Hello Group Inc. (MOMO) Q1 2018 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to First Quarter 2018 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 first quarter 2018 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, 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 that follows. Before we begin, I would like to remind you that the 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 the 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.

Good morning and good evening everyone. Thanks for joining our conference call today. Q1 was a good quarter and a great start to the year 2018. Back in March, we outlined the three priorities for us this year: user-based expansion, top line growth and a healthy profitability level. I am glad to say that we have achieved outstanding results on all those three fronts. Now, my team and I will review the details with you. Firstly, from a high level, total revenue reached $435.1 million for the quarter, up 64% year-on-year and 13% quarter-over-quarter. The strong top line performance reflected the organic growth momentum we have been seeing from the live streaming business, which is in turn driven by the continuous strengthening of our content ecosystem. Adjusted operating income for the quarter was $159.9 million, up 59% from the same period last year and representing a 36.7% operating margin. What we achieved financially in Q1 reflected the strong operating leverage of our business model leaving ample room for us to make significant investment for our future while maintaining a healthy level of profitability. Now, a deeper dive into the quarter. Firstly, our community continued to expand, total MAUs on Momo platform reached $103.3 million for the quarter, up 21% year-over-year and representing a 4.2 million net addition from the previous quarter. We are proud to say that despite the negative seasonality in Q1, per user time spent per day still showed a slight uptick from Q4’s levels and grew meaningfully by 16% on a year-over-year basis. We believe the growth of the community in both size and engagement is mainly attributable to continuous expansion of the social used cases on the platform. At our last earnings conference call, I mentioned that for the coming two quarters, we will focus on product efforts on introducing new ways for the users to discover connections and build interactions. In Q1, we rolled out privacy new features and updates serving that goal. For example, in January, we launched [indiscernible] audio chat room which enables the users to engage in live audio chats in a group environment. Compared to the earlier group video chat feature, the audio version lowers the barrier for user participation. It also provides flexible remarks for us to build on and add new features to make the interactive experience more enjoyable. One example is that recently we made karaoke function available for the chat room users. Our plan is to gradually introduce more of these types of tools for the users to have greater fun together. Other than the newly launched chat room experience, we also expanded the Werewolf game into a collection game of the interactive social game. Many of which used to played offline to bring people more closely together. Although many of these new offerings are still at early stages, we believe they provide more diversified medium over which users can more effectively build connections and interactions. We will continue to iterate and optimize on these experiences to make them better serve to social demand of our users. Another key focus of ours in Q1 was to improve the quality of content in the nearby post. As said before, as a social platform, we are focusing on distribution not just any type of content, but the type of content that facilitates interaction and relationship building. Last Q4, we rolled out a new recommendation engine powering the nearby proceeds on top of the location and recent fee dimensions. The new engine also considers the personal social preference of the users as well as the interactive quality scores of the content. The new algorithm increased the total number of interactions by more than 20% in Q4 from Q3. In Q1, we made further optimizations through the algorithm, including adding the amount of greetings into the evaluation system. As a result, Q1 compared with Q4 last year, we saw another 30% rise in the number of interactions around nearby post. We view this as a significant progress, because it shows that content is playing an increasingly important role in helping people discover new connections and build interactions around it. That progress is made possible, because the technological development based on machine learning is enabling us to better understand what type of content a specific user is more likely to interact with. We believe that algorithm and machine learning are opening up many doors in helping our users discover relevant connections and interact more effectively. We plan to capitalize on it in a bigger way going forward. Speaking of content improvement, one of the most encouraging trends that we are seeing on the platform is the continuous improvement in the content ecosystem around the live streaming service, which is the underlying driving force for the strong organic growth momentum that we are seeing right now. And when we talk about growth, we are not truly talking about revenue growth, but also the underpinning factors that can make such growth sustainable such as constant quality and diversity as well as the number of professional broadcasters, Wang Li will elaborate a bit more in his remarks. Lastly about Tantan, we closed this transaction in May and together we will be moving forward as the dominant player in China’s open social territory. We view Tantan as the strategic complement to the Momo platform and its complementarity comes in several aspects. First of all, its users on average are younger than ours. Secondly and perhaps more importantly, Tantan is very much focused on one-to-one matching for romantic relationships while we are focused on connecting people in a much broader sense over a variety of social used cases. By acquiring Tantan, we have strengthened our leadership and dominance in China’s open social space. In addition, we also believe that Tantan has the great deal of potential to be unlocked both in terms of user growth and in terms of monetization. In fact, although Tantan officially launched its monetization features only in January 2018, it has been showing a very impressive growth trajectory ever since. All of these give us high convictions that will be adding a great deal of value to our ecosystem going forward. Overall, I am very proud about the strong results and the progresses we made on products and operational fronts in Q1. All of these set us up for a strong year ahead. Now, I am passing the call over to Mr. Wang Li, our President and COO for a business review. Mr. Wang, please.

Thanks. Now, let me take you through the key things that we have done as well as the future directions for our major business lines. First of all, on live streaming, although we did see some negative impact from the Lunar year holiday, particularly in the month of February, the robust organic growth momentum gave us a good January and March, so we ended up delivering an extremely strong Q1 growing 75% year-over-year and 13% sequentially to $371.5 million. That strong growth trends came from the fundamental improvement of the content ecosystem driven by our collaborations with the talent agencies. In Q1, we further optimized the agency incentive program that was rolled out in last Q4. The new plan focused on two key areas: number one is to encourage the agencies to bring in more quality new broadcasters. Number two is to strengthen our control over the performing talents that we view as important to our platform. We believe that our strong social attributes and unique community atmosphere gives Momo streaming service strong competitive advantages in terms of the development of new performance as well as users’ stickiness. As we open up doors to the agencies, we are happy to see that more and more MCMs are realizing such competitive advantage of our platform and view Momo as a promising opportunity for them to build their business and grow their revenues. Because of their contribution, we saw a substantial increase in the number of mid to high growth in broadcasters in Q1 from Q4 last year. Those high performing talents and the competition among them are the underlying driving force for better quality content, which in turn drives the increase in the number of core users for the talent show business. Our goal is to perpetuate that cycle in order to gain share against the overall backdrop of market consolidation. Then optimizing the incentive system, in Q1, we also took the initiative to drive the content diversity. Our radio service continues to do well during Q1 in terms of usage and revenues contributing to the number of long-tail paying users with a moderate ARPU level. We have also broadened the content categories of Momo official channel from singing and dancing to comedy and outdoor activities. Although a lot of these efforts are still early experiments with limited contribution through monetization, we believe we are hopeful in broadening the use base of the streaming service. Therefore, we plan to continue down that path. Next, turning to VAS business, despite the negative impact on the Lunar year holiday, VAS revenues generated impressive year-over-year and sequential growth in Q1 driven by three factors: number one, the ramp-up at SVIP subscription; number two, our different experimental monetization efforts around the new used cases such as Werewolf and [indiscernible]; and number three, the natural growth of the virtual gifting revenue in existing social used cases such as greetings and interest groups. These factors contributed positively to ARPPU of the VAS business growing by 23% from last quarter. Our focus for VAS business this year is to build paying features that can enhance the social experience and thus contribute positively to the overall user retention and stickiness. As compared with the talent show business, such monetization features tend to be relatively moderate in ARPPU and thus can appeal to a much broader base of paying users. We believe that the larger user base and the bigger variety of social themes on Momo provide a long runway for us to cultivate the right type of VAS opportunities. The potential is big and we will be moving forward in a careful and methodical manner to make sure we get the product experience right. Now, briefly on Tantan, although Tantan only started to monetize in January this year, it is already making remarkable progress. What’s more exciting for us to be is that features not only drives revenues, but also improve the matching efficiency and thus contribute positively to user experience and retention. Tantan’s early monetization results stand as a good example of how the VAS model is done right can help drive the virtuous cycle in monetization and user experience. As Tantan keeps pushing forward its monetization progress, we believe it will be contributing meaningfully to the VAS business line in the year 2018. Now, briefly on mobile marketing business, with the growing activities around the live video, short video and content fees, the potential to build ad inventories also increases. However, as the priority of the company this year is still growing user base and engagement, we will be very careful in limiting the ad load and making sure that the ad quality and relevancy continues to improve to take better care of user experience. On the other hand, our expertise in building video and AR elements into social activities and the higher tendency of Momo users to interactive people and content are saying that we can uniquely leverage to develop innovative ad products such as sponsor lenses. Such products are playful in nature and thus match well with the overall attribute of our community. They also provide the ad customer a truly native marketing solution that can blend into the consumer experience in a positive way. We have just made an official release of such kind of interactive ad products to the market. That will be the key focus for the team for the coming few quarters. Overall speaking, we are off to a strong start for the year 2018. I am excited about the many opportunities ahead and will continue to capitalize on them to deliver good business results. With that, I am passing the call over to Jonathan for the financial review.

Thanks, Tang Yan and Cathy. Hello, everyone. Thank you for joining our conference call today. We started the year off with a great quarter. Our user base continued to expand, while both top line and bottom line showed robust growth. Total net revenue for the first quarter reached $435.1 million, up 64% year-over-year exceeding the high-end of our revenue guidance by 8%. Despite the negative seasonality from Chinese New Year, we still achieved a 13% sequential growth in revenue due to the strong organic growth momentum from live streaming business. Rapid top line growth cooked with operating leverage enabled us to deliver a 36.7% non-GAAP operating margin. Non-GAAP income attributable to Momo was $142.3 million, up 57% from the same quarter last year. Looking into the key revenue items, in the first quarter 2018, the revenue from live video services reached $371.5 million, up 75% year-over-year. In Q1, we continued our initiative to incentivize the talent agencies, which significantly boosted the improvements of our content ecosystem. At the same time, our operational efforts focused on introduction of new gamifications into showrooms during the non-event days allowing the organic growth momentum of live streaming business to overcome the negative impact from Lunar year holiday, grew at an impressive 13% on a quarter-over-quarter basis. As a result, the number of live streaming paying users for the quarter was 4.4 million, a 7% increase from the same period last year. The quarterly ARPPU was RMB563 before excluding VAT compared with RMB385 from a year ago. Moving on to the VAS and mobile game business, revenue from VAS, which includes membership subscriptions and virtual gifting services together, was $37 million, up 62% from the same period last year. The year-over-year increase was largely driven by the fast growing virtual gifting business and increase in SVIP subscriptions as Wang Li mentioned earlier. As the social behaviors on our platform continue to evolve and the social used cases continue to diversify, one of our key observations is that some social experiences previously put under live streaming business line and VAS business lines are actually converging. For example, the same person who used to chat in the live channels or video services on the live streaming can shift to chat rooms or quick chat experiences, which are under VAS business line and vice-versa, can happen too. As more and more of our users adopt live interactive experiences, we expect the line between what is live streaming and what is not live streaming to get increasingly blurred. Therefore, we encourage investors to look at paying users from VAS business and live streaming business holistically. The total number of paying users from VAS and live streaming services without double-counting the overlap was 8.1 million for the first quarter 2018, up from 7 million from the same quarter last year and 7.8 million a quarter ago or a 0.3 million quarterly net add. Revenue from mobile game revenue decreased by 43% year-over-year to 6.2 million due to our strategic defocus on jointly operated games. Now on revenue from mobile marketing, the revenue from mobile marketing services was $18.7 million up 5% year-over-year. The increase was driven by brand ad revenue growth. The number of key account customers grew significantly from same period last year as we gained more recognition from the brand marketers. Now, quickly to talk about some highlights on the cost and expenses items for the first quarter 2018. Our cost of revenue on a non-GAAP basis totaled $209.1 million, up 74% from the same quarter last year. This was primarily attributable to the increase in revenue sharing with a live streaming broadcasters and agencies. However on a sequential basis, the organic growth of live streaming services during the non-event days came in extremely strong during Q1. We scaled back the revenue oriented operating efforts around the quarterly competition event. Therefore, cost on bonus or rewards offered to broadcasters during the March tournament, was significantly reduced. As a result, the non-GAAP cost of revenue as a percentage of total net revenue dropped by 3.6%. Non-GAAP sales and marketing expenses for the first quarter was $41.1 million compared to $31.8 million for the same quarter last year. The increase was mainly due to our stepped up efforts in marketing spending to drive user growth. The sequential decrease in sales and marketing expenses was largely due to the seasonality in our marketing spending. Q1 tends to be the lowest season in our marketing activities. We do expect marketing spending to pick up from Q1’s level both in terms of absolute dollar amount and as a percentage of revenue as we head deeper into the year. Non-GAAP R&D expenses for the first quarter was $15 million compared to $7.2 million for the same period last year, representing a 3.4% and 2.7% of total revenue respectively. The increase reflected our strategy to step up our investment efforts in R&D area by recruiting additional R&D talents to support our product innovations. We ended the quarter with 1,303 total employees, up from 985 a year ago, of which 46% and 39% are R&D personnel respectively. Non-GAAP G&A expenses for the first quarter, was $11.2 million compared to $6.4 million for the same quarter last year. The G&A expenses as a percentage of total net revenue remains stable. Non-GAAP operating income was $159.9 million, up 59% year-on-year from $100.6 million. The non-GAAP operating margin for the quarter was 36.7%, 5.8% higher sequentially. However as the year progresses, the investment tend to ramp up in different areas such as marketing and R&D activities. The operating margin will come down from Q1 level and fluctuate on a quarterly basis. We will carefully manage the balance of this investment driving overall business growth and annual profitability targets. Now, turning to balance sheet and cash flow items, as of March 31, 2018, Momo’s cash, cash equivalents and the term deposits totaled $899.4 million compared to $1059.6 million as of December 31, 2017. The decrease was mainly due to the first tranche of payments in connection with the acquisition of Tantan, which was $229.8 million. Net cash provided by operating activities in the first quarter was $129.9 million compared to $95.4 million for the same quarter last year. Now turning to the second quarter 2018 revenue guidance, we estimate our second quarter revenue to come in the range from $470 million to $485 million, which translates into a year-over-year growth from 51% to 55%. As we closed the Tantan acquisition in May 2018, we will consolidate Tantan’s financials from June 2018. Therefore, our Q2 guidance includes around $4.5 million of revenue from Tantan, which represent our current estimate of Tantan’s revenues for the month of June. Please be mindful that this forecast represents the company’s current and preliminary view on the market and operational conditions, which are subject to change. In summary, we are very pleased with the remarkable results achieved in the first quarter 2018. That demonstrated the effectiveness of our strategy and the strong execution capabilities of management team. That concluded the prepared portion of today’s discussion. With that, I would like to turn the call back to Cathy to start the Q&A session.

Right. Before the Q&A, just as always a quick reminder, for the Chinese speakers, please ask the questions in Chinese first, followed by English translation by yourself and also please limit the number of questions to two at maximum per person to give other people opportunities to ask questions. Operator, we are ready for questions. Please take in the analyst.

Thank you, Cathy. [Operator Instructions] We have the first question from the line of Thomas Chong from Credit Suisse. Please ask your question.

Thanks management for taking my questions. I have two questions. The first question is about the live game and other short video have been rising very rapidly recently. What’s our take about the impact to Momo if there is any? And my second question is excluding Tantan, how should we think about the trend in terms of MAU and paying users in 2018? Thank you.

Let me translate first. So it has indeed been rising at an incredible pace during the past 15 months. However, we really haven’t seen any negative impact on our operating data. If you look at the operating metrics during the past few months on our top line, they have been showing some very positive trends, including the user growth, per user time spent, retention, number of interactions and obviously the revenue has been growing very robustly as well. I think the reason why we haven’t seen any negative impact from [indiscernible] was mainly because we have very different positioning in the sense that the core type of user demands that we are trying to serve are very different and that leads to huge difference in the way we design our products and the way the users are using our products. So although on the phase of it, there could seem to be some overlap in some of those use cases, there won’t be direct competition between exactly the same kind of product offerings. For example, what a user is primarily looking for on Momo is to find someone new to interact with. So, even if you are talking about constant consumption in use cases such as live video and short video, these type of functionality needs to be deeply integrated with other social features such as user profile page, news feeds, interest groups and instant messaging in order to serve the users demand to build new connections and to find other people to interact with. However, if you look at the situation for a lot of those live streaming and short video pure-plays, the core user demand that they are trying to serve is constant consumption itself. The way they design their products is therefore not centered around, helping people to build new relationships or helping them to interact with other people. Instead, it is centered around encouraging the users to consume more and more and more content. Those two purposes in a lot of occasions contradict with each other as far as product design is concerned. So, that’s the reason why we really haven’t seen an as-complete and comprehensive set of social infrastructure in either [indiscernible]. So what a user is primarily looking for from a platform is to build new relationships to interact with other people, then that user is more likely to choose between Momo and Tantan instead of between us and the short video platform. So, if you are talking about a short video platform that has been quickly rising in time spent, then that short video platform is more likely to have higher level of competitive pressure on other type of short video platforms or to a broader sense to other content consumption platforms. The negative impact that it’s going to have on a platform like Momo is going to be extremely limited, because we serve different demand and design our products in a completely different way. In the past, if you look at bigger players such as Weibo or Weixin, Kuaishou, in the past, they have all pushing very hard in the area of live streaming or short video or both and they have all been growing pretty well, but during the time that they have been growing pretty well, we actually have never seen any substantial negative impact on our platform. I think the reason for that goes back to the difference in the product positioning. So the first question is on MAU target, MAU growth trends, we believe that this year Momo is going to see pretty positive trends in user world and basically, it is the function of several different factors, number one is the retention of the Momo platform. Since October last year, the retention has been showing a bigger trend with a slight uptick. In the year 2018, our plan is to continue to expand the social use cases through product efforts and content improvement in order to drive the retention ratio, especially mid to longer term retention ratio as we step up our investment in research and development and speed up the pace of product innovations and upgrades. We are confident that we will be able to reach that goal. And secondly, in terms of the top of the funnel additions, your user acquisition this year compared with last year we are going to be taking more result-driven kind of marketing approaches. For example, on paid channel marketing other than new registrations were also going to be focused on resurrecting the domain users by leveraging some of its new use cases that we introduced to the platform. In Q1, we actually did a pretty good job on that front. Resurrected users as compared with complete new registrations, the per user activation cost is lower while the retention ratio is higher and obviously we are sitting on a huge amount of domain users. So this year, we think that we will have a lot of opportunities on that front. And the other thing is that we are also looking at user acquisition opportunities by leveraging Momo’s video content. For example, we are considering working some of the well-known variety show IPs and other third-party partners both to elevate the brand equity and to drive the new registrations. So if you consider all these variables in the equation, all of these give us a pretty good level of optimism about the quarterly net adds, about the opportunity to drive a healthy quarterly net adds to MAUs in the year 2018, Thomas, is there a second question on paying user or not or that’s all. Is there a question on paying users?

Yes. Hi, Cathy. I had a question on the paying users, ex-Tantan, how is the trend in 2018? Thank you.

So, the second question is on paying users?

Yes.

On Tantan?

On Tantan yes.

Tantan officially rolled out its membership subscription business in January 2018 and since then it’s number of subscribers have been growing at a very impressive pace, much faster than the pace that we saw when Momo and other similar companies first rolled out these type of services. We believe that speaks to the very strong demand coming from Tantan users to improve their changes of matching through purchasing of value-added services. And we do think that Tantan at this stage is at a very early stage in terms of monetization. And if you look at the roadmap of other similar companies, they have actually achieved acceleration in the number of subscriber growth and monetization growth. Up to this point, Tantan has done none of these yet and therefore even within the membership subscription area, we do think that Tantan still has a lot of potential to further grow its number of subscribers and monetization. In addition, as Tantan continues to grow its user base and reach its social features, we do think that Tantan will have lot of opportunities to monetize beyond the membership subscription business as well in the area of diversifying into other business lines obviously Momo has a lot of expertise and resources that Tantan can leverage down the road and therefore we have high level of confidence in the future growth trends about Tantan paying user as well. Operator, next?

Thank you. The next question comes from the line of Alex Poon from Morgan Stanley. Please ask your question.

My first question is about Tantan, which is very successful in U.S., the Tinder version and I want to ask about future strategy and potential of this business in the next 2 to 3 years, you mentioned about revenue is above $4 million to $5 million in June if I analyze, it’s about $50 million to $60 million a year. How should we expect the revenue and margin in the next 2 to 3 years also some MAU and paying ratio forecast? And my second question is about investments, your balance sheet is very strong, operating cash flow is very strong, can you share with us what would be your future focus of the investments whether it’s R&D or M&A etcetera? Thank you very much.

So maybe your second question first, I think the focus for the management team at this point is still to drive the organic growth in user base and business. But of course, in the general area of social and entertainment space, there are targeted companies that can help us expand along the industry value chain or help us to diversify our product lines or brand portfolios. Of course, we are going to consider to go through M&A opportunities to pursue higher and more efficient kind of development in growth. Let me translate first. With regard to the second question about Tantan, monetization plan in the future actually addressed a big part of it in the earlier question about Tantan’s subscriber and paying user growth. I think I am going to talk about two points here. Number one is since Tantan started to officially rollout its subscription business in January 2018, it has been growing at a very rapid pace. However at this point, I don’t think monetization is the most important thing that draws the attention and focus of us as the management of the combined company. Instead, the number one priority for us is still user growth from content and the current user growth trajectory of Tantan since the beginning of 2018 is actually very, very positive. So that’s the most important focus of us on Tantan. I think we will pass on to CFO Jonathan to address the financial questions.

Hi, Alex, this is Jonathan. Just one color to add is as can be seen from our guidance of around $4.5 million revenue added into our guidance. That only reflects the revenues generated on the existing subscription business. However, Tantan does have a plan to rollout new rounds of monetization efforts of getting into the second half of this year. So we do expect the revenue to ramp from the current level in a meaningful way when those initiatives get launched.

Thank you. The next question comes from the line of Alex Yao from JPMorgan. Please ask your question. Sorry, the line for Alex Yao has dropped. We will move to the next question by Tian Hou from TH Capital. Please ask your question.

So, I want to follow-up with the first analyst question regarding the short videos and Tik Tok and Kwai short videos developing really rapidly. And certainly because the content difference and user difference and two different things, Momo and the short videos satisfy different needs. However and who knows what’s going to happen. So, I cannot believe that management has not preparing yourself for the future or potential pressure from a short video or at least in the short video maybe one of the direction that Momo can also get into to increase another source of content providing. So, I really want to ask Mr. Tang, what have you done and how you are going to – how are you doing in this area to prepare yourself for the future either on both fronts, defend yourself from competition and getting into a new area of the business?

Right. So, on the face of it, the two objects might seem the same, but if you peel off the very outer layer, inside they are actually very different things. The way we position our short video service is that we are hoping that our users can, through creation and consumption of short video content, build out very effective connections and interactions. That’s the reason why during the past 1.5 years period of time we have been very proactively driving the integration of short video functionalities with every major social experiences and modules on the platform such as news feeds, user profile page and live streaming. In Q1, because what we did to the algorithm around short video we actually saw new hike around a lot of operating metrics, including the number of video viewed, number of video published and some other operating methods that internally we view as more important such as deal penetration and number of interactions around the short video content. For example in Q1, the short video DAU penetration ratio has already reached 67%. So, it’s fair to say that short video has already become a very important content medium over which users are building up your social activities. Okay. With regards to future optimization around the short video service, basically we are looking at several key areas. Number one is that we are going to continue to optimize the short video creation tools. For example, we will soon be launching a new feature that encourages the professional short video creators on the platform to set examples and drives more and more content creation activities from regular Momo users. Number two is that we are going to continue to optimize the algorithms. And as a social platform, we are going to be optimizing for interactions, for the users to build interactions and form new relationships instead of focus on – purely focus on encouraging users to consume more and more content. Number three is that we will be working on to drive more synergies between live video service and short video service and we are seeing several benefits in here. Number one is that live broadcasting actually provides a very effective way for the short video creators to monetize. At the same time, the broadcasters, especially new ones can very quickly build up their fan base and influence through the creation and distribution of short video content. And number three that cycle between live video service and short video service can drive more and better quality short video content into the system for our users to consume and interact. So, although I think we designed this overall short video product within Momo platform in a very different way as the way you see in some of the pure content consumption platforms. We do think that short video has a content medium that people used to build social activities. We will continue to be playing a very positive role to the overall social ecosystem. I think in the interest of time that’s going to be the last question for today’s conference call. For those who really haven’t got an opportunity to ask questions on the call we are happy to entertain your questions offline. Thanks for joining us today. We will see you next quarter.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation. You may all disconnect your lines now. Thank you.