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spk01: Hello, ladies and gentlemen. Thank you for standing by for Leju Incorporated's third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Effie Kang, head of capital markets for the company. Please go ahead.
spk03: Thank you very much. Hello, everyone, and welcome to Li Zhi Inc's third quarter 2020 earnings conference call. We released our financial and operating results via Newswire services earlier today, and they are available online. Participants on today's call will include our founder and CEO, Mr. Marco Lai, and our acting CFO, Ms. Chen Fanglu. Management will begin with prepared remarks, and the call will conclude with a Q&A session. As a reminder, this conference is being recorded. In addition, an earnings highlight presentation and a webcast replay of this conference call will be available on the IR section of our website at ir.lich.fm. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements typically contain words such as may, will, expect, target, estimate, intent, belief, potential, continue, or other similar expressions. Forward-looking statements involve inherent risks and uncertainties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. many of which factors are beyond our control. The company, its affiliates, advisors, representatives, and underwriters do not undertake any obligation to update these forward-looking information, except as required under the applicable law. Please note that the EGIS earnings press release and this conference call include discussions of unaudited gap financial measures, as well as unaudited non-gap financial measures. Li Zhi's press release contains a reconciliation of unaudited non-GAAP measures to unaudited GAAP measures. I will now turn the call over to our founder and CEO, Mr. Marco Lai. Please go ahead.
spk08: Hello, everyone. Thank you for joining us today. Our healthy third quarter results
spk03: amidst COVID-19 normalization in China, reflected our leading national position in the online audio sector. For the first time since going public, we achieved a non-gap quarterly profit, which is also a testament to the scalability and robustness of our business model.
spk08: We strive to continuously enrich and optimize our content. With the quality UGC content, we continuously attract more users, and improve user participation. and introduced a series of innovative features to further enhance the user experience. In this quarter, the average number of active users on our platform has increased by 21%, reaching 56.2 million. The number of monthly paid users has increased by 17%. In addition, the average payment amount of our users has returned. This has further highlighted the value of our unique content ecosystem. The number of content creators in this quarter has reached 6.15 million. At the same time, because we continue to promote content creators to participate in user interaction through audio and video entertainment functions, the user penetration rate of audio and video entertainment versions in this quarter has increased from 12.8% in the same period last year to 13.5%.
spk03: Our dedication to keep enriching and optimizing our content offerings, as well as leveraging high-quality user-generated content, continues to drive user attraction and engagement. We also introduced many more innovative features to further improve user experiences. In the third quarter, our monthly average user base grew by 21% year-over-year, reaching 56.2 million. and our monthly average paying user base increased by 17% year-over-year. Additionally, we saw a rebound in the average user spending, signifying the increasing value of our distinctive content ecosystem. The number of average monthly active content creators reached 6.15 million during the quarter. And thanks to our efforts on driving interaction and engagement between content creators and users, through audio entertainment features. The quarterly audio entertainment user penetration rate increased to 13.5% from 12.8% a year ago.
spk08: I will introduce the main areas of our expansion in the third quarter.
spk03: Despite unprecedented challenges in the macro environment this year, our growth momentum reaffirms our ability to capture rising demand for high-quality digital audio experiences and audio interactions. LiZhi is at the forefront of the rapidly developing audio entertainment market by providing users with captivating listening experiences, driving creation of premium content, and expanding user engagement opportunities. We are committed to unlocking the great potential of the online audio market to achieve our well-defined vision for the future. I will now discuss the key areas of focus during the third quarter.
spk08: First of all, we continue to expand and optimize the content of UGC with a wide variety of words, and achieve long-term, fast-growing growth. We are proud of the importance of creating content, and the effective execution of the content strategy. The number of broadcasts uploaded to the Liz platform continues to grow steadily. In this quarter, our platform added 1,977,000 audio programs. As of September 30, 2020, the number of broadcasts accumulated reached 2.3 billion, which is 46% of the total growth.
spk03: Firstly, we continue expanding and optimizing our extensive and diverse user-generated content portfolios to be well positioned for sustainable growth. As we have a strong emphasis on content creation and continue to execute initiatives of our content strategy, the number of podcasts uploaded to our platform continues to grow rapidly. In the third quarter, with 19 million new podcasts uploaded to our platform, our cumulative number of podcasts reached 234 million as of September 30, 2020, representing a significant 46% increase over the previous year. 在本季度,我们通过一系列的创新举措,进一步促进内容创作和优化内容的品类,
spk08: We have improved the audio creation tool and assisted the creation of content. In addition to the audio and voice beautification functions of advanced audio technology, we have also added a lot of audio materials to the platform, including star recordings and user-generated content. We have modified the main page of the LiZi App, re-organized and launched our benchmark products, In the quarter, we further enhanced the content creation
spk03: and optimize the content genre through a number of initiatives. We further improved audio creation tools to support content creation, in addition to audio effects and beautification functions based on our audio-centric technology. Now we provide more audio content templates on the platform, including audio recordings of celebrities and original user-generated materials. We refreshed our Leage app homepage and further organized and launched representative genres with redesigned interface and navigation functions in cleaner and more simplified features. We improved user exploration and listening experiences among wider platform offerings. We are pleased to note that a few of the new content genres, such as entertainment and celebrity, and Leash Premium, which presents the exclusive collections of high-quality podcasts, have gained especially strong traction with existing and target users.
spk08: This season, we continue to promote the diversification of content. We introduce more content based on popular topics. At the same time, through various innovative operations, we encourage content creators to create more special content. and strengthen our platform's attraction to users. For example, we launched a voice-over live show, and created music content with some popular TV dramas and variety shows. For example, the popular TV series and variety show , caused strong fans and users to be allergic to it. with over 200,000 views on average, and more than 1.3 million views on the entire platform. We also launched an event called IDOL's Today's Business, where we invited the most popular idols to share their stories of participating in the competition, their feelings and feelings after the competition, and interact with fans through sound. In the event where I was going to be on the first page, we invited content creators, Based on different themes, creating high-quality audio content, we encourage the content creators of the Central Committee to actively speak up on the platform and provide higher traffic and exposure for the best content creators. In addition, we have also launched a self-operating paid broadcast subscription project, which has actively played an important role in the value of the high-quality audio content of the LIS platform, which has further enhanced our transmission capability.
spk03: In the quarter, we also diversified our content genres to bring in more content aligned with hot and trendy topics. We are leveraging an array of creative operational campaigns and promotional activities to generate fresh and distinctive content from creators and to enhance the platform's appeal to users. For example, we launched live audio shows and produced podcasts in collaboration with a number of popular TV series. and variety shows such as Nothing But 30 and the coming one, Super Band, which created huge fan base and user interest. Each episode was played more than 200,000 times on average and reached more than 1.3 million times the exposure. We also launched a campaign called Idol Show Today, in which we invited some of the most popular idols to share their stories and feelings on competitions and to interact with their fans through voices. In our going-to-front-page campaign, we invited content creators to produce high-quality podcasts based on different themes. This encouraged Me Too long-tail content creators to be more engaged in and active on the platform, and we rewarded the best of them with increased user traffic and higher levels of exposure. Moreover, we launched the pilot playlist subscription program to leverage the growing premium audio content on our platform and further enhance our monetization capabilities.
spk08: At the same time, we are actively expanding our blogging business and continuing to build a leading position in the Chinese blogging industry. In the end of September, we launched the 2.0 recovery plan. As well as online and offline resources, it is only from the upgrade of the transformation service system, the bokeh salon industry, the flow of support plans, and the new data analysis center, etc., to fully support content creators, to absorb more potential content creators, to increase content reserves in terms of quality and quantity. More than 50,000 content creators have participated in this event in the last 30 days of the event. Recently, we also held the first offline blog salon in Beijing, inviting famous blog creators from various industries to participate and share their creative experiences. We also plan to hold offline blog salons every month, as well as more blog related events. In the meantime, we are actively working on expanding our podcast business and strive to build the leading position of Leech in the Chinese podcast industry.
spk03: In late September, we launched the Ecoplan version 2.0, integrating online and offline resources to support content creators in various aspects of operations, including upgraded commercialization service systems, industry podcast salons, traffic support plans, and brand new data analytics capabilities. We aimed to attract more new creators and improve content offerings in both quality and quantity. More than 50,000 podcast hosts participated in the first 30 days of this program. Recently, we hosted our first offline podcast salon in Beijing and invited popular content creators in the podcast sector to share their creation experiences with podcasts. We plan to host more podcast salons and related events every month to establish effective channels of communication and build relationships with existing and future content creators. We believe these initiatives will help us captivate and nurture more talented creators to enrich our content offerings.
spk08: Another key point of this season's operation is to enhance user participation and improve community activity, while strengthening the link between users. In the third quarter, we launched Users can recommend their favorite content creators to the platform and help them grow quickly. This allows creators to gain more exposure and interact with more users. We see that the content creators selected from the recommended activities are more active and active. and more interactive in the audience. This further boosts the positive cycle of our community ecosystem. This event also uses our advanced AI technology to effectively and efficiently dig up more highly potential content creators. In order to better create a community-based audio experience and pull the distance between users, we have also launched Another area of focus in third quarter involved enhancing user engagement.
spk03: increasing the vitality of our user communities and strengthening the bonds between different users. In the quarter, we launched a variety of endorsement campaigns through which users can endorse the performance of their favorite content creators and help them grow on the platform. This enables creators to have more exposure and opportunities to interact with more users. we've seen that the hosts elected from the endorsement campaigns are more active in the content generation and have a better engagement with the audience, which further elevates the virtuous cycle of our vibrant community. The campaigns also utilize our advanced AI technology to effectively and efficiently identify the high potential content creators to build immersive audio experiences in our community and bring users closer together. We've created a sub-site of macro blogs where users can post and interact with each other through a variety of social networking functions. Thanks to all these efforts, enhanced user engagement, and community vitality, the monthly total interactions reached a record high of 3.2 billion times in the third quarter.
spk08: In addition, in this quarter, we see the interaction between bloggers and audio and video entertainment. These two blocks are more closely integrated. More content creators and users are active in these two blocks at the same time. Among them, more than 65% of audio and video entertainment hosts are converted by blogging content creators. This ratio has increased by 15%. This means The content creators have a higher participation in different sections of the platform. In addition, we have also held various activities to help blog creators gain more attention in different sections. For example, at the Li Zhi Film Festival held in August, we invited content creators to create blog programs with films as the theme, and share their stories related to films through talk shows and live broadcasts. This kind of activity also made those bloggers who have never tried live interaction experience interactive music entertainment play. They not only gained more fans for their own broadcast, some bloggers have also become long-term anchors of music entertainment. They continue to interact with their fans through various music entertainment functions. We believe
spk03: In addition, we've seen a closer integration of podcast and audio entertainment as users and content creators are increasingly active in both segments. Over 65% of our audio entertainment hosts were converted from podcast to content creators. marking a year-over-year growth of 15%, indicating the higher participation of content creators across different segments of the platform. Moreover, we've hosted various campaigns to help podcast creators gain more attention in different segments. For example, in August, we hosted a Li Zhi Film Festival and invited content creators to produce podcasts and share their stories about films through live streaming talk shows. This kind of event has motivated podcast creators who have never tried the audio entertainment section before joining the live streaming shows and had a truly interactive and immersive audio experiences. They not only gained more followers for their podcasts through the event, some of them have even become audio entertainment hosts and interacted with their followers through various audio entertainment features. We believe innovative and interactive features have effectively strengthened the connection between creators and users and enabled podcast creators to attract more audiences.
spk08: In addition to the growth of the current business through various strategic measures, we are also exploring new opportunities to promote a diversified business model. With a vast library of content and advanced technical capabilities, We are actively developing the audio and video market in the car industry. Through cooperation with new energy car manufacturers, we have jointly developed this market with great potential. We believe that this project has a strategic meaning for our further development in the online audio and video industry, and can play an important role in the use of audio and video content in diversified use scenarios. We will use audio and video technology and operation to improve users' experience with years of experience and advantages, to attract a wider audience, and to expand our users' scale. We will also work with the leading companies in the market to further advance the strategy of car audio and video, to bring better audio and video experience to users.
spk03: In addition to maintain the business growth through various strategic initiatives, we are also exploring opportunities that will allow us to diversify our business models. Leveraging our massive content base and the leading technology capabilities, we are deploying the in-car audio market and exploring the sizeable market with great potential by collaborating with new energy vehicle producers We believe this plan is of strategic importance for our further development and expansion in the online audio industry, and will optimize the advantages and values of our audio content in diverse use scenarios. We will improve the user experiences, reach a broader user base, and increase our user scale through our years of experiences and strengths in audio technology and operations. we will cooperate with leading companies in the market, advance our in-car audio strategies, and deliver superior audio experience for our users.
spk08: In terms of audio and video technology, we strive to promote the application of artificial intelligence technology on our platform. Through large data analysis and machine learning, we constantly discover talented content creators on our platform. With the support of our advanced AI presentation system, many new and potential content creators have gained the attention of many fans in a short period of time, and have grown rapidly on the platform. In Resonance Project 2.0, we will further upgrade the data analysis center to help creators to understand their creativity and fan base from different angles. In addition, we have established an AI-advanced online audio and video management mechanism to identify and process inappropriate content. At the same time as improving content quality, we have further enhanced the platform's ability to control and operate content. In the future, we will continue to develop these leading technologies of artificial intelligence
spk03: In terms of audio technology, we are dedicated to advancing the application of AI technology on our platform. Through big data analytics and machine learning, we continuously inspire and support talented long-tail creators on our platform. Many newly joined high-potential content creators have gained a large number of followers and more attention in a short time. with support of our AI-enabled recommendation system. In the Equifan 2.0, we will further upgrade the data analytics center to help creators understand their creation ability and theme base from different submissions. In addition, we established an AI-supported online audio content management mechanism to identify and deal with inappropriate content. This has improved our content controllability and enhanced our operating efficiency besides the quality improvements of content. In the future, we will continue to develop cutting-edge technologies such as artificial intelligence to empower the content creators and business development. 总之,我们将继续不懈努力,持续为用户创造价值, In conclusion, we will continue to making efforts to create value for our users, maintain our leading position in China's online audio industry, and capture the tremendous growth opportunities of the online audio market. Thank you, everyone. With that, I will now turn the call over to our Acting CFO, Ms. Chen Fanglu, who will discuss our financial results in more detail.
spk05: Thank you, Michael. Hello, everyone. We are pleased that our third quarter financial results were in line with our expectations. and our endeavor to increase operating leverage brought about a set of improvements in profitability during the quarter. In the third quarter, our total net revenues increased by 10% to RMB 361.5 million from the same period of 2019, mainly contributed by the growth in our paying user base. Our average number of monthly paid users increased by 17% year-over-year to 448.3 thousand in the third quarter, driven by our content offering strategy and our unremitting efforts in driving user attraction and engagement. Currently, we generate our revenue primarily from our audio entertainment business, which contributed RMB 355.8 million to net revenues in the third quarter of 2020. representing a year-over-year growth of 9%. The increase was mainly due to our increasingly expanding user base and increasing the number of paid users for our interactive audio-social entertainment products during the period. Additionally, podcasts, advertising, and other revenue grew by 61% year-over-year to RMB 5.7 million in the third quarter of 2020. The increase was mainly due to our increase in the number of paying users in our podcast services and advertisers. Cost of revenue increased by 2% both year-over-year and quarter-over-quarter to RMB 270.9 million. The year-over-year increase was mainly due to the increase of salary and welfare benefits, payment handling costs, and bandwidth costs, which were generally in line with growth of the company's business. as well as the recognition of share-based compensation expenses that became effective upon and after our IPO, partially offset by a 1% decrease in the revenue-sharing fees because the incentive program for content creators, which launched in the third quarter of 2019, has been scaled down since February 2020. The quarter-over-quarter increase was mainly due to the increase of revenue-sharing fees to our content creators, which was in line with growth of their revenues. partially offset by the decrease of share-based compensation expenses in this quarter. Our gross profit was earned by $19.6 million in the second quarter or third quarter of 2020, representing an increase of 41% year-over-year and an increase of 60% quarter-over-quarter. Our long gap growth profit was earned the 91.9 million in the third quarter of 2020, representing an increase of 43% year-over-year and an increase of 1% quarter-per-quarter. Our growth margin increased by 100 basis points from the second quarter of 2020, reaching 25% in this quarter. Our long gap growth margin was 25% in the third quarter of 2020, compared to 26% in the second quarter of 2020. Operating expenses decreased by 13% year-over-year and 10% quarter-over-quarter to RMB 100.2 million in the third quarter of 2020. Research and development expenses, a key component of operating expenses, was RMB 55.6 million in the third quarter of 2020, representing a year-over-year increase of 28%. The increase was mainly due to our increasing number of research and development employees as well as the share-based compensation expenses, recognized upon and after our IPO. Selling and marketing expenses were RMB 27.1 million in the third quarter of 2020, decreased by 53% from RMB 58.3 million in the third quarter of 2019. A decrease was mainly due to reduced expenses related to branding and promotional activities in the third quarter of 2020. General and administrative expenses were RMB 17.4 million in the third quarter of 2020 compared to RMB 13.8 million in the third quarter of 2019. The increase was mainly due to the increasing expenses in salary and welfare benefits, professional services, and recognition of share-based compensation expenses upon and after our IPO. Our operating loss was RMB 9.6 million in the third quarter of 2020 narrowed down by 82% year-over-year and 62% quarter-over-quarter. Long-gap opening loss was armed with 2.9 million in the third quarter of 2020, narrowed down by 94% year-over-year and 74% quarter-over-quarter. Net loss was armed with 6.1 million in the third quarter of 2020, narrowed down by 87% year-over-year and 72% quarter-over-quarter. Long-gap land income was RMB 0.6 million compared to long-gap land loss of RMB 48.5 million in the third quarter of 2019 and long-gap land loss of RMB 8.2 million in the second quarter of 2020, respectively. Basic and diluted land loss per ADS were RMB 0.13 in the third quarter of 2020 compared to RMB 39.2 in the third quarter of 2019 and RMB 0.48 in the second quarter of 2020, respectively. Long gap basis and diluted late income per ADS were RMB 0.01 compared to long gap basis and diluted late loss per ADS of RMB 3.73 and RMB 0.18 in the third quarter of 2019 and second quarter of 2020, respectively. The difference between gap and long gap EPS is mainly due to adjustments to the equation of preferred share reduction values and share-based compensation. As of September 30, 2020, We have cash and cash equivalents, restricted cash, as well as short-term investment of RMB 350.6 million. Overall, we achieved meaningful progress in the third quarter of 2020. We continue to be optimistic about the future of online audio industry in China and across the globe. In the near future, we will continue to carry out our user growth strategy and remain dedicated to enhancing our content ecosystem. recently brought awareness, expanding technology capabilities, and advancing our strategic initiatives to build our platform for sustainable growth. With that in mind, for the fourth quarter of 2020, we currently expect total net revenues to be in the range of RMB $370 million to RMB $400 million. This forecast reflects our current market conditions, including those related to the COVID-19 pandemic, and reflects the company's preliminary estimates of market and operating conditions and customer demand, which are all subject to changes. Now, this concludes all of our prepared remarks today, and we will now open the call to questions. Operator, please go ahead.
spk01: Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, you may press the pound or hash key. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. Our first question comes from the line of Vincent Yu of NeedM and Company. Please ask your question.
spk07: Sure. Thanks, management, for taking my question. I actually have a few questions. My first question is, can you guys comment on the total time spent by users on the platform at the summer break or short-term during the third quarter? The second question is, can you comment on the paying behaviors of our highest paying user cohorts? Have you seen a significant rebound after COVID-19 subsided? Our third question is, do we have any updates regarding the celebrity live streaming initiative and the entitlement initiative? My fourth question is about the data regarding around podcast and the live streaming dual subscription program. That is to say, do we have any relevant data to share when our users subscribe to the broadcast and live streaming activities at the same time? Thank you. Okay, thank you.
spk08: Let me answer three questions. Okay, the first question is, in the third quarter, we all know that the term is shortened. the overall market of the platform users. Although this period is shortened, we still maintain a 52-minute daily market. We think this is very satisfying for us to meet the needs of our users for audio and video diversification. In this quarter, we have actually seen that we have further enriched and highlighted our quality content. Okay, Marco will take the first three questions and I will translate for him.
spk03: For the first question, it's about the time spent by users on the platform. So with a shorter summer break, we still maintain the average daily usage time of 52 minutes, which is thanks to our efforts on meeting diversified demands of users. So in this quarter, we launched a series of themed events and further enriched and highlighted our premium content. the massive high-quality content pool, and diversified interactive features further improved our platform's appeal to users, ensured the usage time, and enhanced the vitality of our community.
spk08: The second question is to evaluate whether these high-paying users have been able to return to life after the pandemic. First of all, in terms of audio and video streaming, There may be a big difference in the fact that audio live broadcasts are more popular. The concentration of paid users is relatively low. Our platform's income is rarely concentrated on the head of the user. Overall, with the introduction of paid work and paid learning, users have better balance some online and offline consumption, so that online consumption OK. For the second question, it's about the highest paying user cover.
spk03: and any rebound after the COVID-19 subsided. So first of all, the audio live streaming is quite different from the video live streaming. So online audio is much more a mass market. The concentration of paying user is relatively lower, with limited revenue concentration among the top users. So overall, we saw users have better balance the online and offline consumption, while the resumption of work and school. and online consumption is recovering. We saw a rebound in average ordinary user spending compared to last quarter, which is not due to the highest paying user cohort. Thank you.
spk08: The third question is about live broadcasts and ads. In terms of live broadcasts, we have provided them with a platform to interact with fans. At the same time, it also builds a channel for fans to get closer to the artist they like. Many talented artists are very willing to interact and interact with fans through online music entertainment.
spk03: So in terms of celebrity live streaming, we provide a platform for celebrities to interact with fans and a channel for fans to meet and interact with celebrities more closely. Many popular celebrities are willing to interact and communicate with fans through our online audio entertainment features.
spk08: We mainly hope to meet the needs of users and artists through a variety of play methods. There are also a variety of topics to enrich the content of this live broadcast. For example, we invited a hot idol, Zhang Zining, a member of the former Rocket Girls 101. You may have heard of him. He came to our platform for a live broadcast. He actively interacted with fans. The number of broadcasts of the program is close to 2 million. In addition, we have brought together some popular Chinese artists and held many creative events, including SNH48, which has been cooperating with us for a long time, and Yang Yingge, one of the most famous artists of the year. We have also collaborated in a musical way. This has also caused In the meantime, we are dedicated to meeting users' needs of interaction with celebrities through different programs and enriching the live streaming content through various things. So Marco take an example.
spk03: We invited Zhang Zunying, a former member of Rocky Girls 101, which you might have heard about, a highly popular girls group, to our platform for audio live streaming and actively interact with her fans. The exposure accounted for more than 2 million times. In addition, we also collaborated with a number of popular TV shows to host the creative events. The audio letters we cooperated with SNH48, a popular girl's group, and Yang Yingge, a performer in the show of the coming one, Superband, raised the loss of attention and discussion among fans, with more than one million times the exposure across the Internet and 600,000 times cumulative pay.
spk08: In addition to the advertisement, In terms of the advertising, we believe that advertising for audio live streaming is quite high potential.
spk03: So we currently mainly focus on optimizing the advertising management platform at the current stage, which is expected to have more positive effects in the future.
spk08: Thank you.
spk07: Thank you. Thank you. And Michael, can I ask one more quick question? Sorry, Michael, can I ask just one more question? So like you mentioned that we are developing that on the audio on a car, so I'm wondering are we going to work with the auto manufacturers or the software platforms which are installed on these auto manufacturers? And also it feels like for this audio which will be used on cars while driving, it's a will heavily rely on recommendation and also voice control. Are we planning to do more self-development, or are we going to work with some algorithm or provider, or will there be any impact on R&D? Thank you. We are very optimistic that the car market, especially the new energy car market,
spk08: after the launch. We are still trying to make the front end of the car, the application end, better. Of course, I think we need to make many attempts and breakthroughs in product and algorithm. First of all, we will improve product experience. Because a lot of audio or other user experience in the car now, I don't think it's very suitable to use in the car. In addition, you are right. In the car, in this scene, the voice technology recommended by AI is very important. In this respect, we have been preparing I'll translate for Marco. So we think the in-car audio market is a high potential market.
spk03: especially for the new energy vehicle producers. And for the use of audio application is more about the focus we will concentrate on, especially in the product side. And also the algorithm, we are going to improve both of the product, also the algorithm, combined with our AI technology. Firstly, we will improve the the user experiences for the in-car audio products. And you are right that other products might not be applicable to use in the in-car audio system. Another side is for the AI recommendation. AI recommendation is very important for the in-car audio market. And we do have years of experiences in the technology, and also we have leading technology capabilities which we can use to deploy into the in-car audio market. As for now, our focus is more on the AI technology and also the improvement of the user experiences. Thank you.
spk08: Thank you.
spk07: Thank you, Marco. Thank you.
spk01: I have a question from Vicky Wei of Citi. Please ask your question.
spk04: 我自己翻譯一下。 Good morning, management. Thanks for taking my questions and congratulations for the profitability for this quarter. I have two questions. The first one is about the fourth quarter initiative. So we saw the guidance was up on a quarterly basis. May I ask, is there any major marketing event or activity during the quarter? And if so, will there be any implication for the expense line? And my second question is about the implication on the recent regulation about the limitation on the user tipping, including large donor and minor donor. What does it imply for the lead paying user? Thank you.
spk08: Okay. So thank you, Vicky. For the first question, our CFO, Iris, will answer.
spk05: Thank you for your questions, and let me share some information about our major events in the second half of this year. Actually, as Marco mentioned, both in this quarter were more focused on platform development and improving operating efficiency. And in the fourth quarter, we will host regular operating events, and by the end of this year, we plan to hold an annual voice ceremony, which we believe will stimulate revenue as well. In addition, we are incorporating new audio products and plan to fully enter into the in-car audio market, enabling more users to listen to high-quality products. We believe this will help content creators gain more attention and expand its user base as well. Meanwhile, we will also adjust our promotion and incentive policies based on the actual situation. And we expect our revenue-sharing policy remains stable generally in the fourth quarter. Thank you. And I will turn to Marco for the second question.
spk08: Vicky's second question is about supervision. There may be a series of supervision plans that will be launched at the end of the year. I would like to answer that. The monitoring policy of the monitoring department for the monitoring of live broadcasts has been in place for a long time, and it is not a temporary regulation. First of all, I think this regulation is considered in many aspects, and it should be relatively scientific. I haven't seen it yet. For example, we have always to strictly implement this policy of supervision. For the behavior of users on the platform, strict control and identification must be carried out. First of all, from the point of the underage, last December, we developed and launched the youth mode. From the functional level of the product, it does guarantee the rights of underage people. It greatly reduces the risks that underage people bring. So at the present, some of the revelations
spk03: is more about the live streaming platforms and the user behaviors on the live streaming platforms. It actually takes a long time for those regulatory departments process the regulations. It's many, like, according to different aspects in the market, which I believe is reasonable for the industry. As for Li Zhi, we actually have been committed to implementing the regulatory policies, and applied a strict control and user behavior identification function on the platform. As for the underage users, Li Zhi has developed and launched the underage mode in last December to protect their rights and interests from the prospective or product function, which has reduced the risk brought by the underage virtual gifting behavior. We have also been actively cooperating with relevant departments to meet the network security standards. For example, in September, we launched the audiobook Network Literacy for Teenagers on our platform, and actively spread the knowledge of network security.
spk08: In general, the concentration of LIZI's paid users is relatively low. Also, the audio and video entertainment section, which is mainly based on audio and video interaction, is more focused on emotional connection. Because sound is companion. The main reason why our platform drives users to pay is the connection and relationship between users and content creators. So, there are fewer cases of impulsive cleaning on our platform. Generally speaking, the relevant supervision will not have a great impact on our business development. We also continue to actively implement and monitor the relevant supervision requirements. We are also organizing to call on some key units and industries in the field of network audio and video segmentation, So in general, the concentration of paying users on LiZhi is relatively low.
spk03: So audio entertainment sector, which is based on voice interaction, focuses more on the emotional connection between user and the host, as voice is more about the companionship. The main driver for paying activities is a strong bond between the user and the content creator, as well as the relationship. So impulsive virtual gifting behaviors are very rare on our platforms. In general, we don't think the regulation will have much impact on our current business development. We will continue to actively implement relevant regulatory requirements and plan to set up the online audio branches to cooperate with key units and relevant agencies in the online audio field to promote the standardization of the industry and self-regulation of the industry players and to meet the requirements of all the related departments. Thank you.
spk08: Thank you, Vicky. Thank you.
spk01: Thank you. Your next question is from Billy Leung of Haidong. Please ask your question, Billy.
spk06: Hello, Manager. Thank you for accepting my question. I have two questions. One question is about our recent cooperation with the Guangdong government. Can you share with us the details of this collaboration, or the impact it has on our income or investment? This is my first question. My second question is for 2021. Can you share with us the impact it has on our income or investment in 2021? Thank you, management, for taking my question. I have two questions. The first question is, can management share color or some details of our latest cooperation with the Guangdong government, any implications on revenue or investments going forward? And my second question is, on 2021 outlook, can management share any expectations or guidance in terms of maybe revenues or uses? Thank you. Thank you.
spk08: Thank you. It is very important for us to select these four points. This is a very important thing. This is a very important thing for us to select these four points. This is a very important thing for us to select these four points. In the future, in the field of 5G audio and video, we are in the development of content construction, AI and big data development. These have all played a very important role in guiding us. This will further strengthen our industry influence, and also allow us to get more support in the development and innovation of future technology. This is a very good opportunity.
spk03: So the first question is about the pilot online audio visual program Li Zhi has been selected into. So we think Li Zhi was selected as one of the pilot online audio visual companies in Guangdong province. It's actually a great recognition from the regulatory authorities over the company's top position in the industry. and also a demonstration impact of LEACH's practices. So this will actually play a guiding role for us and for our future development of content categorization and AI technology development and also the big data analytics. It will also increase our industry impact and enable us to receive more support in the technology development and innovation.
spk08: Anyway, in the next step, we still need to strengthen the platform's construction, build the unique UGC track, continue to support content creators, drive long-term development through AI technology, and explore diversified business models, and fully expand the new scenarios of audio and video applications.
spk03: In general, our next step will more focus on the enhancement of our platform construction and focus on the unique UGC feature and support our content creators drive a long-term growth through AI technology and explore the diversified business models, including committing ourselves to expanding the audio application scenarios and also bringing users the real interactive audio entertainment experiences. Okay, so for next year's forecast, we think it's still too early to say anything about that, so we need more time for our future development, so we will not discuss the detailed forecast for next year. Thank you.
spk06: Thank you, Bibi. Thank you. Thank you. Thank you.
spk01: Your next question is from Ivy Liu of Credit Suisse. Please ask your question.
spk02: I will translate myself. What's management's view on current audio live streaming or audio entertainment competition landscape on the audio live streaming sector? And do you guys, if you guys have any plan on overseas expansion? Thank you.
spk08: It is also focused on the diversification of content and the management of the UGC business model. Through years of hard work and foundation, we have accumulated a lot of content value, and built a strong community atmosphere, providing users with a highly active interactive community. Through leading technology, we have created more possibilities for audio and video. In terms of commercialization, we have also figured out effective reporting mechanisms for content creators to further encourage their creation and at the same time improve the quality of these contents. We will also continue to use content creation, community atmosphere, and innovative audio and video playing methods to meet the needs of users for audio and video diversification. to help users express themselves through their voices, and to gain voice companionship. This is what we have been doing all along. Through these behaviors, creators of content can gain recognition and create revenue. This is very important. We believe that in audio and video,
spk03: So compared with other platforms in terms of the competition, DG has always been targeting the audio market with a strong focus on diversifying the content and committed to developing the unique UGC business model. With years of development and efforts, We've developed a massive content pool and built a strong community atmosphere and been committed to providing a highly engaged interactive community while creating more possibilities for audio through our leading technologies. So in terms of commercialization, we've actually established an effective reward mechanism for our content creators and further enhanced the content creation. and improved our content quality. We will continue to meet users' diversified demand for audio and help them express themselves and receive the companionship with We Are The Voices through a variety of focus areas like content creation, community, and audio interaction features. We are also dedicated to help content creators present themselves, gain recognition, and achieve considerable income through voices. We believe the audio industry is actually a blue ocean market, and we believe LiYuZhi has differentiated and competitive advantages in the market.
spk08: In addition,
spk03: I personally think the audio market is just beginning to develop and the application scenarios of audio are diverse. With the increasing popularity of intelligent vehicles and like smart home devices, the growth potential for the online audio industry is sizable. As mentioned earlier, we are exploring the in-car audio market. and we believe the development of audio devices can actually further enhance our competitive advantages.
spk08: In terms of overseas expansion, I think the overseas market is also very large. Overseas users also have very strong needs for audio. We have been preparing and trying overseas. After we have more specific news, we will share more with you.
spk03: So in terms of the overseas expansion, we think the overseas market is actually huge, and users have a strong demand for audio products. We are preparing and developing some of the products in the overseas expansion, and when we have more efforts and when we have more results, we will disclose to the market. Thank you.
spk08: Thank you.
spk01: As there are no further questions, now I'd like to turn the call back over to the company for the closing remarks.
spk03: Thank you once again for joining us today. So if you have further questions, please feel free to contact Leach's Investor Relations through the contact information provided on our website at ir.leach.fm or the TPG Investor Relations group. Thank you.
spk08: Thank you. Thank you, everyone.
spk01: Thank you. Ladies and gentlemen, this concludes the conference call. You may now disconnect your line. Thank you.
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