Operator:

Welcome to the 500.com First Quarter 2015 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Christian Arnell. Mr. Arnell, please go ahead. Christian Arnell: Thank you. Hello, everyone, and thank you for joining us today for 500.com's First Quarter 2015 Earnings Conference Call. The company's results were released earlier today and are available on the company's IR website at ir.500.com as well as PR Newswire's wire services. On the call today from 500.com are Mr. Vincent Law, Founder and Chairman; Mr. Zhengming Pan, Chief Executive Officer; and Mr. Min Yu, Chief Financial Officer. Mr. Law and Mr. Pan will first discuss recent events and business operations, followed by Mr. Yu, who will go through the financials. They will all be available to answer your questions during the Q&A session that follows. I 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. Vincent Law, who will speak in Chinese. I will translate for him. Mr. Law, please. San Law Man: [Chinese] Christian Arnell: Hello, everyone, and thank you for joining our call today. I've decided to resign from my position of Chief Executive Officer in order to fully focus my efforts on developing the company's long-term strategy and seek out potential investment opportunities. I know that 500.com will be in good hands under Zhengming's leadership. He and I have been working very closely together on all aspects of the business since he became CFO in 2011. Zhengming is more than qualified in his tenure as President over the past year and has been managing day-to-day operations. I look forward to continuing to work with him as we look to generate meaningful value for our shareholders in my capacity as Chairman of the Board going forward. San Law Man: [Chinese] Christian Arnell: I would also like to express my sincerest gratitude to Mr. Qi Li for his enormous contribution to the company during his tenure as a director. Mr. Qi Li joined the board as a director in 2010. His extensive experience in the internet service industry was invaluable to the company. I wish him all the best in his future endeavors. With that, I will now pass the call to Zhengming. Zhengming Pan: Thank you for the kind words, Mr. Law. I would like to briefly review the events that took place during the quarter. As you all know, we voluntarily and temporarily suspended our online lottery sales operations in response to the promulgation of the Self-Inspection Notice. Such temporary and a voluntary suspension materially and adversely impacted our results in operation and the financial conditions of the first quarter of 2015. We want to reinstate that the company was 1 of the 2 entities approved by the Ministry of Finance in 2012 to provide online lottery sales services on behalf of the China Sports Lottery Administration Center. In particular, such approval mandated that the China Sports Lottery Administration Center use its best efforts to develop an online lottery sales management system as part of a pilot program for online lottery sales in China. And once such a management system is finished, the China Lottery -- the China Sports Lottery Administration Center should apply again for approval from the Ministry of Finance for official commencement of online lottery sales in China. The company notes it has been working, and will continue to work with, the China Sports Lottery Administration Center to develop the management system. To the best knowledge of the company, approval by the Ministry of Finance for the company to provide online lottery sales services on behalf of the China Sports Lottery Administration Center is valid and has not been revoked or amended as of the date of this earnings release. With that being said, we are unable to comment any further on this as we remain in active communication with competent government authorities and will make an announcement with updates on the situation once available. I ask that all questions during the Q&A session that will follow Min's review of the financial focus solely on the business. And now we'll pass the call to Min, who will review the financials of the quarter. Please go ahead. Min Yu: Thanks, Zhengming. I'd like to begin by going over a few of the operational metrics. Active users decreased by 12.9% sequentially to approximately 857,000. This was primarily due to the adverse impact caused by the temporary suspension. New active users, which is defined as a user who makes their first purchase during the current year, decreased 42.5% sequentially to 485,000. This was also primarily due to the adverse impact caused by the temporary suspension. Active new users accounted for over 12.4% of our total purchase amount. Active mobile app users accounted for 50.9% of our total purchase amount, up from 41.4% during the fourth quarter of 2014. Our mobile platform is now combined for over 55.5% of the total purchase amount. Direct active users, which is defined as users who access our products directly through our PC and mobile apps and the mobile website, were 459,000, accounting for 95.3% of our total purchase of volume. Active user from third-party channels was 398,000, accounting for 4.7% of our total purchase volume. Let me now walk you through the major financial items from the first quarter of 2015. Net revenues were $15.9 million, up 10% from the same period last year and down 32.4% sequentially. The sequential decrease was primarily due to the adverse impact caused by the temporary suspension. Total purchase amount was up 23.8% year-over-year to $210.6 million and down 25.7% sequentially. In terms of the GAAP reporting, we are required to report our revenues at net level. In terms of day-to-day management, we pay a close attention to total service fees, which is a commission rate of the total purchase amount. In other words, this is the amounts that we make out of the total purchase amount that we sell. For the first quarter, total service fees received were $18.2 million, up 0.7% from the same period last year and down 35.2% sequentially. Operating expenses were $24.6 million, up 152.6% from the same period last year and 11.3% from last quarter. Cost of services was USD 2 million, up 45.9% from the same period last year and down 15.6% from last quarter. The year-over-year increase was mainly a result of the increasing account-handling expenses for mobile distribution channels, while the sequential decrease was mainly due to accrual of bonuses during the fourth quarter of 2014. Sales and marketing expenses was $7.4 million, up 118.2% from the same period last year and up 4.3% from last quarter. The year-over-year increase in sales and marketing expenses as a percentage of net revenue was mainly due to the increase in headcount of our sales and marketing department, while the sequential increase was mainly a result of advertisement expenses associated with our marketing campaign on TV and other media. G&A expenses increased to $12.9 million, up 235.6% from the same period last year and up 48.8% from the previous quarter. The year-over-year increase was mainly a result of the increased share-based compensation expenses associated with the share options granted to our employees during the second quarter of 2014. The sequential increase was mainly due to a provision of bad debt impairment of RMB 30.3 million. Service development expenses were USD 2.4 million, up 105.6% from the same period last year and down 41.6% from last quarter. The year-over-year increase was mainly due to an increase in share-based compensation expenses associated with the share options granted to our research and development employees, while the sequential decrease was mainly due to the accrued bonuses in the fourth quarter of 2014 and decreased consulting fees on certain research and development programs. Operating loss was USD 8.6 million as compared to operating profit of USD 5.1 million during the first quarter of 2014 and operating profit of $3.1 million during the fourth quarter of 2014. The year-over-year decrease was primarily due to the increases in operating expenses, while the sequential decrease was in line with the decrease of net revenue and increase in operating expenses. Non-GAAP operating loss was USD 2.4 million as compared to non-GAAP operating profit of USD 5.9 million during the first quarter of 2014 and a non-GAAP operating profit of USD 9.1 million in the fourth quarter of 2014. This resulted in net loss of USD 8.4 million and non-GAAP net loss of USD 2.1 million. This translated into basic and diluted net loss per ADS of USD 0.24 each and a non-GAAP basic and diluted net loss per ADS of USD 0.06 each. And lastly, our balance sheet remains healthy. As of March 31, we had no debt and a combined USD 122.9 million in cash and cash equivalents, restricted cash and time deposits. Next, I would like to open the call up for questions now. Operator, go ahead. Operator: [Operator Instructions] The first question comes from Mike Olson of Piper Jaffray. Michael Olson: So I just have 2. You mentioned active mobile app users now account for 50% of your users. Do you see any differences in activity levels for mobile users compared to PC users? Or is it fairly similar between the 2? And then ultimately, do you believe that, over time, nearly all of your users will essentially become mobile users? Min Yu: All right. For mobile users, say, for this quarter, it seems the average ARPU is lower than the PC, but they actually provide more orders from the mobile app side. Going forward, because we are currently on the suspension period -- so, going forward, we still expect mobile users will take more portion of the revenue and accounts more than the -- a larger percentage of number of visits in the future. And one important thing for this quarter is mobile app user is actually the biggest platform to provide users and the new users and as well as revenue. Michael Olson: Okay. And then I guess 1 question as far as the temporary suspension period. Just to better understand, you've mentioned in your guidance that you expect total purchase amount to be 0 during the second quarter. Does that mean that revenue for the company will also be 0? And then also, what are you expecting operating expenses to be? Will expenses come down during the suspension period? Or should they stay relatively unchanged? Min Yu: Yes, you're right, they will be -- currently, we don't think we will have any revenue for second quarter. From -- for the question on expenses, I think that expense will be materially coming down compared to same period of the last year or even compared to the period when we have revenue. One of the key reason is we will not spend money on sales and marketing aggressively as before, and the only cost will mainly be our staff cost. That will be like materially lower than previous quarter as well. Operator: The next question comes from Alan Hellawell from Deutsche Bank. Eileen Deng: This is Eileen on behalf of Alan. I have a question regarding your commission rates. If my calculation is correct, this quarter's commission rate is 8.6%. I wonder, excluding the effect from VAT and the P&L ratio negative impact, what are the other reasons to drop this level down? And what -- should we expect such level in next few quarters when we assume the sales is resumed? Zhengming Pan: Hi, Eileen. This is Zhengming. Actually, we -- as of now, we don't know what the commission rate is going to be once the online lottery management system is online. I think that has not been decided by the government yet. Min Yu: And for your first part of the question, why this quarter have lower commission rate compared to previous quarters? I think the key reason for that is because we -- currently, in the first quarter, one of the provincial lottery centers covered their commission rate from 10% to 8%, and that's the key reason why we have relatively lower commission rates in first quarter. Operator: [Operator Instructions] Seeing that there are no other questions, this concludes our question-and-answer session. I would like to turn the conference back over to Christian Arnell for any closing remarks. Christian Arnell: Thank you. In closing, and on behalf of the entire 500.com management team, we'd like to thank you for your interest and participation in today's call. If you require any further information or have any interest in visiting the company in China, please let us know. Thank you for joining us today. This concludes the call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.