Ladies and gentlemen, thank you for standing by and welcome to Weibo reports second quarter financial results conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would like to hand the conference over to first speaker today, Ms. Sandra Zhang. Thank you. Please go ahead.

Thank you operator. Welcome to Weibo's second quarter 2019 earnings conference call. Joining today are Chairman of the Board, Charles Chao, our CEO, Gaofei Wang, our SINA Group CFO, Bonnie Zhang and our VP Finance and Interim CFO, Fei Cao. The conference call is also being broadcast on the Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the Safe Harbor statement in connection with today's conference call. During today's call, we may make forward-looking statements, statements that are not historical facts, including statements of 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 statements. 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 20-F and other filings with the SEC. All the information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law. Additionally, I would like to remind you that our discussion today include certain non-GAAP measures, which include 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 the 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 are non-recurring in nature or 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 CEO, Gaofei Wang.

[FOREIGN LANGUAGE] Thank you. Hello everyone and welcome to Weibo's second quarter 2019 earnings conference call. On today's call, I will share with you highlights in Weibo's user growth, product and monetization, as well as progress we made on key initiatives in 2019. Let me start with our second quarter financial results. We are delighted to see solid growth in revenues and user base. Our total revenues reached $431.8 million, up 1% year-over-year, or up 7% on a constant currency basis. Advertising and marketing revenues reached $370.7 million, flat year-over-year, or an increase of 6% on a constant currency basis, 86% of our ad revenues come from mobile. Non-GAAP net income during the second quarter was $156.4 million, representing a non-GAAP net margin of 36%. On the user front, in June 2019, Weibo's MAUs reached 486 million, up 13% year-over-year, representing a net addition of 55 million users year-over-year or 21 million quarter-over-quarter. Average DAUs reached 211 million, up 11% year-over-year with a sequential acceleration from prior quarter. In June, 94% of Weibo's MAU come from mobile. In the second quarter, on top of user growth, we have progressively focused on improving user retention and engagement as it is particularly important for us to strengthen our competitiveness amid a deceleration of the growth in overall China mobile Internet population, leveraging and optimizing platform mechanisms in facilitating social interaction and improving content distribution capabilities, we are encouraged to see enhanced efficiency in content distribution which helps to grow our user scale and more importantly led to a double digit growth in feed refreshment and impressions and user interactions on year-over-year basis. On monetization front, KA business continued to grow nicely during the quarter benefiting from the increasing adoption of social ads within client's ad budget. It is most attributable to sales…

Thank you Gaofei and hello everyone. Welcome to Weibo's second quarter 2019 earnings call. Let's start with our user metrics. Weibo's MAUs reached 486 million in June 2019 representing a net addition of 55 million users on a year-over-year basis. Weibo's average DAUs reached 211 million, a net addition of 21 million users on a year-over-year basis. Mobile MAUs represented approximately 94% of total MAU. Turning to financials. As a reminder, my prepared remarks would focus on non-GAAP result and old comparisons on a year-over-year basis, unless otherwise noted. Weibo's second quarter 2017 net revenue was $431.8 million, up 1% or 7% on a constant currency basis. Operating income reached $166.2 million, representing operating margin of 38% compared to 39% last year. Net income attributable to Weibo was $156.4 million, representing a net margin of 36% compared to 37% last year. Diluted EPS was $0.68, flat year-over-year. Let me give you more color on revenue. Advertising and marketing revenues for the second quarter 2019 reached $370.7 million, flat or an increase of 6% on constant currency basis. Mobile ad revenue was $319.2 million, up 5% contributing approximately 86% of total ad revenues, up from 82% last year. Moving on to KA. In the second quarter, KA ad revenues reached $171.6 million, up 12% or 19% on a constant currency basis. From the industry perspective, FMCG continued to exhibit strong resilience and addressed the KA revenue book as Weibo's social marketing solution resonated well with lead brand advertisers to initiate content, enhance brand awareness, leverage influencers and social assets accumulated to target relevant audience for brand loyalty and sales conversion. We are also pleased with the solid performance of entertainment sector despite industry headwinds, largely owing to Weibo's leading position as an essential social media platform to distribute and promote entertainment…

[Operator Instructions]. Your first question comes from the line of Gregory Zhao from Barclays. Please ask your question.

Hi management. Thanks for taking my questions. So actually I have two questions. The first one, we see very impressive user growth momentum in this quarter. So just wanted to check how shall we think about the sustainability of the growth trend in Q3 and in Q4 and what is your strategy to maintain the growth momentum? And second one is on the content. So when we are coming close to the National Day anniversary, so just want to have update from the perspective of regulation around social content. Thank you.

[FOREIGN LANGUAGE] First, we see very strong user growth in this quarter. We are adding over 50 million, 20 million MAU and DAU respectively. I think the net additional users accelerated notably versus prior quarters. What we see is the engagement rate, for example, the frequency of our refreshments, our video viewership and also in terms of the user participating in their interaction on the platform has grown even faster than the pure number of user growth. And we also noted this trend continued in the last two months going to the third quarter. I think that the growth really comes from the two aspects as I indicated in the prepared remarks. I think the user base has already been very large and had a very strong network effect. So we see like the leveraging for the certain hot topics or trends, we were able to track organic traffic from those events. And also we were able to -- that itself has improved our user acquisition efficiency. I think the second point is it comes from our ability to enhance the platform's social attributes. As I indicated that the interaction between the fans and the Big Vs has beefed up quite significantly. And on top of that, we see our platform has the ability to attract other Big Vs from other platform, so that we believe that trend can continue. And also with our new fan features such as hardcore fans and our products in fans community further strengthen the interaction relationship between our fans and the content generators. In summary, I think we are benefiting from the ability to operate in the hot trends or hot events that gives us the efficiency, help us to improve the efficiency in user acquisition both for new users and our ability to recall our users. And on top of that, our community product was able to attract Big Vs from other platforms, even including those from live streaming platforms, so that to create a bigger platform for the Big Vs and the fans to interact. As we indicated in the past, for regulatory event that Weibo's platform feature is not limited to one particular area. But for this year, in particular, in welcoming the National day for 70-years anniversary, entertainment industry is inevitably was most negatively impacted. Well, our contents are not limited to the self media. We have the vast majority official accounts available on our platform. So in an event like this, we are actually benefiting from the more constrained regulatory environment as our content will continue to be supplied from those accounts with validity and with the more formal voice.

Okay. Thank you. Very helpful.

Your next question comes from the line of Alicia Yap from Citigroup. Please ask your question.

Hi. Good evening management. Thanks for taking my questions. My question is related to the advertising budget and also Weibo competitive positioning. So could management share with us or elaborate a little bit like, what are the main reasons why the ad budget from the KA account is more resilient as shown in the recent quarter? Do you think that they are more resilient towards just the Weibo platform while they are cutting back the budget on other platforms? If so, what are the reasons that hold up Weibo? And then can this be sustainable? Will Weibo see any threat in the future? Thank you.

So when we look at KA accounts growth rate for second quarter, we have to consider the tough comp due to World Cup related promotion in last year. And that factor will also impact the growth rate of our Q3 as well. As I indicated, part of the regulatory reasons, some of the IP video shows has been postponed on the video platform. These had a negative impact on certain cosmetic customers, their spending on our platform as well because their budgets largely have to be matched to the release schedule of the blockbuster IP program. If we break this further into the industry segment, our growth are largely depending on those few industry segments such as FMCG, Auto has delivered a reasonable growth in the second quarter, so does e-commerce. However, a few other industry which are less resilient such as [indiscernible] or cellphone manufacturers, these are the ones we see a quite considerable slowdown in terms of their spending for marketing dollar. So with still the uncertainty resides in the macro in those KA accounts, our focus has been shifted much more to our product's competitiveness in the marketplace. I think there are three areas we are focusing for our KA revenue growth starting from a product perspective. Start at number one, it's an integral market effect with the performance and the branding. That's particularly true with FMCG and the e-commerce industry segments. That's the area we are expanding beyond our traditional brand advertising over pricing and we believe there's good growth potential to taking on their performance related ad budget. With our strong inventory available, with our celebrity and our KOL, we are leveraging that advantage with the brand marketing as we see brand marketing moving very quickly on the social needs so that we want to make sure we are definitely taking advantage of this movement. As I indicated in the prepared remarks like Samsung and even some other cases we have done for our automobile industry where we leverage our celebrity resources on the platform to take additional budgets out of these customers. The other element, as I indicated, we are moving more aggressively to taking ad budgets from regional brands. Historically, these brand's marketing focus were on the local TV station. Now we believe that's one of the other areas we see growth potential. I think in summary, these three areas are the focus point for us to grow our KA accounts and continue to enhance our competitive edge in the KA accounts marketing.

Thank you.

Your next question comes from the line of Bill Liu from Goldman Sachs. Please ask your question.

Thank you management for taking my question. My question is on the SME advertising. So could you give us some updates on the strategies to grow this segment because we are seeing the intensive competition environment given some of the private players have raised a very high target for the year and especially on the improving conversion rate front? Also, any new initiative or strategic focus for rest of this year? Thank you.

Even though we have experienced better than expected SME revenue delivered in second quarter, we believe we still see a lot of potential for us, can do better. Put aside the ROI and ECPM. As I indicated, ECPM rates have been relatively stable on a quarter-over-quarter basis. I think the main issue resides on the demand side as we continue to see the weakness on that particular area and that I think for us the issue to resolve is to really try to raise our sell-through rate in the coming quarters. I think right now, we see a mismatch in terms of the commercial sell-through with our growth of our user traffic. At this moment, these two haven't been matched very well, that's the key focus for us to do for the third quarter. And also in the OCPM area, we need to further grow our targeting ability as well as algorithm. I think in terms of the industry segment, particularly for education and gaming, we were less flexible in terms of user acquisition strategy. That was reflected partially in our distributor policy types of thing. So we are definitely making some shift in that area in the coming quarters. On top of that, I think we are continuing to focusing on the new customer acquisition. Even though in the second quarter, our new customer spending as a percentage of revenue has grown meaningfully, we think we can do further even better in the quarters to come. I think as in summary, what we are facing today in terms of SME customer sentiment, the key problem is the sell-through rate. So that will be the focal point in the second half of 2019. In terms of the top customer within the SME customer segment, we need to provide more flexibility in terms of pricing and enhance our service team. So also on the new customer acquisition area, I think we have to be much more aggressive compared to the past.

Thank you.

This concludes our conference call today. Thank you for joining us. We will see you next quarter.

Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may now disconnect.