Weibo Corporation (WB) Q1 2015 Earnings Report, Transcript and Summary

Good day and welcome to the Weibo Corporation First Quarter 2015 Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Julien Gong. Please go ahead.

Thank you and good morning. Welcome to Weibo's first quarter earnings conference call. Joining today are our Chairman of the Board, Charles Chao, our Chief Executive Officer, Gaofei Wang and our Chief Financial Officer, Herman Yu. The conference call is also being broadcast on the Internet and is available through Weibo's IR website. Before the management's presentation, I would like to read you the Safe Harbor statement in connection with today's conference call. During the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report and Form 20-F for the fiscal year ended December 31, 2014 and other filings with the SEC on April 28, 2015 and other filings with SEC. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and future prospects. Our non-GAAP exclude certain expenses, gains, losses and other items that are not expected to result in future cash payments or that are non-recurring in nature or will not be indicative of our operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management's prepared remarks, we will open the lines for a brief Q&A session. With this I would like to turn the call over to our Chief Executive Officer, Gaofei Wang.

Thank you and good morning. Welcome to Weibo's first quarter 2015 earnings conference call. During today's conference call let me share with you the latest updates of Weibo product and user traffic as well as the progress we have made on Weibo’s social marketing. Let me start with our first quarter performance. In the first quarter of 2015 Weibo continued to achieve strong revenue growth and user growth. Weibo’s total revenues grew 43% year-over-year to $96.3 million advertising revenues grew 50% to US$79.2 million with mobile ad revenue reaching 58% of our total advertising revenues. Our non-GAAP net income in first quarter reached US$2.9 million compared to a non-GAAP loss of US$4.8 million last year. Turning to operating results. In March, Weibo’s monthly active users reached 198 million, up 38% from the same period last year and 13% from last quarter. Daily active users reached 89 million, up 34% from the same period last year and 11% from last quarter representing the largest user growth rate since our IPO in April 2014. We also saw significant growth in mobile usage with 86% of Weibo’s MAU in March in mobile. Weibo users who have activated Weibo Pay reached 45 million in March or 37% of our mobile MAU. On the operational front, let me elaborate our key progress we have made. Each year around New Year in China many Weibo users living in the first and second tier cities in China would return to their home in the second and third tier cities to celebrate with their families and friends. We have in the past three years taken this opportunity to run a larger scale Red Envelope giveaway social marketing campaign to expand Weibo’s user base and increase users sticking it known as [indiscernible] or Lucky Money Fly Weibo users can give away Red Envelope or Lucky Money to attract new fans as well as compete to grab the Lucky Money. The winning of which can be into cash AliPay. Our new year Red Envelope giveaway campaign this year not only significantly increased Weibo’s user activities throughout the first quarter it also gave businesses the opportunity to participate in social marketing by letting them experience firsthand how to grow the fan base on Weibo through a promotional event. Weibo's Red Envelope giveaway campaign has really become our hallmark event at the beginning of each year to generate massive user engagement and strong participation from our ad customers including key accounts, large brand advertisers and small and medium sized enterprises or SME. Results from this year's Red Envelope campaign are quite encouraging. Over 70 million users participated in this campaign and over 1.9 million businesses celebrities and other Weibo user accounts together give away RMB1.5 billion or approximately US$140 million in cash and coupon value. Compared to last year's Red Envelope campaign revenue from this year's campaign increased over two times. This was also the first time we work with AliPay at a strategic level to integrate our product and campaign promotion which significantly increased the usage of Weibo Pay and Weibo Coupon. For example during the campaign 36 million users used Weibo Pay and 70 million Weibo users redeemed coupons. In coordination with DishTV's Chinese New Year gala and the Latin festival shows Weibo's daily active user for the first time surpassed 100 million. The Red Envelope campaign not only expanded Weibo's user scale and increased user engagement. It also showcased Weibo's marketing source like Weibo Pay, Red Envelope gave away and Weibo Coupon which provide the foundation for businesses and marketers on Weibo to leverage even based social marketing to grow their following. On the product front at the end of the fourth quarter last year we launched Weibo Group Chat which differ from QQs [ph] and WeChat. As our Group Chat is interest based and is designed to enhance the asymmetrical relationship between celebrities and others with their fan base increasing the liveliness of the fans. In a little over three months we saw the monthly active chat groups reached at 120,000 which validates the value interest based group's chat to Weibo's user base. Weibo's Group Chat function increases what user activeness and engagement. We noted that Weibo users who use Weibo Group Chat on average login to Weibo 1.5 times more than our average user. We will continue to ramp our efforts in Weibo Group Chat to provide a full user base experience. On our last quarter we highlighted that Weibo's core advertising offering involved around native ads new space at mobile marketing solutions. We recognized that social market in China is currently at an early stage thus our target at this moment is to attract businesses and marketers to able to experience social marketing results the requirement to spend a lot of marketing dollars or compel them to use Weibo's marketing tools and service. We are working with third-party service providers to develop and improve service for businesses who wish to do social marketing Weibo. With Weibo enterprise accounts reaching 1 million and a series of marketing solutions now available we are gradually cleaning up undesirable marketing behaviors on Weibo. We believe the net impact of our actions will create a healthier environment for business and marketers to conduct social marketing on Weibo. Historically, first quarter is the slowest quarter for online advertising in China, particularly with New Year, this year occurring in the middle of February. Nevertheless, we witnessed strong growth in advertising sales this year. In the first quarter, the number of active SME at a customers reached 388,000 or 21% increase quarter-over-quarter. One key point to highlight is that rapid pace we are seeing Weibo self-service business growing. Although revenues from self-service native ads we present a small fraction of Weibo SME revenues. The engagement range of such product line is 1.4 times of normal ad. Self-service native ads is an important offering on Weibo and we plan to offer promotions and price discounts for this native ad service to establish a broad customer base. Lastly, with mobile users proportion increasing we are cooperating with mobile based business in various industries to increase Weibo usage as well as increase users from such verticals. With half, such vertical strategy last year for example is era of movies using Weibo's promotional tools and so very good results. Our focus this year is also be broaden Weibo’s offering from information sharing and the discovering to offering lifestyle services and related promotions. With that, let me turn the call over to Herman for financial update.

Thank you, Gaofei. Good morning and good evening, everyone. Let me now walk you through our financial highlights. Revenues came in solid for the first quarter of 2015. Weibo’s total revenue grew 43% year-over-year to $96.3 million which was above our guidance of $93 million to $96 million. The scale of revenues that Weibo has reached allow us to have a profitable quarter. Non-GAAP net income attributed to Weibo’s ordinary shareholders was $2.9 million compared to a non-GAAP loss of $4.8 million for the same period last year. Non-GAAP EBITDA was $6.9 million compared to a negative $5 million for the same period last year. Let me give you more color on revenues. Weibo’s advertising and marketing revenues for the first quarter of 2015 was $79.2 million, up 53% year-over-year. The strength of our advertising growth was led by our small and medium sized enterprise business which generated $22 million in revenues in the first quarter, up 125% from last year. The first quarter is historically the slowest season for many of our advertising sectors such as e-commerce and fast moving consumer goods. However, SME revenues was down only 6% sequentially as the seasonal down trend was blunted this year by the increased spending from our O2O and app developer customers as well as the strong momentum that our self-service marketing platform is experiencing. As mentioned on last quarter’s call Weibo self-service was launched in the fourth quarter of 2014 and we include such revenues in the SME category. For the first quarter total SME customers including self-service was approximately 388,000 up 21% from last quarter. As our self-service platform becomes more establish we're seeing some smaller SME customers whom I have otherwise purchased Weibo marketing services from SME distributors used Weibo self-service. To this reason, we have combined a total SME market direct and indirect together for the purpose of showing revenues in number of customers. This is consistent with our strategy over the long-term to have the smaller SMEs who require minimum service support to go to our self-service platform and have the larger SMEs in those who require value-added services go to our SME distributors. Weibo self-service marketing platform is a service available to businesses and individuals who wish to build an active fan base. On some social platforms this is known as people marketing we call this [indiscernible] fan's economy. Based on Weibo social interest graph recommendation engine, we allow users to purchase fans by promoting the self-service customer accounts to users whom we think are likely to select for following. Since the new fans are obtained, we believe to the Weibo customer this will alter value. Through Weibo self-service users can also purchase services to ensure that their fans see the fee that they are promoting. We then empower our users to strengthen their relationship with their fans by offering group chat, promotional tools like Lucky Money and Coupon Giveaway and Weibo Pay to enable close loop transactions. We also are working with third party service providers to offer services to our users to enable them to more effectively build their following. People marketing, a model that has worked for social platforms in western markets and we believe this is a big opportunity in China. Moving on to KA, revenues from our key accounts mostly large brand advertisers were $22.7 million a drop of 15% quarter-over-quarter. The sequential decrease was anticipated as lunar New Year occurred late this year in the mid of February. As Gaofei mentioned during the first quarter we hosted a large social marketing event evolving 17 million participating known as [indiscernible] Envelope Fly which allowed business and celebrities among others to give away Lucky Money and coupons to recruit new fans and increase interaction with their existing fans. Feedback from our KA customers were quite positive. The success of this event positive feedback on Weibo plus TV and opening up promoted fees to KA customers as well as the launch of advertising on We Chat have our customers asking to learn more about social marketing. In April, we hosted three customers’ seminars across China, in Beijing, Shanghai and Guangdong to educate brand advertisers about big day. This customer event was designed to educate brand advertisers on how fans economy marketing works as well as using Weibo social marketing for new product launches. Given that China has been facing a macroeconomic slowdown over the last couple of years, many businesses are adapting to this environment by launching new products to reignite revenue growth. Big Day is a social marketing solution that we are offering to brand advertisers to help them generate buzz in the initial launch period of their new products. Revenue from Alibaba in the first quarter of $34.5 million representing a growth of 74% year-over-year and a decrease of 9% quarter-over-quarter. Historically, the first quarter is the slow season for Alibaba. By working with Alibaba and AliPay at a strategic level integrating our product and promotional offerings for the Red Envelope giveaway event allow us to derive incremental revenues that dampen the typical sequential declines of Ali revenues in the first quarter. We are developing other strategic initiatives with Alibaba that we hope will turn into recurring promotions overtime. However revenues from such strategic initiatives do not occur in a linear fashion as they need to factor in the targeted customer audience and be plan around other promotional events in the industry. For this reason a big portion of the new businesses with Alibaba that was originally planned for the second quarter we expect we’ll still launch in the second quarter but revenue for which maybe push back into the second half of this year to meet revenue recognition requirements. For the first quarter of 2015 Weibo’s mobile ad revenues reached approximately 58% of Weibo’s total advertising revenues compared to 31% for the same period last year with an MAU of 198 million businesses on Weibo have an advantage to be able to target both PC and mobile users. At the same time when users begin to access the internet more from a mobile devices such as the peer Lunar New Year Weibo offers an advantage as 80% of our MAUs or 170 million are on mobile. Weibo’s strength on mobile can be seen from first quarter mobile advertising results which was down only 2% year-over-year and was up 185% year-over-year. Moving to value added services, Weibo value added services revenues increased 9% year-over-year to $17.1 million, game related services revenue was $10.9 million up 52% year-over-year membership revenues were $3.6 million up 17% year-over-year and data licensing revenues was $2.6 million down 52% year-over-year were 11% quarter-over-quarter. As we explained on the last call we made a strategic shift in the fourth quarter of last year for data licensing and we may see further decline from search revenue. Turning now to cost and expenses, as a reminder unless otherwise noted any comments will focus on non-GAAP financial measures which excludes stock-based compensation, change in fair value of investor option liability and amortization of intangible assets and related income tax effects. Total cost in expenses were $94.7 million up 30% year-over-year. Cost of revenue was $28.7 million up 66% year-over-year. Higher cost of revenue growth can be attributed to two primary factors higher bandwidth and other infrastructure cost resulting from traffic growth as well as the launch of Weibo native video in the fourth quarter of last year and two higher revenue share cost associated Weibo value added services. Operating expenses totaled $66 million up 18% year-over-year primarily due to increase in headcount related cost as well as marketing expenditures. For the first quarter we recorded an operating income $1.6 million compared to a loss of $5.6 million for the same period last year this is a great achievement for Weibo as we are able to grow revenue at a pace ties to growth rate of our operating expenditures. Non-operating income for the first quarter was $1.5 million, compared to non-operating $0.3 million last year. Income tax expense for the first quarter was $0.1 million compared to a tax benefit of $0.5 million last year. Non-GAAP net earnings attributable to Weibo ordinary shareholders for the first quarter was $2.9 million, compared to a loss of $4.8 million last year. Non-GAAP diluted net income per share was $0.01, compared to a loss of $0.03 per share last year. Non-GAAP adjusted EBITDA defined as earnings before interest, taxes, depreciation, amortization, other non-operating income and share based compensation expenses were $6.9 million compared to a negative $5 million last year. Turning balance sheet and cash flow items, as of March 31, 2015 Weibo’s cash, cash equivalents and short-term investments totaled $452.5 million cash provided by operating activities for the first quarter of 2015 was $7.5 million capital expenditure total $3.8 million and depreciation and amortization expenses $5.6 million. Turning to Weibo’s second quarter 2015 guidance, we estimate that Weibo’s total revenue for the second quarter of 2015 will be $102 million or $105 million recognizing the situation around strategic initiatives with Alibaba as explained above. Before I turn over to the operator let me quickly summarize this quarter. Weibo’s traffic is growing as fast as pace since our IPO particularly mobile traffic which is seeing growth rate of 57% year-over-year. Social marketing is at an early stage in China but we believe this will be a huge market similar trends we see in the western markets. As social marketing kicks-off in China we are in a good position to benefit given our user scale and brand chain, the viral nature of Weibo and the steady increases of business fundamentals that we have put in place to enable businesses and individuals to perform people marketing. On the cost side, this was the first time in the first quarter that we turn profitable and we are growing operating expenses less than half the rate of our revenue growth. With that let me now turn to Q&A. Operator, we are ready for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Eddie Lang with Merrill Lynch. Please go ahead.

Good morning. Thank you for taking my questions. Just two questions. The first one is about your revenue guidance for the second quarter there seems to be a bit of deceleration so just wondering if it has something to do with the rev packet promotion we laid the revenue in the first quarter if so how are you could affect the impact from [indiscernible] rev packet promotion revenues in the second quarter. And then secondly just a follow-up question on the user base, could you give us an update on the number of corporate accounts as well as the verified individual accounts in the past quarter? Thank you.

Hey, Eddie. Good morning. With regard to first quarter we actually answered on the call it has more to do with strategic if that we're working with Alibaba particularly in certain verticals so I have nothing to do with rev packet envelope and if you look at our guidance for the second quarter we are expecting the trend of our business excluding Alibaba to continue as we have in the last few quarters. With regard to the second question on verified accounts as in the prepared remarks of Gaofei, we said that total with enterprise accounts now above 1 million.

Thank you.

Thank you. The next question comes from Piyush Mubayi with Goldman Sachs. Please go ahead.

Thank you for taking my question. Herman you mentioned that there is greater interest this year on the back of WeChat's P4P advertising launch. Could you share with us the sort of feedback you are hearing is this from the SME accounts or the brands and at what point of time should we be anticipating ramp up or in acceleration in your revenues? And the second is we noticed that your MAU has accelerated but the DAU has been just a touch behind, I suspect that's going to catch up, could you comment on the time spent if possible? Thank you.

Okay, Piyush I'll take the first then and our CEO will take the second one. With regards to the first one question you mentioned is that our customer feedback and where you expect our revenue to ramp-up. So if you look at our revenues breakdown between the key accounts brand advertisers in the SMEs I think the SMEs over the last few quarters have been pursuing a pretty strongly, they're doubling every year I think that this trend we see right now should be continuing. With regards to our key accounts in the first quarter it was going back to last year first quarter we were quite strong if you look at sequentially last year compared to this year and as we mentioned we have to deal with the Chinese New Year and probably as because our social marketing has just got an significant increase in the beginning of the year. So as we go into Q2, we expect the trend from our key accounts on a year-over-year basis to ramp-up compared to the first quarter.

Okay. So for the second question, for the first quarter what we notice is that because in China a lot of the population go back to their home in the lower tier cities during Chinese New Year so you’ll see a lot of the new users that come on to Weibo would help drive up the monthly active users. And for these new users it take some time for them to get accommodated to get acclimated with Weibo to learn how to use it more frequently so once they become the residual users will what see them actually helping grow DAU overtime. But I think initially as they become new users it takes time to learn about Weibo and to use it more recurrently.

And as to your question why the gross rates what DAU lagging behind the gross rate for MAU this is have being a pattern where I have observed in the last two years I mean for example in the year 2014 DAU grow on yearly basis gross about 31% and I think MAU grow by 36% year-over-year basis so this testing trend and pattern we observed and the probably because some of the MAUs are not using the participation very frequently and that only explanation we can have.

Thank you. Thank you very much.

Thank you. The next question comes from Chi Tsang with HSBC. Please go ahead.

Hi. Thanks for taking my question. I have two questions. Firstly, I just wanted to go back to the revenue guidance so you’re talking about the revenue guidance as it relates to deferring revenues, as it relates to strategic initiatives but I was wondering if you can tie that into the original revenue agreement between Alibaba and Weibo $380 million over three years if you can said and that will be helpful. And secondly I’d like to get a better sense of actually the MAUs maybe a more in tier 1, tier 2 basis age and maybe gender? Thanks a lot.

Let me answer the first question and Gaofei can prepare the second one. Regarding the revenue obligation between Alibaba and Weibo and as you know it's more on a yearly basis for three years and this year is the last year for our the commercial arrangement between the two companies based on original contract. Of course we are going to I mean talk about the new contract in a future but for the recurring year, I mean we actually never had a so called regulation based on quarterly basis and its more on yearly basis and spend depending on Alibaba’s own need and strategic need and advertising need. So, I think what would reflect in the revenue guidance is what we know there plan for this current quarter. But on a yearly basis there are obligations and we will probably and more firm on a yearly obligation but not too much control over the quarterly kind of obligation. So this is what we'd reflect in our guidance for the current quarter and maybe Gaofei can answer the second question.

Okay, so with regards to our MAU those are in our tied 1 probably representing about 30% and those are tier 1 is about 70%. With regards to the age before I can add something about say 20% and then after 1980 to 80.

Okay. Thank you.

Thank you. Next one please.

Thank you. The next question comes from Gene Munster with Piper Jaffray. Please go ahead.

Hey guys. Just a quick question around the revenue recognition again. Just want to get a sense for how we should think about that revenue being deferred to the second half of the year. Is there any sense in terms of just kind of the growth rates you have given us should we expect acceleration kind of Q3 from Q2? Thanks.

Just a minute. Okay Gene. So previously with Ali we used to have an arrangement where we focus on providing brand inventory and performance based inventory. For this year we wanted to tie some things that are new focusing basically on Weibo which we're working on various vertical strategy and Ali has agreed to participate in some of these vertical projects including movies including travels, e-commerce and so forth. So for the second quarter we have not finalized the total amount and plans for these new verticals, these initiatives will start in the second quarter with regards to revenue recognition right now some of these might be deferred into the second half.

And just one that answer your question?

That was helpful Herman. Just one quick follow-up in terms of just seeing about the growth rate and the effect and the impact in that revenue deferral. Do you feel like reasonable to assume that revenue could reaccelerate on a year-over-year basis as we go into Q3 from Q4? Thanks.

Gene this is Charles, I don't know how to say. I would say this is so called revenue deferral for say. It's a really depending on they're on plan in terms of how to spend their marketing dollar for each Q and for this second Q I mean that happen to be spend at but less. But in a third Q I mean naturally they were spend more but the way don't know exactly how much they're going to spend in Q3 or Q4. And so it's really hard for us to say the growth rate on a year-over-year basis I mean will be high in Q3 compared to Q2 I guess. But the trend definitely will be in the second half of the year that we'll have to spend more money you know that.

Okay. Thank you.

Thank you. The next question comes from Juan Lin with 86 Research. Please go ahead.

Hi good morning. Thanks for taking my questions. I have one question regarding gross margin and the cost of revenue. You mentioned the impact on gross margin was mainly due to traffic and the bandwidth and also advanced revenue sharing. So I'm wondering out of the 66% year-over-year cost increase how much was helped by bandwidth cost increase and how much is cost by revenue sharing and how should we look at the gross margin going forward. Thank you.

Yeah so I think the gross margins. If you look at first quarter I think going into second quarter you should see similar gross margin. With regards to the breakup between data I think it's pretty even. Part of revenue sharing that we have is our gains as it takes off some of the games that we offer have lower gross margins.

Thank you.

Okay. Next question?

Thank you. The next question comes from Jin Yoon with Mizuho Securities. Please go ahead.

Hey good morning guys. Herman correct me if I'm wrong but I think Weibo's ad system is some is now open to all the Baba merchants. If that's the case are those revenues hitting the Alibaba contribution line or is that hitting the SME contribution line? And how much of your SME contribution is actually coming from Baba merchants. And finally the Baba merchants advertising on Weibo. What's the do you have a sense I know it's early by what the seasonality on that could be is it following more towards a media seasonality or more towards e-commerce seasonality. Thanks.

Good morning Jin. I think you made a good point. The way our business is separated it depends on which channel the revenue comes in. If the Alibaba merchants go to our distributors or if they buy to our self-service system then the revenue will be considered in our SME because of the channel that they come in from. So that's a good point that if that happens. And your other question was with regards to the seasonality how do we look at our SMEs I think if you look at SME's growth is mainly a big part of their business has to do with e-commerce, but we also have a lot of O2O, we also have a lot of app developers these three are the bigger categories. And we also see some fast moving consumer goods. Typically if you look at seasonality Q1 would be the slowest of the fourth quarter if you look at spending on a customer basis. But when you look at the growth rate that we have in the amount of new customers that we're adding and the increased ARPU from these and then you actually see them even going on a quarter-over-quarter and first quarter it's the sequential decline.

Great. Thanks Herman.

Thank you. The next question comes from Tian Hou with TH Capital. Please go ahead.

Hi good morning Gaofei, Herman and Charles. The first question is related to your vertical strategy particularly on the movie channel. So I'm wondering to the movie channel so saw definitely reach in content. I'm just wondering how Weibo is going to make money and if a movie upcoming movies going to air so are they marketing on Weibo. And if a several celebrities and promotes this movie with each other and the movie guys are promoted instantly millions of a people that noticed this movie and in terms of adding scale is definitely can reach maximum potential audience and however how we was going to get paid. So that's the first question. The second question is related to your TV Weibo strategy and for that's going to program for some of TV program and to go along so what's the TV program at pipeline throughout the each quarter in Q3, Q4 and Q2. Thank you. That's all my question.

Okay. With regard to first question Tian in China we are seeing the movie market growing about 20% to 30% a year and we enter the movie vertical last year to increase an aggregate, the audience for movies and what we're seeing is that domestic movie producers are basically all spending money to promote their movies as it launch and we are beginning to see international movie producers to do the same. So I think our monetization opportunity one is from the people who make the movies and secondly, as we're able to aggregate Weibo users into this vertical for people who are their interest in movies, we're seeing advertisers from the fast-moving consumer goods and automobile particularly also targeting this set of users we for advertising so being able to virtualize our user base helps in-large the advertising opportunities from these industries. With regards to your second question on TV programs second and third quarters are usually the high season for a TV variety shows and with several television stations such as Hunan, such as Gansu television station and basically we are the exclusive social media partner with them and as we get into these seasons in the second-half of this year we think our revenue opportunity in here will be good to going that second and third quarter. So let me give you another stat last year for this television show we basically work with television station and have one show per quarter. This year we are now with Gansu and with Zhejiang television station we have now up to three shows per quarter.

That is very helpful. Thank you.

Okay. Thank you.

Thank you. The next question comes from Thomas Chong with Citigroup. Please go ahead.

Hi, good morning thanks for taking my question. I have two question, my first question is regarding the user trend talks about how we should think about the second quarter and subsequent quarters are there user addition continue to be accelerate? And my second question is about your vertical strategy apart from movie ticket which are the areas we will be focus on in the remainder of this year? Thanks.

Okay so Thomas with regards to your first question I use the trend because of the activities that we have around Chinese New Year. You typically will see our MAUs grow the fastest in the first quarter. And what we try to do is as we try to keep some of these a new years are active through Q2 with technological and operational methods. So you should see a very good growth in second quarter but obviously we expect the growth rate to be slower than the first quarter. with regards our verticals, our focus would be on a variety of verticals but the key ones would be for example e-commerce with Alibaba's certain merchants with movies with music in travel and certain with [indiscernible]. Okay I hope that helps maybe a last one.

Thank you. There are no further questions at this time. I would like to hand back over to management for any closing remarks.

With that we conclude our conference call. Thank you everyone.