Good morning and good evening everyone. Welcome to the YY’s Fourth Quarter and Full-year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. With us today is Mr. Zhou Chen, CEO of YY, and Mr. Eric He, CFO of YY. Following management’s prepared remarks, we will conduct the Q&A session. Before we begin, I refer you to the Safe Harbor statement in our earnings release, which also applies to our conference call today as we will make forward-looking statements. I will now turn the call over to the Company’s CFO, Mr. Eric He.

Thank you, operator. Hello, everyone. Welcome and thank you for coming to our fourth quarter and full-year 2016 earnings call. I would like to address the overview and strategic highlights on behalf of Zhou Chen, our CEO first. We are delighted to have completed another quarter of solid results. Running our strong 2016 driven by accelerating growth in live streaming industry in China. YY’s live streaming business increased dramatically by 41.7% as compared with the prior year period. Our live streaming revenues for the full-year of 2016 reach over RMB7 billion, which is a testament to our ability to maintain our market leaderships and capture the growth in our industry despite a highly competitive landscape. Looking at excitement that is surrounding the live streaming industry. Recent research shows that by 2020 it’s market size will reach RMB60 billion annually. In an industry that is rapidly evolving the platforms that can continuously providing rich and attractive content and guarantee profitable returns for its content players are the ones that can sustainably expand their market share and win over the long-term. That is why we remain committed to both our content strategy and monetization ability. In the past quarter, we focused on expanding our product and content offerings in new diverse market segments to enhance our content ecosystems. Our two live streaming platforms YY Live and Huya Broadcasting has different focus and strategic in their content development. YY Live is a leading integrated entertainment live broadcasting platform. In addition to the successful relationship and sports content we introduced in the third quarter of 2016. In the past quarter, we focused on the development of new outdoor vertical content including travel, wildlife activities, adventures and many others. We believe the new content we are offering on YY Live will be extremely interesting and…

Thank you. [Operator Instructions]. Your first question comes from the line of Zoe Zhao from Credit Suisse. You may ask your question. You may ask in Chinese first and then in English. Please go ahead.

Okay. [Foreign Language]. I will translate myself. My first question is regarding the revenue sharing and content costs. We notice this bit of content increased by a bit. So can management elaborate our content strategy and outlook of this setting? The second question is about our plan around Huya, what is the other revenue on the Huya related to and what is our strategy going forward? Thank you.

Well, let me answer first part of the question on the content costs. Yes, I think this quarter very specifically, we have seen revenue sharing costs and content costs has increased a little bit higher than before. The main reason was, we spend roughly maybe RBM80 million on content costs more than previous quarters. So that’s why you see roughly two or three percentage points increased in these particular items. And due to the various new content such as travel and some outdoor activities. Our revenue sharing percentage is somewhat higher, because of those two reasons. So you have seen the revenue sharing costs and content costs increased larger than the corresponding live streaming revenue. Moving forward, I think this could be no more situation, which will actually be a negative effects on our gross margin one or two percentage points. However, on the other hand as you notice that our bandwidth costs in the last year, we have say roughly one or two percentage points. So hopefully these two will cancel each others. That’s for the first part of the questions. Second part of the questions with regard to Huya current progress and future plans. I would like to ask our CEO of Huya.com Mr. Dong. Dong will answer the question in Chinese and I will try to translate that in English.

[Foreign Language].

In the past quarters, I think Huya have done several business very well. One is mobile game broadcasting, the other was outdoor broadcasting and the third one is that the entertainment broadcasting. Those three areas that we have progressed pretty well and we will continue to deepen our business in those three areas in the future. With regard to your questions to those Ad revenues, that is correct. It is generated from Huya’s platform. I think that amount, it’s not significant, but it is definitely something that we are starting. So we will see how it goes. So far, it has gone very well.

Thank you management. If I may just ask what is the differentiation plan between the main YY Live and Huya? [Foreign Language].

I would ask Mr. Rongjie Dong to answer in Chinese and I will try to translate.

[Foreign Language].

Okay. From the perspective of YY Inc. as a parent Company, our belief is that live streaming of live broadcasting market is a huge market. So in front of this huge markets, we would like to send as many as many much of the team draw efforts try to occupy the market shares. So we really don't mind if we had two or three even four teams going out there and try to help us to increase our market shares. So I think however, we definitely will be focusing on game broadcasting. Huya by its DNA or nature is a game broadcasting platforms. So even that we try to evolve into some of the outdoor broadcasting, the focal points will be very different. It will bring in some elements of the gamers or the game related contents. So we would say that although it looks like from outlook it's very similar, but we are targeting at very different user base, which what I mean is compared with YY Live.

Okay, thanks a lot. That's very helpful.

Your next question comes from the line of [indiscernible] from Deutsche Bank. Please ask.

[Foreign Language]. Let me translate first. My first question is regarding the social focus in 2017. Can management share more color about how to we as the social relationship and how is decent from other competitors in the content. Where the users spending, this kind of content below or then other competency our platform and how should we focus the ARPU going forward? And my second question is regarding the margin trends for 2017. How should we focus YY Live and Huya margin, and how do we see the consolidated? Thank you.

I will ask our CEO, Chen Zhou to answer your first question. I will follow the second, I will follow to answer your second question. Chen Zhou, please.

[Foreign Language].

Okay. Yes. We did mentioned social or [S&S] (Ph) type of the thinking in the previous quarterly report. What we are planning to do in 2017 are in two aspects. One is on our existing line of business, YY Live and Huya. We would like to enhance social networking relationship among users with more fresh contents, more in the active contents so that we can induce them to actually send more money and induce them to interact even more. On the second part is we did mentioned that we have product called ME before and that is the product that we are going to change or switch to become S&S products. However the biggest difference between ME and the rest of the social products is that ME is going to be from the perspective of live broadcasting and video sharing type of the contents to allow people to interact with each other and this product is still under the beta test in our Company. So we are still trying to finalize and we are still trying to tone up the product a little bit. So at this moment, revenue generation or ARPU and that sort of questions with regards to ME is definitely not our first consideration or first priority. So this will come much, much later. However, as I mentioned it before, that for the existing product lines the higher or the enhanced the social networking relationship, we believe it would definitely increase the bonding so that the churn rate will be less and we hope our monetization will be enhanced because of that. For the second part of the question, I believe that was with regard to the profitability the markets. I want to point out that our margins for the fourth quarter was very good despite the…

Thanks a lot.

Your next question comes from the line of Benny Wong from Merrill Lynch. Please ask your question.

Hi. Thank you for taking my questions. I have two questions here. So first question is on the upper trend. It looks like it has been down on this quarter, was it more due to the diversification of the content with newer content vertical as you have mentioned earlier, which probably have lower ARPU in the beginning with expanded ramp up, or is that because of other reasons? And second is that with more intensifying competition, thanks for the color you have shared on the social element that are going to be in place this year. What do you see as the major differentiation versus [indiscernible]? [Foreign Language]

Okay, I would answer the first part of the question maybe Chen Zhou or Dong would like to add more later on. and the second part of the question I would refer to Chen Zhou to answer the question. so for the first part I think ARPU has come down a little bit. But we are very comfortable with our ARPU, because ARPU is not something that we are focusing on. I think the most important business metrics that we are focusing on is user expansions, we would like to see user expand as many as we can as you know that we have expanded a lot of mobile users. Mobile users has a very interesting characteristics in terms of their spending habits needs time to accumulate. So at the very beginning you see that mobile user will expand less that's number one. Number two, our ARPU is somewhat being diluted by the tremendous growth of game broadcasting business. As you know that for game broadcasting business in nature the ARPU is less than entertainment business. So Huya is growing very, very fast with their users expansion being so explosive. So if you look at the ARPU as a whole in our Company you will by definition see that ARPU is declining. But we believe that we are in a very healthy trajectory, we are not too worried about lower ARPU once again we want to focus on user expansion. Chen Zhou for the social part of the questions? A –Zhou Chen: [Foreign Language].

Okay, he answered the differentiation between our social products and the one that in the markets. I think I mentioned that in the last question a little bit. I think the current products in the markets mainly is been generated on text or pictures. So the users normally will use those means to check out the stranger’s profile. Where as ours is different from those, because we are going to utilize live broadcasting or live streaming or videos deals to allow our users to communicate or even chat with someone else. We think that this is going to be natural in actions among peoples. And we believe that live broadcasting and videos being utilize is going to be a major differentiation point among our products and others.

[Foreign Language].

Your next question comes from the line of Natalie Wu [CICC]. Please ask your question.

Hi. Good evening management. Thanks for taking my questions and congratulations very solid quarter. So my first question is about the Huya Broadcasting. So we had recorded exceptionally strong, especially in terms of user growth. So I was just wondering how much of the, I think the 56 million monthly active users contributed by Huya and how should we expect the revenue growth of Huya business this year? And also Eric, you mentioned that ARPU is lower than Music users, it’s the paying conversion ratio of Huya is managed much higher than Music as a whole. So can you show us out how much paying ration you are targeting at Huya Broadcasting business. You mentioned that worldwide when Music business utmost paying ratio may lead to 5%. So wondering if case difference regarding Huya. So I was just translates this part of the question myself. [Foreign Language]. So this is my first part of the question.

Okay. Thank you, Natalie. Let me answer the questions. First question with regard to the mobile MAU that we announce its RMB56 million. For this part, YY and Huya at the end of last year, YY still slightly bigger than Huya. However, in judgment of the trend, Huya’s increase or Huya’s growth momentum in terms of the MAU is bigger than YY. So to answer your questions as of the fourth quarter of 2016, YY is slightly bigger than Huya, how much bigger, I think you can just use a single-digit numbers difference. And so it's not going to be a too big of a differences. In terms of revenue growth for Huya, I think because we recently had some internal discussion, I think Dong as a CEO he is pretty aggressive. We are hoping that we can repeat a triple-digit percentage of growth rate in 2017 again. That's our goal, no promise, no guarantee. And in terms of paying ratio yes you are right. Overall you paying ratio is roughly 4%, but for Huya specifically just like you said their ARPU is lower for the game broadcasting business. But the paying ratio is very low as well that's why you see the Huya's revenues much less than YY Live. Huya in 2017 barely reached RMB800 million right. So there is huge room for Huya to grow. Of course we would love to see that Huya's paying ratio to reach 5% if we can do that we are going to do very well in the last two to three years.

Well that's very helpful Eric. So my second part of the question is related with YY Music, so how that news have some kind of restructure going on last year regarding the business live. So just wondering can management share with us the recent update and of that restructure and also your expectation regarding this business line this year. [Foreign Language].

[Foreign Language].

Well Natallie, Chen Zhou says he is very puzzling about your management team reshuffle. He is not aware of any as you mentioned.

[indiscernible] at least how about the and willingness of revenue like guidance this year? [Foreign Language].

Well normally, we only give out the quarterly revenue guidance. So at this point, at this time you can probably see that in the first quarter of 2017 the overall revenue guidance for the entire company i.e. in my believe is much better than consensus. So I think we are very confident that 2017 although the competitive landscape is pretty intensified. We still believe that we should grow very, very nicely. Of course you can now expect Music with such a large revenue base to grow a triple-digits percentage selling in 2017. I don’t think, even I tell you that, you are not going to believe it. So I don’t think, you should expect that. But I would say that the first quarter 2017, we had seen that our revenue is growing at a very healthy pace. So I think you probably can use that to extrapolate the whole year growth rate and hopefully you can, with your small ideas, you probably can drive some of the growth rate on our YY Live.

Got it. Thanks Eric.

Your next question comes from Alicia Yap from Citigroup. Please ask.

Hi and good evening management. Thanks for taking my questions. Two quick questions. Number one is regarding the new outdoor content offering. Can you share with us some of the current metrics in terms of MAU deepening new user or some as paying user already on your platform? And also the average time spend on this content versus for example the Huya and YY Live and also future monetization models? And then second question is regarding new user essentials, there is a lot more competitors out there stepping up. The social marketing to attract new user and penetrate into lower tier cities this year. What are our current social marketing spend budget and also expectation for this year? [Foreign Language].

Okay. I will refer those two questions to Chen Zhou first. If Dong want to chip in he can always do that. And for the first question and second question Chen Zhou please.

[Foreign Language].

I will translate the first question first. In the last seven or eight months in terms of outdoor broadcasting, we have four different categories, four different verticals. Along those four verticals, we have seen different type of the growth rate, but all of them has grown very strongly. Although, we have to point out from a very small base we have seen from 200% to 400% type of the growth rate within seven months. So that gives us a lot of confidence that this categories might be interesting area. On the other hand you asked about the user base, since all of those outdoor activities that the ones that we have not spent too much of the sales and marketing efforts to promote. So we believe most of the users to be on this four different verticals are those existing users or the new natural users who are interested in this area. But we do see that those new users or those users that are in those four outdoor verticals has relatively less churn rate. So we believe this is probably a reflection of very different type of the categories which are different from the existing entertainments or [indiscernible] type of the content. So this new contents definitely has a very interesting attractions for those users who are utilizing those content now.

[Foreign Language].

Well think it has been our belief that we will putting some efforts in social marketing specifically in 2017 we do planned to spend some money in this area. But we had a tradition or we are under DNA that when we spend money on to promotion to do Ads, we would like to target very specific user base or very specific geographical locations or very specific contents. We are not going to spend tremendous of amount to buy traffics or to spend a lot of campaign Ads. This is not our tradition and it’s not in our DNA. So we will pretty much follow what we have been doing in the past. Maybe putting a little bit more efforts in 2017 to try to see, if we can expand our user based a little bit fast.

Thank you.

Your next question comes from the line of Jialong Shi from Nomura. Please ask.

[Foreign Language]. So I have three quick questions here. So my first question is what are the new rate contents YY Live introduce to YY Live going forward in addition to the game live broadcasting content? My second question is about the G&A expenses. So just wonder what where the driver for strong sequential and annual the year-over-year growth for G&A expenses? And my last question is how many overlap audience volumes between YY Live and Huya? Thank you.

Okay. Well, with regard to the first question on those new verticals on outdoors. As Chen Zhou just mentioned, we have had four different verticals or four different categories. But in 2017, I think the chances are going to increase a little bit more. But in terms of any specific verticals, I don’t think so. We don’t disclose something that we haven’t done. But there is a lot of things that is in our roadmap, I believe that we are going to introduce a little more. The second question is highering questions. With regard to G&A. Yes, you are absolutely right, our G&A has increased quite a bit. But I already answer the questions. In the second question, that was related to one-time charges as I mentioned. In G&A expenses in 2016 fourth quarter, we incurred RMB117 million goodwill impairment and the losses that we dispose, somehow we max off or markdown some of the investments. So if you take out that RMB117 million, our G&A expenses actually was lower than the third quarter. Third quarter was RMB82 million, the fourth quarter G&A actually if we take down that RMB117 million is roughly RMB80 million. So G&A itself did not actually increase at all. The third question is referred to the overlapping users between Huya and YY Live. For this part we know the overlapping percentage is quite low, we don't have a specific numbers, but roughly it's around 10%. So I think Huya and YY Live interestingly enough we don't share too much of overlapping users at this point of time.

Okay. One follow up question just regarding Huya. [Foreign Language]. So my follow-up question is whether Huya may be interested to partner with online game operators?

[Foreign Language].

I would like to answer the second question first. With regard to the cooperation with the game development companies in your words is a large gaming companies, we welcome any source of collaboration. And we actually does not exclude any possibility even including the capital collaborations or investments, we would welcome this type of the collaborations. And so that's our basic attitude. In terms of cooperation with specific or smaller game developers such as client based game developers or mobile game developers, that’s something that we have been doing all alone. And I would say that the cooperation between us and all those game developers has been very good, because all those game developer recognize the value of game broadcasting platform, which is very complementary to their operations, which will help their business. So they welcome our very close relationship with them. So I see that it will continue and we see that is a very complementary force to those game developers.

[Foreign Language].

There are no further questions at this time. I would now like to hand the call back to today’s presenter.

Thank you, everyone. This will conclude our fourth quarter 2016 and whole year’s earnings release conference call. Thank you. See you next quarter.