Ladies and gentlemen, thank you for standing by and welcome to JOYY Inc.'s Fourth Quarter and Full Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question-and-answer session. Please note, this event is being recorded.

I'd now like to hand the conference over to your host today Mr. Matthew Zhao, IR Director of the company. Please go ahead..

Thank you, operator. Good morning, and good evening, everyone. Welcome to JOYY's fourth quarter and full year 2019 earnings conference call. Joining us today are Mr. David Xueling Li, Chairman and CEO of JOYY; CFO, Bing Jin and COO, Ms. Ting Li.

For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. The fourth quarter and full year 2019 financial results and webcast of this conference call are available at ir.yy.com. A replay of this call will also be available on our website in a few hours.

Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in renminbi. I will now turn the call over to our Chairman and CEO, Mr.

David Xueling Li. Please go ahead, sir..

[Foreign Language] Thank you, Matthew. Hello everyone. Welcome to our earnings conference call today. Hope everyone stay safe and sound and healthy in this particular coronavirus period. On December 20, 2019, our shareholders approved the name change of YY to JOYY, which stands for more joyable and reachable.

This name change reflects our commitment to remain joyable and useful experiences not only to those inside China but also to those around the world as we continue our global expansion. In line with our mission to connect people around the world and enrich their lives through video.

We continue to make steady progress on both the domestic and international grounds in the fourth quarter of 2019, expanding our user base, upgrading our products and further advancing our monetization capabilities.

[Foreign Language] Notably our better than expected top-line performance for the fourth quarter and full year of 2019 has illustrated our success in driving growth both at home and abroad.

In addition to the strong financial performance, our video based product and services including Likee, BIGO Live, HAGO, YY Live and Huya have all become leaders in their respective markets.

Such success is a result of our few engine expansion strategy which enabled us to pursue the simultaneous development of both our short form video and live streaming business to construct a truly global video-centric social media ecosystem.

[Foreign Language] First, let me share with you the progress we have made in developing our short-form video growth engine Likee. As we continue to super charge Likee's growth through geographic expansion, product updates and the monetization.

During the quarter, Likee maintained its robust user base expansion momentum, which was largely driven by the growing user base throughout Southeast Asia and developed world. This total mobile MAUs swell to 115.3 million representing an increase of 208.3% on a year-over-year basis and 15.1% on a sequential basis.

In addition, Likee continued to make segue in target markets such as Indonesia and Russia capturing a substantial share of the market during the period to catch with the leading players in both countries.

[Foreign Language] The ongoing our short-form video coverage to geographic expansion Likee further in which it features and content offers enhances its users stickiness. For example, we rolled out the Face Magic function during the fourth quarter to augment Likee's user experience and stickiness.

Face Magic was developed using our proprietary AI technology to provide users with both face swapping and image copying features. The addition of Face Magic and other similar features enabled millions of Likee's users around the world to create and share short-form videos to their friends.

On the monetization fronts, Likee continued to make progress in the areas of grand partnerships and advertisement campaigns during the fourth quarter. In December, for example, Likee formed a partnership with the top India film studio to promote one of its most highly anticipated films.

As part of this campaign, Likee utilized its online distribution network to help move the movie throughout India garnering over 275 million views across social media.

This initiative in a market with high growth potential is very encouraging as it has not only enabled us to establish a unique cultural identity but also created a valuable monetization case study which we're trying to promote going forward.

In the same way, we have completed the initial development and testing for Likee's advertising system which we try to launch in the first quarter of 2020.

Leveraging this system, Likee will enable advertisers to place ads within Likee's short-form video feats allow content creators to promote their fee-based content across the platform and ultimately unleash another stream of monetization in addition to our live streaming virtual gift monetization.

[Foreign Language] Next please allow me to share how we feel overseas live streaming business, the second growth engine by expanding the global footprints of BIGO Live and HAGO in the first quarter.

In addition to our success with short-form videos, we also continued to expand our global live streaming ecosystem through BIGO Live, our flagship international live streaming platform outside China. In particular during the fourth quarter, BIGO Live maintained its numerical growth trajectory in developed world around the world.

As a result, the revenue generated by BIGO Live in developed markets such as the U.S., Japan, Europe and other regions represented 31% of BIGO Live's total revenues in the fourth quarter.

Notably, this revenue growth was driven by 50% increase in BIGO Live's paying user base in developed countries in December 2019 as compared to June 2019, resulting from our focus on the cultivation of the platform's operational efficiency, localization capabilities and cultural sensitivity in regional markets.

During the fourth quarter, BIGO Live also focused on promoting social features to enhance user engagement. In particular our efforts to develop BIGO Live's parties produced encouraging results with 42% of users on BIGO Live streaming that featured in the fourth quarter.

The launch of video and live streaming HAGO, our special casual game-oriented social media platform also maintained its healthy growth strategy through the introduction of new games and enhancement of social features.

During the fourth quarter, HAGO continued to enhance user stickiness and fostered a new social interactions between users on its platform. For example, HAGO's interest base user groups have become a key feature for users to initiate social interactions on the platform.

The average daily penetration rate of HAGO's interest group function improved by 22% on a sequential basis in the quarter.

Meanwhile, the highly social nature of the platform as enabled us to accelerate the development of our innovative monetization capabilities as seen in our virtual gifting features for both voice chat news and interest based user groups.

As a result of this monetization upgrades, HAGO recorded a 20% plus increase in revenues on a sequential basis in the fourth quarter. Importantly India has become HAGO's second largest market to-date. Going forward, we expect that HAGO's monetization capabilities will continue to grow in 2020.

[Foreign Language] Lastly, while expanding roughly overseas, we also maintained our leadership position in the domestic market as Likee continue to fortify is leadership in China's entertainment live streaming industry.

As we closely monitor users constantly evolving demands and preferences for live streaming environments, we further uncovered the growing user preference for variety shows with celebrities.

Beyond our partnership with [indiscernible], which we mentioned on the previous earnings call, while live posted 28 shows with other celebrities in the fourth quarter. Additionally, we also hosted our 2019 YY annual awards in Shanghai in January.

This event collected more than 24.2 million views with an average user viewing time of 63.9 minutes and a total of 180 million bullet comments sent throughout the event, further showcasing, the strengths and scale of our live streaming social media ecosystem.

Notably, we utilized our experience from the past seven years and replicated the success of our YY annual awards in overseas. BIGO caller awards 2020 in Singapore in January served as a prime example.

This event featured the attendance of approximately 1000 of BIGO Live's top performers from around the world and successfully attracting more than 1.6 million fans who turn-in to watch the event online.

[Foreign Language] In summary, we continue to focus on the growth and development of our short-form video and live streaming product to feel our dual engine growth strategy during the fourth quarter and full year of 2019.

Importantly, this expansion strategy has enabled us to transition from a leading live streaming platform in China through our global video based social media platform in domestic and international markets.

Moreover, as we continue to cultivate synergies between business segments, upgrade our products through cutting-edge technology and hence our localization capabilities, we are super charging the effect of our product metrics.

As such, our ability to attract, create, distribute and monetize content both at home and abroad will continue to blossom further enabling us to deliver long-term value for our shareholders. [Foreign Language] With that, I will now turn the call to Bing Jin, our CFO to go through the details of our financial results..

That concludes David's prepared remarks. Now as JOYY's CFO, I will talk about the financial results. We maintain our strong momentum and delivered our robust financial and operating metrics during the fourth quarter of 2019.

Our total net revenues for the fourth quarter increased by 64.2% year-over-year to RMB 7.62 billion exceeding both the high-end of our previous guidance beat consensus.

In particular, our live streaming revenues for the fourth quarter increased by 62.7% year-over-year to RMB 7.15 billion driven by RMB 5.51 billion in live streaming revenues from both our YY and Huya segments and RMB 1.64 billion contribution from BIGO.

Other revenues in the fourth quarter increased by 89% to RMB 471.6 million driven by higher advertising revenues from Huya and BIGO. Cost of revenues for the fourth quarter increased by 69.3% year-over-year to RMB 5.1 billion.

Revenue sharing fees and content costs increased to RMB 3.73 billion in the fourth quarter from RMB 2.56 billion in the same period of 2018 which was inline with the increase in live streaming revenues.

Bandwidth cost increased to RMB 505 million from RMB 246.5 million in the same period of 2018 mainly reflecting the continued expansion of our global user base. Gross profit for the fourth quarter increased by 54.6% year-over-year to RMB 2.52 billion. Gross margin in the fourth quarter of 2019 decreased to 33% from 35.1% in the same period of 2018.

The decrease in gross margin was primarily caused by the fact that Huya and BIGO segment have lower gross margins, but contributed significantly greater portion of our net revenues in the fourth quarter of 2019 as compared to the corresponding period of 2018.

Operating expenses for the fourth quarter increased to RMB 2.3 billion from RMB 931.2 million in the same period of 2018 primarily due to the increase in sales marketing expenses, which reached RMB 1.03 billion in the period.

The increase in sales marketing expenses was primarily attributable to our increased efforts in sales marketing activities, the overseas markets as well as the impact of depreciation and amortization related to the consolidation of BIGO.

Our R&D expenses for the fourth quarter increased to RMB 802.3 million from RMB 332.5 million in the same period of 2018 mostly due to the increase in salaries caused primarily by the consolidation of BIGO. Our GAAP operating income for the fourth quarter was RMB 362.2 million compared to RMB 718.6 million in the same period of 2018.

Operating margin for the fourth quarter decreased to 4.8% from 15.5% in the prior period as a result of a lower gross margin. The impact of depreciation and amortization related to the BIGO's consolidations and other overseas expansion initiatives.

Our non-GAAP operating income for the fourth quarter, which excludes share-based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions as well as gain on deconsolidation and disposal of subsidiaries was RMB 781.3 million compared to RMB 888.5 million in the same period of 2018.

Our non-GAAP operating margin for the fourth quarter was 10.3% compared to 19.1% in the same period of 2018. GAAP net income attributable to controlling interest of JOYY, Inc., for the fourth quarter of 2019 was RMB 172.8 million compared to RMB 693.7 million in the same period of 2018.

Net margin was 2.3% in the fourth quarter of 2019 compared with 15% in the corresponding period of 2018. Non-GAAP net income attributable to controlling interest of JOYY, Inc., was RMB 600.8 million compared to RMB 846.9 million in the same period of 2018.

Non-GAAP net margin in the fourth quarter of 2019 was 7.9% compared to 18.2% in the same period of 2018. Diluted net income per ADS in the fourth quarter of 2019 was RMB 1.87 compared to RMB 10.54 in the same period of 2018. Non-GAAP diluted net income per ADS was RMB 6.7 compared to RMB 13.03 in the same period of 2018.

Now turning to our results for the full year of 2019, our total net revenues increased by 62.2% year-over-year to RMB 25.58 billion driven by the same factors that led to quarterly increase. Our net income attributable to controlling interest of JOYY Inc., for the full year of 2019 was RMB. 3.45 billion compared to RMB 2.21 billion in 2018.

Our non-GAAP net income attributable to controlling interest of JOYY Inc., for the full year of 2019 was RMB 2.25 billion compared to RMB 3.27 billion in 2018. Non-GAAP net margin for the full year of 2019 was 8.8% compared to 20.8% in 2018.

Diluted net income per ADS for the full year of 2019 increased by 59.5% year-over-year to RMB 43.01 from RMB 25.38 in 2018 and non-GAAP diluted net income per ADS for the full year of 2019 was RMB 27.11 compared to RMB 50.07 in 2018. Looking forward to 2020, we are faced with immediate challenges COVID-19 epidemic.

In response to the outbreak, we announced a cash donation of RMB 22 million to procure medical supplies and equipment from all over the world for the hospitals include [indiscernible] provinces by involving the treatment of COVID-19 patients. Our heart goes out to all those who have been impacted by this epidemic, especially in times like this.

We remain committed to our mission of connecting people and enriching their lives through video. Beyond entertainment many of our users are utilizing our live streaming services for regular, casual and work-related communication purpose during this epidemic.

We are formulating a support program to help our hosts and other performers to weather this challenging environment. We plan to continue leveraging our video-based social media platform to help mitigate the impact of the disease rally charitable support, uplifting people's spirits and enrich their lives.

At the current stage, we expect our net revenues in the first quarter of 2020 to be between RMB 6.75 billion and RMB 6.85 billion representing a year-over-year increase between 41.2% to 43.3%. We currently have limited visibility surrounding this epidemics long-term impacts on our business and the markets in which we operate.

Therefore, this forecast only reflects our current and preliminary views on the market and operational conditions which are subject to change. That concludes our prepared remarks. Operator, we will now like to open up the call to questions..

[Operator Instructions] Your first question comes from the line of Thomas Chong from Jefferies. Your line is now open Thomas..

Hi, Good morning. I thank management for taking my questions and congratulate….

Hi, Thomas. Sorry, could you just please ask the question in Chinese first please then translate into English. Thank you..

[Foreign Language] Thanks management for taking my questions and congratulate a strong momentum of BIGO.

I have a question about the 2020 outlook for BIGO in particular the revenue and the user trends across different geographies? And also any expectations in terms of the timeline for narrowing the losses and achieving breakeven? And how should we think about the spending for BIGO across different geographies during the year? Thank you..

Thanks. Thomas let me address these questions. So, first on the trend or on the different markets, BIGO has different components. I think let me talk about BIGO Live. First, BIGO Live has enjoyed tremendous user growth and [indiscernible] in 2019. I would expect similar pattern continue in 2020. The key driver come from the developed markets.

As you can see from the fourth quarter number, the developed markets accounts for more than 31% of the total revenue on the BIGO Live that compared with 26% in the third quarter and 22% in the second quarter, you can see obviously continued increasing trends and we expect that trend to continue across different developed markets including U.S., Europe, Japan, Korea and other parts of the world.

One of the building for those developed markets is that the paying ratio and outlook tend to be very high. And also we have demonstrated that monetization in the developed world has increased by 50% in December of 2019 compared with June 2019. So that is itself is very encouraging.

So we expect BIGO Live will continue to focus on developed world in 2020. That's on BIGO Live.

On the Likee business, we have also achieved a balanced approach, traditionally we are very strong in South Asia, particularly India starting from last year and also continuously into 2020, we will be more balanced approach, meaning we'll focus more on developing into other non-India markets including Russia, Indonesia where we are performing very well and catch up very quickly with the leading player.

And also we'll continue expanding other parts of equally developed world as of now. So that's on the user growth for Likee. Now, on the monetization of Likee, we also ramped up the live streaming capability as BIGO's live streaming, as I say, it's a middle end capability, it can be replicated in different parts of the apps.

So Likee will benefit from BIGO Live's monetization efforts and ramp up the live streaming capability. On top of live streaming, we have also mentioned just now that Likee has build up its own advertising network and system.

So we expect to introduce fee-based advertising campaigns within Likee and hopefully, we would also gradually contribute more and more to Likee's ecosystem. So I think that's a long answer to your question.

In terms of the spending, I think we have communicated with the market before that this year 2020, we're looking at a net loss on the total BIGO's headwind basis, it's U.S.150 million loss but as we can see that a BIGO's total revenue was growing faster than expected to fall, before we had market for BIGO will grow -- the revenue will grow 50% in 2020.

Now we also have seen more than 60% year-on-year. The net loss will be narrowing compared with the number before. In terms of the breakeven point. We expect that total BIGO will be breakeven on a single month basis by end of this year. That will remain to be the same.

But I also mentioned that we tend to be focusing on ROI of the money spent and we tend to focus more on profitability because I think that's one of the differentiator for our overseas business compared with some of the leading players, [indiscernible] adjusting end user base across different parts of the world. Thanks..

[Operator Instructions] Your next question comes from the line of Lei Zhang from Bank of America Securities. Please go ahead. Your line is now open Lei..

[Foreign Language] I will translate myself. For so long, the oversea effects only on the Likee user trend, how should those user end and monetization balance and what's your target for Likee user in 2020.

And secondly, on the competitive landscape of domestic live streaming, how do I think competitors like a short video platform even feature music, can you give us more color on the updates on competition. Thank you..

Thank you so much. Let me address the question. So on the global expansion strategy for Likee, as I mentioned we are focused both on -- in terms of the user growth and monetization. So I don't think the comments is right in a way that if we focus too much on monetization, we will focus less on the user growth.

But as I said, we focus ROIs, so as long as the user retention, meaning the 30-day, 60 user retention base is good in some of the markets, we will continue to spend money. But after we spend money, we also need to make sure that the user we attract can be converted to live streaming users.

So we also pay particular attention in terms of the trends, in terms of the gifting et cetera. So that's for short.

And you also -- in terms of user growth, you expect similar pattern that we have seen in 2019, we will track our product performance, you can see that Likee is having 15 million to 20 million users on a pro rata basis and we expect still the patter will continue.

But, as I said, we need to make sure that the ROI make sense and we will generate decent profitability for Likee business. So that's the answer to the first question. The answer to second question, domestic competition is not a new thing. We have been operating under a highly competitive live streaming business in China for several years.

However, we still continue to grow. Now, if you look at the prospect of 2020 for the live segment, I would say the revenue will continue to grow at a low single digit.

The reason why it's low single digit because when we cut down some of the business including the PC games which we sold, and also we have scaled down the domestic small lending business given the uncertainty for people in the online lending business.

So which those three business scaled back and scaled down, the lives revenue will -- will be down a little bit as we tell people before, it used to be 5% to 8% year-on-year growth, now we're looking at no single digit growth attracting the close down of those two business. But for the main domestic license, I think it is still solid.

For Huya live you can treat it as a traditional kind of PC games where the user base [indiscernible] as we continue to come back, we have seen a very sticky timespan and user behavior on our platform -- taken from the broadcaster perspective. So I think even amidst this domestic competition while Huya live will continue to grow..

Okay. Thank you. Can I have two follow up? First, on the HAGO side, giving you shared more color in the prepared remarks.

Can you remind us, we have hit the HAGO revenue books that's under YY Live, right? HAGO growth in 2020, that means, so YY Live streaming actually are down on a year-on-year basis? And also on the HAGO side, what's the [indiscernible] user scale of HAGO? And secondly, also on the domestic side, I know that eCommerce live streaming is popular right now.

And even some of your competitors actually ask the host to do ecommerce through live streaming. I know we have ecommerce doing [indiscernible], can you share a more color with us on the ecommerce live streaming. Thank you..

Sure. On the HAGO, it is booked on YY Live segments. But given the absolute scale of HAGO's revenue is very small compared with the total for YY domestic live streaming. So in terms of absolute dollar, it is not contributing that much. Yes. So if you strip out the HAGO, YY Live domestic market, I think the business is still stable, put it that way.

And then for ecommerce, we have been doing ecommerce YY Live for awhile. So again, our strategy is different from the others. Our ecommerce is more focused on longstanding products meaning [indiscernible] et cetera or global piece.

And then, we pulled this on introducing high quality broadcast to help improve the productivity of the traditional long standup product that'll change. And hopefully it will create a win-win situation for both the seller and for the users. So that part of the business is running off very quickly.

But, at the right time, we would start disclosing the right metrics to the actual investors, at this point, there are few things that gives us relatively early..

Your next question comes from the line of Brian Gong of Citi Group. [Operator Instructions].

[Foreign Language] Okay. I will translate myself. So, Likee wondering which has competitive dynamics with TikTok from different region. And I think Likee probably can make little impact on the different tools, BIGO Live in 2019 but as far as customer see, how much ground contribution from Likee to BIGO for being in 2020. Thank you..

[Foreign Language] Sorry, let me do the translation firstly and then answer your question. So firstly, as a company and founder or the management, we are really looking [indiscernible] future, right? So, if you look at the past few years, [indiscernible].

So rather than the proper pattern, we are seeing that's a positioning as well as market share for the short-form video, it's more important for us. And in the past several years, although we continue to suffer loss from the Likee business, but after our [indiscernible] for the short-form videos especially outside of China.

At the beginning times, in terms of the technology as well as the investment scale, we are much less than our competitors. But, after two years, [indiscernible] senior kind of level that's our growth competitors. So, I still believe Likee business will enter to the second stage, which is new, it's more healthy and more balanced at this stage.

So, we mentioned in the prepared remarks for this year, Likee will focus on the money addition. So, hopefully at the end of this year, as a whole BIGO business will achieve the single month breakeven.

If HAGO could achieve, it means in the future we have become more dynamically to control the investment cycle especially in terms of the marketing other user acquisition cost for the Likee business.

So that will help us to build up more business model compared with our peers and that in turn help us for the next five to 10 years, long run competition for the short-form video business global. Thank you..

[Foreign Language].

Yes. Let me handle that question. I think we are still observing the progress that I think at this point it's somewhere around 10% of BIGO total segment will be coming from Likee, that number can be depending on the progress..

Your next question comes from the line of Daniel Chen of JPMorgan. Your line is now open Daniel..

[Foreign Language] I would translate myself. So I have a housekeeping question regarding cash, so we have a very healthy balance sheet and a very rich net cash of over U.S.1 billion and so what ways are key strategy in cash management in 2020. Thank you..

Let me address the question. Thanks Daniel. In terms of cash option, we have around U.S.$900 million which were put into different charge of savings and investment. I think generally decent returns return. And meanwhile we're also observing latest market turmoil.

And obviously, [indiscernible] is very undervalued and particularly in the recent turmoil continue to go down. So we will seriously consider share buyback and other methods of returning some of this cash to the shareholders..

[Operator Instructions] Your next question comes from the line of Lee Joon from Goldman Sachs. Your line is now open. Mr.

Joon?.

[Foreign Language] I'll translate myself. So thank you management for taking my question. So I have two questions regarding the impact of the COVID-19, in overseas markets for BIGO.

So the first question is, have you observed any similar surge in user time spend or engagement in the development markets given the fast spread of the virus? And the second question is on whether that will give us any refreshed thoughts on user growth strategy or new monetization methods. Thank you very much..

[Foreign Language] This is David Xueling answering your question. So firstly, in terms of the COVID-19 impact outside China, so we can look at the practice in China for the last quarter. So, while it [indiscernible] China, we don't see that [indiscernible] impact from the COVID-19 operate in China.

So from the China's practice we actually forecast overseas business also won't see any of the significant impact from the COVID-19 in the short-term period.

BIGO Live currently is in the very healthy growth stage as I mentioned in the prepared remarks, rather than the monetization, actually BIGO also focused on the social features, especially its community operation has become one of the key focus for the BIGO Live in the recent stage.

42% of the users has started to use the BIGO Live [indiscernible] of the functions of the platform. So going forward, we tap on directly [indiscernible] growth so BIGO Live also will see the continuously user growth in the future.

And for Likee business, as I mentioned before, [indiscernible] we also will be more focused on the monetization of this year. If the two part can build out the more [indiscernible] for the business, definitely we will be more confident overall our three business will be aligning for the future. Thank you..

[Operator Instructions] Your next question comes from the line of Thomas Chong from Jefferies. You're line is now open Thomas..

[Foreign Language] Thanks for management for taking my follow-up question. My question is about the domestic market. Given, PS end to end including lower [indiscernible] and have we fortunate enough developing other applications to penetrate into Tier-3 and Tier-4 cities going into the future? Thank you..

[Foreign Language] Thomas let me adjust the question. So you are right that on top of YY Live as a main app, we are also developing different products. Of course, something we have audio based license product several of them that's focused on third tier cities and even fifth tier cities. We also have as I said eccommerce licensing products.

We're also developing other social media product all based around probably based because that's all for competence. But we tried to country into different demographics and trying to conceive some focus on lower tier cities and of course, on the first tier cities.

So, many of those products initial stage, so we haven't systematically disclosed to the actual investor about the metrics that we will do so at the right time. Though, you are right, [indiscernible].

And by the way, I also mentioned that we have partner with other big traffic platforms such as Xaomi and we have right now final these two and three additional big traffic platform. We may call it export [indiscernible] competence. And then let me share with those traffic platforms.

So with that we also hope that we can continue to enhance our management communities to our different platforms. Thank you..

Next question comes from the line Yu Zhiqiang from CICC. Your line is now open Yu..

[Foreign Language] I'm on behalf of Natalie Wu. We have two questions.

The first one is that, could the management share some color on the promotion of Likee? What's their plan for the investment in content and user acquisitions this year? And the second question is, could the management share some color? On the margin outlook for the domestic live broadcasting business of buyback this year? Thank you..

Thank you. Let me address those questions. First, in terms of the proportion of the Likee, regarding content as I said before, Likee focused on UGC, user generated content. So by nature we encourage the user to voluntarily create and upload short-form video content.

As a result, we don't tend to spend that much money to acquire the PGC, but we will do so in some of the key markets to partner with some celebrities to produce. But I don't think that will cost that much money.

We will also probably some of the song copyright owners to sign kind of a long-term contract, so that live broadcaster can live broadcast their songs et cetera. So that will cost some money.

In terms of the Direct Gift acquisition, again, we're closely tracking the KPIs, meaning user retention base and then typically in those market we are much slower than in China in terms of per user acquisition cost plus after usage tactics [indiscernible] to realize as user as many times [indiscernible] that will create a closed end loop for the user.

So that's on 19. On the domestic margin, if you look at 2019, our operating margin will [indiscernible] 20%. In 2020, we are looking at somewhere of those 20%, there might be some -- so the decrease of the margin for YY Live, but again, it's not only about domestic but because YY segment also showed the responsibility of [indiscernible] expansion.

So we will continue to add some research in marketing plus we'll continue to recruit some of the high caliber AI expert technologist, so as a percentage of revenue and sales and marketing revenue will increase a little bit resulting to somewhere like 20 something percent for the operating margin for domestic 25%.

As there are no further questions at this time. Now, I hand the call over back to Matthew. You may go ahead..

Thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you, operator..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..