iQIYI, Inc.

Thank you for standing by and welcome to the RKE first quarter 2026 earnings conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Cheng Yu, IR Director of the company. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining ITE's first quarter 2026 earnings conference call. The company's results were released earlier today and are available on the company's investor relations website at ir.ite.com. On the call today are Mr. Yu Gong, our founder, director, and CEO, Ms. Yim Sung, our interim CFO, Mr. Xiaohui Wang, our chief content officer, Mr. Liu Jiaojuan, senior vice president of our membership business, and Mr. Xiangpa Yang, Senior Vice President of International and Online Game Business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by me, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session. Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. IDE does not undertake any obligation to update any forward-looking statement except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead.

Hello, everyone, and thank you for joining us today. The coherency of BrickSoma AI and a supportive domestic regulatory landscape is fundamental. fundamentally reshaping entertainment and creating incredible opportunities for ITE. Let me show ITE's value acquisition in this new area from three perspectives. Three important are called today. Igniting new growth engines. and building for the long term. Let's start with the first perspective, reinforcing our core fundamental foundational threats. Premium content remains the cornerstone of our strategy. And in Q1, we reaffirmed as comparing appeal for audiences. of the worst lineup of heat dramas, including The Punishment 2, Da Zui Er, Born to be Alive, Shen Meng Shu, Pursued Object, Zhu Yu, and How Dare You, Chun'er Qitong, secured a dominant position in the core drama category per Enlightened Data. Moving forward, our commitment to content quality is stronger than ever, designed to deliver expert experience that profoundly connects with viewers. This focus is revitalizing our core operations, evidenced by the sequential growth in membership revenue. We are also highly encouraged by the supportive domestic regulatory landscape, which is accelerating the content approval progress and driving stronger capital efficiency. Importantly, these regulatory policies are unlocking innovation across new formats. This includes short-form dramas. 15 to 25 minutes per episode with flexible episode costs, and internet feature films, which are limited to three chapters of 60 minutes each. These formats are not only a shortened production cycle and lower capital barriers, but also attract a broader pool of creative talent, enabling more innovative storytelling than traditional long-form content. Furthermore, AI is perfectly suited for AI integration, ultimately enriching our portfolio and maximizing our ROI. Looking ahead, we plan to launch over 100 short-form dramas in 2026 while steadily building our internet feature film slate. By continually delivering premium long-form content while drastically expanding into new formats, we are reinforcing our foundational strengths. Importantly, this expansion is efficient allowing us to capture new opportunities without putting additional pressure on our overall content costs. Second, we are igniting new growth engines. Among our emerging business segments, our overseas business has established it as a proven second growth driver. In Q1, overseas membership annual surged by over 40% annually. This success stemmed from a highly differentiated market positioning. Compared to global pairs, we focused on premium Asian content tailored primarily for young female demographics. We think our Asian content portfolio see drummers whose global influence continue to rise, serve as the key catalyst for our international expansion, complemented by a growing slate of local content. Geographically, we are acquiring our presence in Southeast Asia while also expanding into high-growth markets in the Middle East and Latin America. with Brazil as a key focus. We are also deeply integrating AI across our global operations to drive efficiency. Parallel to our market expansion, we are maximizing IP value through our experience business, expanding our content value from online to offline, and extending the IP lifecycle For IP-based consumer products, we are driving deeper user engagement, so merchandising will empower popular IPs to generate both casting window and long-tail monetization. Finally, all foreign into offline experience is yielding encouraging results. Our first IT event in Yangzhou has gathered solid initial feedback, allowing us to rapidly accumulate operational experience to apply to other locations. Thirdly, we are laying a robust foundation for long-term goals, powered by AI and all decentralized platforms. AI is breaking down The historic barrier that once made quality content costly, time-consuming, igniting, explore growth in both creators and the content value, anticipating that this accelerating shift will soon outgrow the traditional centralized media platform model. We have strategically pivoted to build an upgraded and a vibrant decentralized social media ecosystem. This will add lots of central value for decentralized ecosystem greatly expands content supply, allowing us to meet diverse demand at a whole new scale. Creators have a, creators will have greater opportunities to break through another phase. Retaining full ownership of their IP and converting it into fail-attractive returns, while also cultivating private traffic, building lawyers and base, and gathering valuable data from developed user interactions. Meanwhile, for IT originals, We are sharpening our focus on premium content while the decentralized platform drives scale of original well-supplied ads of signature offerings. Additionally, we are building a combo, cohesive support system so creators can focus purely on creativity. One key pillar is NADOCRA, and she is a proprietary platform for zero-grade content production. NADOCRA is powered by both public and self-deployed LATCH models, but it goes beyond generic models. It's built upon our years of technology infrastructure and deep content expertise. We transform Years of industry know-how into AI agent and combines them with our core IP and digital assets to deliver accessible platform capabilities. NadoPro offers one-stop services from content creation to operations and commercial collaborations. Beyond NadoPro, we offer professional training and work spaces We also facilitate financing solutions connecting talent with capital from our own funds and external investor networks. Now, let's explore what defines IT's long-term investment value and how we are uniquely positioned to lead in the AI area. Our confidence rests on two core pillars. how to replicate competitive mount. We possess a unique brand of deep content expertise and cutting-edge technology. We have a proven DNA of innovation from pioneering general specific sales brands to now leading the AIGC transformation in the industry. Crucially, we possess a vast high-quality IP library that is essential in the AI area, alongside a high-engaged user base that we are committed to serving with excellence. Second, a long-term structural enhancement to our business, economics, AI is poised to address major industry pain points, expanding our margins and maximizing capital efficiency. At the same time, decentralized platforms will boost content diversity to capture broader audiences, while IT alternatives focus on crafting enduring premium IPs together. These initiatives fuel our diversified monetization system, expanding membership, advertising, and offline experiences, unlocking IP values across both domestic and global markets. Before we dive into Q1 details, I want to emphasize our core philosophy, the true power of technology as to empower humanity, not replace it. It will serve audiences with richer, deeply resonant content. It will empower creators to overcome human limitations, turning their boldest inspiration into reality with absolute efficiency and freedom. Ultimately, it will elevate the entire industry, unlocking new avenues for growth and helping more creators, especially young talent, realize both their creative vision and commercial value. Now, let's move on to the detailed performance in Q1. Let's start with content. We are pioneering AI-driven storytelling and talent cultivation. In Q1, we unveiled Peter Paul IT AI Delta, featuring a suite of 16 titles across science fiction, thriller, wuxia, and fantasy genres. Each running 11 to 20 minutes, NADO Pro powered the key production process from capture design and scene setting to storyboarding, demonstrating AI's transformative potential in professional content creation. In terms of our long-form drama performance, The Punishment 2 became our second front chart with two seasons exceeding the 10,000 ITA popularity score. Pursuit of Jade also surpassed 10,000, while All In Cause produced a custom drama, How Dare You, exceeded 9,000. Both Pursuit of Jade and How Dare You resounded strongly with young female audiences further solidifying our connection with these key demographics. Furthermore, we secured our leadership in realistic and suspense genres. Born to Be Alive earned the highest toolbar rating among all domestic drama releases in Q1. And People Between Us 2 entered our suspense theater was also well-received by users. Four variety shows of in-house production went there together. Yu Zhou, Shan Shuo, Qin Zhuyi topped the enlightened market share ranking for the first quarter. For animations, we expanded our offering with four key original titles. Among these, the long-running The Great Ruler, Da Zhuzai, continued to captivate audiences, and season two of How Dare You achieved a strong synergy with its drama scenarios. For microdramas, original production contributed over half of revenue from this category in Q1. AIGC has emerged as a powerful driver for content releases. In Q1, we launched more than Suits of the AI-generated microgrammars further enriching our offerings. Finally, for microanimation and AI-native formats, we are rapidly expanding our library, which features over 14,000 titles as of quarter end, with viewership continuing to rise steadily. Next, let me show our Q2 content pipeline. Our drama serials line up features a rich variety of titles, from historical epics to niche gems, including Echoes of Southern Moves, 八千笔录云和月, Bloom Life, 他是两个, Born with Luck, 地质上犯罪, The Earth, and archives the Nanyang mystery, Nan Bu Dao An. Among the already released titles, Born with Luck gained wide popularity driven by its innovative storytelling, combining comedy and mystery. and surpassed an IT-populated score of 10,000, becoming the third to reach such mark this year. For films, our pipeline includes original online movies, The Thin Tree, Free World, Wings of Death, Miles B.T., and The Counterfeit with Chao Chung-an. For licensed titles, we will release theoretical hits on our platform like Pegasus 3 featuring Shun, Awaking of Insects in Silence, Jinzhou Shun, and Blades of the Goddess, Biao Ren, along with the online film The Legend Hunter, Xiong Jun. For variety shows, we will continue to captivate audiences with established front charts such as Five Hearts Season 6, Become a Farmer Season 4, The Drop of China 2026, and Yes, I Do Season 6. While launching new IPs like Voice of Young, Chaoran, Qingchun de He Chang, for microgrammers, we have a diverse slate. schedule, including perfect match, ,, ,, ,, ,, ,, ,, and the of Phoenix. For admissions and the children's content, we will continue the long running against You can check and then you build a localized adaption of the BBC classic. Now turning to membership business, revenue will grow sequentially, primarily driven by premium titles, including pursued object, the punishment tool, how they are used, and the demo between us. Additionally, All refined upselling strategies and value-driven membership options successfully encouraged users to extend their plans, driving a year-over-year increase in average subscription duration for monthly subscribers this quarter. Additionally, all higher-care upselling membership continued to scale, driven by a high highly differentiated value proposition that features free express package. Next, moving on to advertising business or brand as revenue contribution from targeted drummers. The COVID double digit annual growth with titles like Born to be Alive, How Dare You, and the pursuit of JIT gained strong recognition from advertisers sector-wise. Food and beverage, internet services, and e-commerce all achieved double-digit annual growth. Furthermore, we are expanding our advertising appeal across new content formats. For example, we partnered with leading advertisers to co-produce stream of content for micro-dramas, creating new avenues for brand integration. On the technology front, AI continues to empower our advertising operations. We leverage NanoPro to produce marketing materials and combine AIDC capabilities with our IPs to generate high-quality ad content. Learning Q2, our focus will be on maximizing ad sales across premium variety shows, dramas, and the traditional display ads. We further enhancing monetization on large screens. Concurrently, we will continue to leverage AI to optimize advertising efficiency. For performance ads, the advertiser mix is Healthier and more balanced revenue from small and mid-sized advertisers recorded strong annual growth with suspended improvements by sectors. Internet services, e-commerce, and minigames delivered outstanding quarterly results. Additionally, monetization efficiency for microgrammers emerged as measured by revenue per inventory unit increased by over 60% year-over-year. For the rest of the year, our strategy for performance has focused on four key areas. First, expanding our client base across high-growth verticals, including internet services, short-form videos, mini-games, and AI tools. capturing greater market share during peak window such as major e-commerce festivals. Third, enhancing monetization efficiency through AI-powered capabilities. Finally, typing into additional ad budgets by harnessing a more diverse content ecosystem and upgraded ad placement system. Moving on to our business performance in regions outside of mainland China. Membership revenue increased by over 40% annually in Southeast Asia markets. Membership revenue from Indonesia grew by over 80% annually. Meanwhile, Portuguese and Spanish-speaking regions demonstrated robust growth with membership revenue by over 100% annually. Average daily subscribers reached a new high. The global influence of C-Dramas continues to expand. Notably, the pursuit of jet labs, performance across multiple markets, and a secure top position on our international platform, Billshape Rankings, is top to Google Trends, among all C drummers broadcast during the same window in 15 markets and set a record as the most searched Chinese drummer on Google. Beyond C drummers, we are scaling original local productions to elevate the appeal of our content library particularly. In case of Southeast Asia markets in Q1, our first original Thailand show, Running Man Thailand, delivered exceptional results, setting multiple new records for variety shows on our international platform. Google Trends confirmed its position as the most popular. over the past three years, and the title earned strong recognition from advertisers. Meanwhile, our first original Indonesian drummer is on track to premiere in Q2, marking a further step in our localization journey. Our overseas micro-drummer business also gained momentum with growing revenue or contribution filled by both licensed and original content. Our original production pipelines consistently deliver new releases across multiple languages, including English, Thai, Korean, and Indonesian. Next, our experience business. We focus on two core areas, IT-based consumer products and IT land. For IT-based consumer products, our soft-operated merchandise deliver solid performance with collectible tasks from pursuit of a new sales record in its category. For offline experience business, our first IT land in Yangzhou performed in line with expectations and was highly acclaimed for its scenery design, immersive experiences, and technology-enabled interactions. Going forward, we will continue refining operations and introducing new creative offerings to encourage repeat visits and onsite consumption. Furthermore, we are leveraging our experience gained in Yangzhou to drive to development of new location in Kaifeng and Beijing, which are progressing smoothly. Now, I would like to hand it to Ying for the financials. Thank you.

Thanks, Mr. Gong. And hello, everyone. Let me walk you through the key numbers for Q1. Total revenue score, 6.2 billion RMB, down 8% sequentially. Membership services revenue reached 4.2 billion RMB, up 2% sequentially, driven primarily by our diverse lineup of key summaries. Online advertising revenue was 1.2 billion RMB, down 8% sequentially, primarily due to seasonality. Content distribution revenue reached 358.7 million RMB, down 54% sequentially, primarily because less number of diamonds we distribute to third parties. Other revenues were 426.7 million RMB, down 22% sequentially. Moving on to costs and expenses, we adopted a disciplined strategy in Q1. Content cost was 3.7 billion RMB, down 2% sequentially. Total operating expenses were 1.2 billion RMB, down 10% sequentially. Moving on to cash flow. Net cash provided by operating activities were 186 million RMB, reflecting some encouraging early signs in financial performance driven by our new business initiative. Turning to bottom line and cash balance, non-GAAP operating loss was 149 million RMB, and non-GAAP operating loss margin was approximately 2%. As of the end of Q1, we had cash, cash equivalents, restricted cash, short-term investments, and long-term restricted cash, including prepayments and other assets, and a total of 4 billion RMB. The sequential decrease in cash balance was primarily due to the repurchase of our 6.5% convertible senior note due to 2028. which reduced our outstanding debt, further strengthening our capital structure. At quarter end, the company has a loan of 636.6 million U.S. dollars to PAG, recorded under the line item of proponents and other assets. We remain committed to delivering shareholder value over the long run. In March, we announced a proposed listing on the main board of the Hong Kong Stock Exchange and our first share repurchase program of up to US$100 million effective through September 2027. Up to now, we have repurchased a total of approximately for $5 million for a total cost of $8 million. For detailed financial data, please refer to our press release on our IR website. Now I'll open the floor for Q&A.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. We ask that you please ask your question in Chinese first and then translate the question into English. In the interest of time, please limit it to one question per person. If you would like to ask further questions, you may press star 1 again to rejoin the queue. Your first question comes from Zaiqing Zhang with CICC. Please go ahead.

Thanks management for taking my question and my question about NADO Pro. The company previously launched NADO Pro as an agent for film and television content creation. Can management share more details about the recent progress of NADO Pro and any specific examples of its practical applications? In addition, how does management view the future commercialization prospects for NADO Pro? Thank you.

Let me answer. Thank you. AnotherPro is a platform for professional creators. It's not just a simple large model. There are also large models that we've been working on for years. We've been working on editing, shooting, and production, and we've been able to bring back some of the industrialized experience. and tools that have been used within iQIYI in the past few years. For example, script evaluation, search for the camera, and these functions are also included in NADO Pro.

The CEO, Gong Yu, is taking this question. So NADO Pro is iQIYI's proprietary platform for studio-grade production. It is powered by public large models, but it goes beyond generic models. It's actually built upon our years of tech infrastructure and deep content expertise. For example, we have transformed years of industry know-how from key areas such as screenwriting, filming, and production into AI agents and combine them with our core IP and digital assets to deliver accessible platform capabilities. Creator tools previously used only within ITE, such as the script evaluation and shop-based reference search, have now been incorporated to NADO Pro.

Since April 2, NADO Pro has had over 10,000 active creators since NADO Pro officially opened to the market. There are also creators from traditional film companies,

NADO Pro has been available to all creators across the industry since April 20th. We now currently have over 10,000 active creators on board, ranging from traditional production companies to independent creators.

And then the content of the production includes long-distance dramas, medium-distance dramas, web stories, short-distance dramas, of course there are also short-distance dramas, and commercials.

Content production covers a wide variety of formats, including the long-form dramas, micro-dramas, micro-animation, and for videos, and also for some commercial app content.

Of these, about 100 are IT-oriented projects.

among which about 100 of them are IT original titles of projects.

Recently, Nanoprom has launched the Creator Community, allowing creators to exchange experiences directly, and to respond to Nanoprom's gratitude to the IT team. In the future, we will also launch an integrated platform,

Another tool actually recently launched a creator community as a platform for creators to interchange experiences and want some feedback, and that will feed internal development for the upgrades in the coming versions. And also, this platform will feature some commercial mass-making features upcoming next. And then these will empower the creators with the full cycles, from content creation to commercial monetization. In addition, the international version of Naadu Pro is in development and will be online soon. Regarding another commercial prospect, it will serve as a standalone product to boost, actually, monetization capabilities. And it will continue to reiterate and continue to improve the development and also to go for the upgraded version to create more better features.

Thank you.

Thank you.

Thank you, Yuxin. It comes from Dickey Way, City, East Coast.

Thank you management for taking my question. Would management share some latest progress about the industry anti-privacy update? Thank you.

Thank you. We will invite our chief content officer, Wei, to take this question.

Please go ahead. Thank you. I will answer this question. Recently, we have seen some very favorable situations in the field of counterfeiting. Since the end of April and early May, the National Broadcasting Bureau has started to focus its focus on the management of illegal websites and browser search engines For the anti-terrorism situation, we actually have

observed very positive progress. Around the end of April and early May, the National Radio and Television Administration launched a targeted campaign to crack down on the priority distribution of trauma content across illegal websites, browsers, search engines, and cloud storage services. The industry regulators actually attach great importance to this issue and have established

clear requirements for the prevention and handling of online copyright infringement, including some of the initiatives.

To give you guys some examples, for example, We established a rapid response mechanism for infringement content, enabling real-time communication between copyright owners and platforms to ensure swift response and removal.

Secondly, there is a double responsibility for the pressure on the platform and the land management.

The General Directorate requires the provincial and municipal authorities to implement the land management responsibilities to increase the monitoring and processing efficiency.

Second, the new policies and regulations actually enforce dual responsibilities for platforms and local authorities, requiring provincial and municipal to fulfill their local management duties. For example, enhancing monitoring and improved processing efficiency. The platforms must resolve and remove infringing content within 24 hours of receiving a report or notice. For newly released dramas, hit series, or key titles, the removal must be completed within four hours.

And third, building a coordinated enforcement mechanism, regularly reporting on infringement status, takedown rates, and the typical cases,

for repeat offenders who will be publicly named and handed over to copyright and police authorities for investigation and prosecution.

这次的集中治理将与常态化的治理相结合, 后续紧随其后的国家版权局的建网2026专项行动, 也把网络侵权盗版列为了首要重点的整个领域, 治理的力度将会更加严厉。

This targeted campaign will be integrated with routine regulatory enforcement. Looking ahead, the National Copyright Administration's short-net 2026 anti-piracy special campaign has designated online copyright infringement and piracy as its top priority, signaling even stricter enforcement measures.

We see that the processing efficiency of the current financial power has indeed been significantly improved. We also believe that the future of copyright issues will be significantly improved.

Strong copyright protection can ensure the commercial interests of all sectors in the industry, and can promote the investment will of our quality content creation to form a positive cycle of content supply. iQIYI will continue to upgrade the mechanism of technology and operation to build a positive copyright ecosystem, and help to improve the user size and revenue level of our long-term video business.

Currently, we're happy to see the efficiency of handling infringements has improved significantly, and we believe the piracy issue will be substantially mitigated in the future. We believe strong copyright protection safeguards the commercial interests of all industry stakeholders, with the willingness to invest in high-quality content creation and foster a virtuous cycle of content supply. And for ITE, we will continue to upgrade our technology and operational mechanism to co-build a healthy copyright ecosystem, ultimately helping to drive user growth and revenue of our long-form video business. Thank you.

Thank you. Your next question comes from Jenny Yuan with UBS. Please go ahead.

So let me translate myself. So membership business saw sequential recovery in the first quarter. in particular, overseas business delivery robust growth momentum. So how does management view the sustainability of this improving trend? And how should we think about the membership business outlook into the second quarter and beyond? Thank you.

Thanks, Jenny. We'll invite the Senior Vice President of Membership Business to take on this question. Go ahead, please.

Okay, I'll answer this question.

In Q1, driven by a strong slate of premium content and refined operational strategies, membership revenue delivered sequential growth in the first quarter.

In Q2, our content is more rich in accessories and materials. Recently, many works have been released, and they have performed well. Among them, the style of Dizhi Chang San Zhui is based on suspense and comedy, and the heat is extravagant. In addition, Ba Tian Li Lu, Yun He Yue, Yu Ji, Jia Ye, Wu Ha Liu, Zhong Di Shi, We have a rich content pipeline for Q2.

A number of recently launched titles actually have performed well. Notably, Born with Luck surpassed 10,000 on IT's popularity index, powered by its distinct suspense plus comedy narrative style. And in addition, we have also an extended slate for the second quarter, including the long-term dramas, for example, Echo of Thousand Moons, The Epic of Mealy, The Heir, and for variety shows, we have Five Hubs Season 6, Become a Farmer Season 4, and we believe these content will effectively reach a broad membership base.

In addition, in Q2, we will introduce We will focus on the recruitment of silent users, as well as the optimization of the Chinese market, which will increase the number of members. At the same time, we will increase the size of the users and the income of the members, as well as the ratio, through the joint operation with TV manufacturers. Finally, we will make sure that Q2's most important sales node, 618, Looking ahead, looking for Q2, we're looking at our operations and the sales priorities.

For example, we're focusing on reactivating dormant members. optimizing variety show schedules to offer more content for members, and expanding large-screen membership via joint operating initiatives with smart TV manufacturers, and also leveraging the June 18th e-commerce festival to boost annual and bundled membership. And together, we believe these efforts will expand our subscriber base and extend subscription cycles.

Looking ahead, as the stability and consistency of our premium content pipeline continues to strengthen, coupled with our ongoing optimization of our membership operations,

We believe our membership business will maintain a steady development trajectory. Thank you.

Thank you. Your next question comes from Thomas Cheung with Jefferies. Please go ahead.

晚上好,謝謝管理層接受我的提問。 我的問題是關於我們海外的業務的。 When we look at the trend in Southeast Asia, it is all in a very high-speed growth state. The question is, what is the situation of our investment in overseas in the future? Then we can share the habits of overseas and domestic users, or whether they have some metrics to share in the trend of paying. Thanks, management, for taking my question. And congratulations on the fast growth of your overseas business. Just now, we talked about the fast growth in Southeast Asia. So may I ask about our investment strategies in Southeast Asia market? And also, can you share about some of the differences or similarities in terms of the audience preference in domestic versus overseas? Thank you.

Thank you, Thomas. We'll invite our Senior Vice President of our World Received Business, Mr. Sampa, to take on this question. Please go ahead.

Okay, hello everyone. I'll answer the first part of the question. I'll answer the first part of the question. I'll answer the first part of the question. I'll answer the first part of the question. Okay, well, I will take this part into two segments.

First, for the key markets, Currently, our key markets are performing pretty well, and then for the Southeast Asia market, have been growing quickly. And for the market that's crucial for our Southeast Asia, we'll continue to invest in countries such as Thailand, Indonesia, Malaysia, Vietnam, and Philippines. And also for some of the emerging markets that have also grown pretty well, for example, North America, Brazil, etc. So we'll continue to invest in these areas and markets.

Regarding the specific mistakes, the first one is regarding content. We continue to use recording as the core to promote and get our users. In the middle of recording, we use idolatry as the core. And then specifically for recording, we have already produced it in China. We will Let's start with content.

So for us, our key differentiation is our C drama. So that will continue to be our key in terms of getting users and especially for these content that's favorable and liked by young female users. And in key areas that I mentioned earlier that will increase the promotional activities and marketing activities for these For example, for user growth, using content to attract and also to retain users. And for local content, we'll control and also have a good case in terms of the content investment, also in terms of the volume that we're investing into the local content. We also focus for the young female users like genre and content for local production.

um um

And for a third, for our matured markets, we'll continue to cooperate with telecom carriers and also e-commerce platforms to increase our membership scale. And we will continue to use this strategy to replicate it to other markets that we're trying to. Thank you.

In terms of the user demographics for overseas audiences, the majority are focusing on the young female users who are under 40 years old. For the user behaviors for overseas market, each major market is a bit different.

Some of them have higher user, you know, restricted cycles, better cycles, better retention than others. But overall speaking, the R pool for overseas memberships are higher than the domestic ones. Thank you.

Thank you. Your next question comes from Gigi Zhao with Guangfa. Go ahead.

Thank you, Guan Licheng, for accepting my question. You can hear me, right? I will translate the question myself. Seeing IT's efforts in NADO Pro and fostering AI-driven creation and talent cultivation, how do we view the competitive landscape in the AI era? Thank you.

Of course, the CEO won't be able to take this question.

Please go ahead. Video, as we usually say, is the biggest problem with video. The biggest challenge is that the cost is getting higher and higher, and the risk of investment is getting bigger and bigger. The number of works has to be reduced, and the more investment you make, the bigger the cycle. AI technology can greatly reduce costs and shorten the production cycle, so it will allow more creators to make long-term content, which is what I usually call long-term content. Then the number of works will gradually increase, and the number of users will naturally increase, forming a positive cycle. um

For long-term video, in the past, our challenge has been the investment scale or the amount that we invest in content is massive. The content cost is high, which means the investment risk is high, which leads to less number of titles that's been invested and rolled out for the industry. And for any content that we invested, we typically focus on the premium head content. That was the cycle that we faced and the challenge we faced. For AI, it actually fundamentally improves the situation. Under the AI model, the content cost is much cheaper. The production cycle and production period is shorter, which means there are more titles, a number of titles will be rolled out and introduced in this industry. Because there are more content, there are more choices for users to enjoy. So user skill will increase under the new AI model. So overall speaking, we think it's greatly beneficial for long-term video to improve its business fundamentals and economics, and also to attract more users to the platform.

In order to address this change, we also took the initiative to do some work, such as the development of NADO Pro, for example, to make our IT function more powerful. More people cooperate with IT in a way of division, so that creators can get more income. These measures are all for the sake of addressing the cost reduction and increasing the number of creators and works. This is something that must be done.

To better accommodate this industry trend, you know, we wrote out a number of initiatives, for example, the Narble Pro we discussed, and also the IG account, which means the users can upload their content to our platform. Under the revenue share model, they will have the opportunity to introduce their content to more users to enjoy and to increase their revenue performance and also monetization capabilities. So under this whole backdrop, we believe that the content cost will be lower and the number of video content will be increased.

In fact, looking back at the past 10 years, the development of short videos and short films is due to technological innovation or other factors that lead to the cost of creation will be reduced, the foundation of creation will be reduced, and more creators will be created, which will lead to prosperity in the industry. In the long term, we very much believe that there will be the same pattern.

If we look back for the past 10 years of the Internet, and especially for short-form video and also microdrama in the recent years, we believe that technology is the fundamental driver in terms of the industry boom and industry development. So we think, you know, under the AI era, we think it becomes a great opportunity for the long-form video to have better economics and better industry dynamics. Thank you.

Thank you. There are no further questions at this time. I'll now hand back to the company for closing remarks.

Thank you, everyone, for participating on the call today. If you have further questions, don't hesitate to contact us. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.