Ladies and gentlemen thank you for standing by and welcome to the Third Quarter 2017 Momo Incorporation’s 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 third 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; 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 over 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. I’m happy here to deliver another solid quarter with strong financial performance and progresses in other operational areas. [Foreign Language] Total revenues hit another record high at $354 million for the third quarter of 2017, up 126% on a year-over-year basis. Adjusted net income for the quarter reached $93.75 million, up 89% from the same period last year. [Foreign Language] Now a deep dive into the quarter. Firstly, our community continues to expand. Total MAUs on Momo platform reached 94.4 million for the quarter, up 22% year-over-year and representing 3.1 million net additions from the previous quarter. On the engagement side, Q3 saw a slight sequential increase in per user time spent driven by the enrichment in our social and entertainment content offerings. [Foreign Language] The slowdown in the quarterly net add in MAU was primarily due to the revaluation and adjustment around our channel marketing strategy in order to pursue higher level of the efficiency and quality in user growth. I will elaborate a little bit more here. [Foreign Language] In our last quarter’s earnings call, I mentioned that we intend to revamp our pay channel marketing efforts and try to manage our user growth process with greater granularity. In Q3, we started to implement a new marketing scheme to drive long term retention and federal return on investment in connection with pay user acquisition efforts. As the implementation of the new marketing plans involve the establishment of a real-time data monitoring and feedback system, testing out existing and new channel partners, and respective tactics, as well as getting up new policies and streamlining the working process with the channel partners, we have taken our time and led to a meaningful slowdown in new…

[Foreign Language] Thanks. Now let me walk you through the key things that we’ve done, as well as the future directions for our major business lines. [Foreign Language] First of all, on live streaming, revenues achieved another record high at $303 million, the rapid growth of the live streaming business during the past several quarters largely benefited from the strong community atmosphere and user stickiness built upon the social infrastructure that has taken us years to build out. That includes basic social features such as instant messenger, interest groups, posts and [indiscernible], as well as the social relationships people formed on our platform over time. We believe that the strong social attribute is the most important success factor that sets us apart from other live streaming players and will remain as a long-term competitive advantage of Momo’s live streaming business. However, as Tang Yan mentioned earlier, recent industry trends have led us to set new goals and priorities for ourselves. Going forward, we will drive further growth from the live streaming business and increase our market share by expanding to work through different directions. Number one is that, for the showroom business, namely users tipping professional performers, we will be pushing harder to improve content offerings both in terms of quality and in terms of diversity. The other direction that we will be moving toward is that for the large amount of long-tail chat room users who take live streaming simply as a better way to socialize, we will keep rolling out new form of interactions beyond broadcasting the broadcasting model. That is going to involve deeper and broader explorations in the areas of audio and video-based services, as well as social games. [Foreign Language] Now with respect to those two directions, I’m going to talk about the progresses that…

Thank Tang, Wang, and Cathy. Hello everyone. Thank you for joining our conference call today. We are delighted to deliver another quarter of strong financial performance. With the total net revenue reaching $354.5 million, exceeding the high-end of our guidance and representing a 126% and 13.5% year-over-year and sequential growth respectively. Non-GAAP net income was $93.6 million, up 89% from the same quarter last year. Now looking to the key revenue items. In the third quarter of 2017, revenue from live video services continued its strong growth momentum with a total revenue reaching $302.6 million up 179% year-over-year. The fast-rising revenue was due to the strong growth in our people, which amounted to RMB 521 before VAT exclusion for the third quarter up from RMB 296 a year ago. The number of live streaming paying users, another gross driver for the live streaming revenues was 4.1 million for the quarter, an increase of 58% year-over-year. On a sequential basis, the revenue from live video services increased by 16.6%, which was mainly driven by growth in ARPPU, which was RMB 463 for the second quarter 2017. The revenue from mobile marketing was $17.4 million, slightly down from $17.7 million in third quarter 2016, and 8.3% decline sequentially. As we previously communicated, the 8.0 version cost and ad inventory to decrease meaningfully in Q3 2017, resulting in a decrease in the fee-based or performance-based advertising revenues. However, such decrease was offset by increase of revenues from brand advertising customers. We expect such negative impact, due to product upgrades is temporary plus more advertising inventory will be released as Mr. Wang Li just mentioned earlier, revenue from marketing services would gradually bottom out and back on the growth path in the future. Value-added service revenue or VAS revenue, which consist of membership subscriptions…

Yes, just one quick reminder before Q&A. For those who can speak Chinese, please ask the questions in Chinese first followed by English translation. And also, please limit the number of questions, so that we could take in more people. Operator, ready for questions. Please take the first one.

Thank you. [Operator Instructions] The first question comes from the line of Jialong Shi from Nomura Securities. Please ask your question.

Hi good evening, Tang, Wang, Jonathan, and Cathy. Thanks for taking my question. [Foreign Language] Thanks management for taking my call. I have two questions. My first question is about the paying users for your live broadcasting service. We have noticed in Q3, your paying users remained stable sequentially as did in previous quarter, so I just wonder how do you think of the trend for this metric going forward? In addition, what was the driver for the ARPU of your live broadcasting service in Q3? My second question is about the Quick Chat service, Momo has rolled out this Quick Chat service for a few months, so I just wonder if management has any positive impact from Quick Chat on your overall user engagement? Thanks.

[Foreign Language] First of all, before answering the questions, I would like to remind everybody about the fact that we’ve added many new social features powering by streaming technology and the way that we calculate the paying users for our live streaming service and the fact that some of these paying users related to the new features that we rollout are booked under the VAS line, and if you look at the VAS business and the live streaming business altogether holistically the total number of paying users on the platform actually increased in the third quarter as compared with the second quarter, mainly driven by some of the newly introduced social use cases around the virtual gifting service. Next year, we are looking to rollout more of these type of paying used cases in connection with the new ways of interaction that we rollout. For example, the video and audio based live chat experiences both one to one and group chatting environment, we believe that by doing that we would be able to continue to drive the growth in the paying user as well as ARPU. [Foreign Language] Trend wise, the number of paying users, high-paying users still grew with a very strong momentum. ARPU also grew, but at a slow slower pace than the number of paying user growth within that top cohort. The long term paying users continue to see some diverging impact from the new social use cases and that was mainly because that the public broadcasting model sets a very high barrier for the long tail users to participate. For them, things like Quick Chat or group video chat are perhaps better suited use case to participate, and the paying users for those type of services are booked under VAS line. As a result, we are seeing that the paying user for our VAS business grow from 4.5 million in the second quarter to 4.8 million in the third quarter with several ARPU trend. So that’s why, if you look at the live streaming business and the VAS business holistically, the total number of paying users still grew at a pretty healthy pace during Q3. And third is - the second question about Quick Chat which - our COO, Wang Li will be answering that question.

[Foreign Language] We believe that the new form of interaction based on life and video-based services, as well as the social games represents one of the future directions that young people are moving towards in the social space, and a lot of these new functionalities that we recently rollout are helpful in lowering the participation barriers for the live streaming service. Things like Quick Chat and Werewolf's and Momo Radio these are all our early experiments on those fronts, so of course they are going to be helpful in improving the user engagement on our platform. However, these are early days efforts and we still have a lot of work to do in those areas.

[Foreign Language] Quick Chat Plus is another early experience that we made in the one-to-one video interaction space. In a lot of aspects, including monetization is in very early days. For our next-step plan, we are going to continue to optimize on that experience reporting to that data and feedbacks that we received over the past two months period time. We are looking to rollout an audio based experience into the Quick Chat Plus experience. We believe that there is very strong demand for the one-to-one live video and audio based interaction experience. We are confident that we would continue to move this business forward and cultivate on bigger monetization potentials around it.

Operator, next.

Thank you. Next question comes from the line of Fan Liu from Goldman Sachs. Please go ahead.

[Foreign Language] Let me try and state this. So, the first question is, management mentioned in last quarter's results that there are 20 million users assessing Momo via other channels which are not recognized as MAU, so why the strategy is to make this user a register and use the app more regularly to be justified as MAUs? And the second question is, how should we think of the total addressable user base for Momo and so as the MAU growth strategy? And the last one is, in terms of the channel marketing cost we see that for the overall industry it seems to be rising. So, we were wondering what is management's take on this and the strategy for user acquisition the following year? Thank you.

[Foreign Language] User growth has always been the number one priority within our strategic plan. At the beginning of the year, I’ve communicated to the investor community that there are two pillars underpinning our user growth strategy and they are product innovations and marketing activities. On the marketing side, obviously this year the biggest strength of our advertising budget went into brand advertising and next year we’re looking for cut down on the brand advertising budget and shift towards channel marketing. At the same time, we will also be considering tying up some of our brand building activities with the constant production and distribution efforts. And the other thing is that in the past channel marketing was not one of our key strength areas and obviously our job on that front left a lot of improvement. In the future our focus will be on improving the efficiency of the top of the funnel effort. And that would translate into several things that we need to do. Number one is, we will strengthen our collaborations with the telecom carrier - with the cellphone makers, telecom carriers, as well as some of the quality new seed advertising platforms on the data side and utilize some of the industry-leading technologies, including targeting, re-targeting, and real-time optimization of channel strategies in order to increase the quality of the users that we acquire. On the other side, in the past the material that we use to acquire users through different channels were kind of limited due to our use case as we are continuing to expand our content offerings, we increasingly have larger room in devising different channel strategies. For example, nowadays it is possible for us to work with the channel partners use their data to target certain group of users and then push…

Hello. Operator?

Are you ready for next question?

Yes.

Thank you. Next question comes from Greg Zhu from Credit Suisse. Please go ahead.

[Foreign Language] Okay, I will transfer my own question. Management thanks for taking my question. I have two questions. First, could management share some color on the margin trending in the next quarter and in 2018 in light of the new marketing scheme and the user acquisition strategy? And my second question is, how does the management take on the competitive landscape short videos and live forecasting in the coming year? Thank you.

Hi this is Jonathan. Let me take your first question and then Tang Yan will address your second question. As we started from Q3, we rolled out additional incentives to individual broadcasters, and then in Q4 to the professional agencies we do ask them if that will create certain pressure on our gross profit margin, but however, as I said during my prepared remarks because currently we are only at testing phase, we are going to make adjustments on those additional incentive programs as on a we go basis. So, we want to make sure our incentive plan, not only drives revenue growth, but also drives a profitable revenue growth as well. So, currently we are - we just kicked off our 2018 business planning and budgeting processes. It’s hard for us to be sure where the margin will trend for next year, but here I’d like to share some factors that would impact the margin in different ways. First of all, as I said, the gross margin we will trend down, but however we are confident that our gross profit will continue to grow and then also as we continue to drive the top line growth we are looking to achieve a certain level of leverage at OpEx level. So, our current target is to at least to come out with a stable net margin in 2018.

[Foreign Language] No matter if you are talking about live video and short video spaces, obviously there has been some consolidations out there in the market and there are also some of the changing trends that we need to adapt to. We’ve talked about these trends in my prepared remarks. Overall, we do think that there are still plenty of opportunities in both the live streaming and the short video spaces and Momo has very strong social attributes, as well as very unique community hemisphere in both live streaming and short video service. And those factors give us very unique competitive advantages in those two industries. So overall, in the future we want to continue to build on those competitive advantages and are confident that we would be able to continue to increase our market share in those markets through constant expansion and improvement in diversity, as well as the optimization of our operational efforts. And also, we are seeing that many other companies, a lot of these are live streaming and short video pure plays, they are all performing well. However, each of us has our different positioning, as well as user mentality and attributes. As far as Momo is concerned, our short video and live video services are all serving the users social demand and if you look at the ways that we design and operate our product and services, as well as the way we brought up our community hemisphere, they are all very different from the live streaming and short video pure play. So overall, I think the competition is always going to be there, however it won't be direct competition between - it is actually the same kind of content and service offerings.

Operator, next.

Thank you. Next question comes from the line of Tian Hou from TH Capital. Please ask your question.

Good evening. [Foreign Language] The first question is related to the R&D investment. So, currently Momo's R&D investment as a percent of revenue is kind of low compared with other China’s technology Internet company and I wonder what’s the management's plan going forward for the investment in the R&D as we are going to develop a lot of new product in the social networking area? So that’s number one question. Number two, is related to the core flow analysis where paying user cohort information Tang Yan gave some information last quarter, I wonder if we can get the same similar color on those cohort analyses? That's it.

[Foreign Language] This is a very good question. We have noted that issue internally as well. Next year, we’re looking to step up our investment in research and development. In terms of the key areas for investment that’s going to be consistent with our product direction. So, a lot of these will revolve around the new interactions and new ways to connect people and that would involve - that would include areas such as audio and video technologies, augmented reality, recommendation, engines and algorithm, machine learning, a lot of these and other newly emerging areas and a lot of these new areas were going to significantly stop up our investments. [Foreign Language] With regards to your question about the concentration and the trends within different layers of paying users, I think the whole live streaming industry tends to have relatively high level of concentration towards top layer and that is kind of determined by the tipping modern itself. However, it’s because of Momo's unique way to dispatch our traffic in order to lean towards the new talent and our strong social attributes. We believe that our level of revenue concentration should be a lot low - a lot lower than our industry peers no matter from the broadcaster’s end or from the paying user end. With regards to the trends within different cohort, I think Tang Yan mentioned in earlier remarks already.

Operator, ready for next.

Certainly. Next question comes from the line of Chen Wang from TF Securities. Please ask your question now.

[Foreign Language] I will translate myself. Good evening Tang, Wang, Jonathan, and Cathy, thank you for taking my question. My first question is regarding user growth, in view [indiscernible] management we have done the newly added user influence of channels [indiscernible] as we are democratic, how about retention rate between the independent group? This is my first question. My second question about the product upgradation in view of the new products such as the Hani. Could management give us some color [indiscernible] some new product in some niche market just like our competitor? Thank you.

[Foreign Language] With regards to your first question, currently we’re not seeing a lot of changes in the demographic of the new users coming onto the platform. And one thing that I would like to add in here is that the core value proposition the Momo application is to help the users to discover and establish new relationships on the platform and build effective interactions, based on that kind of core user demand that we would like to serve and the current fabric of the China Mobile Internet users, our estimation of our total addressable market would fall somewhere between 200 million to 300 million. If you look at our current MAU it is only a little bit over 90 million. So, we should have plenty of penetration rate in every user - every cohort of users in terms of different demographic and every geolocation in China. One of the key limitations that we had before was related to the narrowness of our core used case. And it is difficult to satisfy the diversifying demand of all of our users and since the beginning of 2016, we have made a lot of progresses in expanding our core use cases. So, I think one of the biggest opportunities that we are seeing in acquiring users through different channels is through effective channel partners to be able to reach the large amount of dormant users, give them richer and better social experiences and be able to retain them. And the other thing with regards to your question is that we’re seeing a big trend in China Mobile Internet market where a lot of the new users into the market are going deeper into lower tier cities. So, currently we are going to adjusting - readjusting our channel strategies in order to better take advantage of that bigger trend. I think that is one of the key purpose why we need this new channel marketing system to do better targeting and to manage the process with greater granularity. And with regards to the question on retention rate, after several adjustments in the 8 series, within the 8 series and that the new marketing system start to function well, our overall retention rate, including those of the existing users, as well as the new users continue to improve. And based on these trends we believe that we will be able to continue to penetrate our total addressable market. We’re very confident about that. And Wang Chen could you repeat your second question on, the question about new products, can you repeat that one in Chinese?

[Foreign Language]

[Foreign Language] On your second question, about our future plans. In the future, we do have plan to potentially build standalone applications in order to penetrate into new demographics or to carry some of the new form of interactions.

I think, we’re running out of time already. That would conclude our conference call today. Operator, we're ready to close this call. We will see you next quarter.

Thank you, ladies and gentlemen. That does conclude the conference for today. Thank you for your participation. You may now disconnect the line.