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spk00: Hello, ladies and gentlemen. Thank you for standing by for Leach's Inc's second quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. And I'll turn the call over to your host, Afrika, head of capital markets for the company. Please go ahead.
spk02: Thank you very much. Hello everyone and welcome to Li Zhi Inc's second quarter 2023 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, our COO, Mr. Zilong Li, and our acting CFO, Ms. Chengfang Lu. Mr. Li and Ms. Lu will begin with prepared remarks. As a reminder, this conference is being recorded. In addition, a web cluster replay of this conference call will be available in the IR section of our website at ir.leach.fm. Before we continue, please note that today's discussions will contain forward-looking statements made under the Safe Harbor Prohibitions of the U.S. Private Securities Litigation Reform Act of 1995 These statements typically contain words such as may, will, expect, target, estimate, intent, believe, 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's affiliates, advisors, representatives, and underwriters do not undertake any obligation to update this forward-looking information, except as required under the applicable law. Please also note that Li Zhi's earnings press release and this conference call include discussions of unaudited GAAP financial measures, as well as unaudited non-GAAP financial measures Please refer to Li Zhi's earnings press release for reconciliation of unaudited non-GAAP measures to unaudited GAAP measures. I will now turn the call over to our COO, Mr. Zilong Li. Please go ahead.
spk03: Hello, everyone. Thank you for joining Li Zhi's second quarter 2023 earnings conference call. In the second quarter of 2023, Leeds will continue to carry out a global development strategy with the core of live audio. Through continuous development of core technology, continuous optimization of product models, continuous improvement of user experience, and active development of a good business environment. Although facing challenges in the public environment, the second quarter of the Group's revenue has increased by 15% to RMB5.93 billion. Overall, the average number of foreign users in the mobile sector in the second quarter is 45.6 million. The total number of paid users in the month of June is 43.37 million, achieving a net profit of RMB11.6 million. Next, I will introduce the specific situation of the second quarter's business development.
spk02: In the second quarter of 2023, we remain committed to executing our online audio-centric globalization strategy. By assessing and advancing core technologies, optimizing product features, and elevating user experience, we are actively fostering a thriving business ecosystem. Despite macro challenges, In the second quarter, the company's revenue increased by 15% year-over-year to RMB 593 million. Our total average mobile MAUs amounted to 45.6 million, and our average monthly paying users totaled 433.7 thousand. We also achieved a net income of RMB 11.6 million. Now let me go over our business development during the second quarter.
spk03: In terms of audio and video entertainment business, we continuously carry out detailed user management, and create diverse theme activities to further enhance the community atmosphere. For example, through the launch of a year-end event, we enhanced the connection and interaction between content creators and users. In addition, we also launched a year-end blog week college entrance exams, and other special events, calling for the positive content creators within the platform to actively participate, including the well-known creators such as Beijing Hua Si Ren, Anxion Export, Gile Radio, and others, who have behind-the-scenes control of Lixi Live, and the story of the users talking about their youth, and creating more diversified content that fits the interests of young users, bringing the users a rich audio interaction experience. With respect to the audio entertainment business,
spk02: We effectively enliven the atmosphere across the community by further implementing refined operational management and introducing more diversified themed activities. For example, our Li Zhi Mid-Year Voice Gala activities strengthen the connections and interactions between our content creators and users. We also launched an area of themed activities such as our Mid-Year Podcast Week. featuring a special season with National College Examination, which encouraged quality content creators to actively participate in our programs. Many popular content creators include Beijing Talk, Exit FM, and Yile Radio were featured on our live streaming sessions, gladly sharing their personal stories and thoughts to inspire young minds. We diversified our content matrix with offerings that better suited young users' diverse tastes and preferences, delighting our users with enriched audio-based interaction experience. Going forward, we will continue to roll out innovative product functions and additional activity formats to closely connect our content creators and users, fostering more immersive audio entertainment experiences and promoting a virtual cycle across our vibrant community and ecosystem. Furthermore, we will continue exploring innovative product features in reaching our product matrix and providing our users with highly differentiated product experiences.
spk03: In terms of the product ecosystem, we continue to optimize the management system of the product. In the face of all kinds of content creators, we have developed a standardized solution. to promote the growth of creators within the platform. For example, in the second quarter, we launched the Summer Wanderer anchor growth plan, which focuses on the needs of content creators to diversify their growth, and helps content creators achieve self-improvement through standardized operation management systems. At the same time, we have also launched a new generation of new projects, aimed at encouraging new content creators For content creator ecosystem,
spk02: We continued to upgrade our creator management system and supported a wide array of content creators with differentiated, customized development solutions, helping them grow and flourish on our platform. For example, in the second quarter, we focused on our content creators' diverse growth needs with our newly launched Summer Success program for streamer development. and providing meaningful support to enhance their capabilities and skill sets through our refined operational management system. We also involved the young generation in content planning. We set up a rising star official channel in support of our outstanding emerging content creators and worked with them to conceive inspirational ideas for high quality content creation, helping our rising stars attract more users and grow faster. By improving our creator management system, we hope to continuously attract and cultivate more talented content creators, further enriching the content offerings across our platform.
spk03: In terms of globalization innovation business, we continue to improve product innovation through core technology, accelerate the upgrade of product diversification function, and promote the development of international business. Since the first quarter of this year, Since we launched the My AI Slam chat bot in the globalized voice and social products TIF, we have continued to enrich the user experience through the diversified product function. In May this year, we launched more than a dozen diversified pre-set virtual AI roles based on the diversified virtual role resource library on the platform. For example, artists DJ Flash, The game consultant, Alice, has satisfied the user's diversified interest, and achieved a more intelligent online virtual social experience. Users can also create individualized virtual partners through the definition of AI-equipped friends, predict the role of virtual AI, and experience unique virtual online social experiences. In fact, we are also the user-designed AI friend function has been added to the function of the dynamic image, so that the designated AI friend can show a richer expression feedback in the dialogue, further enhancing the interactivity. Based on the continuous innovation in AI voice technology, we have already opened up the designated AI friend's voice chat function in front of all users. so that AI friends can respond more naturally in different social contexts, and achieve more effective emotional transmission. Next, we will continue to accelerate the market layout of globalized business through multi-product innovation, further promote the localization and development of products, and set good foundations for the expansion and commercialization of overseas business.
spk02: Regarding our global business, we continue to empower product innovation through core technologies, accelerating the upgrade and integration of our diversified product functions, and further propelling the development of our global business. Last quarter, we launched the chatbot My AI Friends in TIA App, a global audio-based social networking product. And since then, we have consistently enriched the user experience with various new product functions. In May this year, we leveraged our large pool of avatars to launch over 10 virtual AI presets components, spanning characters such as musician DJ Fresh and game consultant Alex. These new components cater to tier users' diverse needs and interests, enabling a smarter and more engaging virtual online social experience. Users can also create and customize their own inclusive AI friends through presets to enjoy unique virtual online social experiences. In July, we launched a new expressive animated avatar feature for users to customize their AI friends, which enables users to add more realistic micro gestures and facial expressions to their AI friends Further enhancing interactions across the platform. Thanks to our consistent innovation in voice AI technologies, all our users can now access our customized AI Friends voice chat function. This feature empowers AI Friends to speak and move more naturally to accommodate extensive social networking scenarios, establishing a deeper emotional connection between users and their AI companions. Going forward, We will further advance our global positioning through constant product innovation and push forward with product localization, strengthening the foundation of our global business expansion and commercialization efforts.
spk03: At the same time, we continue to promote the construction of core technology capabilities such as AI and audio processing and transmission. Through technological innovation, the development of energy-saving businesses, At the product level, based on AIGC and AI cloud technology, we have further enhanced the optimization of the relevant product functions, and launched a more diversified innovative feature play method. The commercialization of the product application has improved the firmness of the technology. At the management level, we have also continuously expanded the application range of the support technology, effectively reducing the cost of the technology, In the meantime, we continue to build our capabilities in core technologies, including AI and audio processing and transmission
spk02: empowering business development through technological innovation. On the product front, we further optimized and integrated relevant product functions and launched more diverse, innovative features based on AIGC and voice AI technologies, laying a solid foundation for our product's commercial application. For operations, we comprehensively applied our self-developed technologies effectively reducing technical costs and improving operational efficiency. As we move forward, we will continue enhancing research and development in the AI field, exploring applicable AI technology scenarios, and making the most of our advantages in voice-based technologies, ultimately amazing our users with incredible next-generation social networking experiences.
spk03: In the face of the future, although the public environment is still challenging, we will do our best to improve our product competitiveness through product innovation, ecological optimization, and precision operation. At the same time, we will also fully diversify the applications of AI voice technology, AI chat robots, and AI assistants in business. Through technology innovation,
spk02: Looking ahead, despite macro challenges, we will go all out to elevate our product competitiveness through innovative products, optimize the ecosystem, and refine operations. Moreover, we will continue to adopt and more deeply integrate AIGC and voice AI technologies, AI chatbots, and AI assistance across our business. continuously empowering business development through technological innovation and further advancing our global expansion. Thank you all. 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.
spk01: Thank you, Zilong, and hello, everyone. We maintain year-over-year revenue growth in the second quarter of 2023 while focusing on building a sustainable and innovation-driven ecosystem. Moving forward, we will continue strengthening core technologies to spur ongoing product development and promote global business expansion over the long term. Now, I'd like to provide a brief overview of our financial results for the second quarter of 2023. In the second quarter, our total net revenues were RMB 592.9 million, representing an increase of 15% year-over-year, as we continue to diversify our audio entertainment product metrics. Cost of revenues were RMB 418.4 million in the second quarter of 2023, representing an increase of 23% year-over-year, mainly attributable to increased revenue sharing fees to our content creators, increased salary and welfare benefits related to increased average salary, and increased payment handling costs, partially offset by a decline in other miscellaneous costs. Gross profit was RMB 174.4 million in the second quarter of 2023, compared with RMB 175.6 million in the same period of last year. Long-gap gross profit was RMB 175.6 million in the second quarter of this year, compared with RMB 176.8 million in the same period of last year. Gross margin in the second quarter of 2023 was 29%, compared with 34% in the same period of last year. Long-gap gross margin in the second quarter of this year was 30%, compared with 34% in the same period of last year. Operating expenses were RMB 166.6 million in the second quarter of 2023, compared with RMB 161.6 million in the same period of last year. Research and development expenses were RMB 75.2 million in the second quarter of this year, compared with RMB 17.3 million in the same period of last year, primarily due to increased salary and welfare benefits related to the increase in the number of our R&D stock and increased rental expenses, partially offset by decreased share-based compensation expenses and expenses related to research and development services provided by third parties. Selling and marketing expenses were RMB 67.5 million in the second quarter of 2023, compared with RMB 16.8 million in the same period of last year. primarily attributable to increased branding and marketing expenses, and increased salary and welfare benefits related to the increase in the number of our sales and marketing staff. We will monitor our advertising and promotion expenses and adjust accordingly based on market conditions. General and administrative expenses will only be $23.9 million in the second quarter of 2023. compared with RMB 30.6 million in the same period of last year, mainly driven by decreased probation for litigation contingencies, professional service fees, share-based compensation expenses, and other miscellaneous expenses, partially offset by increased salary and welfare benefits related to the increased average salary. Operating income was RMB 7.8 million in the second quarter of 2023, compared with RMB 14.1 million in the same period of last year. Long-gap operating income was RMB 13.6 million in the second quarter of 2023, compared with RMB 21.2 million in the same period of last year. Land income was RMB 11.6 million in the second quarter of this year, compared with RMB 18.9 million in the same period of last year. Long-gap net income was RMB 17.3 million in the second quarter of 2023, compared with RMB 26 million in the same period of last year. Basic undiluted net income per ABS was RMB 25 cents and RMB 24 cents, respectively, in the second quarter of 2023, compared with RMB 37 cents and RMB 36 cents, respectively, in the same period of last year. Longan basis and diluting lane income per EDS were both RMB 35 cents in the second quarter of 2023, compared with RMB 50 cents in the same period of last year. End of June 30, 2023, we had cash and cash equivalents, shorter investment and restricted cash of RMB 697.1 million. Okay, this concludes all of our prepared remarks today. Now I would like to turn the call to Abby for the closing remark.
spk02: Thank you once again for joining us today. If you have further questions, please feel free to contact Leach's Investor Relations through the contact information provided on our website, ir.leach.fm, or the Piantre Group Investor Relations. Thank you.
spk00: Thank you. That concludes the conference call. You may now disconnect your line. Thank you.
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