Welcome to the Second Quarter 2017 Momo Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note this conference is being recorded today. I would now like to hand the conference over to your first speaker today Ms. Cathy Peng. Thank you. Please go ahead ma’am.

Thank you operator. Hello everyone and thank for joining us today for Momo’s second quarter 2017 earnings conference call. The company’s results were released earlier today and are available on the company’s IR website. On the call today from Momo are Mr. Tang Yan, Co-Founder, Chairman and Chief Executive Officer; and Mr. Wang Li, Co-President and Chief Operating Officer; and Mr. Jonathan Zhang, Chief Financial Officer. Mr. Tang and Mr. Wang will discuss Momo’s business operations and company highlights followed by Mr. Jon who will go through the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company’s control, which may cause the company’s actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, and factors is included in the company’s filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. I will now pass the call to Mr. Tang. I will translate for him. Mr. Tang, please.

[Foreign Language] Good morning and good evening everyone. Thanks for joining our conference call today. We have another good quarter with solid financial performance, as well as progresses and achievements in user expansion, product innovations and business development. [Foreign Language] Total revenues keep hitting new record highs at $312.2 million, up 215% year-on-year. Adjusted net income for the quarter reached $73.6 million, up 217 from the same period last year. [Foreign Language] Now a deep dive into the quarter. Firstly, on user works. Total MAUs on Momo platform reached 91.3 million for the quarter, up 22% year-over-year and representing over 6.1 million net additions on the previous quarter. As the user growth continues to accelerate, average content per DAU in the second quarter remained stable bought on a year-over-year basis and on a sequential basis. [Foreign Language] Our reporting and MAU only includes those users who access our service through the main Momo platform. Those users who access our content and services to properties owned and operated by third parties are not calculated as our active users. In the month of June, the users who access our services and content from third party properties where somewhere around $20 million in total. Although we are seeing third-party traffic going rapidly as we continue to expand our content offering in short video and live streaming areas, at the current stage we are not including them in our MAU calculation because of the limited amount of information that we have on those users and the fact that we have no intention to manifest the third-party traffic in the near-term. Active users on our stand-alone application such as Hani and jointly operated games are not included in our reported reporting MAUs either. [Foreign Language] Now let me walk you through the key initiatives that…

[Foreign Language] Now let me walk you through the key things that we’ve done, as well as the future direction for our major business lines. [Foreign Language] Firstly, on the live streaming business, in Q2 we continue to optimize our tournament experience. In June, we won the second season of our 2017 live streaming tournament and introduced a new gamification called Liang Shun [ph] to make the knockout matches more compelling as the content experience. At the same time, the tournament also outperformed our relational expectation in driving the shipping revenues. Through continuous upgrades of the tournament system and introduction of new gamifications we’re building the tournament into an indicative content and community experience that provide ongoing motivation for the performers and the viewers. [Foreign Language] Other than the quarterly tournament, we also took a few other initiatives to drive the content upgrades. For example, in the second quarter we teamed up with four prestigious record companies to roll out a music production project called Momo Golden Song. The program involves an open audition and contract system to showcase singing talent from the platform. We have been working with BMG and Tycho Music to publish songs for the top winners in the first season of the Golden Song contest. In August, we started to debut the professionally produced songs through the top online music platforms in China. With that effort we’re hoping our top singing talents to extend their career path from live streaming to the broader entertainment industry, which in turn would help us attract more broadcasters with real performing talents to improve the content quality on the platform. [Foreign Language] During the second quarter, based on the multiple connected channel technology, we launched the dating live channel within the live streaming service, both operational and financial indicators of…

Thanks Tang Zong and Cathy. Hi everyone. Thanks for joining our conference call today. We are very pleased to deliver another strong quarter with a total revenues growth of 415% year- over-year reaching $312.2 million, compared to $99 million in the second quarter 2016. The total revenues for the quarter exceeded the top range as we guided during the previous quarter earnings announcement. Although we significantly stepped up our investment in branding campaigns in the second quarter, I’m glad to see that with a robust top line growth coped with a strong operating leverage of our business model. We were able to deliver a 28% non-GAAP operating margin up from 22% the same period last year. Non-GAAP net income for the quarter was $73.6 million, up 217% from the same period last year. Now looking to the key revenue line items. In the second quarter of 2017, revenues from live video services continued to generate strong momentum with total revenues reaching $259.4 million, up 348% year-over-year. The year-over-year growth in live streaming revenues was largely contributed by the 206% increase in the quarterly paying users, which totaled $4.1 million for the second quarter 2017 versus $1.3 million for the same quarter last year; and to a lesser extent the 54% increase in average revenues for paying users per quarter, before excluding value-added tax or quarterly ARPU, which was 463 RMB in the for the second quarter of 2017, compared to 301 R&B for the second quarter 2016. Effective DAU penetration rate for the live streaming services was approximately 24% in the second quarter of 2017, up from 13% for the same period last year. In addition to the overall business space expansion, I’d like to reiterate that the higher than expected revenues from live streaming service were attributable to our…

Just a quick reminder, for the Chinese speakers please ask the question in Chinese first followed by English translation and also please limit the number of questions asked, so we could take in more people. Operator, we are ready. Please start to connect people in.

Thank you, ma’am. [Operator Instructions] We have the first question from the line of Binnie Wong. Please ask your question.

Good evening management. Thank you so much for taking my question. So, I have two questions here. One is that we see the growth with the number of paid user this quarter has been quite flattish; conversion rate has also been coming down, what is the reason behind that? In relation to that, we understand the latest 8.0 version offers more social networking tools, be online forecasting, say, short video, Quick Chat and NDN, isn't that monetization potential is currently quite limited on this new function. Why would more Momo divert its traffic away from live broadcasting, a very good monetization tool? That’s my first question. My second question is, in terms of the margin trend, I understand we’re investing more as marketing expenses to drive faster growth, how effective have you seen in terms of like say any metrics you can share, say a percentage of new user recruit or any user cohort will be helpful, and how should we expect this to normalize, would you expect that some of this marketing and branding investment remark, so like one of maybe in second or third quarter, when should we expect to normalize going forward? Thank you.

Binnie, yes, if you could do that it would be great.

[Foreign Language]

[Foreign Language] Okay. I will try to capture everything. So the question is on the fattish trend in the live streaming paying users in this quarter. I think that can be attributed to the fact that some of the users have shifted part of their activities from the long tail smaller live streaming chat rooms towards newer used cases, I mean the audio and video-based life interaction experiences such as Quick Chat and Werewolf because essentially they kind of fit newer used cases kind of satisfied exactly the same kind of user demand. I will give you an example here. For the Quick Chat experience on daily basis we had somewhere around 50,000 daily paying users sending wrap packet. On a monthly basis, we had 800,000 these type of paying users sending wrap packer, however because the wrap packets are recorded as the company's revenues because they were not taking revenue shares from the wrap packets and on the top line, so the revenues going to wrap packet are actually not recorded as the company's revenues, and thus the users that - the users sending wrap packet are not reported as our paying users either. However, we are seeing for the Quick Chat kind of new social experiences, the paying users who paid to send wrap packet have been increasing pretty rapidly. Your second point is, why we would divert traffic from our very monetizable live streaming service to more newer used cases. I think the key thing here is that we’ve never been positioning Momo as a live streaming company. We have always been positioning Momo as a social company and we’re seeing these - the user experience, the social experience around the newer used cases are actually pretty good in some ways actually better than the live streaming service. So although the newer used cases currently do not monetize at the same level as the live streaming - traditional live streaming service does, we will like to make more explorations on those front to drive the overall user experience around the social activities. We think that kind of transition is very healthy for the platform. For Momo as a social platform in the long term. So that’s for your first question.

[Foreign Language] Right, maybe one quick point to add. Right now we are seeing very - we are seeing the use cases such as Quick Chat and Werewolf already reaching a pretty good level in terms of the user base within the application, as well as the per user time spend around these newer use cases. So we do believe that in the long term we should have plenty of room to drive demonetization around these new product experiences. However in the short-term I don't think demonetization is the focus here. I think the focus is still around building up the activities and usage around them.

[Foreign Language] I think on the one hand it’s a little bit difficult to measure the retail investment in the short-term for branding activities. On the other hand, we did see a pretty decent growth in the organic new registrations in the second quarter that are not coming from pay-channels. I think that has something to do with the branding efforts. The other thing about the future trend, I think in Q3, the overall marketing budget is still going to remain at a pretty high level, but in terms of the - in terms of how much we will end-up spending and in terms of the budget allocation in between the branding activities and direct user acquisition efforts we’re going to maintain some level of flexibility in order to make adjustments on an as we go basis. And I think overall, we are going to - in terms of budget allocation try to lean more towards direct user acquisition efforts as opposed to branding efforts.

[Foreign Language]

Operator, we're ready for next.

Thank you, ma’am. We have the next question from the line of Zoe Zhao from Credit Suisse. Please ask your question.

[Foreign Language] The first question is regarding our team members. We saw the team members up a lot this quarter, how much of that is related to your features of the version 8.0 and how much of that is membership subscription? And the second question is, when shall we expect an acceleration in other pricing revenue? Thanks.

Hi Zoe, this is Jonathan. Let me address your two questions. Firstly, as I mentioned during the prepared remarks, starting from this quarter on, since we have seen the virtual gifting paying users has become a significant - virtual gifting revenue has become a very significant portion of vast revenue, so we started from this quarter, we disclosed the paying users for the vast services on a blended pattern. So the of 4.5 million paying users for vast services for second quarter 2017 actually includes both membership subscribers and paying users for virtual gifting. We do not separately disclose further breakdowns from this point onward. And for the $3.2 million paying members during the second quarter 2016 because that was purely for the membership subscriptions because we launched virtual gifting services in Q4 2017. So, I hope that answers your first question. Second one is, as I’d stressed during the prepared remarks because of the product changes we predict the marketing revenue will decline on a sequential basis in Q3 and as Wang Li mentioned we are testing out new set of advertising inventories to be launched in full scale gradually over time. So we anticipate the marketing revenue will start on the upward trend in Q4, so Q3 probably will be the lowest.

Great thanks a lot. That was very helpful.

Okay thank you.

Operator, we're ready for the next.

Thank you, ma’am. We have the next question from the line of Tian Hou from TH Capital. Please ask your question.

[Foreign Language] As the company is more focusing on short video content, the two things I would like to know, Wang, how do you attack each content, what is the hiding logic? The other issue is about the content recommendation, how do you optimize the recommendation algorithms, so that’s the two question? Thank you.

[Foreign Language] Okay. So one of the key things that we did in the second quarter in order to improve the algorithm of our recommendation engine is that we've built a system that allows us to evaluate on a real-time basis the content quality for the vast amount of user generated content distributed on our platform. At the same time, we built a hierarchical kind of content distribution mechanism that help us surface the quality user generated content from the bottom all the way through to the top according to their respective quality grades. And the only here is still make sure that the higher the content quality is the greater level of user exposure that piece of content can get on the platform. And through such a kind of content distribution mechanism we very significantly improve the efficiency in content distribution and increase the user exposure of the quality, user generated content, and raise the overall content quality and the engagement level around our short video activities. Regarding the question about personalized recommendation logic and content tagging logic, I think our system is pretty much based on what is called collaborative filtering. This is a rather complicated and sophisticated mechanism. To put it simple, the system will assign different interest tax to users according to their respective interest graph and then what you are going to see - what you are more likely going to see on the platform is largely determined by the type of content that other users with similar interest tied to you gravitate toward, and that gravitation is further defined by user actions such as clicking through liking or other type of engagement. I hope that answer your question.

So that concludes our call today. Thank you for joining our conference call. We will see you next quarter. Operator, we're ready to close.