Good day and thank you for standing by. Welcome to the Weibo Report Second Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sandra Zhang. Please go ahead.

Thank you, operator. Welcome to Weibo's second quarter 2023 earnings conference call. Joining me today are our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on the Internet and is available through Weibo's our IR website. Before the management remarks, I would like to read you the safe harbor statement in connection with today's conference call. During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statement involve inherent risks and uncertainties. A number of important factors could cause actual result to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update forward-looking statement in this conference 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 SEC. All the information provided in this press release is occurring as of today's period. Weibo assumes no obligation to update such information, except as required under applicable law. Additionally, I would 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 financials exclude certain expenses, gains or losses and other items that are not expect to result in future cash payments, while are nonrecurring in nature or not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management prepared remarks, we'll open the line for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang.

Thank you. Hello, everyone and welcome to Weibo's second quarter 2023 earnings conference call. On today's call, I will share with you highlights on Weibo's user, product and monetization in the second quarter of 2023. On the user front, Weibo's MAUs reached 599 million and average DAUs reached 258 million in June 2023, adding approximately 17 million and 5 million users year-over-year, respectively. In June, 95% of Weibo's MAUs came from mobile. Our monetization, leveraging for the pickup of offline consumption and events in the second quarter, we are pleased to see our ad revenues returning to the growth track trajectory, with a broad-based recovery on the advertising side. In the second quarter, our total revenues reached $440.2 million, a decrease of 2% or an increase of 5% year-over-year on constant currency basis. Our ad revenues reached $385.7 million, flattish year-over-year or an increase of 7% year-over-year on a constant currency basis. 94% of our ad revenues came from mobile. Our non-gap operating income reached $153.8 million, representing a non-gap operating margin of 35%, thanks to the solid execution of our efficiency initiative over the first half of this year. While anticipating the post-pandemic challenges generated from a shift in user interest and differentiated progress in ad demand recovery across various sectors in the first half this year, we adjusted our operational strategy in the first quarter. We shift our operation focus from pandemic-related hot topics over the past three years through the traffic recovery of vertical content, as well as cultivation of users' mindset. In the second quarter, we focused on improving operating efficiency of hot trends, as well as entertainment and consumption-related verticals in the second quarter, which further enhanced the user engagement this quarter. Next, let me share with you our progress made in product and monetization…

Thank you, Gaofei, and hello, everyone. Welcome to Weibo's second quarter 2023 earnings conference call, let's start with business metrics. In June 2023, Weibo's MAUs and average DAUs reached 599 million and 258 million respectively, representing a net addition of 17 million and 5 million users on a year-over-year basis. We are pleased with the user book trend and lead ongoing execution of a disciplined channel divestment strategy. Turning to financials, as a reminder, my prepared remarks will focus on non-GAAP results. All amounts are in U.S. dollar terms and all comparisons are on a year-on-year basis unless otherwise noted. We experienced headwinds to our financials due to the volatility of foreign exchange rates this quarter, still our business primarily operates in China. While we report our financials in U.S. dollars, our dynamic performance was affected by adverse currency movement. Now let's go through our financial highlights for the second quarter 2023. Weibo's second quarter 2023 net revenues were $440.2 million, a decrease of 2% or an increase of 5% on a constant currency basis. Operating income was $153.8 million, representing operating margin of 35%. Net income attributable to Weibo reached $126.4 million, up 15% or 23% on constant currency basis, represents a net margin of 29%. Diluted EPS was $0.53 compared to $0.46 last year. Let me give you more color on the second quarter 2023 revenue performance. Weibo's advertising and marketing revenues for the second quarter 2023 was $385.7 million, flattish or up 7% on a constant currency basis, with advertising business improving month-over-month. Mobile ad revenue was [$363 million], contributing approximately 94% of total ad revenue to industry. In terms of growth, we are glad to see a solid growth trajectory of automobile, handset and e-commerce sector as the top largest contributor to ad orders increase. For…

Thank you, dear participants. [Operator Instructions] Now we're going to take our first question and the question comes from the line of Timothy Zhao from Goldman Sachs.

My question is regarding the outlook into the second half of this year. Could management share any color on spending trend in July and August to date? And how should we think about the ad revenue growth in the third quarter and fourth quarter this year? And we've seen the verticals that Weibo has, is there any specific verticals that we are going to see very strong recovery into the second half?

So first of all, in terms of Q2, we had actually maintained a positive growth year-on-year basis. So we had a 13% growth quarter-by-quarter and 7% growth year-on-year. So this was much better than before. And also, first, there are several reasons. First of all is that the May Day holiday came and also you can see that we had more revenues from the verticals like the consumption and also the people's travel as well. And also the 6/18th as the -- one of the biggest e-commerce events taken place after the COVID, we have seen more placement and also the budget from the e-commerce sector as well. So these are all given us the boost. And also turning to the July and also August, we have already finished our performance in July. So the growth rate has been a little bit down compared with that of the June because that was still associated with the macro economy and also the consumption-related performance because 2/3 of our verticals are pretty much related to consumption. And also in August, we're going to have a better recovery pace than that of July. So overall speaking, we have the confidence of the recovery pace of the whole second half of the year, but still we have to keep an eye on the macroeconomic developments of China. And also further I've seen for the overall second half of this year in terms of the verticals. So first of all, I would like to talk to you about supply, which is all about traffic. So in July and also August, we have seen a very, very good recovery in terms of the entertainment culture as well. And of course, talking about the overall kind of a track recovery, this is already better than the period…

Excuse me, Timothy, do you have any further questions?

That's it.

And the question comes from the line of Miranda Zhuang from Bank of America Securities.

I want to pull up management's comment on this year's strategy, which is to increase the overall traffic and also to be perhaps support for the verticals traffic. So my question is, can you share your outlook for the user growth in the second half and also your operational strategies to boost the user traffic and then the vertical content areas?

So first, let's talk about the scale of user. So first of all, everybody is aware that the shipment of the handset in the first half of year experienced a decline of about 10% year-on-year. And also as a result, the marketing expenses relevant to that was also decreasing. So our focus for this will be, first of all, increase the efficiency of the traffic. And second of all, focus on those high ARPU value clients, especially the traffic supporting those iPhone users and Huawei smart phone users as well. And also in Q2, you can see more activities of the -- and also still we are going to focus on the recovery of the traffic, especially from 2 areas, 1 is culture and entertainment. The other is the news and hot trends. So in Q2, especially talking about the activities of the culture and entertainment industry, we've been seeing more activities organized, for instance, the movies and theaters and also variety shows, as well as the concerts et cetera. So we had a very clear trend of the recovery and increase of the traffic in July and also August as well. This was mainly due to for instance more activity in the entertainment industry in the summer holiday season and also in the first half of this year as a whole we've been seeing over 20% of the growth for the interactive users number in the entertainment industry and also 50% growth versus the pre-COVID period, so that we are going to have a very good trend getting from that particular industry. And also in the second half of the year, we're going to focus first on the overall recovery of the traffic efficiency. And also second is that give more support to those different vertical content and verticals…

And the next question comes from the line of Daisy Chen from Haitong International.

My question is about the AIGC, can management share more color about the deployment application scenarios into the product planning in AIGC and what are your current state of the movement, project?

So I think that during the last quarter earnings conference call, we had already answered part of this question. So AIGC of Weibo has 2 functions versus that we are going to enhance the production speed and productivity of those individualized content by those key accounts on our platform or the big accounts on our platform and also help them to enhance the stickiness and customer relationships. And also second is that it could help us to really supplement and also regain some of those medium to long-tail accounts on Weibo. So you can see that for Weibo in terms of the content creation, we have a characteristic which is that the ecosystem for the top accounts or top ranking accounts is pretty much optimized and also -- but still pretty much weaker for those medium to long-tail accounts. So AIGC is going to be very much a supplementary in helping with those medium and long tail accounts in terms of the content generation. And also in Q2, we've been seeing a very good trend of some of those big accounts like hundreds of those important accounts of already trying the AIGC capability in helping them to actually cater the needs of their customers in writing some of the articles or creating some of the contents that will have the similar style that their customers want. But still, this is not fully rolled out to the rest of the community. So I think that in the second half of this year, we're going to see more and more of those top accounts of using AIGC capability. And also, second thing is that we really believe that it is going to be very important for giving us a further supplementation of the vertical traffic and also vertical content, especially in terms…

Dear speakers, there are no further questions and I would like now to hand the conference over to Sandra Zhang for any closing remarks.

Thanks, operator. This concludes our conference call today. We will see you next quarter. Thank you.

Thank you very much for participating. You may now all disconnect.