Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2016 Momo Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advice you that this call is being recorded today November 8, 2016. I would now like to hand the conference over to your first speaker today, Ms. Cathy Peng. Thank you, please go ahead.

Thank you, operator. Hello everyone, and thank you for joining us today for Momo’s third quarter 2016 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. Tang Yan, Co-Founder, Chairman and Chief Executive Officer; and Mr. Jonathan Zhang, Chief Financial Officer. Mr. Tang will discuss Momo’s business operations and company highlights followed by Mr. Zhang who will go through 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 this 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 statement as a result of new information, future events or otherwise, except as required under law. I will now pass the call over to Mr. Tang. I would translate for him. Mr. Tang, please.

[Foreign Language] Good morning and good evening, everyone. Thanks for joining our conference call today. From a high level, Q3 2016 was a remarkable quarter for us, with achievements on product innovations, business operations, as well as financial results. Total revenues for the quarter reached $167 million, up 319% year-over-year. With the strong operating leverage in our business model, the following top-line performance has brought significant bottom-line expansion. For the third quarter of 2016, non-GAAP net income reached $49.5 million, growing more than 11-fold from the year-ago period. [Foreign Language] Now, quickly, on the operating metrics, total MAUs on the Momo platform reached 77.4 million for the quarter, compared with 73 million a year ago, and 74.8 million for the previous quarter. The total MAUs we are disclosing here does not include the active users on our stand-alone live-streaming application Hani, which achieved close to 1 million MAUs in September. As most of the live broadcasting activities happen within the Momo application, instead of on Hani, we will not be separately disclosing the user metrics for Hani until it reaches the next milestone. Neither are we going to count it into the platform MAU that we disclose on a quarterly basis. [Foreign Language] For those investors who are relatively new to our story, I wanted to take a few minutes on this call to share some of my strategic thinking about Momo. [Foreign Language] User growth stays on top of our agenda. I believe the most effective way to keep expanding our user base is through continuous product innovations, and expanding the core use cases. During the past five years, Momo has evolved from a simple location-based feature that helps people discover new relationships to a platform that accommodates a variety of different social and entertainment use cases, including one-to-one…

Thanks, Tang Yan and Cathy. Good morning and good evening, everyone. Thanks for joining our conference call today. The third quarter of 2016 was quite a successful quarter for us. We posted top-line results that far exceeded our internal expectations. Total net revenues grew by 319% year-over-year to $157 million, higher than our earlier guided range of $125 million to $130 million. Benefited from continued growth in our revenues, our highly scaled efficient business model resulted in a record-level profitability for the third quarter. Non-GAAP net income was $49.5 million for the quarter, compared to $3.9 million in the same period last year. Now looking to the key revenue items, in the third quarter of 2016, revenue from live video service continued its strong growth momentum, reaching $108.6 million, up 88% sequentially. Paying users for the third quarter of 2016 reached 2.6 million, compared to 1.3 million for the previous quarter. Average revenue per paying user, or the ARPPU for the quarter, before excluding value-added tax, was RMB296, slightly down from RMB301 for the second quarter 2016, due to the developing long-tail effect. In the third quarter, live video service covered around 20% of our total daily active users of the platform, compared with about 13% a quarter ago. Just as Tanzo mentioned earlier, as we continue to optimize user experience and drive richer content for the live broadcasting service, we believe there is ample room for us for further grow this business. Revenue from mobile marketing was $17.7 million, up 64% from $10.8 million, for the third quarter of 2015. The year-over-year growth was mainly powered by the increase in effective CPMs, as well as better sell-through of our ad inventories, which was, in turn, driven by the strong demand from the marketers across different sectors. As many of…

Well, actually, just quickly one thing before Q&A, for those who can speak Chinese, please translate your question into Chinese by yourself. That would help us to ensure the quality of translation to the largest extent. With that, operator, we are ready for Q&A. Please open the lines.

Thank you. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Claire Chow of Morgan Stanley. Please ask your question.

Hi, management, and thanks for taking my question and congratulations on the strong quarter. My question is related to the revenue concentration level of top-paying users for our live broadcasting business. So just want to have an update on that number. And my second question is, do we have any more plan on our REN advertising spending for the user acquisition? Or any other plans for more content investment in the coming quarters? [Foreign Language]

[Foreign Language]

Can I quickly interrupt? Allow me to translate first.

Well, Claire, on your question about the revenue concentration on the broadcasters as well as the high-paying users, in the months of September, if we look at the top-layer performers, or the top-layer broadcasters, for those broadcasters who can bring in more than RMB30,000 on a monthly basis, these are usually the group of broadcasters who are taking this as a profession. We would call them professional broadcasters. In terms of revenue contribution, they – this group of broadcasters represent from 40% to 50%, a little bit less than half of our total revenues generated from live broadcasting service. So that is the top layer of the pyramid. If you look at the bottom layer of the pyramid, if we look at the broadcasters who bring in less than RMB1,000 per person per month, we have, in the month of September, 400,000, these type of broadcasters on the platform. This is a group of people who are really just taking live broadcasting as a better way to socialize and have fun on Momo. These are part of our existing Momo users who are on the platform to socialize. So this is the situation for the revenue concentration among the performers. In terms of the revenue concentration among the high-paying users, also in the month of September, if you look at the high-paying users, or whales, as somebody called them, for those paying users who have spent more than RMB5,000 per month, in September, we have – sorry, close to 10,000 of these type of high-paying users, and they represent also around half of the total revenues generated from the platform. [Foreign Language] Okay. In terms of your question on brand advertising, in the third quarter, we did run a major branding campaign to drive user growth. Actually, during the first three quarters in the year 2016, we run different kinds of branding campaign to push the users. And in the fourth quarter, we have such plan on the branding side as well. However, if you look at how we have been growing our users during the past five years, product innovation has been the major driver, or the key channel, how we continue to drive the user growth and expand our user base. I think that is still going to be the case down the road.

That is very helpful. Thanks, Tanzo and Cathy.

Operator, we ready for next.

Thank you. The next question comes from the line of Zoe Jau of Credit Suisse. Please ask your question.

Hi, management. Congratulations on a very strong quarter. I have two questions. First of all, could you share with us the DAU over MAU trend in the past three months, especially after the launch of the new video products? And number two, could management give us some colors on the apple-to-apple base, like paying ratio? For example, could management share with us MAU watching live streaming videos, so that we can better compare? Yes. [Foreign Language]

[Foreign Language] In terms of the DAU/MAU ratio, it actually has been pretty stable over the past period of time, as we haven’t really been providing DAU numbers, so we hesitate to disclose an absolute amount here for the ratio. On your question about the MAU, watching live broadcasting, using live broadcasting service, again, we haven’t really been disclosing that number regularly to the investor community, so I don’t really have an answer on that question either.

Zoe, any other questions?

Yes, thank you for the colors. Maybe just another question. We noticed there are more activity from the platforms, such as the competitions and the unions among the anchors. Just a question on how to balance the top host versus the ordinary host. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] Yes, I am going to talk about the general direction that – general policy that we have in terms of traffic dispatching and allocation. [Foreign Language] In terms of the recommendation tab, the recommendation page on the live broadcasting tab, we tend to use that page to push more talented new performers instead of pushing the top-layer performers, who already have a sizable audience base. [Foreign Language] And then we, other than the recommendation page on the live broadcasting tab, we also have the nearby tab, nearby page, on the live broadcasting tab, which is very unique to Momo. And we are using that page, that nearby page, to push more new live broadcasters, as well as, you can call them more long-tail kind of live broadcasters who are just taking Momo as a way to socialize. [Foreign Language] Momo Live, as you mentioned just now, is our official professionally produced content. It is for the top-tier talented performer to be put in front of a bigger audience. [Foreign Language] In terms of the different competition that, or the different kind of events that we are running, it’s more leaning towards a very, very top layered performers, to drive the performance as them and make them more famous.

Zoe, does that answer your question?

Yes, thank you, management.

Great. Operator, let’s move to next.

Thank you. Your next question comes from the line of Alex Yao from JPMorgan. Please ask your question.

[Foreign Language] Congratulations Mr. Tang Yan and Jonathan. My quick question is about the [indiscernible] of live broadcasting after two quarters of nice run. Specifically, take the six to eight quarters view, what do you guys do to further drive the monetization of the live broadcasting? And then second question is on the investment and the spending sides. Over the next 6 to 12 months, what are the key investments, initiatives that you have got in mind? Thank you.

[Foreign Language] So your first question is about where we are in terms of how deeply we dig into the monetization opportunities around the live broadcasting service. [Foreign Language] My view is that – I’m going to break that down into four major drivers to review the performance of the growth potential of the live broadcasting service. [Foreign Language] The first driver is obviously the total DAUs of the Momo platform. And the second driver is out of that total user base, how much we can convert into the live broadcasting feature. And the third driver is the paying ratio, how much of the – how many of the total live broadcasting users actually pay. And the fourth driver is average, revenue per paying user, or ARPPU. [Foreign Language] Well, firstly, let’s look at the conversion ratio. In June, in the month of June, live broadcasting feature covered 13% of our total DAU. In September, that number went up to 20%. Based on our observation, because the high level of compatibility between the Momo user’s mentality and the mentality required for consuming live broadcasting content, we believe there should be ample room for us to further drive that conversion ratio. [Foreign Language] In terms of paying ratio, during the second quarter, we had 1.3 million paying users for live broadcasting service. In the third quarter, that number went up to 2.6 million. In terms of where we are in terms of driving the paying ratio, we believe we are still at a pretty early stage. [Foreign Language] In terms of ARPPU, because our live broadcasting service has been around our platform for only a short period of time, for only six months, we haven’t really been very aggressive rolling out the operational efforts. Other than the monthly Hani starts event…

I think we are running – we are already running out of time. With that, we are ready to conclude the call. I will hand back to the operator. Thank you, everyone, for joining us this quarter. We will see you next quarter. Bye.

Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for participating and you may all disconnect.

Operator? Operator?

Yes.

Well. Actually, we have the second part of Alex’s question that hadn’t been addressed. I apologize for that. I will hand it back to Jonathan to answer the second question.

Hey, Alex, this is Jonathan. Let me just take your second question quickly. As I mentioned, during my prepared remarks, going forward, we are going to continue on the assets light operation efficient business model. In the meantime, we keep close eyes on the M&A opportunities to expand our product platform and also the enrichment of contents. But however, at this moment, we don’t have targeted – focus a target yet. But when we do, when the opportunity do come, we will have no hesitation to invest. But once again, at this moment, we don’t have focus target on the upper stream, downstream businesses. And also, for the telemarketing-related expenditures, we are going to continue to invest in the branding empowerment. That is a long-term initiative for the Company, for us to grow our user base, in the longer run. And then for short run, as Tanzo just mentioned, when the right time comes, we will intensify the investment in marketing channels for new user acquisition. But however, we do monitor the cost and benefits, and then spend the money carefully. Secondly, we are going to continue to invest on our human capital. We do believe it is the future of the Company. So that is our key investment area we are going to focus on. But however, as a public Company, we do balance the investment and the financial metrics we promise to the market. So from time to time, the market may fluctuate, but if we invest, that is going to be for the long-term well-being.

Thank you very much, Tanzo and Jonathan.

Yes. Thank you, Alex.

Okay. We’re ready to conclude this call this time, Operator please.

Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for participating and you may all disconnect.