Hello, everyone and welcome to the Cheetah Mobile Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Helen Zhu, IR Director of Cheetah Mobile. Please go ahead, ma'am.

Thank you, operator. Welcome to Cheetah Mobile's third quarter 2018 earnings conference call. With us today are our Chairman and CEO, Mr. Fu Sheng, and Company’s CFO, Mr. Vincent Jiang. Following management's prepared remarks, we will conduct a Q&A session. A presentation for the Company's earnings call is also available at the Company's IR website. Before we begin, I refer you to the safe harbor statement in our earnings release, which also applies to our 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 Chairman and CEO, Mr. Fu Sheng. Please go ahead, Fu Sheng.

Thanks, Helen. Hi, everyone. Thanks for joining us today. In the third quarter of 2018, we achieved the high-end of our guidance range. Our total revenue grew by 16% year-over-year and 23% quarter-over-quarter to RMB 1.35 billion. We also earned RMB 193 million in non-GAAP net income and generated RMB 326 million in free cash flow. In the third quarter we continued to roll out the new -- our new mobile games, mobile utility products and AI-powered hardware products. As a result, revenues from mobile games increased by 78% year-over-year and 106% quarter-over-quarter. Revenues from mobile utility products in the domestic market increased by 54% year-over-year and 18% quarter-over-quarter. Mobile games made up 21% of our total revenue in the quarter and mobile utility products in the domestic market made up 28%. Now, I would like to highlight our progress in three areas: One, mobile games; two, mobile utility products in domestic market; and three, AI-powered hardware products. First, let me discuss our mobile games business. We launched Bricks n Balls, a classic and exciting block adding elimination game early this year. We started ramping it up this quarter and we've continued in-game improvements, enhanced the user interface design and new content and features. In September, Google Play featured Bricks n Balls on its global homepage. According to App Annie, Bricks n Balls is one of the top 3 casual games in the U.S. on Google Play, and was the top 10 board games on Apple App Store in terms of user downloads. Importantly, through our operation of Bricks n Balls, we discovered the right tactics to increase average revenue generated from our mobile gamers. We also continued to use the high-quality third-party content to enrich our flagship games including Piano Tiles 2, Rolling Sky, and Dancing Line. In addition,…

Thank you, Fu Sheng. Hello, everyone. Now, let me walk you through the details of our third quarter performance. Our financial numbers are in RMB, unless otherwise noted. In third quarter, we continued to focus on rejuvenating our revenue growth. As a result, our total revenues for the third quarter of 2018 grew by 16% year-over-year and 23% quarter-over-quarter to RMB 1.35 billion, meeting the high end of our previous guidance. Particularly, revenue from our mobile games operations increased by 78% year-over-year and 106% quarter-over-quarter to RMB 285 million, which accounted for 21% of our total revenues in the quarter. Revenues from our mobile utility business in the domestic market increased by 54% year-over-year and 18% quarter-over-quarter to RMB 372 million in the third quarter, which accounted for 28% of our total revenues. Driven by our accelerated revenue growth, our non-GAAP gross profit increased by 22% year-over-year and 29% quarter-over-quarter to RMB 970 million in third quarter of 2018. More importantly, our non-GAAP gross margin expanded to 72% from 68% in the same period last year and in the previous quarter. Non-GAAP operating profit remained flat year-over-year, but increased by 8% quarter-over-quarter to RMB 154 million. Non-GAAP operating margin decreased to 11% from 30% in the same period last year, in the second quarter of 2018. The year-over-year decrease in our non-GAAP operating profit was mainly due to more promotional activities for the mobile utility products business in the domestic market and mobile game operations. The sequential increase was due to higher share-based compensation expenses. In third quarter, share-based compensation expenses increased by 23% year-over-year and 80% quarter-over-quarter to $26 million as we granted a certain number of restricted shares to our key employees. While we experienced a decrease in operating profit, the decline was attributed to our added investment…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question today comes from Thomas Chong with Credit Suisse. Please go ahead.

Hi. Thanks management for taking my questions. I have a quick question about our 2019 outlook. Given the fact that the economic situation is not very clear, how should we think about the growth momentum for our different businesses in 2019? And on top of that, how should we think about our margin outlook, given we are more -- investing more in the smart device business? Thank you. [Foreign Language]

[Foreign Language]

Okay. First of all, we are pretty confident about the mobile games business in the next year because in the middle of last year -- actually in the middle of this year, we have -- did quite some structural change for the mobile game business. For example, we now are able to rapidly release new games compared to our previous business operations. And we have a very strong game operating capability and game publishing capabilities now. For example, what we can see now, in the past quarter, is the new game Bricks n Ball, which is one of the hit games we have. But in reality, we have many other games in the pipeline we’re testing. As soon as the game testing result is okay, then we are going to release those and promote those games. Also, because of the gaming regulations in China and because of the license issue, we cannot get new game released in China. Many game developers in China actually are coming to us and trying to utilizing our platform to launch their games in overseas market. So, actually we’re now having a very good pipeline for the future gaming products. In addition, we are trying to converting our existing carrier game into a relatively more contrast game in a way that we can generate more revenue. For example, we’re now having more and more in-game purchase capabilities, which increased our monetization capability during the past, we’re doing a lot of monetization through advertising only. In addition, our existing mature games such as Piano Tiles 2, Rolling Sky, those are performing very well. Okay. Just add one more thing. Previously, we might think that the lifespan of our carrier games are kind of short, but in reality, they are actually very long. For example, for Piano…

Thank you.

Okay. Thanks, Thomas.

[Operator Instructions] As there are no more question at the present time, I would like to turn the call back over to Helen Zhu 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 so much. Bye.