Good day and welcome to the Bilibili 2018 Second Quarter Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Senior Director of Investor Relations. Please go ahead.

Thank you, operator. Please note that discussion today will contain forward-looking statement statements relating to future performances of the company and are intended to qualify for Safe Harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performances and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company’s control and could cause actual results to differ materially from those mentioned in today’s press release and this discussion. A general discussion of the risk factors that could affect Bilibili’s business and financial results as included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information except as required by law. During today’s call, management will also discuss certain non-GAAP financial measures for comparison purpose only. For our definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2018 second quarter financial results news release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili Investor Relations website at ir.bilibili.com. Joining us today on the call from Bilibili’s senior management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer; Ms. Carly Lee, Vice Chairwoman of the Board and Chief Operating Officer; and Mr. Sam Fan, Chief Financial Officer. And now, I will turn the call over to Mr. Fan who will read the prepared remarks on behalf of Mr. Chen.

Thank you, Juliet and thank you everyone for participating in today’s second quarter earnings call. I am pleased to deliver today’s opening remarks on behalf of Mr. Chen. We are proud of another solid quarter with strong top line growth and continued user expansion. Total revenues for the second quarter reached RMB1 billion representing an increase of 76% year-over-year. Each of our core business contributed to those games, with growth across our games, advertising and live broadcasting and the value-added services settlements. The key to our success is the active growth of our community. Our average monthly active users grew by 30% year-over-year or 7.6 million quarter-over-quarter, reaching 85 million in the second quarter. Mobile MAUs grows even faster, increasing 39% year-over-year to 71 million. The strong growth momentum trend in the second quarter continued as we entered the summer, where we achieved record high MAU of 98 million in July beyond our expectations. While we do expect to see some one-off impact to our new users acquisition in August based on our APP download being temporarily suspended from certain APP stores in China from July 26 to August 25, our overall user engagement and user retention rates remains high. We are in the process of implementing content monitoring, including a self inspection and increasing the number of our content order percentile. We will continue to work closely with relevant government authorities on an ongoing basis to improve the management and operations of our business. With our APP being full restored in all APP stores on August 25, we are actively exploring ways to attract new users and we are confident in our ability to resume our user growth momentum going forward. Content remains the cornerstone of our business. We will continue to attract and engage users with a variety…

Thank you, sir. [Operator Instructions] Our first question comes from the line of Mr. Alex Yao from JPMorgan. Your line is open.

So I have two questions. Number one is how to think about the user growth outlook for second half considering you guys did pretty good job in terms of the user growth in July, but then also there is a recent suspension for APP downloads in domestic and Android apps to work? And then second question is about the new game launch timetable you talked about a lot of new game developments in the prepared remarks, how do you think about the timetable for new game launch given the new game monetization approval has been suspended in China for 5 already? Thank you.

Okay. Let me just translate the first part. Mr. Chen’s has had in his view that the second half the user growth trend outlook is very positive that can be reflected in our Q2 results, MAU result as well as our July performance, you achieved 98 million MAUs in July and that is driven by our improved content quality and our user experience and a strong demand from our users. Okay. So the temporary suspension of APP downloads will have a little impact on our August new user acquisition, but it won’t affect the overall trend of our Q3 and the overall second half user trends. So in July, given that we are short for 5 days due to the temporary suspension, we still achieved 98 million MAUs, that’s a very, very good result and beyond our expectation. Our APP download has been fully restored on August 25 in all APP stores in China and we are actively exploring ways and activities to capture the last wave of the summer vacation traffic and we see it’s working quite well. Okay. So we forecast the August MAU will definitely be higher than the June MAU and the overall average monthly active user in Q3 will be over 90 million. So from our previous data, normally Q4 will be slower than Q3, but because of the temporary suspension in the summer and other new user acquisition strategy that we are undertaking we think our Q4 MAU should be equal or even larger than Q3 MAU. So for the licensing permit situation, Alex mentioned, we believe that this industry wide temporary problem we are facing and we believe it’s just a short-term delay. Still although that temporary suspension have certain impact to the whole industry regarding the second half game launch schedule, but…

And let me explain about user acquisition cost and selling and marketing expense trend, overall we will spend more in the third and fourth quarter that’s mainly because usually the peak time for us to acquire new users in summer. And especially in Q3, we will spend more to catch up the new users acquisition momentum after our APP has been resumed in all APP stores and we will also organize some offline anime events, such as Bilibili war and attend a lot of very hot anime events offline and we will also prepare for the second anniversary celebration of FGO in September. We estimate that we will spend on average spend about 15% of our total revenues on selling and marketing in the second half of this year and more budget will be shifted into Q3 in order to make sure our strategy can work and another component of our selling and marketing staff related cost for our advertising business and that kind of cost will be increased with advertising business. So that will be the trend for selling and marketing in the second half of this year.

Operator next question please.

Thank you, ma’am. Our next question comes from the line of Marcus Yang from Macquarie. Your line is open sir.

Thanks management for taking my questions. I guess, just a follow-up on the capital removal events, so can you quantify the impact from this removal of events, I mean, the revenue guidance now suggest 37% to 40% year-on-year growth and how should we look like without these events? And maybe also in our cost expense and expense perspective I understand that you may add more staff for auditing for instance. So, that’s my first question. And I guess my second question is with regard to your advertising business, last time I recall that you are planning to increase your app loads and ECPM etcetera and has that started to contribute from second quarter or any updates on that progress will be appreciated? Thank you.

And Marcus, do you mind translating that into Chinese?

So overall, there will be certain impact for the new user acquisition in August related to the temporary APP removal, but we think overall revenue growth trend as well as user growth trend will not be impacted by this temporary removal. During the period of suspension, we have contact approval of acquisition ratification process, but doubling auditing team plan was not just simply to dealing with this suspension, but it’s actually related to our actual business involvement, our new content recognition is increasing very rapidly and we were going to increase the headcount of our auditing team and we are just expediting this process.

Yes. Just to add two points, one we will double our current auditing team member – the member of our current auditing staffs, so basically we estimate that the income will be around RMB5 million in the second half of this year. And as we mentioned before we are spending more on the selling and marketing team in August and the September in order to catch out acquisition momentum. And I think Mr. Chen can add more color on the advertising business.

Our advertising revenue growth momentum is very positive. As has been showed on our Q2 earnings report, the performance based advertising which was just launched early this year is already contributing over one-third of our advertising revenue. Okay. So continuing with the performance-based advertising, we have launched two large scale of new agency recruiting conference in end of March and the beginning of June and that help us to recruit and increase the number of advertising agencies who are representing Bilibili. Actually, in Q2, the number of advertising agencies grew over 100% quarter-over-quarter. This growth not limited to the number growth, but we are also expanding our coverage in multiple industries and that is also helping our conversion and revenue growth. We are also optimizing our algorithm and our strategy to improve the click-through rate. So as you may know to increase performance-based advertising revenue, there are several metrics that grows a number of advertising agency and the quality of advertising agency as well as the algorithm and a recommendation policy as well as the app loads. What we are doing and improving in Q2 was mainly focused on increasing the number of advertising agency and the quality of advertising and improved our algorithms and Big Data capabilities, not so much on increase of app load. On the brand advertising front, we are also expanding our customer base and improving our brand influence in the industry where we think we have improved our overall strategic planning marketing as well as integrated marketing capabilities for brand advertisers in the second quarter.

Thank you. And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.