS business..

[Foreign Language].

Again, if you put all these different pieces together, it looks like that it’s very possible that the core will turn YoY positive. The core revenue will turn YoY positive in the second half of the year. I am hoping that in the fourth quarter, we could reach double-digit YoY growth. And now it looks like a pretty easy target to reach.

In the interest of time, I think this is going to be the end of the Q&A session. Operator, we are ready to close. Thank you for joining our conference call. We will see you next quarter..

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect..