Good evening and welcome to the Weibo Corporation First Quarter 2016 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lidya Yu [ph]. Please go ahead.

Thank you, operator. Welcome to Weibo's first quarterly earnings conference call. Joining me today are 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 presentation I'd 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 on Form 20-F for the fiscal year ended December 31, 2015, filed with the SEC on April 28, 2016, and other filings with the SEC. Additionally, I'd 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 financial excludes certain expenses, gains or losses and other items that are not expected to result in future cash payments or that are non-recurring in nature and will not be indicative of our core 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 line 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. Hello everyone and welcome to Weibo's first quarter 2016 earnings conference call. On today's call I will share with you our key developments in user, product and monetization areas, as well as Weibo's key initiatives in 2016. First, on Weibo's financial results. In Q1 Weibo continued strong revenue growth. Our total revenue reached $119.3 million, up 24% year-over-year. Advertising and marketing revenue was $99.2 million, up 25% year-over-year with 66% of our ad revenue coming from mobile. Non-GAAP net income in the first quarter was $16.4 million, up 491% year-over-year. Turning to users, Weibo's monthly active users reached 261 million in March, up 32% year-over-year, while average daily active uses reached 120 million, up 35% year-over-year and 13% quarter-over-quarter. In March 85% of Weibo's MAU and 91% of Weibo's DAU were on mobile app. Also in March Weibo saw the highest sequential net user add ever. Our DAUs increased by 40 million and MAUs by 26 million over the same period last quarter. In the first quarter every year many Chinese in Tier 1 and Tier 2 cities will return to their hometown in Tier 3 and Tier 4 cities to celebrate the Lunar New Year with their family. The period around the Lunar New Year with city dwellers away from their offices present a unique opportunity for Weibo to accelerate its user growth. Due to Weibo's high mobile usage we are able to take advantage of this period to run a platform wide red envelope marketing giveaway campaign allowing businesses, brands and celebrities participate and they giveaway our red envelopes and coupons in exchange for [indiscernible] This campaign allows us to expand Weibo’s user base further in the second and third tier cities throughout China. The uniqueness of Weibo being a public open social platform enables to…

Thank you Gaofei and good morning everyone, and good evening to those of you in the west. Welcome to Weibo's first quarter 2016 earnings call. Let me give you the top level numbers. At first quarter Weibo's total revenue was $119.3 million, up 24% year-over-year or 29% on a constant currency basis, exceeding the company's guidance. Non-GAAP net income reached $16.4 million, up 491% year-over-year. Non-GAAP diluted EPS was $0.07 compared to $0.01 a year ago. Adjusted EBITDA reached $19 million, up 182% year-over-year, representing an adjusted EBITDA margin of 16% compared to 7% last year. Let me give you more color on revenue. Advertising and marketing revenue for the first quarter was $99.2 million, up 25% year-over-year or 31% on a constant currency basis. Revenue from small and medium size businesses and key accounts was $88.1 million, up 97% year-over-year. On a constant currency basis, revenue from our SME and KA businesses together was up 106% year-over-year, which is acceleration from the 50% growth in the first half of last year and 82% year-over-year growth in the second half. Weibo's SME business continues to be robust while KA business is experiencing accelerated growth. As advertisers and marketers in China shift their budget from PC to mobile, we are benefiting from Weibo's strong mobile usage. As Gaofei mentioned, 91% of our DAUs in March was mobile. Historically, the period around our Lunar New Year, which occurred on February 8 this year is slow season for PC-based online advertising companies. For Weibo however we saw strong mobile ad revenue growth in the first quarter which was up 43% or 49% on a constant currency basis. Mobile ad revenue made up 66% of Weibo's total ad revenue in the first quarter. Another driver of Weibo's advertising and marketing revenue is the adoption…

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Thank you. Our first question comes from George Meng from Goldman Sachs. Please go ahead.

Good morning management. Thank you very much for taking my question. Congratulations on the great quarter. So my question is regarding your user growth, as far your DAU up 35% year-on-year which is the fastest in the past two years. And also MAU also sustained about above 30% growth for the past few years which is in contrast with some of the other applications who we saw the - I'll say, most of the other application where the growth rate will tend to decelerate relatively quickly. So my question is what do you think about the total addressable market of your users both MAU and DAU in the long run? In particular I think you mentioned before that in top tier cities your user growth is already slowing down. But you do have a lot of room to grow in lower tier cities that [ph] 268 per MAU and 120 million DAU what do you think about the room left for your user growth in the lower tier cities? And thank you very much.

Yeah. Our current MAU is about 261 million. And we can see that in China and other mobile apps such as Q2, WeChat and Qizone have MAUs over 500 million. If you look at how our users are geographically dispersed in tier 1 cities, we have a penetration rate of probably around 50% and we're growing probably around 10%. And then if you look at tier 2 to tier 4, we probably have a penetration of 20% to 30%. So we have still plenty of opportunity to actually grow. So in the next two to three years, we think that our users in tier 2 and tier 3 cities will probably approach their penetration rate in tier 1 city and then below tier 4 probably not as fast, but still we think that there is still great opportunity to grow.

And I think the other thing is George, we mentioned that historically we've been on kind of the social market. But as you have been seeing us in the last two quarters, we've been - in China especially from last year we are seeing a strong growth in video market especially on mobile. And as Weibo start entering in this space with user generated content or short videos and also with live streaming with - I think that probably enlarges the markets go beyond social and to focus on user related - users especially consumer to mobile devices.

Got it. And I have a quick follow-up if I may. So you also mentioned on the call that you're basically catering to more users because previously it's more about the information and now you're going to do more social-related stuff. I think a few years ago you also tried to do more social network. So at this time, how are you going to accelerate [ph] and also by if you can achieve that what the incremental user that you can cater to, where in the previous case when you are focusing more on the instant information that you cannot address. Thanks.

Yeah. First of all in the last two years, we weren't positioned ourselves as information consumption [ph]; we've been positioning ourselves as a social media. So comparable companies in the U.S., we will be addressing users like those of Twitter and Instagram. So on top of these markets we will also focus on user-generated content video short videos. And we think that this market could be bigger than social.

Great, thank you very much. That’s very helpful.

Thanks George.

The next question comes from Dick Wei from Credit Suisse. Please go ahead.

Hi, thanks for taking my questions. I have two questions. The first question is regarding the new information feeds and ranking. I wonder if you can give little bit more details on the new algorithms and how you weigh between different attributes and maybe the results from the testing before and after. And the second question is on KOL. I wonder any progress you can share in terms of KOL-related advertising currently and maybe in the future. Thank you.

Yeah, so our original information feed is based off of what the user thought - the content from the account that the user follow and it's basically a time sequence. The new information feed will also take into consideration user interest and the information that users can follow. And this will be added to a user, if for example if a user is looking at the content and the user hasn't been using the content for several days, versus the content that probably old that the user missed we will add back what we think are more interesting content and we suggest those contents to the user. So we can take an example of if a user comes on to Weibo and looks at Weibo two to three times a day, some of the users may not have much content to read after they come on a couple of times that day. And then what we will do is we'll look at the content that the user missed probably over the next three days and then we'll also consider the content from the information that the followers, the user's followers viewed in the last few days and then recommend this kind of content, so that will increase the amount of interesting content that the user will be able to see. So if you look at first quarter, you'll notice from rolling out this new information feed to 50% of users that the refresh of these users growth is faster than the growth of our DAU, which is faster than the growth of our MAU. So we’re seeing that as a roll out, actually it’s increasing the content consumption on our… Yeah, so we push out this information feed. We started our beta testing in Q4 and we’ve been testing this for the last two quarters. So this year we’re going to continue to roll out to the remaining users at the same time our development teams are going to look at ways to actually improve further the information feed relevancy.

Yeah, so the second question Dick, I believe you talked about the KOL advertising and the revenue we derive from that. So basically the KOL that we’ve been talking about is KOL revenue derived from e-commerce, and we see a lot of people on Weibo creating their fan base and then directing this traffic to Taobao and to other e-commerce sites. The way we look at this is that we think that from monetization prospects for Weibo it really comes into two sets. The initial set is if e-commerce KOL is trying to generate revenue they need to build a fan base. So we see in the initial stage that these KOLs would be buying impressions on Weibo to increase their fan base, and then also buying other type of Fans marketing so that they build up engagement, they build up the scale of their audience, and I think once they have a certain level of audience then they can probably generate meaningful GMB [ph]. And at that point we’ll start pushing down enterprise services which we’re developing now, so that they would have more effectiveness in their marketing push to these e-commerce sites. So this is kind of a two set process and we started - we tested Weibo Showcase in the fourth quarter which allows close loop purchase to e-commerce sites like Taobao. So that when KOL pushes a particular set of line of clothing and so forth, that from a user perspective they can go for branding to interest generation and to actually making that push on Weibo and remain in the information pool. So this is how we’re progressing with the monetization of KOLs.

All right. That’s was great. Thank you very much and congrats on the good quarter.

Thank you Dick.

The next question comes from Claire Cao from Morgan Stanley. Please go ahead.

Hi thanks, management for taking my questions. I have three questions here. First one is that Gaofei mentioned going forward Weibo may cooperate more with the institutions. So I'm just wondering what kind of money transition model will probably become the major contributor in the future and what could be the margin profile? And the second one is regarding our sales and marketing expense in the quarter. I noticed that this line declined on a year-over-year basis. So I'm wondering what’s the reason behind that and how should we think about the magnitude of trading leverage going forward? And my third question is just a housekeeping one, regarding the CPM and ad load for the promoted feed ad? Thanks.

Working with agencies, KOL agency is just a part of our overall KOL strategy. Yeah, so when we look at the current development of KOLs on Weibo we're seeing that it's very similar to the early stage of YouTube where KOLs was developing. And we see that actually today that - KOLs on YouTube and other social platforms that there is been agency forms what they call multi-channel networks, MCN. So we're seeing that in China these MCNs are also forming that are starting to represent KOLs and that these KOLs are branching into different industries. So we will work with these KOL agencies on two levels. Number one is on content collaboration. So we'll help them build the scale of their fan base for the KOLs, help them to improve the quality of the content. So in terms of monetization, as I mentioned earlier it really comes into two formats. One is initially when we see KOL agency actually investing in these KOLs by spending marketing dollars for fans marketing, helping their KOLs build their fan base. And once their fan base become meaningful scale than they will probably help them with the enterprise services to allow their KOLs to be more effective on Weibo. And then we'll also look at other perhaps revenue sharing models.

So the second question Claire I understand is you're asked about our sales and marketing dollar amount on a year-over-year basis. On a non-GAAP basis, sales and marketing dropped very little, dropped little over $1 million. So I think in the first quarter of 2015 we had a more marketing spending especially around the red envelope. So I don't think that the small drop is too meaningful. I think overall I think this is a year where our revenue - we expect our revenue to grow continuously and then on top of that we expect our margins to also be growing in correlation. We think that we have great potential as a social media platform with UGC content to expand on margins. So we should see that as our revenue grows that our margins will continue to grow. And then the third question is on ad load. First of all let me clarify [indiscernible] of ad load. If you look at our platform there is really three type of advertising right. One is the advertising information flow; the second one is display ads; and then a third one is based on events. So ad load only pertains to the advertising portion from the information feed. And that makes up about 49% of our total advertising revenue in the first quarter. So we're only talking about that. And in terms of ad load in the first quarter it's over 3%, it's about 3.3%. Okay, Claire?

Okay. Herman, can you also talk about the CPM in this quarter?

CPM, we don't…

[indiscernible].

You are talking about the pricing of our advertising?

Yes, I think during the last quarter we mentioned the CPM is about 18 RMB in the quarter. So I just want to have that comparable number.

So our CPM because of our inventory makeup, as I mentioned earlier we have a different type of inventory. Our CPM actually varies very drastically positive and have [ph] inventory type. But with regards to information feed I think you were alluring to earlier, that RMB18 comparable in Q1. That has dropped to RMB 15 per CPM. But we also have for example looking at CPM for our brand advertising, and that has been a pretty stable quarter-over-quarter. Okay?

That's very helpful. Thanks.

Thank you.

This concludes our question-and-answer session. This concludes the time allocated for it. I would now like to turn the conference back over to Lidya Yu for any closing remarks.

That concludes today's conference call. Thank you for joining us everyone.