Welcome to the Weibo Reports First Quarter Financial Results. [Operator Instructions]. I must advise you that this conference is being recorded today, 16th of May 2017. I would now like to hand the conference over to your first speaker today, Lydia Yu. Thank you. Please go ahead.

Thank you, Operator. Welcome to Weibo's first quarter earnings 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 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, 2016, filed with the SEC on April 27, 2017 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 nonrecurring 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.

Thank you. Hello, everyone and welcome to Weibo's First Quarter 2017 Earnings Call. On today's call, I will share with you highlights on Weibo's user growth, products and monetization as well as our key initiatives in 2017. Let me first discuss our first quarter financial results. We continued to see strong revenue and user growth this quarter. Our total revenue in the first quarter reached $199.2 million, up 67% year-over-year. Advertising and marketing revenue reached $169.3 million, up 71% year-over-year, an acceleration from the 25% year-over-year ad revenue growth in Q1 2016. 70% of our ad revenue in Q1 came from mobile. Non-GAAP net income in the first quarter was $57.8 million, up 254% year-over-year. On the user front, Weibo's monthly active users reached 340 million in March, up 30% year-over-year. Average daily active users in March reached 154 million, up 28% year-over-year. In March, 91% of Weibo's MAUs were mobile. In the first quarter, we held a series of platform-wide marketing campaigns and events, such as the red envelope giveaway and the Chinese New Year Gala live streaming from various television stations which contributed to Weibo's strong user growth and user engagement. In March, we added 15.6 million DAUs and 27 million MAUs sequentially. In the first quarter, our customers continued to increase their ad spending on Weibo, much to the credit of our sales force and Weibo's strong advertising product offering. KA's ARPA in Q1 reached the highest level over the past year. The continued growth of Weibo's user base and user engagement further solidifies Weibo's position in the social media space as well as empowers us to become an indispensable component of mobile marketing in China. In discussing our operational updates for the first quarter, I will cover Weibo's progress in the area of user content and…

Thank you, Gaofei. Welcome to Weibo's First Quarter 2017 Earnings Call. Let me now go through our financial highlights. We had an amazing quarter in Q1, with Weibo's revenue growing the fastest post our IPO in 2014. We're benefiting from the fast growth of the mobile ad market in China, compounded by the increasing adoption of social marketing, similar to what we're seeing in other parts of the world. As Weibo's revenue scale and our brand influence grow, we're seeing significant operating margin -- we're seeing significant operating leverage, excuse me, resulting from platform efficiencies. For the first quarter, Weibo's total revenue reached $199.2 million, up 67% year-over-year or 76% on a constant-currency basis, exceeding the company's guidance between $185 million and $190 million. Non-GAAP net income attributed to Weibo reached $57.8 million, up 254% year-over-year. Non-GAAP diluted EPS was $0.26 compared to $0.07 a year ago. Our adjusted EBITDA reached $70.5 million, up 272% year-over-year and adjusted EBITDA margin reached 35% in the first quarter compared to 16% last year. Let me give you more color on first quarter revenues. Advertising and marketing revenue for the first quarter reached $169.3 million, up 71% year-over-year or 80% on a constant-currency basis. Mobile ad revenue was $118.6 million, up 80% year-over-year or 90% on a constant-currency basis and made up 70% of our total ad revenues. With 91% of our MAU mobile, Weibo is benefiting from the ad budget in China gravitating toward mobile, especially when we consider the unique characteristics of Weibo's social ads, including audience targeting, [indiscernible] marketing and closed loop solution. Total advertisers reached 782,000 in the first quarter, down 6% year-over-year or up 14% quarter-over quarter. As discussed on previous calls, in the third quarter of 2016, we couldn't place a negative feedback system in an ad…

[Operator Instructions]. Your first question comes from the line of Alicia Yap from Citigroup.

My questions is related to the margins. So despite the weak seasonality, your Q1 margins improvement is very impressive. And then but with more sales and marketing planned, right, for the rest of the year, should we think about a more gradual improvement of margins rather than step functions? So what would be the optimal margins level that you could share that you would like to achieve for 2017 and 2018?

Alicia, this is Herman. Yes, so if you look at our margin expansion, we've been pretty consistent over the last few quarters. And we think that with operating margin at 33% in the first quarter, we typically see a seasonality where we should be able to continue to scale this and increase our operating margin as our revenue grow. So I would expect, with our revenue to continue to grow in the next few quarters, that our operating margin and our net margin would continue to grow. And we see a pretty consistent pattern over the last 3 quarters.

I see. Can I ask a follow-up questions related to the revenue share that you mentioned, that starting second half, you're going to start to share the live broadcasting revenue with [indiscernible]. So can you give us some color in terms of how should we think about on the modeling side?

I think, right now, it's probably a little bit too early to consider that part. I think for that, what we're looking at is we're not only looking at our relationship with [indiscernible]. We're looking at the overall live broadcasting market and we want to help them grow. At the same time, we want to be able to benefit from the growth by getting more content from the video bloggers and also be able to get advertising revenue from their broadcasters. So I think at this point, it's more just helping them be able to grow to even a bigger scale. And then we'll consider that at the second half of this year.

Your next question comes from the line of Fan Liu from Goldman Sachs.

So my question is regarding the competitive landscape. Would the management show us how do you think the current industry dynamic? And what do you think the Weibo's position in this competitive market? And also, do you mind showing us the headcount of your sales and marketing persons right now? And then also second question, apologies if I missed, what's the percentage of advertising revenues for the videos in this quarter? Would you mind to share with us as well?

What we're seeing in the market with regards to competition is we're really competing in two areas. So for our -- with regards to the first area of time line consumptions, we look at our competition in this way. In addition to further optimizing our relationship-based information feeds, we're also adding information -- interest-based information feeds to our home time line. And as a result, we're seeing incremental growth of the home time line by adding the interest-based information feed. And we think that by doing this, we're also seeing that we're able to acquire new users more effectively, especially users with a low social relationship. We also -- we see that interest-based time line is competing in a pretty fierce market, however, Weibo has an advantage in content offering and also being a follow model with -- and having a social ID. We believe that we can further increase our market share after entering the market for long-form interest-based content. And also, in competing with the social market based on our experience for news apps and other type of apps that just have a time line, it would take time for them to actually be able to develop the social ability of a social network. So with regards to competition, the other part that we're seeing is maybe competing in short videos. In the past few years, we've been focusing on developing our professionally generated content. And we recently started focusing also UGC content, user generated content, by launching Stories which is to create short videos. And in a short amount of time that we have launched this product, about 10% of our test base pool are already using this on a daily basis. If you look at Instagram, we understand that their daily users are up to maybe 40%. So over the next 2 quarters, we're going to continue to optimize this UGC function to help more video creation and consumption. The other question you've mentioned is what percentage of our revenue comes from video. Approximately 18% of our advertising are currently derived from video. And I think you had also another question with regards to how many people we have in sales. When you look at our sales model, we actually don't have -- much of our sales is not through direct. It's either self-service or it's through the agencies. So we have a few hundred in place that's focused on supporting the finance as well as the back end for sales support.

Your next question comes from the line of Alex Yao from JPMorgan.

I have two questions. Why the -- you guys mentioned that you are moving into the interest-based reading or time line market which essentially puts you in a very highly competitive market. What does it take for you guys to become more competitive in this market? Or put in another way, based on your current infrastructure engineering capability, R&D capability, et cetera, et cetera, what are the incremental investment do you guys need to do to be more competitive in this market? And then secondly regarding the video, given that a lot of the video consumption on your platform is PGC, especially short-form PGC, what does it mean for monetization? Do you see issues in terms of monetization because of the viewing time is short versus long form? Because advertisers require a certain period of viewing time, maybe 15 seconds, 30 seconds, et cetera, et cetera. Can you talk about the monetization outlook for short-video form on your platform?

So we can currently see that in the relationship-based information feed, we already have a very big advantage. As we enter the interest-based feeds, we're going to leverage our existing attributes, such as social ID, such as our content ecosystem. So when you look at our interest-based time lines, you'll see that it's a little bit different than some of the other time lines because ours is more multimedia centric. We have more photos, we have more videos, more short-form information rather than long articles as other interest-based apps would have. So this is more consistent with the creation and also the consumption of our Weibo product. So as we enter 3, 4 and perhaps Tier 5 cities, what we notice is that these users probably have not been on a mobile Internet for a very long time. So they're probably not as accustomed to relationship-based -- interest information feeds. So as a result, we believe by introducing them interest-based information feeds, it would lower the on-boarding experience, making it easier for them to actually adopt our product and then maybe slowly, gradually also build relationships. So with regards to developing video ad market, we see this in 3 phases. The first phase is to focus on building a video advertising product and also building the content ecosystem so that you would have users -- we would increase users to consume videos and also time spent on consuming video-related content. So phase 2 would be to work with our sales, work with our channels to actually educate the customers so that we can increase the number of customers. By this, we would need to help and encourage them to create more video ads. That would foster more engagement and also have more virality as they get launched on Weibo. So phase 3 would be to open our inventory to allow more -- a larger proportion of our total ad inventory using video ads. So in doing that, we will be able to monetize in a very large scale. So at this conjunction, we don't believe that the length of our content video ads, whether it's short or long, would be that important. I think it's because these video ads appear in the time line, it's about users consuming the feeds rather than looking at it 1 feed at a time. So if you look at -- in March, when we looked at users who consume video content, we see it growing 40% sequentially. And we hope to continue to grow this user base and we should be able to increase then more content being consumed over video which will allow us to actually insert more video ads.

So your next question comes from the line of Gregory Zhao from Barclays.

My first question is a follow-up on the video ad. So just want to understand now what kind of the metrics or measures we're using to track and measure the video advertising efficiency, such as ROI. And my second question is just on guidance, for the revenue guidance. Can you share more color on the guidance like such as key account and SME advertising growth trend and which lines you think may grow faster?

[Indiscernible] revenue guidance.

So currently, when we evaluate the effectiveness of the video ads, we're looking at it very similar to, for example, photo ads looking at basically click-through rate. We have not yet set up a specific set of metrics to measure video ads. So as we mentioned earlier, at this conjuncture in phase 2 of our video ad rollout, we're more focused on getting more customers to purchase video ads and also to use video ads more often. And thus, at this point, we have not focused on increasing our video ad prices for KAs and SMEs. With regards to your second question, Greg, on advertising guidance, we don't typically give specific guidance on a customer segment, but we will say this, that if you look at the last few quarters, we've been growing very strong both with SMEs and with KAs. So it hasn't been anything different as we go into Q2. We continue to see that both SMEs and KAs are 2 strong engines and pillars of our growth, Weibo's growth. So we should expect both of them to do fairly well in Q2.

And unfortunately, we have run out of time for any further questions. I would now like to hand the conference back to today's presenters. Please continue.

That concludes today's conference call. Thank you for joining us, everyone.