Hello and welcome to the Weibo Reports Second Quarter 2016 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Lydia Yu. Please go ahead.

Thank you, operator. Welcome to Weibo's second quarter earnings conference call. Joining me today are Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Herman Yu. The conference call is also being broadcasted on the Internet and is available through Weibo's IR website. Before the management presentation, I'd like to read you the Safe Harbor statement in connection with today's conference call. During the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20-F for the fiscal year ended December 31, 2015, filed with the SEC on April 28, 2016, and other filings with the SEC. Additionally, I'd like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP financial excludes certain expenses, gains or losses and other items that are not expected to result in future cash payments or that are non-recurring in nature and will not be indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management's prepared remarks, we will open the lines for a brief Q&A session. With this I would like to turn the call over to our Chief Executive Officer, Gaofei Wang.

[Foreign Language] Thank you. Hello, everyone and welcome to Weibo's earnings call. [Foreign Language] On today's call, I will share with you our key developments and product user and monetization, as well the product we have made thus far in 2016 on some of our key initiative. [Foreign Language] First, I will discuss our Q2 financial results. Weibo continued strong revenue in user pro. Our total revenue reached 146.9 million, up 36% year-over-year. Advertising and marketing revenue reached 127.2 million, up 45% year-over-year with non-Ali ad revenue increasing 93% year-over-year. 68% of our ad revenue was from mobile. Non-GAAP net income in the second quarter was 35.5 million, up 225% year-over-year. Turing to users, Weibo’s monthly active users reached 282 million in June, up 33% year-over-year. Daily active users reached 126 million, up 36% year-over-year. In June, mobile users made up 89% of MAU. [Foreign Language] In the first quarter, we ran a large campaign around the Chinese Lunar New Year which resulted in strong user pro. In Q2, in our part [ph] of growing users, we focused on the retention of these new users and begin laying all the ground works for future monetization. To our sales force credit as well as advertising effeteness improvement, over the year, we noted a meaningful increase in a number of ad customers as well as average revenue for advertiser AK ARPA. Our efforts to continue enhance our ad products now improving the ROI for our customers. As Weibo developed with a reinforcing cycle of user growth, user engagement and monetization, this will be a strategic advantage for us to maintain our leadership in the mobile internet industry. [Foreign Language] In discussing our operational update for second quarter, I will cover Weibo’s thought progress and the area of user, content and customer. First,…

Thank you, Gaofei, and good morning, everyone, and good evening to those of you in the west. Welcome to Weibo’s second quarter 2016 earnings call. I’ll give you the top level numbers. For the second quarter, Weibo’s total revenues reached $146.9 million, up 36% year-over-year, 44% on a constant currency basis. It’s eating the company’s guidance between $138 million and $143 million. Non-GAAP net income reached $35.5 million, up 225% year-over-year. Non-GAAP diluted EPS was $0.16 compared to $0.05 a year ago. Adjusted EBITDA reached $38.8 million, up 152% year-over-year representing an adjusted EBITDA margin of 26% compared to 14% last year. Let me give you more color on our revenues. Advertising and marketing revenues for the second quarter reach $127.2 million, up 45% year-over-yeah, while on a constant currency basis 53%. We continue to see strong adoption of Weibo social marketing with total advertisers reaching 906,000, up 104% year-over-year. Mobile revenue in the second quarter made up of 68% of Weibo’s total ad revenue and was up 58% year-over-year, or 67% on a constant currency basis. As online ad in China budget shifts to our mobile, Weibo is well positioned to benefit from this trend. Turning to SMEs and KAs, revenues from small and medium size enterprises and key accounts together was %114.3 million, up 92% year-over-year, or 104% on a constant currency basis. This is an acceleration from a year-over-year growth of 50% in the first half of 2015 and 82% in the second half last year on a constant currency basis. The strength was Weibo’s advertising was led by our SME business which grew a 107% year-over-year or 119% on a constant currency basis. On the SME agency side as Gaofei explained, the growth can be attributed to an upgrade of our app downloaded promoted feed, EunJu…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Alicia Yap of Citigroup. Please go ahead.

Hi, Good morning, Gaofei and Herman. Thanks for taking my questions. I have two questions. First question is regarding the ad revenues breakdown by product line. Can you share with us what is the percentage of the promoter feeds versus display ads this quarter? And if we look into next year, what would be the product monetization mix after the video revenues ramp up?

Hi, Alicia. Yeah. Our advertising is broken up into three different type of advertising. One is a promoted fee as you talked about, the other is display and the other is topic that’s associated with the key words. So for the second quarter, our promoted ads was 53%, and our display ad is about third of our revenue. The other question you mentioned was in terms of videos. So we think that video is really part of the display ads. So I think going into next year with regard to the mix of display and promote I think we’ll have to see as we get into it. It’s hard to estimate that a year out as we just started promoting our video ads.

I see, I see. Then on my second question is how regarding the margin. So it’s a very impressive improvement here for the second quarter, will there be any change in the landscape just in case that will lead to you to spend more expenses that would prevent the margin from continue improving? And then what would be time novelized target margins range that you could achieve or for example into next year. Thank you.

Yeah. If you look at our expense trend lines in our overall net margin trend lines over the last few quarters, we’ve been pretty consistent. If you look at our revenue growth compared to our expenses, our expenses have been pretty much maybe half or a little bit half of our revenue growth and you’re seeing that margin operating leverage. So right now, as going into the first half and the second half of this year, we continue to see the operating leverage to continue as our revenue continues scale. So I think that if you look at our biggest differentiation as a social media is that our content is user generated it. So that allows us as a revenue grows there is some much of associated costs with it. So I think the bottom line as you should see our operating margin for this year and next year to continue to increase as revenue increases.

Okay, great. Congratulations on a good result.

Thank you, Alicia.

Our next question comes from Claire Cao of Morgan Stanley. Please go ahead.

Hi, Herman. Thanks for taking my question. My first question is a follow-up on the margin profile. We notice that non-GAAP growth margin improved both sequentially and on year-over-year basis in the quarter which seems to be contrary to the market expectation of margin pressure because that increasing bandwidth cost. So if can management give us some color, what is driving or offsetting the bandwidth cost increase in the quarter? Thank you.

Good morning, Claire. Yeah with regards to bandwidth cost, it’s like you’re seeing our video are taking off very rapidly and seeing our traffic going very rapidly. But same time the operation side, our technology team has been very good at producing a lot of a milestone to improve delivery of a video at the same time to reduce the amount of data. So I think you can see this as a lot of technological breakthrough, at the same time in the second quarter, we also started working with third parties to negotiate our bandwidth costs. So we have a couple of third parties that we work with bandwidth and we made significant unit cost improvements vis-à-vis prior quarters. So I think with this kind of strategy the first diversified bandwidth purchased with third parties especially working with Alibaba that the Ingo [ph] at the same time and also with the technological advances, we’re able to keep our bandwidth cost at bay while increasing our video in overall traffic.

Thanks. I have a follow-up question regarding on live broadcasting services. So I noticed there we launched great key functions for our live broadcast services starting from the early second quarter. So I’m wondering, currently is Weibo taking a cut out of the cross selling and how you booking the revenue? Thanks.

Yeah. So, hi, Claire. Yeah, so right now as Gaofei talked earlier about live broadcasting, the primary partner that we have is working with the EE, right. And the way it works is that they generate the GMB the this behind their platform and they’re paying for their bandwidth and so forth. And with regards to us taking revenues share, at this current stage, we’re not taking the revenue share from them. I think that we’re looking, we’re helping them enabling their broadcast on Weibo delivery successful, that’s usually number one, right. As Gaofei mentioned, our - us add the platform first is to help their broadcast and set up accounts to help them come up with really good content and then really the third step is then talk about moderation. So as this whole business model builds on a lot of broadcaster from EE comes on to Weibo will enabling them to do to growth traffic and also new users to test and we’ll also then consider driving share sometime down the road. But for the second quarter, we have not taken any revenue share from them.

Okay, that’s very helpful. Congratulations on the strong result.

Thank you.

Our next question comes from Juan Lin of 86 Research. Please go ahead.

Hi, good morning, Gaofei and Herman, and congratulations on a very strong result. So my question is related to your video ads and self-service ad system, I’m wondering what is the current progress of your video ad in terms of revenue contribution, how does the price fixed rate and ROI, we hope video ad compare with a regular feed ad? And secondly, what is the current revenue generation from the self-service system? Thank you.

Hi, Juan. Yeah. Good morning. Yeah, we have not disclosed video ads. I think our strategy this year for video ads is to trying to get proliferation as we just launched this thing. The whole idea this year is to try to get a lot of customers to actually try our video ads. So while our list price for video ads is much, much higher than our other inventories. We’re trying to allow a lot of customers to test. So you’re not going to see moved CPM at this point. But we envision as there is more of option for a video ads. You see us probably pullback on a discount further down the road. With regards to our self-service ads, that’s about a quarter of our SME advertising.

Thank you Herman.

Thank you.

Our next question comes from [indiscernible] of Credit Suisse. Please go ahead.

Hi, good morning, Gaofei, Herman, thanks for taking my question, congrats on very nice quarter. My question is regarding a portion of revenue was coming from the revenue sharing key opinion leaders, can you quantify how much of that coming from that type of ad format and what’s our set of content basically, do we recognize COGS on that? How much of - with the cost of revenue, how much of the revenue share have actually booked within the COGS? The follow-up questions second of the potential business tax impact from the new ad regulations, could you maybe quantify a little that I get that be pretty meaningful that some point quantification will be helpful. Thank you.

Good morning, Evan. Your first question was on how much revenue were booked we’re booking from KOL. Is that correct.

Yes, yes.

Yeah. So Evan, actually I would don’t have a specific number for KOLs. As you can see from our total advertisers, we have over 900,000 customers per quarter is not able to - we’re not able to tag which one is our KOL. The way actually works is if you look at our fans marketing, the whole idea is that on Weibo, people want to build their fan base, so that they get recognized, so that they get a whole fan base. So you might have a few a KOL that does this and others who want to be like certain KOLs, especially if you look at Weibo now you have a lot of e-commerce KOLs, you have people who do live videos, people who do a short videos and so forth. So it’s more like a pyramid where you have top KOLs driving examples and then you have a lot of the materials and you have to the kind of the grass root who want to be KOLs. So as a result of that, you’re seeing our whole SME revenue growth. So it’s really hard to say which specific part relate to KOL, but it’s really that whole pyramid of trying to do your own personal branding on a social media. So I would probably just characterize that all of our SMEs - all of our self-service is related to fans marketing and then probably a portion of our SMEs to the channel as that kind of fans or marketing. Okay, and then with regards to the business that you talked about, my understanding is that in the second quarter, there’s a new regulation that has a 3% VAT on search revenues. As you probably know, this will impact us very minimal, as we have very, very little revenue coming from search right now. [Foreign Language]

Our understanding of the new tax rate relation is that basically has standardize a lot of the current policies. [Foreign Language] Yeah. So the regulation, our understanding is there, is focuses on advertising that are not very standard and whereas for social advertising, we believe especially native ads we think that this is something that possibly positive based on the new government regulation policy trend. [Foreign Language] Thank you. Next.

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

Thank you. First, I want to clarify your comment on the VAT just now, because in my understanding that 3% so called VAT construction fee that have actually in 2013 and effectively applied to all advertising revenue, so does that mean Weibo has always been paying this 3% fee?

Yeah. We have.

Okay. And second question is also -

The key issue is that when Weibo - when we generally revenue, all way of revenue, our advertising revenue whereas for some of the search companies their revenue is technology services. So historically they don’t call themselves advertising revenue.

Okay. I Understand. So secondly, I noticed that some of the live broadcasting custom like Incur [ph] recently increased that the revenue share was their key performers. So are you also actually seeing the pressure to increase the revenue share with some of your content, video content providers?

[Foreign Language] Gaofei mentioned that, I’ve spoken in earlier that our entry into direct broadcasting is through our investment with EE app. [Foreign Language] So under our investment model, the investee or the company that we invest and that we will be generating the overall revenue and there is a cost associated with that revenue, obviously we think that they will play with under the condition of the market. And what we’re seeing from our side is that we’re seeing a lot of the broadcasters, live video are want to be on Weibo they want to increase their brand influence and also expand fan base. [Foreign Language] That the space for live video is very big and we also see that it being very competitive. We were - I’m happy to see that as entering live video at a very fast pace. We’re able to secure a lot of celebrities, a lot of the media accounts and one of the big KOL counts. And through partnership with ‘E’, we hope to also be able to secure a good market share with regards to the grass roots during kind of these live shows, live shows.

Thank you. My last question is brand advertising trend that you are seeing from SMEs and so I think you get some great example about SME are using, using the platform to do the campaign. So can you give some color on the typical standing by the SMEs on the brand advertising and or so do you expect your almost 1 million SME customer based to all kind of adopt is actually in the long-term and also is this is case how were the ARPU standing from the SME versus KA to different. Thank you.

So to answer your question, so under SMEs we have two type, we have the self-service and then we also have SME. The ones are doing brand advertising are the ones through the channel. So we actually see a good portion of our SME through the channels as that could good branding. We see that probably more at the large, small enterprises and also the medium size enterprises. So I think we see a good segment being to do those. I think at the day SMEs in general are still trying to do performance ads but we are cases where when they make their brands better know that when they do performance ads, you are seeing much more engagement as a result of people knowing their brand. So I would just say that the SMEs through the channels there is a good segment of that that has that potential to be able to do better to do just promoter feeds.

Thanks Herman and Gaofei.

Okay. Okay, next question.

Our next question comes from Alex Yao of J.P. Morgan.

Hi, good morning, everyone. Thank you for taking my question and congratulations on strong quarter. I have two questions. Number one is you guys have been able to grow your user base reasonably fast over the past few quarters without incurring much step up in terms of sales margin cost. So I am just wondering from content perspective, what is the content that is driving the user growth i.e. what are the content that’s most few to the new users?

[Foreign Language] So you are seeing a lot of our growth from second, third and four tier cities and the kind of content I was driving a lot of new user growth for example like celebrities. We are also seeing a lot of media content such as finance, such as sports especially as we’re into Olympics, you can see us getting a live traffic there. [Foreign Language] So the way we have set up our self, media allows us to go into other vertical content such as food and we would able to do is allow a lot of these content providers to be able to setup account to generate builder stand base and at the same time build a traffic and monetization that we have allowed, so allows them to create good content, create families, increase event, at the same time be able to monetize more activities that they do. So we think that the monitor we have put in place in addition to celebrities and media, we can actually expand this to other verticals. [Foreign Language] So another part of our content is trying to aggregate more video related content from various different industries that would actually help us acquire more user growth and traffic from people in Tier 1 cities and also people from younger generation. Okay Alex?

Yes, sir, thank you very much. Then I have a quick follow-up on the video comes in strategy, so in your short video broadcasting vertical, you have content as generating and broadcasted by professional haul such CCTV and then you also have content broadcasted by the KOLs or even the grass root users. So just want to understand how the user behave differently on your video broadcasting vertical compares to peers such as YY and INCA, In, would you be able to elaborate on what kind of content you are seeing the biggest demand and then maybe the metrics such as percentage of usage between these two anything related about will be helpful? Thank you.

[Foreign Language] We can see that YY in the traditional show stage form of live video is mostly coming from UGC, so from those. [Foreign Language] So for INCA, is very similar to YY’s model except it’s more mobile based, where we have started enter into a live video is focused on celebrities, on media and also on KOLs and trying to get people from these various domains to be continue exclusively on Weibo. [Foreign Language] So in the second quarter in addition to the key strategic domains there we are focused we also have live videos or live broadcasting to our grass root users who have verified accounts. And what we are seeing is that those are getting a lot of traffic or grass root users and also big KOLs. And we also see that there is people who are interested in media accounts but we are seeing there actually get a tipping and monetization publicly is not as strong as the other two that I mentioned. [Foreign Language] So our strategy is to leverage media content and gross root to increase coverage of live, get more people into a watching live and then to leverage KOLs to be able to monetize better from this segment. Okay, thank you very much Alex.

Thank you.

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

This concludes our call for today. Thank you every one.