Ladies and gentlemen, thank you for standing by, and welcome to Weibo Corporation Report Third Quarter Financial Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. And I'll now hand over the conference over to your first speaker, Ms. Wen Li. Thank you. Please go ahead.

Thank you, operator. Welcome to Weibo's 2018 third quarter earnings conference call. Joining me today are our Chairman of the Board, Charles Chao; our Chief Executive Officer, Gaofei Wang; and our Interim CFO and VP, Finance, Fei Cao and SINA CFO, Bonnie Zhang. The conference call is being broadcasted on the internet and is available through Weibo's IR website. Before the management's presentation, I would like to review 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 of 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 these and other risks, including the Weibo's Annual Report on Form 20-F and other filings with the SEC. All information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law. 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 the future prospects. Our non-GAAP financial exclude certain expenses, gains or losses and other items that are now 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'd like to turn the call over to our Chief Executive Officer, Gaofei Wang.

Thank you. Hello, everyone and welcome to Weibo’s third quarter 2018 earnings call. On today’s call, I will share with you highlights of Weibo’s user growth, product and the monetization, as well as our key initiatives in 2018. First, let me discuss our third quarter financial results. We continue to see strong revenue and user growth in this quarter. Our total revenue reached 460.2 million, up 44% year-over-year. Advertising and marketing revenue reached 409.3 million, up 48% year-over-year, with 83% of our ad revenue in Q3 from mobile. Non-GAAP operating margin during the third quarter reached 41% On the user front, Weibo’s monthly active users reached 445.9 million in September, an increase of 19% year-over-year. Additionally the daily active users in September was 195.2 million, up 19% year-over-year with 93% of Weibo’s MAUs for mobile. On the user front, Weibo’s monthly active users reached 445.9 million in September, an increase of 19% year-over-year. Additionally the active -- daily active users in September reached 195.2 million, up 19% year-over-year with 93% of Weibo’s MAU from mobile. Thanks to our continuous efforts to enhance the operation and distribution of [indiscernible], which are typically either hot issues or popular events discussed by users on Weibo. We will have further solidify its leading position as a platform for users to create and the consume content. This strategy has allowed Weibo’s user scale to continue to expand during the third quarter. Our focus to strengthen our platform ecosystem for social interactions among users and the content distributions has further increased the Weibo’s value proposition at the social media platform and strengthened our platform effect. In return more and more advertisers are recognizing Weibo’s ability in social marketing. In discussing our operational update for the third quarter, I will cover Weibo’s progress in area of users,…

Thank you Gaofei. Welcome to Weibo’s third quarter 2018 earnings call. As a reminder we adopted ASC Topic 606 on January 1, 2018 and our new value guidance is consistent with this tender. In order to provide investors with clear comparisons during today's call and will also leverage our revenue and expense figure under the old revenue guidance, which excluded other transactions and includes value added tax to the reported figure in our earning release. Now let me walk you through our financial highlights. All comparisons are on a year-over-year unless otherwise noted. Weibo’s third quarter net revenue was 460.2 million, up 44% or 43% under the old accounting standard, or an increase of 48% on constant currency basis. Strong advertiser revenue growth was offset by the recent regulatory changes in certain verticals particularly in the gaming industry which led to a decrease in merchant advertising spending during the quarter especially for SMEs. We expect these regulatory adjustments may continue to affect growth of these verticals, our advertising spend in the near term. In addition, the continued depreciation of RMB related to U.S. dollar had a favorable impact on revenue growth during the quarter and we expect foreign currency headwinds to continue in the near-term. Non-GAAP operating income was 108 million, up 42%. Non-GAAP net income attributable to Weibo was 171.8 million, up 49%. Non-GAAP diluted EPS was 0.75 compared to 0.51 a year ago. Advertising and the marketing revenue for the third quarter was 409.2 million, up 48% or an increase of 52% on a constant currency basis. Mobile ad revenue in third quarter was 341.6 million, up 58% representing 82% of our total ad revenue. Our focus to strengthen our platform ecosystem and user social interaction and content distribution has further increased Weibo's value proposition as a social…

Thank you. Ladies and gentlemen, we’ll now begin the question-and-answer session. [Operator instructions] Our first question comes from the line of Juan Lin, 86Research. Please ask the question.

Thank you management and good evening. Thanks for taking my questions. My first question is on Q4 guidance. I noticed that the Q4 guidance shows a slowdown compared to the third quarter in terms of growth. I’m wondering, whether the guidance is mainly due to the regulatory environment change and also the macro impact on certain categories that you have already noticed or whether you have noticed, you know some more further impact on the macro environment change and how should we look at 2019? The second question on the margins I noticed that non-GAAP operating margins actually improved versus last quarter especially on sales and marketing expenses seem to be well controlled. So, I wonder what is future investment plan for user acquisition and how we should we look at the margins going forward? Thank you.

I think I addressed this -- somewhat addressed this issue in my prepared remarks. As I indicated in my script there's two main elements that are affecting our growth rate in the fourth quarter as you have -- we indicated that our growth rate in the fourth quarter will be slower compared to the third quarter. The first one will be the macro situation, particular for those items was big dollar ticket size in the -- we’re looking at industry segment such as auto segment with the travel and the -- like a big ticket item such as wedding services. And the other element I addressed on the call is the gaming industry. I think you’re very much aware of the regulatory challenges that most of the companies are facing these days and that has had an impact on the marketing dollars spent on that particular industry. That impact was larger than the initial estimate we had made at the beginning of the year. As a result that could impact our growth rate in the fourth quarter. What I have indicated earlier these are considered external factors. There will be few like a company specific factors for you to consider. One as I indicated in my remarks, during the tough period of the microeconomic situation, we’re doing -- we are actually expanding our investments in the gaming verticals. We believe right now it's a good time to acquire users, Weibo users at a much more reasonable cost. That’s one factor, even though this is not too much related to the revenue growth. The other thing which I also indicated on my script is we have significant increase in our investment in those MCN multi-channel network agencies, who are actively with -- who are being very active with Weibo. We are…

Thank you very much. Very helpful.

Thank you. Our next question comes from the line of Binbin Ding of JPMorgan. Please ask the question. Moving to the next question from Karen Chan, Jefferies. Please ask your question.

Thank you, management for taking my question. So my first question is just wondering what your general thoughts on China's social ad market growth going into 2019 and how should we think about Weibo’s growth profile versus industry as peers like Tencent, they start adding more ad inventories? My second question is any color management can provide on [indiscernible] current monthly growing level or how much of a revenue contribution should we be expecting starting first quarter 2019 as a result of consolidation. That would be very helpful. Thank you.

I'll divide the question into I guess two parts to address your question on the social ad outlook for 2019. To start with the brands, I think we look at the competitive landscape in the social ads for brand advertisers, there were limited competitors in the marketplace and our primary competitors in this area is WeChat. This from demand of a brand and advertiser in terms of they execute a campaign at Weibo. They are not simply looking at the traffic we're providing. They're more concerned about their brand influence, brand awareness, their influence, also the participation of our KOL in their distribution and amplify their brand impact. As a result we have seen continued growth of our ARPA from brand advertisers. And on top of that we are further expanding our customer basis where we’re looking into further going into local brand advertiser level in 2019. For a brand -- the growth of our brand advertisers, I think that the primary pressure is not from the competition we had with WeChat. More so it's from the market acceptance meaning that we can affirm more marketers or brand advertisers who are willing to accept our social ad products, and to understand and to utilize our social marketing efforts. On the other side, let’s move on to SME side. Overall, we for 2019 SME growth will be a bit of challenging. There’s two-folds, one is with the current macro condition, the overall demand is decreasing. And on the other side, we are looking at increasing supply in traffic in the market. In the past few years our growth of SME has largely depending on the growth of our traffic and we have been paid a little bit lot less attention in terms of our product with the social marketing features. With…

Thank you very much. Very helpful. Thank you.

Thank you. Our next question comes from the line of Binbin Ding from JPMorgan. Please ask the question.

Hi. Good evening, management. Thanks for taking my question and congratulations on the strong third quarter results. My first question is on your short video strategy. So can you elaborate the progress on the execution of the short video strategy so far? What is the current revenue and traffic contribution from short video in the third quarter? In terms of monetization, is there any particular sectors factored into focus of the initial stage? And also what kind of impact that short video monetization bring to our existing KA and SME advertising revenue? My second question is quickly, so between the live streaming and shot video content, how do you prioritize your focus on the investment in this type of content format? And lastly, I would like to quickly ask if there are any new initiatives shall we expect from your partnership with Alibaba in the next year? Thank you.

I think most of you are aware of that in the last two years the short video has been the primary drivers for our platform growth both from our viewership and from a user growth point of view. However, for the first half of 2018, we saw popularity of few short video platforms that have put pressure in terms of our user growth rates on the video site. In the third quarter, we have made adjustment in terms of user acquisition from a video content. So, we’ve been focusing more efforts in terms of the content functioned and interactions between the content creators and the users to acquire users and a firm with the content type point of view we have -- which more focusing on the PTC content and the content with particular IP. In terms of advertising demand rather they try to put a more advertising material into the video format. They haven't been strictly associated their video campaign with particular our video content on the platform, as a result, you see continued stable growth of our video advertising dollar as a percentage of our total advertising dollar. This quarter has been up two percentage points to 27%. In terms of your second question on our investment priority in between live broadcasting and short video, no doubt short video will be continued the top priority for this platform. We believe short video will be the baseline media format going forward in terms of the content creation and the content consumptions. In terms if the volume of short video and the live broadcasting, short video creation on the platform on a daily basis is in the millions while the live broadcasting might be in the 10,000. So from that volume difference, you could have seen, who has been the dominant player. The live broadcasting will be primarily used by our top content creators such as celebrities as supplemental media format for their content distributions.

Okay.

I think at this point of time, we have not started our particular negotiation or discussion with 2019 plan with Alibaba. So we have no – at this point there’s no indicator in terms of the further new programs will be working with Ali neither they will be the frame contracting in advertising dollars, so we’ll be working with Ali for the following years.

Thank you. As there are no more further questions, I’ll hand the call to the presenters for closing remarks. Please, continue.