Cheetah Mobile Inc. (CMCM) Q4 2016 Earnings Report, Transcript and Summary

Hello and welcome to the Cheetah Mobile Fourth Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Helen Zhu, Director of Investor Relations. Please go ahead.

Thank you, operator. Welcome to Cheetah Mobile’s fourth quarter and full year 2016 earnings conference call. With us today are Mr. Fu Sheng, our CEO and Mr. Andy Yeung, our CFO. Following management’s prepared remarks, we will conduct a Q&A session. Before we begin, I refer you to the Safe Harbor statement in our earnings release, which also applies to our earnings conference call today as we will make forward-looking statements. At this time, I would now like to turn the conference call over to our CEO, Mr. Fu Sheng. Please go ahead, Fu Sheng.

Thanks, Helen and hi, everyone. In early 2016, our business faced some difficulties, which forced us to rethink our positioning and our growth strategies for the future. It is increasingly clear to us that content is the driver for future growth and AI is a core enabler to connect our user with highly personalized content. With that, we are excited to see that two of our key content apps, Live.me and News Republic, grew strongly in Q4 2016 in the U.S., showing that Cheetah Mobile has the capability to develop not only popular utility apps, but also popular content-driving apps. Financially, our total revenues and profits again grew Q-over-Q in the 4Q. In fact, our total revenue hit a record high in the quarter and our quarterly mobile revenues exceeded RMB1 billion for the first time despite entering into a more mature growth phase. Our utility app grows steadily and sustained in the quarter. At the company’s profit center, our utility apps continued to expand its profitability over the past couple of quarters, which in turn supported our mobile content strategy. Looking forward, we remain both focused in implementing our mobile content strategy, leveraging the big data generated by a massive user base and AI technology to connect our user with more personalized leisure content. We have further enhanced our leading position as a global traffic platform. For our core utility apps such as Clean Master, our user base remains relatively stable in key developing markets. In addition, we are pleased with good progress in our other utility apps. [indiscernible] was ranked as the #1 personalization app globally in January 2017 on Google Play. It is also important to note that both its user base and its engagement grow significantly over the past few months without any marketing activities. PhotoGrid expanded its popularity, now the second large photo app in Indonesia. Moving on to our content-driving products. We are pleased to see continued strong growth of Live.me in user members – user engagement and the paying users. In less than a year, Live.me has become one of the top social apps for young people in the U.S. According to App Annie, Live.me has been the #1 grossing social app in the U.S. on Google Play since August 2016 and one of the top 5 social apps on Apple App Store. In the past quarter, we introduced the nearby function, which enable users to discover people or things that they may find interesting around them. This feature helps to increase user stickiness with the app. We remain amazed by how well the virtual function was received by our users and that is used by our users in interactive – interact with each other in social settings. We will continue to refine Live.me, make it easy and more fun for users to share their daily lives on our live streaming social platform. News Republic also delivered robust results in the fourth quarter of 2016. We upgraded News Republic to AI-enabled personalized news content deliver model in the third quarter of 2016. Since then, both its user base and the user engagement have grown rapidly. Currently, our user, on average, reads 2x to 3x more than articles than before. According to App Annie, News Republic has been the #1 news app in U.S. on Google Play since December 2016. The key element of our content strategy is AI. For example, we have adjusted our personalized news content deliver engine several times since we acquired News Republic. When we changed the predictive model from CBDT to [indiscernible] and updated to DNN [ph], our CPR improved by 30%. Accordingly, we continued to expand our partnerships with global leading media in the past quarter. Also, we recently launched Cheetah Open Feed platform, which also allows app developer and OEM to place Cheetah personalized news delivery service into their apps and the mobile operating systems helping them to attract and engage users. We made significant progress on our content strategy, but we know we still have lot of work ahead of us. Our utility app has entered into a more mature growth phase and significant investments are still needed to drive the growth of our content-driving products, which are likely to steal on margins in 2017. However, given our strategies, strength in product and the technology development and our massive 600 million user base, we are confident that our transformation into our mobile content platform will enable us to build a standard and profitable business model in the long run and create value to all of our shareholders. Before I hand the call to Andy, I want to thank him for his significant contribution to the company over the past 3 years having helped Cheetah Mobile established a solid financial operating team and corporate governance platform. Andy will be missed. On behalf of the company’s Board of Directors, I would like to thank you, Andy for your dedication to the company. We wish you best of luck going forward. With that Andy, please go ahead.

Thank you, Sheng. Hello, everyone. As you read in the press release, I will be resigning from Cheetah Mobile effective March 31, 2017. A new CFO search is being conducted by our Board of Directors. Meanwhile, the Board has appointed Francis Ng, CFO of Kingsoft and a Board member of Cheetah Mobile, as the interim CFO until a replacement is onboard. On a personal note, I would like to thank Fu Sheng, the Board and the rest of the management team for providing me the confidence, trust and opportunity to work with one of the most dynamic global companies emerging out of China. It has been a pleasure to work with you all. For all the investors and analysts who have covered our company ever since we went IPO and subsequently, thank you for your interest in the company and respect you have for me and the team. It has been a pleasure to work with you all as well. Cheetah Mobile has been an amazing company with hundreds of millions of users globally. It will remain one of the most dynamic names in the mobile Internet space and continue to rapidly evolve and lead in the mobile Internet ongoing evolution. I wish you the best of luck and success going forward. Moving on, we are delighted to have delivered solid financial results in the fourth quarter of 2016. In the second quarter of 2016, we set a clear goal to rejuvenate revenue growth and improve our financial conditions and both of our revenues and portfolio continue to improve in the second half of 2016. In fourth quarter 2016, our total revenues, mobile revenues and overseas revenues all hit record highs, driven by the steady and sustained revenue growth generated [ph] by our utility apps. Importantly, we also further expanded our portfolio in the past quarter. Our non-GAAP operating profit grew more than 200% as compared with the previous quarter. In addition, we generated RMB419 million in free cash flow in the fourth quarter 2016. Going forward, we will remain focused on the execution of our mobile content strategy, which will lay a strong foundation for another round of strong monetization, revenue growth and portfolio improvement in the coming quarters. Now let me walk you through the details of our fourth quarter financials and full year 2016 financial performance. All financial numbers are in RMB unless otherwise noted. In December 2016, the number of mobile MAUs was 623 million, an 11 million increase from quarter-over-quarter. For the fourth quarter of 2016, total revenues increased by 11% year-over-year and 13% quarter-over-quarter to RMB1.27 billion, which was slightly above the high end of our guidance. For the full year of 2016, total revenues increased by 21% year-over-year to RMB4.56 billion, primarily driven by the steady and sustained revenue growth from our user apps and the contribution from our new content driven apps, Live.me and News Republic. By platform, for the fourth quarter of 2016, mobile revenues increased by 28% year-over-year and 15% quarter-over-quarter to RMB1.03 billion. Mobile revenues accounted for 81% of our total revenues in the fourth quarter, up from 70% in the prior year period and 80% from the third quarter 2016. For the full year of 2016, mobile revenues increased by 43% year-over-year to RMB3.53 billion. Mobile revenues accounted for 77% of our total revenues in 2016, up from 66% in 2015. For the fourth quarter, PC revenues declined by 29% year-over-year, but increased by 5% quarter-over-quarter. The year-over-year decrease was mainly due to the migration of Internet traffic from PC to mobile in China and a quarter-over-quarter increase was mainly due to high PC game revenues in the fourth quarter 2016. For the full year of 2016, PC revenue declined by 20% year-over-year. By region, for the fourth quarter, overseas revenues increased by 31% year-over-year and 16% quarter-over-quarter to RMB833 million. Overseas revenues accounted for 65% of our total revenues in the quarter. For the full year, overseas revenues increased by 42% year-over-year to RMB2.75 billion. Overseas revenues accounted for 60% of total revenue. For the fourth quarter of 2016, China revenue declined by 14% [ph] year-over-year, but increased 8% quarter-over-quarter. The year-over-year increase – decrease was mainly due to the decline in PC revenues and the quarter-over-quarter increase was mainly due to higher mobile advertising revenues in the fourth quarter 2016. For the full year, China revenue declined by 1.2% year-over-year. By segment, revenue from online marketing services for the fourth quarter were RMB1.03 billion, which remains stable year-over-year and increased by 5% quarter-over-quarter. For the full year, revenues from online marketing services increased by 20% to RMB3.95 billion, driven by higher demand from mobile advertiser and monetization of light causal games to in-game advertising. Revenue from IVAS for the fourth quarter of 2016 were approximately RMB209 million, which increased by 134% year-over-year and 89% quarter-over-quarter. For the full year 2016, revenues from IVAS increased by 27% to RMB501 million, primarily driven by our initial monetization of Live.me in the overseas market. Going forward, we will continue to experiment with innovative monetization model for Live.me, which include a one step proven to be successful in China. Revenue from Internet security services and others for the fourth quarter were approximately RMB33 million, which increased by 36% year-over-year and 5% quarter-over-quarter. The year-over-year increase was primarily driven by higher mobile Internet services platform, software and licensing revenue. For the full year, revenue from Internet security services and others increased by 19% to RMB113 million. Moving to our costs and expenses, to help facilitate the discussion of the company’s operating performance in addition to financial information presented in accordance with U.S. GAAP, the following discussion will also provide financial information relating to non-GAAP basis, which excludes stock-based compensation expenses. For detailed financial information presented in accordance with U.S. GAAP, please refer to our press release, which is available on our website. Total SBC expenses for the quarter declined by 45% year-over-year and 25% quarter-over-quarter to RMB54 million, for the full year of 2016, SBC expenses decreased by 3% to RMB306 million, which was mainly due to changes in the estimated or future rate of our share-based compensation expenses. Cost of revenues for the fourth quarter of 2016 increased by 57% year-over-year and 15% quarter-over-quarter to RMB464 million. Non-GAAP cost of revenues for the fourth quarter of 2016 increased by 56% year-over-year and 15% quarter-over-quarter to RMB463 million. For the full year, cost of revenue increased by 61% year-over-year to RMB1.54 billion. Non-GAAP cost of revenue for the full year increased by 62% to RMB1.54 billion, which was primarily due to step-up investment in content for our content driven products and an increase in bandwidth, Internet data center costs associated with increased user traffic and data analytics. Gross profit for the fourth quarter decreased by 5% year-over-year, but increased by 12% quarter-over-quarter to RMB810 million. Non-GAAP gross profit for the quarter decreased by 5% year-over-year, but increased by 12% quarter-over-quarter to RMB811 million. For the full year 2016, gross profit increased by 7% year-over-year to RMB3.02 billion. Non-GAAP gross profit for the full year of 2016 increased by 7% to RMB3.02 billion. Gross profit margin for the fourth quarter 2016 was 63.6% as compared with 74.3% in the prior year period and 64.2% in the third quarter of 2016. Non-GAAP gross margin for the fourth quarter of 2016 was 63.6% as compared to 34.2% in the prior year period and 64.2% in the third quarter of 2016. For the full year of 2016, gross margin was 66.2% as compared with 74.7% in the prior year. Non-GAAP gross margin for the full year of 2016 was 66.2% compared to 74.7% in the prior year period. Now R&D expenses for the quarter increased by 12% year-over-year and slight [ph] quarter-over-quarter to RMB235 million. Non-GAAP R&D expenses for the quarter of 2016 increased by 32% year-over-year and 7% quarter-over-quarter to RMB213 million. For the full year, R&D expenses increased by 30% year-over-year to RMB906 million. Non-GAAP R&D expenses for the full year of 2016 increased by 37% year-over-year to RMB758 million, primarily due to the increased headcount associated with our step-up investments in big data analytics and new product development. At the end of 2016, we had approximately 1,700 R&D personnel. Selling and marketing expenses for the fourth quarter of 2016 decreased by 21% year-over-year, but increased by 4% quarter-over-quarter to RMB408 million. Non-GAAP sales and marketing expenses for the fourth quarter decreased by 20% year-over-year, but increased by 6% quarter-over-quarter to RMB408 million. The year-over-year increase was mainly due to lower expenses on promotional activities as a result of our strategy to implement cost control for our utility apps, which was partially offset by increased product promotional activities for our content driven applications and an increase in direct sales personnel. The quarter-over-quarter increase was mainly due to increased mobile product promotional activities in the quarter. For the full year 2016, sales and marketing expenses increased by 10% year-over-year to RMB1.65 billion. Non-GAAP sales and marketing expenses for the full year 2016 increased by 10% to RMB1.64 billion. G&A expenses for the quarter increased by 29% year-over-year and decreased by 10% quarter-over-quarter to RMB127 million. Non-GAAP G&A expenses for the fourth quarter 2016 increased by 82% year-over-year and decreased by 14% quarter-over-quarter to RMB96 million. The year-over-year increase was mainly due to higher personnel – professional services fee and increased excellence in G&A function and the quarter-over-quarter decline was mainly due to a decrease in professional service fee. Now for the full year, G&A expenses increased by 25% year-over-year to RMB552 million. Non-GAAP G&A expenses for the full year increased by 42% to RMB419 million. Operating profit for the quarter was RMB62 million as compared with operating profit of RMB80 million in prior year and an operating loss of RMB34 million in the previous quarter. Non-GAAP operating profit for the fourth quarter of 2016 decreased by 35% year-over-year, but increased by 205% quarter-over-quarter to RMB116 million. For the full year, operating loss was about RMB12 million as compared to an operating income of RMB217 million in 2015. Non-GAAP operating profit for the year decreased by 45% to RMB294 million. Operating margin for the quarter was 4.9% as compared to 6.9% in the prior year period and operating loss margin of 3% in the previous quarter. Non-GAAP operating profit margin for the fourth quarter was 9.1% as compared to 15.5% in the prior year period and 3.4% in the third quarter 2016. The year-over-year decrease was mainly attributable to increased investments in content driven applications and the quarter-over-quarter increase was mainly due to total revenues increase and cost control measures. For the full year 2016, operating loss margin was 0.3% as compared to operating margins of 5.7% in 2015. Non-GAAP operating margins was 6.4% in 2016 as compared to 14.4% in 2015. Net income for the fourth quarter of 2016 increased by 4% year-over-year and 13x quarter-over-quarter to RMB59 million. Non-GAAP net income for the fourth quarter was RMB113 million, which decreased by 27% year-over-year, but increased by 56% quarter-over-quarter. For the full year of 2016, net loss was RMB81 million as compared to net income of RMB176 million in ‘15. Non-GAAP net income for the full year of 2016 decreased by 54% year-over-year to RMB226 million. Diluted net income per ADS for the quarter was RMB0.41 or $0.06 as compared to RMB0.40 in the prior year period and breakeven in the prior quarter. Non-GAAP diluted net income per ADS was RMB0.80 or $0.12 as compared to RMB1.08 in the prior year period and RMB0.51 in the previous quarter. For the full year of 2016, diluted loss per ADS was RMB0.58 or $0.08 as compared to diluted income per ADS of RMB1.24 in 2015. Non-GAAP diluted net income for ADS for the full year was RMB1.59 as compared to RMB3.45 in the 2015 period. Adjusted EBITDA for the fourth quarter was RMB159 million. For the full year 2016, adjusted EBITDA was RMB457 million. Looking ahead, for the first quarter of 2017, we currently expect total revenues to be between RMB1.15 billion and RMB1.19 billion, representing a 3% to 7% year-over-year increase and a 7% to 10% quarter-over-quarter decrease. The estimated quarter-over-quarter revenue decrease is primarily due to our user seasonality. Please note that this forecast reflect the company’s current and preliminary view and is subject to change. Before we start the Q&A session, I would like to remind everyone that on March 16, 2016, the Board of Directors authorized a 1 year share repurchase program, which allow the company to buyback up to $100 million in aggregate values of its ADS. During the 1 year period, the company has repurchased a total of RMB2.54 million ADS, representing RMB25.4 million Class A ordinary share at an average price of $10.75 per ADS under the share repurchase program that expired on March 16, 2017. This concludes our prepared remarks. Operator, we are now ready to take questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from David Sun of Morgan Stanley. Please go ahead.

Hi Fu and Andy. Thanks for taking my questions. So first of all, I am sorry to hear that Andy is leaving. I wish you all the best, Andy. So I will translate my questions. So first one is on the core business. We have seen quite a few initiatives, changes in the past few months such as rebranding mobile app business, launching Cheetah Open Feed platform. So I am just wondering what’s the thinking or logic behind those changes and can management share more color on the product positioning, so same structure and the potential revenue opportunities from those new initiatives? And the second question is on the content products, IVAS numbers was quite positive this quarter. And what’s the revenue contribution and associated losses from the new business in this quarter, I mean, in fourth quarter? And also from the third-party data tracking, we found that Live.me first quarter numbers is also very strong. So, what do we expect the contributions from content products in Q1 and also what’s the major areas of development and revenue expectation for 2017? Thanks.

Okay. So I will translate the answer for the question. First of all, David, thank you for your comments. So in terms of our utility applications, I think over the past couple of quarters, you have seen the user applications remain pretty strong and grew steadily. It remains the top position in the application space despite increased competition. If you look at our business line overall, I think CM and other utility applications continue to have shown solid performance and steady growth. I think if you look at not only those user applications, but only growing in revenue contribution, but also contributing increasingly on the [indiscernible] as well. So, if you look at the overall two applications as a product matrix, I think over the past year, I would admit that we have not been as focused, but you have seen more increasingly more focused for us to develop the product matrix in the two user application site and I think that’s shown in the past couple of quarters. I mean, we also if you look at about that, if you look at our recent data or you look at the publicly available data, you have seen – you probably have seen that CM Launcher is a product that produced by us have become the #1 launch product globally, beating some of the more global competitors like Apple and others and that product growth was mainly organic without much or very little marketing activities to promote that application, mostly coming from users download the product themselves from the App Store. Another product that we also have seen very strong user demand and organic download is PhotoGrid and that user number continues to grow quite nicely. And so I think if you look at our product matrix for two applications is that we will continue to maintain our market leadership in that space and we will continue to explore other products to satisfy user demand as well. So regarding the second question, I will answer the question about contribution from our content products. I think if you look at the income contribution, it continued to grow very rapidly. If you look at the content product themselves probably heading somewhere between RMB140 million to RMB150 million to our revenues in the quarter and – however, because it’s still subscale right now in our view, even though it’s growing very nicely, Live.me, News Republic, both in terms of user, user number, user engagement level and also revenues are all growing very nicely for us, but it is still in investment phase. So, the combined operation probably added to about RMB190 million to RMB200 million losses to our bottom line. So again, we have delivered pretty strong earnings this quarter and that’s despite investments in the content product. Looking forward for the full year, I think we will continue to expect the content product to grow, because obviously we are just beginning to launch a product for less than a year. So, I think – and then we also recently turned on the monetization. So we are seeing it will continue to deliver, be a key driver for our growth in 2017. In term of the investments in content side, I think we continue to invest quite heavily on content. But again, as we mentioned before, we would like to see that the content investments supported by the profit that we derive from our two applications as well as our PC operations. So – and that strategy has not changed at all. So that’s how we look at it. Hopefully, that answers your question, David.

Okay, thank you for that, Andy.

The next question comes from Joyce Ju of Citi. Please go ahead.

Hi, Joyce.

Hello. This is Joyce from Citi. Good evening, Andy, Mr. Fu and Helen. Congratulations on the strong set of results this quarter. I basically have one follow-up question on the content apps. As you mentioned, the content apps have already achieved quite good revenue growth in the fourth quarter and we have seen those App Annie ranking also performed pretty well in the first quarter as well. So we are just trying to kind of get more colors on what type of monetization methods Cheetah plans to explore for those apps, because I think you mentioned early that there are different ways like you tried to monetize it probably not only for IVAS? And my second question is a follow-up on the new utility app Mr. Fu just mentioned, like what – further like new utility apps, do we expect like large investments or it cause like further like pressure on the margins?

Okay. So Joyce, thank you for your question. So in terms of monetization for Live.me or News Republic, even for our recent application, I think as we have previously mentioned, we will continue try out different innovative monetization methodology. And so including, for example, more outsourcing, looking at more precise targeting based on regions, based on criteria. If you look at Live.me, we are also very happy to see that the virtual gift function was very well received by our global user and produced some very good results. And then last, I think the overall company remain mainly largely by – driven by advertising revenues. But certainly, we will continue to trial different monetization models. For example, if you look at the gaming operation side, initially, we have these virtual item purchased. Later on, we also switch and experiment with in-app advertising. So I think for monetization, right now, we are looking at trying out different things for sure and when we launch those monetization strategies, we will definitely discuss more with you and other folks here. Right. So regarding your second question, with the new product for user applications that increase expenses or put pressure on profit margins, I think the way we look at utility application, our PC product as well is that they are a cash cow and we like to maintain that steady pace. And also we want to maintain that profitability. So if you look at new application development for utility applications, we would focusing on looking at what the user demand is and have small team to develop those product and try it out. And only if they are successful and we maybe utilize some of the marketing dollar to help promote these products, but again like the main focus for utility applications for us is to provide what the user wants and demands and we want to satisfy that demand. And so as a result, we will definitely control the expenses both for the R&D as well as marketing dollars for the new applications. And I think the way we do that is just that we will definitely try to maintain a steady growth and profitability for those applications and then look for incrementally adding more products that have demand, strong demand from the user base. Okay?

Thank you.

Thanks Joyce.

Thank you.

Your next question comes from Wendy Huang of Macquarie. Please go ahead.

Thank you. My first question is about the long-term margin outlook and where do you expect the 2017 margins to be. And the second question is to make sure your country has robust agreements also under your operations, so do you have any change in asset to a listed company, we also want to clarify the RMB140 million to RMB150 million revenue you just mentioned from the content, so is that actually classified under the Internet value-added services or under the other revenue? Thank you.

Okay. So I will translate that. So really, I think when we look at the portfolio comparisons between in 2016 as a whole and versus 2015, certainly I think as we mentioned in the second quarter 2016, we did face some difficulties and our growth rate was meaningfully, significantly less than what we have expected at the beginning of the year and that have an impact on the first half 2016 profitability. But as we mentioned in the second quarter, at that time, we will initiate a number of initiatives to rejuvenate growth and also improve profitability. So I think if you look at our results in the third quarter and fourth quarter, we delivered on those promise. You have seen two consecutive quarters of significant increase in our revenues and you have also seen our profitability expand in the third and fourth quarter consecutively. I think another thing that – and that achievement was accomplished under the condition where we invest very heavily on our content product. As we mentioned, we invest very significantly on R&D, marketing and to a lesser extent, IDC service expenses for our content product. And we are very glad that those investments are beginning to pay off. As you have seen the results in the recent quarter, Live.me and News Republic are both performing, as we mentioned in our prepared remarks, quite well in term of user number, user engagement level and also revenue contribution. So – and for us, content is our core strategy and we have pretty stepped up in investing in the content product. And underlying content is the AI technology, for example. That’s a very core technology that I think we have opportunity for us to become a market leader to really breakthrough in our current product side as well. So we are pretty stepped up investing in content and also in AI technology. And so – but of course, we will do it as we mentioned before, within reasonable parameter. And so if you have seen what we have done in the prior two quarters, it’s pretty clear that we will continue to invest in content, but we will continue to maintain steady and solid growth and profitability from our existing PC products as well as our user application to support that investment. And so hopefully, that answers your question. Okay. Regarding the robotics, so Mr. Fu actually have invested in a robotic company himself last year. And as you probably have seen our prior press release, we are in the process of looking into potential agreement to acquire some stake in the robotic company. I think the detail of that would be announced once we have that detailed information. So we won’t discuss much about that. But if you look at the reason why Cheetah Mobile maybe interested in robotics is that there is a lot of commonality between robotics, especially in deep learning and AI that may have common applications for what we want to do on the Internet space. And so in the long run, I think as a company we definitely would like to invest in this very important emerging technology that we think is going to be a game changer in the internet industry and so that’s why we anticipate in potential investment in this company. But again, like we will provide further details once we have them in the form of a press release. Nothing more we would like to add other than that. Thank you.

[Foreign Language]

Okay. So if you look at our content revenues for Live.me, it’s fully in IVAS, because it’s virtual gift and so you if look at virtual gift, it increased – sorry, the IVAS increased quarter-on-quarter mainly coming from the increase in Live.me’s revenue increase. And News Republic is mainly advertising. So, it’s placed in the online marketing services category of revenues.

Thank you. Thanks, Fu Sheng and Andy.

Thanks.

The last question will come from Thomas Chong of Bank of China International. Please go ahead.

My first question is about our relationship with Facebook. Can management give us some color about whether we will deepen our cooperation with Facebook this year? And on top of that, may I also ask about the Facebook revenue contribution to mobile advertising revenue this quarter? And my second question is about the recent online video initiative. Is there any color about the monetization potential and management expectation on this revenue contribution? Thanks.

Okay. So let me translate that. So Thomas, thank you for your questions. First of all, like I think we continue to work very closely and very amicably with Facebook. Obviously, Facebook is a very large company and work with many, many other partners as well. So, as we mentioned in our – and obviously, Facebook remain one of our very important partners and we definitely would like to continue to work well with them and expand partnership as much as we can. But as we mentioned since the second quarter, we have taken some initiatives to diversify our revenue stream from different partners, different channel partners and we are very happy to say that today, our channel diversification have been moving quite nicely. And so the contribution from Facebook as a percentage of our overall revenues probably would have been declining, be smaller compared to last year and also because our revenue also have grown as well. So we will provide that more information – more detailed information on our public – on our 20-F, but I think it’s fair to say that even though our company has seen 21% year-over-year increase in our own revenues, the contribution from Facebook will likely be smaller compared to 2015. The second question that you have is on video advertising. So as a company, we see video advertising as very important format for mobile advertising. But to be honest with you, if you look at our video content right now, besides live streaming, we have still limited video content. So we would like to increase that, but we do not anticipate that as a key driver, at least in ‘17, at this time.

Thank you.

Thanks, Thomas.

This concludes the question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Thank you all for joining us today. If you have any further questions, please do not hesitate to contact us. Thank you. Bye.