Ladies and gentlemen, thank you for standing by, and welcome to Weibo Reports First Quarter 2019 Unaudited Financial Results 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 advise you that this conference is being recorded today, Thursday, May 23, 2019. I’d like to hand the conference over to your first speaker today, Ms. Sandra Zhang. Thank you. Please go ahead.

Thank you, operator. Welcome to Weibo’s first quarter 2019 earnings conference call. Joining me today are Chairman of the Board, Charles Chao; our CEO, Gaofei Wang; our SINA Group CFO, Bonnie Zhang; and our VP Finance and Interim CFO, Fei Cao. This conference call is also being broadcast on the Internet and is available through Weibo’s IR website. Before management remarks, I’d like to read you the Safe Harbor statement in connection with today’s conference call. During today’s 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 statements. Weibo assumes no obligation to update the forward-looking statements in this call and elsewhere. Further information regarding this and other risks is included in Weibo’s Annual Report on Form 20-F and other filings with the SEC. All the 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 include certain non-GAAP measures, which include stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo’s comparative operating results and the future prospects. Our non-GAAP financial excludes certain expenses, gains and losses and other items that are not expected to result in future cash payment or are non-recurring in nature or 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’ll open the line for a brief Q&A session. With that, I would like to turn the call over to our CEO, Gaofei Wang.

[Foreign Language] [Interpreted] Thank you. Hello, everyone, and welcome to Weibo’s first quarter 2019 earnings conference call. On today’s call, I’ll share with you highlights in Weibo’s user growth, product and monetization, as well as progress we made on key initiatives in 2019. Let me start with our first quarter financial results. We continue to see solid growth in revenues and user base this quarter. Our total revenues reached $399.2 million, up 14% year-over-year, or 21% on a constant currency basis. Advertising and marketing revenues reached $341.1 million, up 13% year-over-year, or 20% on a constant currency basis, with 85% of our ad revenues coming from mobile. Non-GAAP net income during the first quarter was $128.5 million, up 14% year-over-year. On the user front, in March 2019, Weibo’s MAUs reached 465 million, up 13% year-over-year, representing a net addition of 54 million users on an annual basis. Average DAUs reached 203 million, up 10% year-over-year. 94% of Weibo’s MAUs came from mobile. During the Chinese New Year, we delivered solid user growth and improved user engagement through innovative grand advent of marketing and holiday-specific branded campaigns. On the monetization front, KA business continued its momentum, thanks to sales team efforts and our ongoing ad product optimization and innovation. SME business also exhibited some positive signs with product mix and customer structure revamp and ad product optimization. In discussing our operating ARPU for the first quarter, our covered areas of users’ content and customers of Weibo. Let’s start from user growth and user engagement. We have two areas of focus this year. First, our user growth. Both strived to ramp up our user scale in the third and fourth-tier cities to further user product optimization and channel investment. From a channel perspective, we continue to partner with major domestic smartphone manufacturers…

Thank you, Gaofei, and hello, everyone. Welcome to Weibo’s first quarter 2019 earnings conference call. Before the detailed financial review, I would like to remind you that my prepared remarks will focus on non-GAAP results and all the comparisons on a year-over-year basis unless otherwise noted. Now let me walk you through our financial highlights for the first quarter 2019. Weibo’s first quarter 2019 net revenue was $399.2 million, up 13%, or 21% on a constant currency basis. Operating income reached $136.8 million, representing operating margin of 34%. Net income attributable to Weibo was $128.5 million, representing a net margin of 32%. Diluted EPS was $0.56 compared to $0.50 last year. Let me give you more color on our first quarter 2019 revenue growth. Advertising and marketing revenues for the first quarter 2019 reached $341.1 million, up 13%, or 20% on a constant currency basis. Mobile ad revenue was $288.4 million, up 19%, or 26% on a constant currency basis, representing 85% of total ad revenue, up from 18% last year. Let’s start with KA. In the first quarter, our KA ad revenue reached $168.8 million, up 31%, or 39% on a constant currency basis. Despite macroeconomic completion and a highly competitive digital advertising market in China, our KA sector continued a strong momentum and demonstrated the resilience we grabbed from Weibo’s unique value proposition to brand advertisers as indispensible platform for mobile and social marketing demands. Among various brand industries that Weibo covers, we’re particularly impressed with strong performance of FMCG sector, as Weibo consistently adjust value for these customers to target broader audience to enhance brand awareness and deliver better ad performance through our differentiated social marketing tools and the powerful KOLs’ influence. Turning to SMEs. In the first quarter, Weibo’s SME ad revenue reached $155.7 million, up…

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Binbin Ding from JPMorgan. Please ask your question.

Good evening, management. Thanks for taking my question. My question is about SME advertising revenue. As you and many other Internet companies indicated in their 1Q earnings report, condition in the inventory surprise. So one major reason leading to the [indiscernible] of the performance as growth. I’m just wondering if management can share some color regarding your current views in terms of the competition intensity on Weibo’s SME advertising versus last year? And what kind of measures are you going to take in response to this competition? Lastly, how should we think about the long-term growth rate of SME advertising revenue, say, in two to three years? Thank you.

[Foreign Language] [Interpreted] Based on our ad industry tracking and their peer operating results, virtually, we see the overall ad market growth is significantly slowing down or even a cutback in the first-half of 2019. This was mainly caused by the macro and the regulation headwinds, as well as the competition on the inventory supply side. For us, we saw sluggish ad growth from some of our top SME customers since the latter part of 2018, particularly in those industries hit hard by macro and the regulation factors. On top of that, pricing pressure across the industry caused by the oversupply of inventory in the market, the growth of our SME business was short of expectations. Also, I think, just for particular industry, on the gaming part, the hope of the licensing approval for gaming happened in Q2 2018, which means gaming customers still contribute a very meaningful revenue to us in the first quarter of 2018. So the tough comp was another reason for the deceleration in our SME business. So coming back to our results, in response to the external environment analytics competitions, we have been focusing on three areas since fourth quarter 2018 and we are – start to see some initial progress. One is, we introduced the social marketing playbook to SME as well, such as the KOL marketing to highlight our unique value proposition in the market. Number two, we beefed up our efforts in optimizing our advertising algorithm, so that we could improve our targeting and ad conversion and ultimately customer ROI. This is very essential for both our customer acquisition and retention. As – to give you some color, our e-commerce customer, particularly Taobao merchant, ramped up – ramp up their ad spending on our platform in Q1 2019, mainly to cause a…

May I have a quick follow-up on the expansion into the new customer base in new category. So are there any specific industries are we going to focus in the next few quarters and we – these new initiatives bring some support to your revenue growth in 2019? Thank you.

[Foreign Language] [Interpreted] I think in terms of the segments for new customers, it continues to be relatively broad. So we’re talking about auto, we’re talking about e-commerce, even the gaming sector. Historically, our key SME customers, I mean, meaning those top SME customers takes relative large percentage of our total SME revenue. However, we are slowly adjust – we’re slowly making adjustments with this composition. Now we are giving priority to new customers for certain new inventories. So for us, scale and the market share being the key focus at this point.

Great. Thank you for the color. Thank you.

Your next question comes from the line of Binnie Wong from HSBC. Please ask your question.

Hello, this is Freya on behalf of Binnie Wong. My question is regarding the user growth strategy. So the company mentioned that we are going to increase the online video sector exposure. So I was wondering like what is – especially, like investment we’re going to make in this sector and how we expect our user to grow in the rest of the year? Thank you. [Foreign Language]

[Foreign Language] Interpreted] Even though I mentioned that our engagement – user engagement was primarily benefiting – user engagement and time spend growth has been major benefit – benefiting from our new video tab. But for the scale growth on the platform, it’s more coming from our social – our efforts in enhancing the social attributes on the product. I’ll probably go back to look at fiscal 2018. If you are familiar with our results, particularly our increased investments on user growth in 2018 through the channels. We have achieved a relative solid user scale in 2018 by means of our increased investments. However, these new users came to our platform, our total user scale expansion lagged behind the growth of user engagement, especially the growth of the users’ social interaction as our platform core competence lies on our users’ social relations and interaction. Our data tracking through the user behavior of new user versus the – like old user or loyalty users has proved that. As a result, in the first-half of 2019, we will put more emphasis on promoting our user engagement and the frequency of usage by each user through enhancing their user social interaction. Along with the increase of user frequency, we believe our monetization scale and efficiency could also grow. For – if you look at our DAU versus MAU percentage, you might have noted that our -- such percent in the number has to – has moved to a higher percentage level sequentially. And for the – from operation key performance – KPI perspective, the user content consumption frequency and the volume of their content consumption will be our key focus or the key KPI for right now. From user growth perspective, there’s still a large room for us to further penetrate into lower-tier city. However, as I indicated, the first-half of 2019, we will be focusing to increase the user engagement level of those customers we acquired in last year. So we tend to convert those new users from pure content consumption users to users that will be engaging in social interaction on the platform. In terms whether we will or we’ll not adjust our user growth strategy, that depends on how the progress we’re making in terms of user engagement growth performance on the operation. So there’s a possibility we will adjust our channel marketing strategy, particularly in the lower-tier city in the second-half as we judge on the market condition, as well as to develop our current user base.

Your next question comes from the line of Gregory Zhao from Barclays. Please ask your question.

Hi, management, thanks for taking my questions. Two quick questions. First, can you share any colors of the user activities of your new version Weibo app? And how does the new version can help improve your user engagement? And secondly, we see your KA advertising still maintain very strong growth momentum in Q1. While consistent of some of your other peer companies, your media advertising have some very substantial differentiation. We want to understand your bargaining power in key advertising and what’s your current price trend and the contract, especially your contracts signed after the Chinese New Year compared to last year? Thank you.

[Foreign Language] [Interpreted] I think to comment on the new version, particularly on the new video community, I think, as I indicated in the prepared remarks, that has helped in the time spend of our users in a meaningful way. For us, we think the functionality of our video community is to attract KOL in the video creation area, so that PTC – the high-quality PTC video creators will be able to have a specific place to land their product – to land their products or their content. So effectively, we will have the ability to track users in the video community as well. So we have seen significant growth from video KOL content creation in the first-half – first quarter. We are in the process of – to optimize their creation and their content in an easier way for users to consume. There’s updated version likely to come out in the month of June. By then, we will push for a – we will push much harder for user –new users or user engagement at the video community tab. In terms for the lower-tier-city users, we are actually in the progress of generating a new feed to specifically targeting these users. What we have noted that users from third, fourth-tier cities, they are not typical user to consume content related to celebrities or hot topics or hot trend on Weibo. Their interest has – they have tendency to consume much more UGC content compared to people from first or second-tier cities. With that, our feed has been revised that you provide a more UGC content and we have started pilot run in selected locations. The initial test has indicated with updated content with focusing on UGC, the retention rate per user – the user retention rate in third, fourth-tier…

Thank you very much.

I would like to hand the conference back to the presenters. Please continue.

Thanks, operator. This concludes our conference call today. Thank you for joining us. See you next quarter.

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