Hello and welcome to the Cheetah Mobile Fourth Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Helen Zhu, Director of Investor Relations. Please go ahead.

Thank you, operator. Welcome to Cheetah Mobile’s fourth quarter and full year 2016 earnings conference call. With us today are Mr. Fu Sheng, our CEO and Mr. Andy Yeung, our CFO. Following management’s prepared remarks, we will conduct a Q&A session. Before we begin, I refer you to the Safe Harbor statement in our earnings release, which also applies to our earnings conference call today as we will make forward-looking statements. At this time, I would now like to turn the conference call over to our CEO, Mr. Fu Sheng. Please go ahead, Fu Sheng.

Thanks, Helen and hi, everyone. In early 2016, our business faced some difficulties, which forced us to rethink our positioning and our growth strategies for the future. It is increasingly clear to us that content is the driver for future growth and AI is a core enabler to connect our user with highly personalized content. With that, we are excited to see that two of our key content apps, Live.me and News Republic, grew strongly in Q4 2016 in the U.S., showing that Cheetah Mobile has the capability to develop not only popular utility apps, but also popular content-driving apps. Financially, our total revenues and profits again grew Q-over-Q in the 4Q. In fact, our total revenue hit a record high in the quarter and our quarterly mobile revenues exceeded RMB1 billion for the first time despite entering into a more mature growth phase. Our utility app grows steadily and sustained in the quarter. At the company’s profit center, our utility apps continued to expand its profitability over the past couple of quarters, which in turn supported our mobile content strategy. Looking forward, we remain both focused in implementing our mobile content strategy, leveraging the big data generated by a massive user base and AI technology to connect our user with more personalized leisure content. We have further enhanced our leading position as a global traffic platform. For our core utility apps such as Clean Master, our user base remains relatively stable in key developing markets. In addition, we are pleased with good progress in our other utility apps. [indiscernible] was ranked as the #1 personalization app globally in January 2017 on Google Play. It is also important to note that both its user base and its engagement grow significantly over the past few months without any marketing activities. PhotoGrid…

Thank you, Sheng. Hello, everyone. As you read in the press release, I will be resigning from Cheetah Mobile effective March 31, 2017. A new CFO search is being conducted by our Board of Directors. Meanwhile, the Board has appointed Francis Ng, CFO of Kingsoft and a Board member of Cheetah Mobile, as the interim CFO until a replacement is onboard. On a personal note, I would like to thank Fu Sheng, the Board and the rest of the management team for providing me the confidence, trust and opportunity to work with one of the most dynamic global companies emerging out of China. It has been a pleasure to work with you all. For all the investors and analysts who have covered our company ever since we went IPO and subsequently, thank you for your interest in the company and respect you have for me and the team. It has been a pleasure to work with you all as well. Cheetah Mobile has been an amazing company with hundreds of millions of users globally. It will remain one of the most dynamic names in the mobile Internet space and continue to rapidly evolve and lead in the mobile Internet ongoing evolution. I wish you the best of luck and success going forward. Moving on, we are delighted to have delivered solid financial results in the fourth quarter of 2016. In the second quarter of 2016, we set a clear goal to rejuvenate revenue growth and improve our financial conditions and both of our revenues and portfolio continue to improve in the second half of 2016. In fourth quarter 2016, our total revenues, mobile revenues and overseas revenues all hit record highs, driven by the steady and sustained revenue growth generated [ph] by our utility apps. Importantly, we also further expanded…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from David Sun of Morgan Stanley. Please go ahead.

Hi Fu and Andy. Thanks for taking my questions. So first of all, I am sorry to hear that Andy is leaving. I wish you all the best, Andy. So I will translate my questions. So first one is on the core business. We have seen quite a few initiatives, changes in the past few months such as rebranding mobile app business, launching Cheetah Open Feed platform. So I am just wondering what’s the thinking or logic behind those changes and can management share more color on the product positioning, so same structure and the potential revenue opportunities from those new initiatives? And the second question is on the content products, IVAS numbers was quite positive this quarter. And what’s the revenue contribution and associated losses from the new business in this quarter, I mean, in fourth quarter? And also from the third-party data tracking, we found that Live.me first quarter numbers is also very strong. So, what do we expect the contributions from content products in Q1 and also what’s the major areas of development and revenue expectation for 2017? Thanks.

Okay. So I will translate the answer for the question. First of all, David, thank you for your comments. So in terms of our utility applications, I think over the past couple of quarters, you have seen the user applications remain pretty strong and grew steadily. It remains the top position in the application space despite increased competition. If you look at our business line overall, I think CM and other utility applications continue to have shown solid performance and steady growth. I think if you look at not only those user applications, but only growing in revenue contribution, but also contributing increasingly on the [indiscernible] as well. So, if you look at the overall two applications as a product matrix, I think over the past year, I would admit that we have not been as focused, but you have seen more increasingly more focused for us to develop the product matrix in the two user application site and I think that’s shown in the past couple of quarters. I mean, we also if you look at about that, if you look at our recent data or you look at the publicly available data, you have seen – you probably have seen that CM Launcher is a product that produced by us have become the #1 launch product globally, beating some of the more global competitors like Apple and others and that product growth was mainly organic without much or very little marketing activities to promote that application, mostly coming from users download the product themselves from the App Store. Another product that we also have seen very strong user demand and organic download is PhotoGrid and that user number continues to grow quite nicely. And so I think if you look at our product matrix for two applications is…

Okay, thank you for that, Andy.

The next question comes from Joyce Ju of Citi. Please go ahead.

Hi, Joyce.

Hello. This is Joyce from Citi. Good evening, Andy, Mr. Fu and Helen. Congratulations on the strong set of results this quarter. I basically have one follow-up question on the content apps. As you mentioned, the content apps have already achieved quite good revenue growth in the fourth quarter and we have seen those App Annie ranking also performed pretty well in the first quarter as well. So we are just trying to kind of get more colors on what type of monetization methods Cheetah plans to explore for those apps, because I think you mentioned early that there are different ways like you tried to monetize it probably not only for IVAS? And my second question is a follow-up on the new utility app Mr. Fu just mentioned, like what – further like new utility apps, do we expect like large investments or it cause like further like pressure on the margins?

Okay. So Joyce, thank you for your question. So in terms of monetization for Live.me or News Republic, even for our recent application, I think as we have previously mentioned, we will continue try out different innovative monetization methodology. And so including, for example, more outsourcing, looking at more precise targeting based on regions, based on criteria. If you look at Live.me, we are also very happy to see that the virtual gift function was very well received by our global user and produced some very good results. And then last, I think the overall company remain mainly largely by – driven by advertising revenues. But certainly, we will continue to trial different monetization models. For example, if you look at the gaming operation side, initially, we have these virtual item purchased. Later on, we also switch and experiment with in-app advertising. So I think for monetization, right now, we are looking at trying out different things for sure and when we launch those monetization strategies, we will definitely discuss more with you and other folks here. Right. So regarding your second question, with the new product for user applications that increase expenses or put pressure on profit margins, I think the way we look at utility application, our PC product as well is that they are a cash cow and we like to maintain that steady pace. And also we want to maintain that profitability. So if you look at new application development for utility applications, we would focusing on looking at what the user demand is and have small team to develop those product and try it out. And only if they are successful and we maybe utilize some of the marketing dollar to help promote these products, but again like the main focus for utility applications for us is to provide what the user wants and demands and we want to satisfy that demand. And so as a result, we will definitely control the expenses both for the R&D as well as marketing dollars for the new applications. And I think the way we do that is just that we will definitely try to maintain a steady growth and profitability for those applications and then look for incrementally adding more products that have demand, strong demand from the user base. Okay?

Thank you.

Thanks Joyce.

Thank you.

Your next question comes from Wendy Huang of Macquarie. Please go ahead.

Thank you. My first question is about the long-term margin outlook and where do you expect the 2017 margins to be. And the second question is to make sure your country has robust agreements also under your operations, so do you have any change in asset to a listed company, we also want to clarify the RMB140 million to RMB150 million revenue you just mentioned from the content, so is that actually classified under the Internet value-added services or under the other revenue? Thank you.

Okay. So I will translate that. So really, I think when we look at the portfolio comparisons between in 2016 as a whole and versus 2015, certainly I think as we mentioned in the second quarter 2016, we did face some difficulties and our growth rate was meaningfully, significantly less than what we have expected at the beginning of the year and that have an impact on the first half 2016 profitability. But as we mentioned in the second quarter, at that time, we will initiate a number of initiatives to rejuvenate growth and also improve profitability. So I think if you look at our results in the third quarter and fourth quarter, we delivered on those promise. You have seen two consecutive quarters of significant increase in our revenues and you have also seen our profitability expand in the third and fourth quarter consecutively. I think another thing that – and that achievement was accomplished under the condition where we invest very heavily on our content product. As we mentioned, we invest very significantly on R&D, marketing and to a lesser extent, IDC service expenses for our content product. And we are very glad that those investments are beginning to pay off. As you have seen the results in the recent quarter, Live.me and News Republic are both performing, as we mentioned in our prepared remarks, quite well in term of user number, user engagement level and also revenue contribution. So – and for us, content is our core strategy and we have pretty stepped up in investing in the content product. And underlying content is the AI technology, for example. That’s a very core technology that I think we have opportunity for us to become a market leader to really breakthrough in our current product side as well.…

[Foreign Language]

Okay. So if you look at our content revenues for Live.me, it’s fully in IVAS, because it’s virtual gift and so you if look at virtual gift, it increased – sorry, the IVAS increased quarter-on-quarter mainly coming from the increase in Live.me’s revenue increase. And News Republic is mainly advertising. So, it’s placed in the online marketing services category of revenues.

Thank you. Thanks, Fu Sheng and Andy.

Thanks.

The last question will come from Thomas Chong of Bank of China International. Please go ahead.

My first question is about our relationship with Facebook. Can management give us some color about whether we will deepen our cooperation with Facebook this year? And on top of that, may I also ask about the Facebook revenue contribution to mobile advertising revenue this quarter? And my second question is about the recent online video initiative. Is there any color about the monetization potential and management expectation on this revenue contribution? Thanks.

Okay. So let me translate that. So Thomas, thank you for your questions. First of all, like I think we continue to work very closely and very amicably with Facebook. Obviously, Facebook is a very large company and work with many, many other partners as well. So, as we mentioned in our – and obviously, Facebook remain one of our very important partners and we definitely would like to continue to work well with them and expand partnership as much as we can. But as we mentioned since the second quarter, we have taken some initiatives to diversify our revenue stream from different partners, different channel partners and we are very happy to say that today, our channel diversification have been moving quite nicely. And so the contribution from Facebook as a percentage of our overall revenues probably would have been declining, be smaller compared to last year and also because our revenue also have grown as well. So we will provide that more information – more detailed information on our public – on our 20-F, but I think it’s fair to say that even though our company has seen 21% year-over-year increase in our own revenues, the contribution from Facebook will likely be smaller compared to 2015. The second question that you have is on video advertising. So as a company, we see video advertising as very important format for mobile advertising. But to be honest with you, if you look at our video content right now, besides live streaming, we have still limited video content. So we would like to increase that, but we do not anticipate that as a key driver, at least in ‘17, at this time.

Thank you.

Thanks, Thomas.

This concludes the question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Thank you all for joining us today. If you have any further questions, please do not hesitate to contact us. Thank you. Bye.