Weibo Corporation

Good day and thank you for standing by. Welcome to Weibo reports fourth quarter and fiscal year 2023 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to the first speaker today, Ms. Sandra Chang from Wave4 Corporation. Thank you. Please go ahead.

Thank you, Operator. Welcome to Wave4's fourth quarter and full year 2023 earnings conference call. Joining me today, our Chief Executive Officer, Kangfei Wang, and our Chief Financial Officer, Faith Hong. The conference call is also being broadcasted on the internet and is available through Wave4's IR website. Before the management remarks, I would like to review the Safe Harbor Statement in connection with today's conference call. During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Weibo assumes no obligation to update the following statement in this article and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20-X and other filings with the SEC. All the information provided in this press release is occurring as of the date here. Weibo assumes no obligation to update such information. except as required and applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which includes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating results, performance, and future prospects. Our non-GAAP financials exclude certain expenses, gains or losses, and other items that are not expected to result in future cash payments, or are non-recurring in nature, or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following mentioned prepared remarks, we open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gao Fei Wang.

Thank you. Hello, everyone.

Welcome to Weibo's fourth quarter and third year 2023 earliest conference call. On today's call, I will share with you highlights on Weibo's product and monetization, review the progress made in 2023, and elaborate our strategies for 2024. First, I would like to introduce the financial performance of Weibo in the fourth quarter.

In the fourth quarter of 2023, thanks to our hard work in acquiring and returning high-value users, as well as our gradual recovery in the vertical economy, the strengthening of content economy operations and hot-point marketing services, in the fourth quarter, the advertising overall softened. The total revenue of Weibo in the fourth quarter reached US$1.637 billion, which increased by 3% year-on-year and increased by 5% year-on-year. Advertising revenue reached $4.037 billion, annual revenue increased by 3%, and interest rate increased by 4%. In terms of exchange rate, the total annual revenue increased by 5%, and advertising revenue increased by 5%. The company's adjusted profit after adjustment reached $1.459 billion, and the adjusted profit after adjustment was 31%.

Starting from our financial performance in the fourth quarter, in the first quarter of 2023, our efforts to improve user acquisition and engagement of high-value users continued to pay off. In addition, we beefed up our initiative to further recover the vertical company ecosystem strengthen counter-operation, and enhance our ability to serve hot-chain marketing. As a result, despite the overall sluggish air market, our total revenue in the first quarter reached $463.7 million, an increase of 3% year-over-year and 5% quarter-over-quarter. Our total air revenues reached $403.7 million, an increase of 3% year-over-year and 4% quarter-over-quarter. On a constant currency basis, both our total revenues and ad revenues in the fourth quarter would have increased 5% year-over-year. Our non-GAAP operating income in the fourth quarter reached US$145.9 million, representing a non-GAAP operating margin of 31%.

In the past, in terms of Weibo's financial performance throughout the year, due to the uncertainty of the macroeconomic economy and the industry environment, the demand for the advertising market has been fluctuating. This also led to the customer annual sales budget of some core industries to be weakened at the beginning of the year, affecting the overall increase in advertising business. In 2023, Weibo's total revenue reached $17.6 billion, which is 4% per annum. Among them, advertising revenue reached $15.3 billion, which is 4% per annum. Except for the profit factor, the total revenue increased by 1% per annum, and the advertising revenue increased by 1% per annum. Facing the changes and challenges of the external environment, we are more concerned about the improvement of product and business competitiveness and operation efficiency this year.

Turning to our full-year financial performance, in 2023, due to uncertainties of the macro and industry environment, the recovery of ad demand was a bit volatile. It resulted in lower than expected annual marketing budget for some clients in key industries, compared with our expectation at the beginning of the year. which weigh on the growth of our ad business. For full year 2023, our total revenues reached 1.76 billion US dollars, a decrease of 4% year-over-year. Our total ad revenues reached 1.53 billion US dollars, a decrease of 4% year-over-year. On a constant currency basis, both of our total revenues and ad revenues it would have increased 1% year-over-year. This year, we focused on improving our product's core competitiveness and enhancing operating efficiency to navigate through challenges from external environment. For full year 2023, our non-GAAP operating income reached $592.1 million, representing a non-GAAP operating margin of 34%.

On the user front,

WeWork's MAU reached 598 million, and the average daily use reached 257 million in the fourth quarter, adding approximately 11 million and 5 million users year-over-year respectively.

Next, let me elaborate our progress made on product operation and monetization in the fourth quarter, and our key strategies for 2024. Looking back at the first half of 2023, we are facing the recovery of post-pandemic users. In the second half of the year, the company has maintained its hot spot in the record of the core performance of the SICP ecosystem. The focus is on maintaining the flow of the vertical field, strengthening the development of the content of the vertical field ecosystem, and improving the competitiveness and health of Weibo's overall ecosystem.

Looking back on strategies in 2023, in the first half of the year, we started to recover user traffic in the post-pandemic era. In the second half of the year, while maintaining our core competitiveness in hot chains, entertainment, and sports, we strengthened the development of vertical content ecosystem through traffic support for vertical content, which enhanced the competitiveness and health of Weibo's overall ecosystem.

In terms of channel customers, we maintained cooperation with manufacturers in the fourth quarter. On the channel front, in the fourth quarter, we maintained cooperation with manufacturers to increase channel investments for acquisition of high-value users.

Through more accurate algorithm and targeting capability, our user engagement has been improved, which laid foundation for monetization.

In terms of social activity, we continue to develop a vertical strategy based on the company's development in the fourth quarter. On the one hand, we continue to optimize the content structure of the relationship flow product, increase the distribution of the focus on the vertical field, and promote the reconstruction and construction of the vertical content ecosystem. On the other hand, we continue to strengthen the social interaction form between bloggers and fans, and enhance the interaction efficiency between bloggers and fans in the vertical field. The above two aspects of the focus work will not only allow vertical bloggers to continue to gain traffic and interaction growth, but also make the vertical blogger ecosystem more active. At the same time, The number of people interacting with each other in the past two or three years and the number of interactions has continued to increase year by year. In addition, community products have also launched more topics and interactive playlists this year to increase users' social interaction in the community, especially with regard to the improvement of the environment. Our focus is to strengthen the social scene of community products as a deep discussion of users and the content of children's works. In the past two or three years, the activity of users in the community has significantly increased compared to last year, which has also promoted the growth of the size of community users' daily interaction.

On social attributes, in the first quarter, we continue to execute strategies to focus on development of content verticals. On the one hand, we continue to optimize content structure for relationship-based feed to reinforce the distribution of content from key verticals and recover the overall content ecosystem. On the other hand, we continue to enrich the way vertical KOLs interact with their fans and improve their interaction efficiency. As a result, KOLs from vertical areas continue to gain more traffic and user interaction and became more willing to generate content. In 2023, the number of daily interactive users and the number of interactions in the relationship-based feed continues to grow year-over-year. For Super Topic, we launched new functions for users to post and interact, boosting user engagement in the community. In particular, for the entertainment vertical, we further enhanced the super-topic social attributes and interaction for users' in-depth discussion and content recreation in the entertainment sector, leveraging improvement of the overall sector. As a result, User engagement in the entertainment vertical increased significantly in 2023 versus 2022. The number of daily use of Super Topic increased year-over-year, and the number of users who post per day and interaction of the Super Topic increased over 20% year-over-year.

In terms of content and ecosystem, we have maintained a high level of competitiveness in the IP ecosystem, including hot topics such as culture and language. Our main focus is to boost the flow of the Cui Zhi Qin Xie platform in the industry market.

On the content front, in the first quarter, on top of retaining the competitiveness of health topics, entertainment, and other advantages key IP-related verticals, we leaned our shadows toward verticals to support the industry market. For example, we increase investment in digital, automobile, online games, fashion and beauty, and healthcare verticals to enhance industry partners' perception of the platform's value and further enhance the competitiveness of our content ecosystem.

In terms of IP ecosystem, the 4G group in the 5G field continues to enhance the interaction and interaction of top stars, strengthen the discussion of products, and consolidate the competitiveness of new products and products. In 2023, the flow of the 5G field and the size of the interaction have been improved. Especially, the number of postings and interactions of celebrities on Weibo and the size of news interaction increased by more than 30% last year. With the transition of the work environment this year, the number of posts and discussions on Weibo increased significantly last year. The number of posts and discussions increased by more than 50% this year. The collective flow and discussion created a new beginning. In the field of hot spots, we have strengthened the organization of the national media to discuss the hot spots of the world. Promote the coverage of the hot spots of the media from the hot spots of the news society to the hot spots of the world. Increase the participation of the media in the hot spots of the world.

On IT-related content ecosystem, in the fourth quarter, for entertainment vertical, we continue to boost the engagement and interaction of top celebrities and increase the discussion around their works to strengthen our competitiveness in the fans and entertainment work-related content ecosystem. the traffic and interactions in the entertainment vertical increased year-over-year. In particular, top celebrity engagement and posts increased over 30% year-over-year. With a better environment for entertainment work production and release, the traffic around the promotion of entertainment work and discussion around this work have increased significantly year-over-year, with total discussion increasing by more than 50% year-over-year. the traffic and discussion around TV series and Weibo reached a record high. In terms of hot trends, we encourage national media to organize discussion of hot trends in the vertical area, facilitating media's hot trend coverage from social news to vertical hot trends to increase the media engagement in the vertical hot trends and stabilize user demand for consumption and discussion of the social hot topics.

In terms of industry verticals, we continue to increase the selection of resource investment in the fourth quarter. Enhance the distribution of high-quality vertical content on the platform chain to improve the comparison of vertical areas and promote the growth of the head and neck of high-quality vertical areas. Enhance the flow of hot spots for the content of vertical hot spots to form a platform hot spot-effective product mechanism to enhance the sense of hot spots in the industry. Enhance the operation and operation of our industry topics, play the advantage of Weibo cross-sector, guide the media to publish and participate in the production of vertical content in the cross-sector account. These measures have led to a further increase in the traffic and interaction scale of commercial and private companies. For example, since October, users have increased their attention to respiratory diseases such as flu and respiratory diseases. With the help of the media's active participation in reports and research, and the value of cross-sector blogging sharing, the consumption of related hot spots on Weibo has exceeded 2 billion, and it has also attracted a large-scale combination and contract of doctors, which has quickly increased the influence of Weibo on the medical industry, and has built up the mentality of users to discover, consume, and discuss health hot spots on Weibo.

On industry-related content verticals, we continue to invest more resources across the platform in the first quarter. First, we strengthened the traffic distribution of high-quality vertical content, increased the proportion of vertical content on the platform, and promoted the development of top KOLs in each content vertical. Second, we adjusted the product mechanism to enhance traffic support to vertical hot content that creates hot trend effects. improving the perception of industry-related hot trends. Third, we improved the operation of industry-related vertical topics and events, leveraging Weibo's advantages in cross-vertical operation to guide media and top cross-vertical KOLs to post and engage with the vertical content. All these measures contributed to the continuous growth of the traffic and interaction in industry-related verticals. compared with the third quarter. For example, since October, we have seen a surge in youth interest in various respiratory diseases such as influenza and mycoplasma. We encourage the media accounts to actively post content of popular science and also promote related content sharing from vertical KOLs from across verticals. As a result, the total consumption of the related hot topics has exceeded 2 billion, attracting a large number of doctors to join and engage on Weibo. It has quickly increased Weibo's influence in the medical industry and established user habits of discovering, consuming, and discussing hot topics in the healthcare vertical on Weibo.

Next, I will talk about commercialization. In the fourth quarter, under the influence of e-commerce node, annual discount node, and game version 26, Moving on to Monetization Fund.

In the fourth quarter, thanks to the e-commerce shopping festival, the year-end promotion, and tailwinds from game license approval, Weibo's ad revenues grew 3% year-over-year and 4% quarter-over-quarter, leveraging Weibo's strengths in hot-chain marketing.

From the perspective of the industry, the car and mobile phone industry has still maintained an increase in revenue in the fourth quarter. This is mainly due to the differentiated advantages of new products in micro-blog content marketing and the advantages of the platform in the field of digital new technology and new power car discussion. At the same time, in the fourth quarter, health industry revenue in the medical and health sectors has increased significantly year-on-year. The health industry is an industry with a rapid increase in user interest after the outbreak of the epidemic, and it is also an important field in which we are moving forward. The influence of the Chinese industry is still commercialized and is in the path of steady growth. In the game industry, with the release of the board number and the good environment, customers and Weibo based on the speed of content production and marketing, we have seized the opportunity to promote new products to four-level key customers, leading to the growth of the flow rate. For example, the four-level release of Tencent's original dream and NetEase, but in the party, we invested a large-scale budget in Weibo and focused on hot content marketing as the core marketing budget. We have obtained more than the customer's expectations of brand sales through exclusive content marketing and new products.

By industry, revenues from the automobile and the handset sector sustained solid year-over-year growth in the fourth quarter. The growth was mainly attributable to Weibo's differentiated advantage of content marketing in new product launch, as well as favorable discussion lines in the areas of digital technologies and new energy vehicles. The online games and healthcare industries booked a double-digit growth year-over-year in the fourth quarter. As for the healthcare sector, we are pleased to see steady growth trajectory of both our industry influence and monetization, with a surge of user interest in the healthcare industry post-reopening. Our increased investment in vertical company ecosystem of healthcare also gradually bear fruit. In terms of the online game industry, with tailwinds from game license approval and better recognition of our content marketing solution among customers, we captured the opportunity to promote the new blockbuster titles for key clients in the fourth quarter, delivering sustained year-over-year revenue growth. For example, in the fourth quarter, Tencent's Dream Star and United Party spent heavily on Weibo for a new game campaign. With budget allocated mostly to hot trends and content marketing, we have delivered a strong branding effect, beating clients' expectations, entertained by our unique content marketing and service capability of building market hype for the new games. Ad revenues from the e-commerce sector also boosted year-over-year and quarter-over-quarter growth in the first quarter, thanks to the mega e-commerce shopping festivals.

However, even though the 4G platform has increased traffic support and accelerated the production and activity of bloggers, due to the fact that the head office is still in a state of economic expansion, and the budget for the effect budget needs to be transferred to the effect platform, the recovery of 4G consumption is still not as expected. The cosmetics industry has become the main target of the overall growth in the past 23 years. There are two main reasons for this. One is the impact of the 2020 and 2021 pandemic. In the process of the transfer of the sales of cosmetics products to the online market, Weibo has continued to profit, On the flip side,

For the beauty and personal care industry, even with strong traffic support to entice content generation, top clients were still clearing out inventory during the Double 11 shopping festival, resulting in continued budget shifts toward performance-based platforms. Therefore, the recovery pace of the beauty and personal care industry still fell short of our expectations, which has become the major drag for the overall ad growth in 2023. For one thing, driven by ad budget shifts from offline to online during the pandemic, revenue contributions from the beauty and personal care industry increased significantly in 2020 and 2021, which created a high base at that time. This effect, for another, since 2022, customers have been shifting their sales channels toward e-commerce live streaming platforms. leading to a decline in ad-worthy shares of social media and traditional e-commerce platforms. Additionally, we also need to further beef up our investment to strengthen Weibo's competitiveness in the content vertical of beauty and personal care. We hope to be viewing positive ad roles in this sector this and for next year, with further recovery of content ecosystem and normalization in customer sales channel adjustments.

In the past 23 years, we have faced challenges in the post-pandemic era where users' interest in cross-border transfer, users' demand for hot-point news has dropped, and demand for cross-border content consumption has increased rapidly. We are also facing challenges that the overall consumer market recovery rhythm is not as expected, and customers are at a certain level in reducing brand budget. In the case of customer content consumption demand transfer and customer brand demand pressure, the company used platform management efficiency as the core in 2003 to strengthen the competitiveness of platform hot-point. Looking back on 2023, we faced challenges from rapid shift in user interest in the post-pandemic era.

Namely, we saw a decline in content consumption demand for news and hot trends while a surge in consumption demand for vertical content. In the meantime, The recovery pace of the overall consumer market also fell short of expectation, leading to a cut in brand ad budget for certain customers. In light of the headwinds from content consumption and advertising demand side, we focused on improving the platform's operating efficiency in 2023. We strengthened our competitiveness in hot trends and social products, further growing our user community and traffic, as well as enhanced monetization value of the platform traffic. These efforts lay solid foundation for us to promote vertical traffic and thus revitalize Weibo's company ecosystem and competitiveness.

In general, although it is not expected by individual industry revenue to have a negative impact on total revenue, but thanks to the efficient implementation of the company's down payment, we have maintained a higher operating profit and increased sales last year. The increase in the company's economic efficiency, stable operating capacity, and healthy cash flow improve our financial flexibility. It also allows us to further invest in the development of vertical content and ecological competitiveness in the next 24 years, and thus enhance our user size and activity, and strengthen our commercial competitiveness. We see that the competitive furniture of the current vertical content and ecological competitiveness is challenging. We will gradually expand the recovery of the vertical content and ecological competitiveness while focusing on the development of the advantageous field. We estimate that it will take two to three years for vertical content and ecological competitiveness to achieve a higher level of flow in the overall flow of the platform. to further consolidate and strengthen the market influence and the health of the content ecosystem, to improve commercial efficiency and commercial scale.

Overall speaking, although revenue from certain industries fell short of expectations and dragged the total revenue growth, we delivered decent operating profits with further input from last year. Thanks to the solid execution of our efficiency initiatives, leveraging improved operating efficiency stable profitability, and healthy cash flow, we've further elevated our financial flexibility, giving us ample room to invest in vertical company ecosystem and drive user growth and engagement. In view of the challenging competition landscape of vertical content, we'll take gradual steps to restoring our competitiveness of vertical company ecosystem while focused on solidifying our advantages areas. It may take two to three years to drive up the traffic share of vertical content on the platform. In this way, we could further reinforce Weibo's market influence, achieve healthy development of the content ecosystem, and thus build a solid foundation to enhance our monetization efficiency.

In 2024, Weibo will enhance user size and activity, strengthen the content competitiveness of the platform, and enhance the performance efficiency of the platform. Under the current market environment, In 2024, we will focus on growing our user community and engagement, strengthening the competitiveness of our content ecosystem

as well as further enhancing our operating efficiency. In light of the current market conditions, we strive to maintain steady revenue growth and improving the overall efficiency in the meantime. On the operation front, we will beef up our efforts to reinforce the competitive edge of hot trends and IPs. and revitalize our vertical ecosystem at the same time. On the monetization part, we aim to optimize our content marketing and performance-based ad products. We believe execution of these strategies will lay solid foundation for our top-line recovery from user, content, and monetization side, enabling us to capture market opportunities once the macroeconomy gets better and the brand ad demand improves.

In terms of increasing the size and activity of platform users, the key work will be carried out from the following three aspects in the next 24 years. First, we will continue to maintain and channel the cooperation of the platform partners to continue to increase the high-priced user acquisition and promotion as the focus of channel work. Second, we will focus on optimizing the social product structure and further strengthen the information flow and the network's promotion efficiency to promote user interaction and drive the increase in the size and activity of social network users. Third, we will focus on improving the atmosphere and user experience of hot products. On the user engagement front, in 2024, our product operation will focus on three aspects. First, we will continue to operate closely with strategic partners with focus on improving high-value user acquisition

and usage frequency. Second, we emphasize on optimizing the structure of social products and further enhancing the recommendation efficiency of information feeds in the hope of driving user skill, social interactions, and engagement. Third, we'll refine the product vibe and user experience of hot trend products in order to reinforce the mindset and market influence of hot search users. Meanwhile, We will also try to create more hot trend-based products, enabling users to discover more hot topics and trends under public discussion, and thus, grow the user scale and engagement of hot trend products.

In terms of strengthening the content of the platform and the ecosystem, we will continue to work on the following three aspects in the next 24 years. First, we will continue to strengthen the advantages of the platform's cultural and ecological and competitive ecosystem, especially in terms of cultural and ecological competitiveness. to enhance the interactive scale of the new film ecosystem, and to strengthen strategic cooperation with the film and drama selection platform, to consolidate the production ecosystem and promote the further improvement of platform traffic and user service. With the 24th year of the Spring Festival Film Party as an example, based on our interaction with the film IP party on the topic of film plot, and the cooperation of the film extension on the topic, we have led to a 50% increase in the number of discussions of the Weibo Spring Festival Film Party. This makes us more confident that we can become the first selection platform of the film IP party this year. This year is also the year of the Olympic Games. In the past few years, we have had a chance to take a new high on the topic of sports and entertainment.

Our content ecosystem will also highlight three aspects in 2024. First, we will continue to reinforce our leading position around the ecosystem of entertainment and sports events. In particular, as for the entertainment sector, we will strengthen the selective flower ecosystem to increase user interaction and focus on strengthening our strategic cooperation with the promotion and distribution platform of movies, TV series, and variety shows. This will not only solidify the competitiveness of entertainment work-based ecosystem, but also drive platform traffic and user engagement. Taking the movie promotion during the 2024 Screen Festival as an example, Leveraging our cooperation with movie IP holders around the Hot Trends operation of movie plots, celebrity followers' interactions, and extended vertical topics, we are pleased to see a 50% increase in topic discussion year for year, giving us confidence in becoming the go-to platform for movie promotion this year. 2024 also marks the year of Olympics. Our years of cultivation around the sports vertical will pay off, with opportunity to achieve new record high in sports-related traffic and discussions.

Second, we will continue to strengthen the leading advantage of the platform's hot spot ecology. The media's income has returned to steady growth. The focus is to strengthen the discussion of the hot spot of the head bloggers participating in the industry, to create more head hot spot effects, to consolidate the influence of the hot spot ecology on Weibo, and to continue to scale up the acquisition of users.

Second, we will continue to solidify our leading position around hot trends. We hope to resume the steady growth of society and the media-related hot topics. The key is to better engage the media and top content creators in the distribution and discussion of hot topics around vertical trends, enabling the build-out of mega hot topics. These efforts would hopefully consolidate Weibo's market, consolidate market influence in the hot trend area and facilitate user acquisition at a large scale.

Third, we will continue to strengthen the vertical industry. The key industry is vertical ecosystem construction. Improving the industry's vertical and micro-data scale will be active. Improving the industry's hot topic discussion scale will further realize the industry's content ecosystem.

Third, we'll further strengthen the cultivation of vertical ecosystem in key industries. To elaborate, we'll grow the number and engagement of golden and orange verified accounts, boosting the discussion of vertical hot topics, and thus reinforcing the synergy between company ecosystem and monetization ecosystem, which forms a virtuous self-reinforcing cycle.

From the perspective of improving the efficiency of the platform, we will continue to strengthen the investment of the company's commercial competitiveness, continue to strengthen Weibo's content IP marketing, establish and consolidate in more industries and customers, and improve the budget competitiveness of customers. In terms of advertising products, content IP marketing products continue to standardize and scale their sales, and store brand advertising will improve the efficiency and content service capability. Effective advertising will strengthen the efficiency and evaluation capability in the main industry and top customers. For example, the well-known Yurong Group brand Boston Based on the two major product trends, Qingbaoyu and Chongshu Classic, Weibo will combine endorsement marketing and long-term marketing to tie up the extension hotspot of the endorsement company Yang Zi. The platform's actual hotspot, such as catching the winter winter, lowering the temperature, and low snow, will tie up the users' mindsets of cold, cold, cold, cold, and hot Boston. At the same time, we will use the star hotspot to guide e-commerce online, and the online link to brand big events, and the opening of enterprises, to drive the sales of the four seasons to increase by 40%. This year, we will use a standardized advertising product and marketing service process Finally, on the operating efficiency, we will stack up our efforts in enhancing our monetization competitiveness. We will continue to strengthen the recognition of Weibo's content and IP marketing

among more industries and clients, and thus improve our competitive edge in capturing clients' budgets. In terms of the ad products, we standardize and scale up the sales of our content and IP marketing offerings. As for performance-based ads, we strive to improve our service capability around ad performance and content, with focus on optimizing evaluation of ad performance of key industries and the top clients. For instance, the renowned Don Jacket brand, Boston capitalized on its two product concepts, lightweight and thin, and reshaping classics in winter campaign of 2023. Leveraging a combination of celebrity endorsement and content marketing on Weibo, Boston deeply bonded with hot topics around this brand ambassador, Yang Zi. tapping into real-time winter-related trends such as temperature drop and light snow to firmly associate the brand with the same one in Boston. At the same time, Boston leveraged the celebrity's popularity to drive e-commerce traffic online, while promoting its opening of the OneFooting flagship store as a grand event offline. As a result, the sales performance boosted dramatically in the fourth quarter, with sales volume increasing 40% every year. This year, we will standardize our ad products and services to timely integrate popular IPs such as entertainment and sports events with the campaign goal of our clients, which will further promote the monetization value of Hot Trend. On top of this initiative to drive top-line growth, we will also continue to effectively discipline our cost and expenses, strengthen the resource platform management, and further improve the overall operating efficiency of our platform. With that, let me turn the call over to Fatal for a financial review of the fourth quarter of 2023 and three-year financial results. Thank you, Gauti, and hello, everyone. Welcome to Weibo's first quarter and fiscal year 2023 government conference call. Let's start with user metrics. In December 2023, Weibo's NEU and average DEU reached $598 million and $257 million respectively. Representing an acquisition of 11 million and 6 million users on a year-on-year basis in 2013, our user community and engagement remains healthy besides facing all post-pandemic related traffic. After an ongoing execution of 80% of the child investment strategy, Turning to financials, as a reminder, my prepared remarks will focus on non-GAAP results. All monetary amounts are in US dollar terms and all the comparisons are on a year-on-year basis, unless otherwise noted. We experience hedging to our financials due to the volatility of free interest rates throughout the year. Since our business primarily operates in China, while we report our financials in US dollars, Our financial performance was affected by adverse currency movements. Let me now walk you through our financial highlights for the fourth quarter and fiscal year 2023. This was fourth quarter 2023 net revenues were $463.7 million, an increase of 3% or 5% on a contract currency basis. Operating income was 145.9 million, with an operating margin of 31%. Net income, attributable to Weibo, used at 76.4 million, and the diluted ETI was 31 cents. For four years, 2023, total revenue reached 1.76 billion, a decrease of 4%, or an increase of 1% on a constant currency basis. Operating income was $592.1 million, representing operating margin of 34%. Net income attributable to Weibo reached $415.6 million, and the diluted EPS was $1.88. Operating cash flow for full year 2023 reached $672.8 million, an increase of 19%. Let me give you more color on the fourth quarter and the four-year 2023 revenue performance. Wave of advertising and marketing revenue for the fourth quarter 2023 was $403.7 million, an increase of 3%, or 5%, on a counter-currency basis. Mobile ad revenue was $379.2 million, contributing approximately 94% of total ad revenue. Full-year funding-conditioned advertising and marketing revenue reached $1.53 billion, a decrease of 4%, or an increase of 1% on a counter-currency basis, with mobile ad revenue contributing 94% of total ad revenue. Recalling our Q4 performance first, Consistent with our expectations, advertising business booked a solid growth overall with divergent performance across our pillar ad verticals. The industry, our largest of three verticals with three seed products, FMCG and e-commerce, in terms of growth, were encouraged to see strong momentum of concept sector continue throughout the year. The hub-side sector delivered a double-digit growth for both year-over-year and quarter-over-quarter. Our customers embraced our platform to reach high-up users and build market heads. The e-commerce and game sectors also demonstrated a robust recovery trend with double-digit growth, leveraging favorable dynamics in competition landscape and launch of blockbuster titling on three steps. The FMCG categories continued on descending trajectories. The food and beverage sector faced a high comparable phase because the world top campaign season in 2022. Meanwhile, the cosmetic and personal care sector remained under pressure, suffering from self-sale and last-minute marketing expense control among our multinational customers. Also, we continue to see as-budget shift world to those platforms to serve the marketing purpose of inventory clearance during the e-commerce season. Moving on to four-year time-tested performance. Due to macro uncertainties and consumption weakness, the recovery pace of our advertising business in 2023 proved to be rough on a constant currency basis. Our advertising and marketing revenue increased 1% versus 2022 by industry, our largest of three verticals to FMCG, 3C products and e-commerce, with respect to growth. Safety products was the largest contributor to year-over-year growth, followed by e-commerce and automobiles among major categories. However, discretionary consumption categories such as cosmetic and personal care, luxury, apparel, faced broad-based heavy strong demand set. The ad products. Commodity feed was the largest, followed by social display ads and topics and search. In 2023, In light of the rapid advertising demand, we focused on revitalizing the company's ecosystem with high monetization potential, such as basic products and automobiles. This effort has enabled us to further strengthen our company's marketing offerings and enhance our market differentiation. Ad revenues from Alibaba for the fourth quarter were 44.9 million, an increase of 6%. or 8% on a constant currency basis, then promoted the recovery of consumption margins and intensified the competition during the mega shopping festivals. Full year ad revenues from Alibaba were $1,011.6 million, an increase of 4% or 10% on a constant currency basis, consistent with Alibaba's moderate pickup in marketing margins. Alibaba stepped up marketing plan this year amid sluggish consumption environment as well as heightened competition in the e-commerce sector. Before turning to that segment, let me share some preliminary curves on the trend entering 2024. With economy in a state of transition and geopolitical uncertainty in 2024, the macro conditions and consumption sentiment are turning even harder to predict. Despite the limited visibility of the mindset due to macro uncertainties, we are cautiously optimistic on further recovery of our advertising business in 2024. We hope to further leverage tailwinds in Weibo's competitive sectors as well as a series of mega-quad events. Our team will beef up sales execution to further unlock the long-term monetization opportunities underpinned by our unique value proposition and diversified content ecosystem. Value-added service, VAT renewal, was 59.9 million in the fourth quarter, an increase of 4% or 6% on a constant current basis, mainly due to higher revenue contributions from game-related business. Four-year 2022 VAT revenue decreased 6% or 1% on a constant currency basis to $225.8 million. Turning to cost and expenses, total cost and expenses for fourth quarter was $317.8 million, an increase of 7%, mainly attributable to higher G&A expenses. The increase of G&A expenses was primarily resulted from lower GMA expenses booked in the fourth quarter of 2022, mainly related to the reversal of compensation expenses for technology, based on the contingent payment arrangements . Four-year cost and expenses totaled $1.7 billion, a decrease of 5%, primarily attributable to the unfavorable foreign exchange impact on the reported number, as well as a decrease of personnel related costs. This decrease was partially offset by the increase of J&A expenses, mainly related to the degradation of compensation expenses of J&A technologies, as mentioned above. Offering income in fourth quarter was 145.9 million, with an operating margin of 31% compared to 34% last year. All paid income for four years in 2013 was $592.1 million, with an operating margin of 34% compared to 33% in 2022. Turning to income tax. And the gap measure. Income tax expense for the fourth quarter was $72.6 million compared to an income tax benefit of $18.7 million last year. The increase was primarily due to two factors. First, the growth and reversal of tax liabilities recognized in the fourth quarter of 2022 related to uncertain tax provisions. Second, With paid and accrued withholding tax, residual earnings, remittance from the wholly foreign-owned enterprise WUBI to Weibo Hong Kong Limited, the earnings distribution from onshore to offshore would fund our demand for U.S. dollars in business operations and payment of dividends and debts, etc. Four-year income tax expenses were $145.3 million compared to $30.3 million last year. Many resulted from increase of tax refunds in the fourth quarter after the expense. Net income attributable to Weibo in the fourth quarter was $76.4 million, representing a net margin of 16% compared to 40% last year, primarily due to the aforementioned impact from income tax. Net income for fall year 2023 was $415.6 million, representing a net margin of 26% compared to 29% in last year. Turning to our balance sheet and cash flow items as of December 31st, 2023, WebOS cash, cash equivalents, and short-term investments totaled $3.23 billion compared to $3.17 billion as of December 31, 2022. In the first quarter, cash provided by operating activities was $218.2 million. Cash expenses totaled $30.7 million, and the depreciation and allocation expenses amounted to $13.7 million. On a four-year basis, tax provided by operating activities was $672.8 million compared to $164.1 million in 2022. Capital expenditures totaled $36.8 million, and depreciation and amortization expenses amounted to $58.5 million. Before turning to the planning motion, I would like to let you know that we completed an offering of $313 million US dollars covered for bond in December last year. The bond is due to 2030 with an annual coupon rate of 1.375%. We plan to use the next proceeds from the NOAA offering to refinance a portion of the outstanding 3.5% senior note during July this year. Upon the convertible note issuance, we would also effectively give up our offshore cash reserve in US dollars, which gives us more financial flexibility in cash flow allocation in the future. Lastly, given our healthy profitability and cash flow generation, We are pleased to announce that our Board of Directors has approved a special cash dividend of 82 cents U.S. dollars for ordinary shares for ADN to our shareholders. The aggregate amount of the dividend will be approximately 200 million US dollars with payment state expected to be in May. Looking ahead, we remain highly committed to embracing long-term growth opportunities while generating more returns to shareholders and boosting marketing confidence. With that, let me now turn it over to the operator for the Q&A session. Thank you.

Thank you. We will now begin the question and answer session. If you would like to ask question, please press star one one and wait for our name to be announced. To cancel your request, please press star one one again. One moment for the first question. Our first question comes from the line of Timothy Chao from Goldman Sachs. Please go ahead.

Thank you, Benjamin, for taking my question. My question is regarding our advertising business. Could Benjamin elaborate more on your outlook for the advertising business revenue growth for this year, including the first quarter? And specifically regarding the advertising products, what is our key strategies for this year? Thank you.

Okay. According to the current record, we will see some signs of recovery in most industries. However, we believe that there are still uncertainties and challenges in the 20-year market. Gordon.

Thank you for this question. So, first of all, because in 2023, for many different quarters, we had a lot of uncertainties for providing these vehicle expectations. So, we remain cautious and prudent in giving expectations for the whole year of 2024. So, in Q1, we do see a recovery of almost all the industries. However, still, there are a lot of uncertainties and also challenges relating to the consumption market as a whole. Okay.

From the point of view of demand, in 2024, there will be certain opportunities for some industries. For example, this year's Olympic Games and the events will benefit many of our consumer industries in terms of advertising and increasing budget release. This will benefit industries such as food and beverage, In fact, the decline of our video content in 2023 is mainly due to the Olympics in 2022, including the World Cup. Therefore, we expect that the average of the second half of 2024 will be better than the first half, because the Olympics will be held in July and August this year. In terms of gaming, with the good release rate of the board, we focus on the customer base. As we mentioned just now, the hot spot of Weibo, including the demand for Weibo content marketing, is gradually increasing. We should be able to play our own content marketing in the market. And also, in terms of the overall demand, in 2024, still we have seen some of the certainties for some industries. For instance, in terms of the sports, for instance, in the Olympics, which took place in July and also the beginning of August,

So this has boosted some of the budget of advertisement for the consumption market, for instance, from the food and beverages and also the apparels and also the footwears as well. So, of course, in 2022, we had actually a very high base because of the Asian Games and also the World Cup. But still, we expect to have a better second half of the year in 2024 than the first half of the year. And also in terms of the gaming, we do see a lot of uncertainties. So for instance, with the booming of the granting of licenses to those gamers, to the game developers, we do can leverage our advantages in terms of the content marketing. And then we would like to leverage this advantage and also help to explore and also help a lot of the new games to be exported, exploded. So in 2024, we expect to have a better gaming industry than that of 2023. Okay.

In some other industries, we will see that in 2022, we think that our competitiveness in the industry is relatively high in terms of budget and wallet. Our competitiveness is also relatively strong. But can these industries maintain the same growth rate as in 2023 in 2024? It is still a challenge because of the situation of the industry itself. For example, in the two industries of mobile phones and cars, the growth rate in 2023 has remained more than double. The share of budget and wallet in our industry customers 23 years is also a bit better than two years, but in 24 years I will see if the mobile phone can still have such a high increase like two years Although we see that the mobile phone export situation in the first quarter is much better than we expected But in terms of the previous year, we still feel that there is a greater certainty Then the mobile phone car side, of course, the advantage of our new car is still relatively obvious, but And also in 2022, we did see the enhancement of our competitiveness

And also the percentage of the ad budget against the total revenue of, against the total budget of the ad of our customers is actually growing as well. But still in 2024, whether those industries are still going to enjoy the same momentum in Weibo, it is pretty much uncertain and also challenging. For instance, take the examples of the headsets and also the automotive industries. So, for instance, in 2023, we had a very good growth in terms of the headset industry, which was double-digit. And also, we had an increase of the total ad budget percentage allocated to Weibo in 2023. But still, in 2024, we still remain precautious in terms of maintaining the same momentum of the growth for headset industry versus that of 2022. Still, we have seen better than expected shipments. of the asset industry in Q1, but still throughout the whole year of 2024, there is a big uncertainty about this. And turning to the automotive industry, we have gained a natural advantage in helping to promote those products of new energy vehicles, but still due to the price war and the budget that decreased for the ads for the ICE vehicles, still we found it quite challenging to maintain the same momentum of the growth of our business in the automotive industry than out of last year. But still, overall speaking, we are still keeping a very good momentum of maintaining a very high competitiveness and also the attraction of a higher budget of the ads from our customers. Okay.

This is mainly due to the impact of the epidemic in the industry in 2021. In addition, in 2021, whether it is the flow or the marketing of fish, the entire industry has achieved the highest level. Therefore, the competition in the makeup industry is relatively high in 2021. In 2021 and 2022, it is relatively high. In the past two years, you can see that on the one hand, it is because of the competition in the makeup service industry itself. Uh, it's the price increase that's more intense Then customers in the brand This kind of budget is the share of the front desk The front desk is down If you look at it again, uh, like Tianmao, including this traditional e-commerce platform Many of its customer budget and customer sales also turn to live broadcasts. This actually creates a lot of pressure for the placement of brand ads and e-commerce sales on Weibo. The decline in this industry itself is also one of the main reasons why we did not complete the growth we expected last year. In terms of our original plan in 2024, we originally predicted that this industry could be relatively stable in 2024, but from the 1st quarter, it is still not very optimistic. Although our international brand has not fully recovered yet, the domestic brand has already begun to grow, but the domestic brand has not greatly increased its brand budget. And also, last but not least, I would like to share some of the colors on the industries of the beauty and cosmetic products. In 2022 and 2023, we had suffered from some of the challenges

because of the industry itself. So in 2021, because of the COVID and also because of our high concentration in promoting the entertainment and also the traffic attraction. So we had a pretty good year in 2021 and also 2022. But reasonably speaking, there are a lot of challenges going on and headwinds going on in the cosmetics and beauty products industries. For instance, the high competitiveness and also the price war engaged by almost all the brands. And also they were decreasing their allocation of the ad budget overall speaking. And also you can see that there are a lot of transfer of those budgets, the budget from the commercial or the traditional e-commerce industry to the live stream. So this gave us a lot of pressures in terms of the allocation of a budget to the brand-based performance, brand-based ad or the e-commerce-based ad. So still, you know, there are still a lot of challenges. And also in 2024, originally we wish to have a stabilized performance of the beauty and cosmetics industry at an allocation of our ad budget. But still in Q1, we thought that was less than expected and also less than optimal and optimized. So you can see that for those international brands, still they are a little bit far away from their full recovery. And also, we do see the recovery of the domestic brands, but still, it is not the time for them to increase their ad budget. So, of course, overall speaking, we still wish that we could have a very stable vertical like the cosmetics and beauty products. But still, up to now, we think that this industry is still the most challenging industry of our total business portfolio. Okay.

So from our overall strategy, as Scribd mentioned just now, we will continue to strengthen our IP hotline, including our investment in content marketing. This is for us to improve the share of our brand in the customer brand wallet, and our competitiveness is the most helpful. This will continue to add to our investment. In the same way, we will continue to increase our users and scale. In this way, we can continue to stabilize the traffic flow of our variable-effect advertising information. As for the customer's brand budget,

And also, lastly, I want to say that in terms of the overall strategy, as we have already stated in our prepared script, you can see that our focus of this year will be still emphasizing on those IP hot trends. and also the content marketing so that we can increase our competitiveness and also gain more money and also budget from the total budget of our customers. And also, second of all, we would like to further enlarge the user base and also the total scale of that and focusing on those monetizable traffic. So as a whole, in 2024, still very much a focus and also the main driver for us to grow further is to getting more budget from our customers, and also thus we can grow our overall business. Thank you.

Thank you for the questions. One moment for the next question. The next question comes from the line of Thomas Chong from Jefferies. Please go ahead.

Thank you, management, for taking my question. My question is about our strategies in Transgender 4 with regard to users and our content ecosystem. And on the other hand, how should we think about our AIGC strategies? Thank you.

Let me briefly talk about the 24-year user strategy. In 2023, we will see that our entire market sales budget will be equal to the two-year average. At the same time, you will see that the total number of mobile phones in 2023 will drop, but in this case, our MAU will probably be about the same as the competition, or a little more than 10 million, and the DAU may be about 5 million. On the one hand, we have a relatively close strategy with major mobile phone manufacturers. And also for this question, first of all, let me talk to you about the overall user strategy in 2024.

So in 2024, still, we are going to maintain the same budget for the marketing activities than out of 2023. So for the asset industry in 2023, we do see a decrease of our total shipment. But still, we had a net gain of MAU of over 10 billion, 10 million, and also over 5 million of net gain of DAUs because of a very deep strategic collaboration with the asset makers. so that you can see that we can have a very low user acquisition cost. And also, overall speaking, by focusing on the entertainment and also the hot trends and hot topics, we have also very good positioning in getting the users from outside of the whiteboard.

In 2024, we will see that our overall budget will increase by 6% in 2023. At the same time, we estimate that in 2024, the whole of Wenyu and the whole of our society will probably recover further. This phenomenon is still relatively obvious from this year's spring festival. So I think at present, in fact, the growth of the size of users this year should not be higher than in 2023. It should be higher than in 2023. But from our own internal point of view, we have more challenges in how to get this flow and hot spots are more in the vertical field we are talking about, because these vertical fields are more effective for us to improve users' annuality and commercialization transformation and commercialization efficiency. Before the epidemic, in 2019, the overall flow structure of our entire flow in the vertical field accounted for nearly 60% of the overall flow, about 58%. In the past few years of the epidemic, there has been a relatively obvious decline to about 47-48% in the second year. And also in 2024, as a result, we had almost a flat

or a little bit more budget allocated to this area than in 2023. We do see a very good recovery of the social health trends and also the entertainment industry and approved by the performance during the Chinese New Year period. And so that we are very confident to have a very good user gain and also user scale in 2024 than in 2023 and also a much better one. Also, the internal challenges still, um are that first of all you know we would like to focus on a shift of the traffic of entertainment and social hot topics to the verticals um because you know by having more traffic of the vertical or vertical traffics we are able to increase the user's thickness and enhance our monetization efficiency and also improve our competitiveness so before the covet before 2019 we had almost 58 percent of our traffic allocated to vertical traffics But still during the COVID period, we had a decrease to almost around 47 to 48% by the end of 2022. We had a very good strategy to recover that after that, but still it is still at a level of around 50%. So the next two to three years of time, by focusing on more efforts taken in this area, we hope to increase the total vertical traffic as the amount of the total traffic to about 60% and more. so that we are able to enhance the user's stickiness, the efficiency of monetization, and also our overall competitiveness as a whole. Okay.

In terms of AIGC, as I have said briefly in the past few reports, for Weibo, we are more open to using these AI models to improve our work in the application field. In the past two or three years, the direction has been relatively clear. On the other hand, through the AIGC model, which is similar to the Character AI model, we are able to increase the number of AI assistants in the head of our blog, and we can also increase our excitement interaction, which is the efficiency of interacting with our fans. This year, our goal is to achieve the activity rate between these excitement interactions. Through AI assistants, we can achieve a ratio of 5% to 10%, which is achieved by AI assistants. And then the other one is for some special ones, just for some vertical fields. For example, last year we talked about makeup. This year we may expand to about four to five fields. Then through AIGC to assist in mass production content. In the fourth quarter of last year, in the makeup test, when we were high, we were able to reach 8% of the entire field. It's this kind of content that supports production. This kind of user reading and interaction. In this year, we also set a target for each other. And also relating to where IGC, we have stated a few comments

already in the past annual performance or some of the quality performance announcements. Still, you know, now we would like to have an open-mindedness to use the LLMs and also focusing on the applications of those large language models. So, for instance, in 2024, still, we have some of the directions of the application. First of all, in terms of the AI assistance, assisting the interactions between the new fans and followers and also the KOLs. we have been doing a lot to really enhance the interactiveness between the new fans and some of the followers and also their KOLs. So now we can see that around 5% to 10% of the overall interactions between the followers and KOLs are actually supported by the AI assistance. And also, second of all, in terms of different verticals. So last year, we pretty much focused on the verticals of beauty and cosmetic products. and also to facilitating the generation and the production of the content in this area. And also this year, we would like to further expand the application of the content generation to another four to five different verticals. So last year, 8% of the content in this cosmetics and beauty perks area was generated by the AI tools. And also this year, we hope to have around 10% to 15% of the content generated by AIGC facilitation. which is still challenging to say. And also for the other areas, for instance, the AI robots and also some of the commercializations or monetizations using AI to support, it is still an experimental phase. So we don't have a very detailed target or figure to be shared with everyone. Okay.

Thank you for the questions. One moment for the last question. Our last question comes from the line of Xueqing Zhang from CICC. Please go ahead.

Thank you for taking my question. You notice that the company among special builders this quarter So with capital allocation and the shareholder return plan this year, can management share more on the share buyback and dividend plan in the future? Thank you. Hi, Xueqing. Thank you for your question. This is Fei. As mentioned in my prepared remarks, Weibo maintains decent profitability and relatively strong capability to generate operating cash flows. In 2023, our non-GAAP operating income reached $592 million, representing a non-GAAP operating margin of 34%. We generated operating cash flow of approximately $673 million in 2023, representing an year-over-year increase of 19%. So if you can remember last year, when they distributed special cash dividends for the first time last May, we talked about certain principles we would adhere to in use of our cash. First of all, we always prioritize supporting business growth and strengthening our platform's competitive advantages, such as investing in content ecosystems, in vertical areas and AIGC and any opportunities which closely related to our business. And then in addition to investing in our own business development, we certainly need to ensure shareholder returns. So as you know, our board of directors has approved the distribution of another 200 million special cash dividend. after we made the $200 million US dollar cash dividend last year. So going forward, we expect to continue paying out the dividends to our shareholders and gradually formulate an annual cash dividend distribution policy. The board would primarily set the dividend amount based on our company's profit performance in the previous fiscal year, while also considering factors such as our cash flow, our financial condition, and the capital requirements. So looking ahead, we will continue to explore various ways to reward our investors, our shareholders, including the dividend payouts and the stock repurchases. These measures will be carefully considered and land with our core objectives and subject to our board approval. They will communicate the progress with market and with our investor in a timely manner. So I hope this can address your questions. Thank you.

Thank you for the questions. There are no further questions at this time. I would like to hand the call back to management for closing.

Thank you all for joining us, and we will see you next time.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines. you Thank you. Thank you. Thank you. Good day and thank you for standing by. Welcome to Weibo Report's fourth quarter and fiscal year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to the first speaker today, Ms. Sandra Chang from Waveboard Corporation. Thank you. Please go ahead.

Thank you, Operator. Welcome to Waveboard's fourth quarter and full year 2023 earnings conference calls. Joining me today are our Chief Executive Officer, Congfei Wang, and our Chief Financial Officer, Faith Hong. The conference call is also being broadcasted on the internet, and it's available through Weibo's IR website. Before the management remarks, I would like to read you the safe harbor statement in connection with today's conference call. During today's conference call, we may make four looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Flow-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any flow-looking statement. WAIBO attains no obligation to update the flow-looking statement in this article and elsewhere. Further information regarding this and other risks is included in WAIBO's annual report on Form 20-X and other filings with the SEC. All the information provided in this press release is occurring as of the date here. Weibo assumes no obligation to update such information, except as required and an applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which includes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating results, performance, and future prospects. Our non-GAAP financials exclude certain expenses, gains or losses, and other items that are not expected to result in future cash payments, or are non-recurring in nature, or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following mentioned prepared remarks, We'll open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gao Fei Wang. Thank you. Hello, everyone. Welcome to Weibo's fourth quarter and third year 2023 earnings conference call.

At the same time, I would like to review the strategy for 2023 and the overall strategy of our company in 2024.

On today's call, I will share with you highlights on Weibo's product and monetization, review the progress made in 2023, and elaborate our strategies for 2024. First, I would like to introduce Weibo's financial performance in the fourth quarter.

In the fourth quarter of 2023, thanks to our hard work in acquiring and returning high-value users, as well as our gradual recovery in the vertical economy, Enhanced content production and hot-point marketing services. In the case of the overall softening of the ad in the fourth quarter, the total revenue of Weibo in the fourth quarter reached 10.63 billion U.S. dollars, the annual revenue increased by 3%, and the net profit increased by 5%. Among them, the ad revenue reached 10.37 billion U.S. dollars, the annual revenue increased by 3%, and the net profit increased by 4%. In terms of exchange rate, the total revenue of the fourth quarter increased by 5% in the annual revenue, and the annual revenue increased by 5% in the advertising revenue. In the fourth quarter, the profit of the company after adjustment reached 14.5 billion.

Starting from our financial performance in the fourth quarter, in the first quarter of 2023, our efforts to improve user acquisition and engagement of high-value users continue to pay off. In addition, we beef up our initiative to further recover the virtual content ecosystem strengthen common operations, and enhance our ability to serve hot-chain marketing. As a result, despite the overall sluggish air market, our total revenue in the fourth quarter reached $463.7 million, an increase of 3% year-over-year and 5% quarter-over-quarter. Our total air revenues reached $403.7 million, an increase of 3% year-over-year and 4% quarter-over-quarter. On a constant currency basis, both our total revenues and ad revenues in the fourth quarter would have increased 5% year-over-year. Our non-GAAP operating income in the fourth quarter reached 145.9 million U.S. dollars, representing a non-GAAP operating margin of 31%.

In terms of Weibo's financial performance last year, due to the uncertainty of the macroeconomic economy and the industry environment, the demand for the advertising market has been fluctuating. This also led to the customer annual sales budget of some core industries to be weakened at the beginning of the year, affecting the overall increase in advertising business. In 2023, Weibo's total revenue reached $17.6 billion, which is 4% per annum. Among them, advertising revenue reached $15.3 billion, which is 4% per annum. Except for the exchange rate factor, the total revenue is 1% per annum, and advertising revenue is 1% per annum. Facing the changes and challenges of the external environment, we are more concerned about the improvement of product and business competitiveness and operating efficiency this year.

Turning to our full-year financial performance, in 2023, due to uncertainties of the macro and industry environment, the recovery of ad demand was a bit volatile. It resulted in lower than expected annual marketing budget for some clients in key industries, compared with our expectation at the beginning of the year. which weigh on the growth of our ad business. For full year 2023, our total revenues reached 1.76 billion US dollars, a decrease of 4% year-over-year. Our total ad revenues reached 1.53 billion US dollars, a decrease of 4% year-over-year. On a constant currency basis, both of our total revenues and ad revenues it would have increased 1% year-over-year. This year, we focused on improving our product's core competitiveness and enhancing operating efficiency to navigate through challenges from an external environment. For full year 2023, our non-GAAP operating income reached $592.1 million, representing a non-GAAP operating margin of 34%.

On the user front,

WeWork's MAU reached 598 million, and the average daily use reached 257 million in the fourth quarter, adding approximately 11 million and 5 million users year-over-year respectively.

Next, let me elaborate on progress made on product operation and monetization in the fourth quarter, and our key strategies for 2024. In the second half of 2023, we will face the recovery of the wave of post-pandemic users. In the second half of the year, the company will maintain a hot spot in the record of the core performance of the SICP ecosystem. The focus is on maintaining the wave of the vertical field, strengthening the development of the content of the vertical field ecosystem, and improving the competitiveness and health of Weibo's overall ecosystem.

Looking at our strategy from 2023, in the first half of the year, we started to recover user traffic in the post-pandemic era. In the second half of the year, while maintaining our core competitiveness in hot-sharing, entertainment, and sports, we strengthened the development of vertical content ecosystem through traffic support for vertical content, which enhanced the competitiveness and health of Weibo's overall ecosystem.

In terms of channel acquisition, in the fourth quarter, we maintained the cooperation On the channel front, in the fourth quarter, we maintained cooperation with manufacturers to increase channel investment for acquisition of high-value users.

Through more accurate algorithm and targeting capability, our user engagement has been improved, which laid foundation for monetization.

In terms of social activity, we continue to develop a vertical strategy based on the company, on the one hand, to continue to optimize the content structure of relationship flow products, to enhance the distribution of key vertical fields, to promote the reconstruction and construction of vertical content ecology, on the other hand, to continue to strengthen the social interaction form between bloggers and fans, to enhance the interaction efficiency of vertical field bloggers and fans. The above two aspects of key work not only allow vertical bloggers to continue to gain traffic and interaction growth, vertical bloggers' ecology is more active, at the same time, The number of people interacting with each other in the past two or three years and the number of interactions has been continuously improved year by year. In addition, community products have also launched more topics and interactive games this year to increase users' social interaction in the community, especially with regard to the improvement of community products and the environment. Our focus is to strengthen the social scene of community products as a deep discussion of users and the content of children's works. In the past two or three years, the activity of users in the community increased significantly compared to last year. This has also promoted the growth of community users' daily interaction size year by year.

On social attributes, in the first quarter, we continue to execute strategies to focus on development of content verticals. On the one hand, we continue to optimize content structure for relationship-based feed to reinforce the distribution of content from key verticals and recover the overall content ecosystem. On the other hand, we continue to enrich the way vertical KOLs interact with their fans and improve their interaction efficiency. As a result, KOLs from vertical areas continue to gain more traffic and user interaction and became more willing to generate content. In 2023, the number of daily interactive users and the number of interactions in the relationship-based feed continues to grow year-over-year. For Super Topic, we launched new functions for users to post and interact, boosting user engagement in the community. In particular, for the entertainment vertical, we further enhanced the super-topic social attributes and interaction for users' in-depth discussion and content recreation in the entertainment sector, leveraging improvement of the overall sector. As a result, User engagement in the entertainment vertical increased significantly in 2023 versus 2022. The number of daily use of Super Topic increased year-over-year, and the number of users who post per day and interaction of the Super Topic increased over 20% year-over-year.

In terms of content and ecosystem, 4G, we maintain a high level of competitiveness in the IP ecosystem, such as hot topics, language, and other high-quality IP ecosystem. The main focus is to support the flow of vertical clean-up platforms in the industry market.

On the content front, in the first quarter, on top of retaining the competitiveness of hot topics, entertainment, and other advantages key IP-related verticals, we leaned our shadows toward verticals to support the industry market. For example, we increased investment in digital, automobiles, online games, fashion and beauty, and health care verticals to enhance industry partners' perception of the platform's value and further enhance the competitiveness of our content ecosystem.

In terms of IP ecosystem, the 4G group in the 5G field has continued to enhance head-to-head communication and interaction in the 5G field, strengthen the discussion of works, and consolidate the competitiveness of new and old ecosystems. In the last two or three years, the flow and size of the 5G field has been improved. Especially, the number of postings and interactions of celebrities on Weibo and the size of the news interaction increased by more than 30% last year. With the transition of the work environment this year, the number of broadcasts and discussions on Weibo increased significantly last year. The number of discussions increased by more than 50% this year. The collective flow and discussion created a new channel. In the field of hot spots, we have strengthened the organization of the national media to discuss the hot spots of CuiZi. Promote the media to cover the hot spots of CuiZi from the hot spots of the new people to the hot spots of CuiZi. Improve the participation of the media in the hot spots of CuiZi.

On IT-related content ecosystem, in the fourth quarter, for entertainment vertical, we continue to boost the engagement and interaction of top celebrities and increase the discussion around their works to strengthen our competitiveness in the fans and entertainment work-related content ecosystem. The traffic and interactions in the entertainment vertical increased year-over-year. In particular, top celebrity engagement and posts increased over 30% year-over-year. With a better environment for entertainment work production and release, the traffic around the promotion of entertainment work and discussion around these works have increased significantly year-over-year, with total discussion increasing by more than 50% year-over-year. the traffic and discussion around TV series and Weibo reached a record high. In terms of hot trends, we encourage national media to organize discussion of hot trends in the vertical area, facilitating media's hot trend coverage from social news to vertical hot trends to increase the media engagement in the vertical hot trends and stabilize user demand for consumption and discussion of the social hot topics.

In terms of industry verticals, we continue to increase the selection of resource investment in the fourth quarter. The first is to strengthen the distribution of high-quality vertical content on the platform chain to improve the comparison of vertical fields and promote the growth of vertical field high-quality head and neck. The second is to strengthen the flow of hot spots for the content of vertical hot spots, to form a platform hot spot-effective product mechanism, and to strengthen the sense of hot spots in the industry. Third, we strengthen the industry topic and activity operation, play the advantage of Weibo cross-sector, and guide the media to publish and participate in the production of vertical content in the cross-sector account. These measures have led to a further increase in the traffic and interaction scale of commercial and private companies. For example, since October, users have increased their attention to respiratory diseases such as flu and respiratory diseases. With the value of leading the media to actively participate in reporting and covering cross-segment blog sharing, the consumption of related hot spots on Weibo has exceeded 2 billion, and it has also attracted a large-scale use and contract of doctors, and quickly improved the influence of Weibo on the medical industry, and established the mentality of users to discover, consume, and discuss health hot spots on Weibo.

On industry-related content verticals, we continue to invest more resources across the platform in the first quarter. First, we strengthened the traffic distribution of high-quality vertical content, increased the proportion of vertical content on the platform, and promoted the development of top KOLs in each content vertical. Second, we adjusted the product mechanism to enhance traffic support to vertical hop content that creates hot-trend effect. improving the perception of industry-related hot trends. Third, we improved the operation of industry-related vertical topics and events, leveraging Weibo's advantages in cross-vertical operation to guide media and top cross-vertical KOLs to post and engage with the vertical companies. All these measures contributed to the continuous growth of the traffic and interaction in industry-related verticals. compared with the third quarter. For example, since October, we have seen a surge in youth interest in various respiratory diseases such as influenza and mycoplasma. We encourage the media accounts to actively post content of popular science and also promote related content sharing from vertical KOLs from across verticals. As a result, the total consumption of the related hot topics has exceeded 2 billion, attracting a large number of doctors to join and engage on Weibo. It has quickly increased Weibo's influence in the medical industry and established user habits of discovering, consuming, and discussing hot topics in the healthcare vertical on Weibo.

Next, I will talk about the progress of commercialization. In the fourth quarter, under the influence of e-commerce node, annual sales node, and game version 26, Through a full-fledged use of Weibo's marketing trend, we are able to increase Weibo's advertising revenue by 3% and increase it by 4%.

Moving on to monetization fund. In the fourth quarter, thanks to the e-commerce shopping festival, the year-end promotion, and tailwinds from game license approval, Weibo's ad revenues grew 3% year-over-year and 4% quarter-over-quarter, leveraging Weibo's strengths in hot-chain marketing.

From the perspective of the industry, the car and mobile phone industry still maintains an increase in revenue in the fourth quarter. This is mainly due to the differentiated advantage of new products in the content of Weibo marketing and the advantage of the platform in the field of digital new technology and new power car discussion. At the same time, in the fourth quarter of the game, medical health industry revenue has increased significantly year-on-year. The health industry is an industry with a rapid increase in user interest after the outbreak of the epidemic. It is also a key area of ​​our traffic flow in Canada. The influence of our industry is still commercialized and is in the path of steady growth. In the game industry, with the release of the board number in a good environment, customers and Weibo based on the speed of content production and marketing, we have seized the opportunity to promote new products to four-level key customers, leading to the growth of the flow of revenue. For example, Tencent's original dream of information and networking was released in the fourth quarter, but in the party, we invested a large-scale new product budget on Weibo, and focused on hot content marketing as the core marketing budget. Through exclusive content marketing and the service capability of new products, we have achieved the brand sales that our customers expected.

By industry, revenues from the automobile and the handset sector sustained solid year-over-year growth in the fourth quarter. The growth was mainly attributable to Weibo's differentiated advantage of content marketing in new product launch, as well as favorable discussion lines in the areas of digital technologies and new energy vehicles. The online games and healthcare industries book the double-digit growth year-over-year in the fourth quarter. As for the healthcare sector, we are pleased to see steady growth trajectory of both our industry influence and monetization, with a surge of user interest in the healthcare industry post-reopening. Our increased investment in vertical accounting ecosystem of healthcare also gradually bear fruit. In terms of the online game industry, with tailwinds from game license approval and better recognition of our content marketing solution among customers, we captured the opportunity to promote the new blockbuster titles for key clients in the fourth quarter, delivering sustained year-over-year revenue growth. For example, in the fourth quarter, Tencent's Dream Star and United Party spent heavily on Weibo for a new game campaign. With budget allocated mostly to hot trends and content marketing, we have delivered a strong branding effect, beating clients' expectations, entertained by our unique content marketing and service capability of building market hype for the new games. Ad revenues from the e-commerce sector also boosted year-over-year and quarter-over-quarter growth in the first quarter, thanks to the mega e-commerce shopping festivals.

But even though the 4G platform has increased traffic support and accelerated the production and activity of users, the head office is still in a state of economic expansion, and the budget continues to be transferred to the effect platform. The recovery of our 4G consumption is still not as expected. The cosmetics industry has become the main target of overall growth in the past 23 years. There are two main reasons for this. One is the impact of the 2020 and 2021 pandemic. The sales of cosmetics products have continued to prosper in the process of transferring to the online market. On the flip side,

For the beauty and personal care industry, even with strong traffic support to entice content generation, top clients were still clearing out inventory during the Double 11 shopping festival, resulting in continued budget shifts toward performance-based platforms. Therefore, the recovery pace of the beauty and personal care industry still fell short of our expectations, which has become the major drag for the overall ad growth in 2023. For one thing, Driven by ad budget shifts from offline to online during the pandemic, revenue contributions from the beauty and personal care industry increased significantly in 2020 and 2021, which created a high base at that time. This effect, for another, since 2022, customers have been shifting their sales channels toward e-commerce live streaming platforms. leading to a decline in ad-worthy shares of social media and traditional e-commerce platforms. Additionally, we also need to further beef up our investment to strengthen Weibo's competitiveness in the content vertical of beauty and personal care. We hope to be doing positive efforts in this sector this and or next year, with further recovery of company ecosystem and normalization in customer sales channel adjustments.

In the past 23 years, we have faced challenges in the post-pandemic era in which users' interest in fast transition and transition, the decline in the demand for hot-point news, and the rapid growth in the demand for vertical content sales. We are also facing unexpected changes in the overall consumer market recovery rhythm, and customers are at a certain level in the challenge of reducing brand budget. In the case of customer content consumption demand transition and customer brand demand pressure, in 2003, the company focused on platform management efficiency to strengthen the competitiveness of platform hot-point. Looking back on 2023, we faced challenges from rapid shift in user interest in the post-pandemic era.

Namely, we saw a decline in content consumption demand for news and hot trends, while a surge in consumption demand for vertical content. In the meantime, The recovery pace of the overall consumer market also fell short of expectation, leading to a cut in brand ad budget for certain customers. In light of the headwinds from content consumption and advertising demand side, we focused on improving the platform's operating efficiency in 2023. We strengthened our competitiveness in hot trends and social products, further growing our user community and traffic, as well as enhanced monetization value of the platform traffic. These efforts lay solid foundation for us to promote vertical traffic and thus revitalize Weibo's company ecosystem and competitiveness.

In summary, although the unexpected impact of the total revenue generated by individual industry revenue is not expected, we have maintained a high operating profit and increased our operating profit last year thanks to the efficient implementation of the company. The increase in the economic efficiency of the company, stable operating capacity, and healthy cash flow improve our financial flexibility. It also allows us to further invest in the construction of vertical content and ecological competitiveness in the next 24 years, thereby increasing our user size and activity, and strengthening our commercial competitiveness. We see that the competitive furniture of the current vertical content and ecological competitiveness is challenging. We will gradually expand the recovery of the vertical content and ecological competitiveness as we focus on the development of the advantageous field. We expect that in two to three years, we will be able to achieve a higher share of vertical traffic in the overall traffic of the platform. to further consolidate and strengthen the market influence and the health of the content ecosystem, to improve commercial efficiency and commercial scale.

Overall speaking, although revenue from certain industries fell short of expectations and dragged the total revenue growth, we delivered decent operating profits which further increased from last year. Thanks to the solid execution of our efficiency initiatives, leveraging improved operating efficiency stable profitability, and healthy cash flow, we've further elevated our financial flexibility, giving us ample room to invest in vertical company ecosystem and drive user growth and engagement. In view of the challenging competition landscape of vertical content, we'll take gradual steps to restoring our competitiveness of vertical company ecosystem while focused on solidifying our advantages areas. It may take two to three years to drive up the traffic share of vertical content on the platform. In this way, we could further reinforce Weibo's market influence, achieve healthy development of the content ecosystem, and thus make a solid foundation to enhance our monetization efficiency.

In 2024, Weibo will enhance its size and activity, strengthen the content competitiveness of the platform, and enhance the efficiency of the platform. Under the current market environment, In 2024, we will focus on growing our user community and engagement, strengthening the competitiveness of our content ecosystem,

as well as further enhancing our operating efficiency. In light of the current market conditions, we strive to maintain steady revenue growth and improving the overall efficiency in the meantime. On the operation front, we will beef up our efforts to reinforce the competitive edge of hot trends and IPs. and revitalize our vertical ecosystem at the same time. On the monetization part, we aim to optimize our content marketing and performance-based ad products. We believe execution of these strategies will lay solid foundation for our top-line recovery from user, content, and monetization side, enabling us to capture market opportunities once the macroeconomy gets better and brand ad demand improves.

In terms of increasing the size and activity of platform users, the key work will be carried out from the following three aspects in the next 24 years. First, we will continue to maintain and channel the cooperation outside of the platform to continue to increase the high-priced user acquisition and promotion as the key to channel work. Second, we will focus on optimizing the social product structure to further strengthen the information flow and the network's promotion efficiency to promote user activity and lead to the increase in the size and activity of social network users. Third, we will focus on improving the atmosphere and user experience of hot products. On the user and engagement front, in 2024, our product operation will focus on three aspects.

We will continue to operate closely with strategic partners with focus on improving high-value user acquisition and usage frequency. Second, we emphasize on optimizing the structure of social products and further enhancing the recommendation efficiency of information feeds in the hope of driving user skill, social interactions, and engagement. Third, we'll refine the product vibe and user experience of Hot Trend products in order to reinforce the mindset and market influence of Hot Search users. Meanwhile, we will also try to create more Hot Trend-based products, enabling users to discover more hot topics and trends and their public discussion, and thus further user scale and engagement of Hot Trend products.

From the strengthening of the platform's content and ecosystem, In 2024, the key work will be carried out from the following three aspects. First, we will continue to strengthen the advantage of the platform's cultural and ecological and competitive environment, especially in terms of cultural and ecological competitiveness, strengthen the scale of interaction between new and old ecotourism, and strengthen strategic cooperation with the film and drama selection platform. At the same time, we will consolidate the ecological competitiveness of the works, and promote the further improvement of platform traffic and service activities. In 2024, the Village Party and the Film Party will be an example. Based on our interaction with the film IP party on the topic of film plot, and the cooperation on the topic of film extension, Our content ecosystem will also highlight three aspects in 2024. First, we will continue to reinforce our leading position around the ecosystem of entertainment and sports events.

In particular, as for the entertainment sector, we'll strengthen the celebrity flower ecosystem to increase user interaction and focus on strengthening our strategic cooperation with the promotion and distribution platform of movies, TV series, and variety shows. This will not only solidify the competitiveness of entertainment work-based ecosystem, but also drive platform traffic and user engagement. Taking the movie promotion during the 2024 Screen Festival as an example, leveraging our cooperation with movie IP holders around the Hot Trends operation of movie plots, celebrity followers' interactions, and extended vertical topics, we are pleased to see a 50% increase in topic discussion year for year, giving us confidence in becoming the go-to platform for movie promotion this year. 2024 also marks the year of Olympics, Our years of cultivation around the sports vertical will pay off, with opportunity to achieve new record high in sports-related traffic and discussions.

Second, we will continue to strengthen the leading advantage of the platform's hot spot ecology. The media's social media has regained steady growth. The focus is to strengthen the discussion of the hot spot of the head bloggers participating in the industry, to create more head hot spot effects, to consolidate the influence of Weibo's hot spot ecology, and to continue to scale up the acquisition of users.

Second, we will continue to solidify our leading position around hot trends. We hope to resume the steady growth of society and the media-related hot topics. The key is to better engage the media and top content creators in the distribution and discussion of hot topics around vertical trends, enabling the build-out of mega hot topics. These efforts would hopefully consolidate Weibo's market influence in the hot trend area. and facilitate user acquisition at a large scale.

Third, we will further strengthen the cultivation of vertical ecosystems in key industries.

To elaborate, we will grow the number and engagement of golden and orange verified accounts, boosting the discussion of vertical hot topics, and thus reinforcing the synergy between company ecosystem and monetization ecosystem, which forms a virtuous self-reinforcing cycle.

From the perspective of improving the efficiency of the platform, we will continue to strengthen the investment in the company's business economy, continue to strengthen the internal IP marketing of Weibo, and establish and consolidate it in more industries and customers. to improve the budget and productivity of customers. In terms of advertising products, the use of IP marketing products continues to standardize and scale the sale. Pure brand ads need to improve the efficiency and content service capability. Effective ads need to strengthen the efficiency and evaluation capability in the main industry and head customers. For example, the well-known Yurong group brand Boston, in the winter of 2023, with two major product new products, Qingbaoyu and Chongshu Classic, will combine the marketing of spokesperson and the marketing of the venue on Weibo to attract the attention of the spokesperson Yang Zi. GrabRudong, such as temperature, snow, and other platform real-time hotspots. We will tie up the users' mindsets of cold, cold, cold, hot, and hot. At the same time, we will use the star hotspots to guide e-commerce online, and the online link to brand events, and the opening of enterprises, to drive the sales of 4G to increase by 40% in total. This year, we will use standardized advertising products and marketing services to combine the hot spot IPs such as text messages and sites with our customer needs in time to continue to increase the commercial value of the hot spot content. At the same time, we will continue to effectively manage costs and expenses,

Finally, on the operating efficiency, we will step up our efforts in enhancing our monetization competitiveness. We will continue to strengthen the recognition of Weibo's content and IP marketing among more industries and clients, and thus improve our competitive edge in capturing clients' budgets. sales of our content and IP marketing offerings. As for performance-based ads, we strive to improve our service capability around ad performance and content with focus on optimizing evaluation of ad performance of key industries and the top clients. For instance, The renowned Don Jacket brand, Boston capitalized on its two product concepts, lightweight and thin, and reshaping classics in winter campaign of 2023. Leveraging a combination of celebrity endorsement and content marketing on Weibo, Boston deeply bonded with hot topics around its brand ambassador, Yang Zi. tapping into real-time winter-related trends such as temperature drop and light snow to firmly associate the brand with the same one in Boston. At the same time, Boston leveraged the celebrity's popularity to drive e-commerce traffic online, while promoting its opening of the OneFooting flagship store as a grand event offline. As a result, The sales performance boosted dramatically in the fourth quarter, with sales volume increasing 40% every year. This year, we'll standardize our ad products and services to timely integrate popular IPs such as entertainment and sports events with the campaign goal of our clients, which will further promote the monetization value of Hot Trend. On top of this initiative to drive top-line growth, we will also continue to effectively discipline our costs and expenses, strengthen the resource platform management, and further improve the overall operating efficiency of our platform. With that, let me turn the call over to Fei Tao for a financial review of the first quarter of 2023 and three-year financial results. Thank you, Gauti, and hello, everyone. Welcome to Weibo's first quarter and fiscal year 2023 earnings conference call. Let's start with user metrics. In December 2023, Weibo's annual use and average daily use reached 598 million and 257 million respectively. Representing an application of 11 million and 6 million users on a year-on-year basis in 2013, our user community and engagement remains healthy besides facing all post-pandemic related traffic. As well as ongoing execution of 80% of child investment strategies, Turning to financials, as a reminder, my prepared remarks will focus on non-GAAP results. All monetary amounts are in US dollar terms and all the comparisons are on a year-on-year basis, unless otherwise noted. We experience hedging to our financials due to the volatility of free interest rates throughout the year. Since our business primarily operates in China, while we report our financials in US dollars, Our financial performance was affected by adverse currency movements. Let me now walk you through our financial highlights for the fourth quarter and fiscal year 2023. May 4, fourth quarter, 2023 net revenues were $463.7 million, an increase of 3% or 5% on a contract currency basis. Operating income was $145.9 million, with an operating margin of 31%. Net income attributable to Weibo was $76.4 million, and the diluted ETI was $0.31. For four years 2023, total revenue reached $1.76 billion, a decrease of 4%, or an increase of 1% on a constant currency basis. Operating income was 592.1 million, representing operating margin of 34%. Net income attributable to Weibo reached 415.6 million, and the diluted EPS was 1.88. Operating cash flow for full year 2023 reached 672.8 million, an increase of 19%. Let me give you more color on the fourth quarter and the four-year 2023 revenue performance. Wave of advertising and marketing revenue for the fourth quarter 2023 was $403.7 million, an increase of 3%, or 5%, on a counter-currency basis. Mobile ad revenue was $379.2 million, contributing approximately 94% of total ad revenue. Full-year funding-conditioned advertising and marketing revenue reached $1.64 billion, a decrease of 4%, or an increase of 1% on a constant currency basis, with mobile ad revenue contributing 94% of total ad revenue. Recalling on Q4 performance first, Consistent with our expectations, advertising business booked a solid growth overall with divergent performance across our pillar ad verticals. By industry, our largest of three verticals with three seed products, FMCG and e-commerce, in terms of growth, we are encouraged to see strong momentum of concept sector continue throughout the year. The headset sector delivered a double-digit growth for both year-over-year and quarter-over-quarter, as customers embraced our platform to reach high-up users and build market heads. The e-commerce and game sectors also demonstrated a robust recovery trend with double-digit growth, leveraging favorable dynamics in competition landscape and launch of blockbuster titles on three steps. The FMCG categories continued on descending trajectories. The food and beverage sector faced a high comparable phase because of the World Cup campaign season in 2022. Meanwhile, the cosmetic and personal care sector remained under pressure, starting from self-sales and last-minute marketing expense control among our multinational customers. Also, we continue to see as-budget shift world to those platforms to serve the marketing purpose of inventory clearance during the e-commerce season. Moving on to full-year planned visitor performance. Due to macro uncertainties and consumption weakness, the recovery pace of our advertising business in 2023 proved to be rough on a constant currency basis. Our advertising and marketing revenue decreased 1% versus 2022 by industry, our largest of three verticals was in CG, 3D products and e-commerce. With respect to growth, Safety products was the largest contributor to year-over-year growth, followed by e-commerce and automobiles among major categories. However, discretionary consumption categories, such as cosmetic and personal care, luxury, apparel, faced broad-based hedging from the demand side. The ad products promoted speed was the largest, followed by social display ads and topics under search in 2023. In light of the rapid advertising demand, we focused on revitalizing the company's ecosystem with high monetization potential, such as basic products and automobiles. This effort has enabled us to further strengthen our company's marketing offerings and enhance our market differentiation. Ad revenues from Alibaba for the fourth quarter were 44.9 million, an increase of 6%. or 8% on a constant currency basis, then promote its recovery of consumption margins and intensify the competition during the mega shopping festivals. Full year ad revenues from Alibaba were $1,011.6 million, an increase of 4% or 10% on a constant currency basis, consistent with Alibaba's moderate pickup in marketing margins. Alibaba stepped up marketing plan this year amid sluggish consumption environment, as well as heightened competition in the e-commerce sector. Before turning to that segment, let me share some preliminary current on the trend entering 2024. With economy in a state of transition and geopolitical uncertainty in 2024, the macro conditions and consumption sentiment are turning even harder to predict. Despite the limited visibility of demand sets due to macro uncertainties, we are culturally optimistic on further recovery of our advertising business in 2024. We hope to further leverage tailwinds in Weibo's competitive sectors as well as a series of mega-quad events. Our team will beef up sales execution to further unlock the long-term monetization opportunities underpinned by our unique value proposition and a diversified content ecosystem. Value-added service VAT renewal was 59.9 million in the fourth quarter, an increase of 4% or 6% on a constant currency basis, mainly due to higher revenue contributions from game-related business. Four-year 2022 VAT revenue decreased 6% or 1% on a constant currency basis to $225.8 million. Turning to cost and expenses, total cost and expenses for fourth quarter was $317.8 million, an increase of 7%, mainly attributable to higher G&A expenses. The increase of G&A expenses would primarily result from lower GMA expenses booked in the fourth quarter of 2022, mainly related to the reversal of compensation expenses for technology, based on the contingent payment arrangements . Four-year cost and expenses totaled $1.17 billion, a decrease of 5%, primarily attributable to the unfavorable foreign exchange impact on the reported number, as well as a decrease of personnel related costs. This decrease was partially offset by the increase of J&A expenses, mainly related to the degradation of compensation expenses of J&A technologies, as mentioned above. Offering income in fourth quarter was 145.9 million, Representing operating margin of 31% compared to 34% in the 30-year last year. All-paying income for four years in February was $592,000,000. Representing operating margin of 34% compared to 33% in 2022. Current income tax. Under GAAP measure, income tax expense for the fourth quarter was $72.6 million compared to an income tax benefit of $18.7 million last year. The increase was primarily due to two factors. First, the growth and reversal of tax liabilities recognized in the fourth quarter of 2022 related to uncertain tax provisions. Second, with paid and accrued withholding tax related to earnings, remittance from the wholly foreign-owned enterprise, WUBI, to Weibo Hong Kong Limited. The earnings distribution from onshore to offshore would fund our demand for U.S. dollars in business operations and payment of dividends and debts, etc. Four-year income tax expenses were 145 pounds per million, compared to $30.3 million last year. Many resulted from increase of tax refunds in the fourth quarter of 2018. Net income attributable to Weibo in the fourth quarter was $76.4 million, representing a net margin of 16% compared to 40% last year, primarily due to the aforementioned impact from income tax. Net income for fall year 2023 was $415.6 million, representing a net margin of 26% compared to 29% in last year. Turning to our balance sheet and cash flow items as of December 31, 2023, we will test cash equivalents and short-term investments. totaled $3.23 billion, compared to $3.17 billion as of December 31, 2022. In the first quarter, cash provided by operating activities was $218.2 million. Cash expenses totaled $30.7 million, and the depreciation and the multiplication of expenses amounted to $13.7 million. On a four-year basis, tax provided by operating activities was $672.8 million compared to $164.1 million in 2022. Capital expenditures totaled $36.8 million, and depreciation and amortization expenses amounted to $58.5 million. Before turning to the planning session, I would like to let you know that we completed an offering of $313 million US dollars covered for bond in December last year. The bond is due to 2030 with an annual coupon rate of 1.375%. We plan to use the next proceeds from the NOAA offering to refinance a portion of the outstanding 3.5% senior note during July this year. Upon the convertible note issuance, we would also effectively give up our offshore cash reserve in US dollars, which gives us more financial flexibility in cash flow allocation in the future. Lastly, given our healthy profitability and cash flow generation, We are pleased to announce that our Board of Directors has approved a special cash dividend of 82 cents U.S. dollars for ordinary shares of ADN to our shareholders. The aggregate amount of the dividend will be approximately $200 million, with payment state expected to be in May. Looking ahead, we remain highly committed to embracing long-term growth opportunities while generating more returns to shareholders and boosting market confidence. With that, let me now turn it over to the operator for the Q&A session. Thank you.

Thank you. We will now begin the question and answer session. If you would like to ask question, please press star one one and wait for our name to be announced. To cancel your request, please press star one one again. One moment for the first question. Our first question comes from the line of Timothy Chao from Goldman Sachs. Please go ahead.

Thank you, Benjamin, for taking my question. My question is regarding our advertising business. Could Benjamin elaborate more on your outlook for the advertising industry? revenue growth for this year, including the first quarter? And specifically regarding the advertising products, what is our key strategies for this year? Thank you.

Okay. In the first quarter, we will see some signs of recovery in most industries. However, we believe that there are still uncertainties and challenges in the 20-year red line. Gordon.

Thank you for this question. So, first of all, because in 2023, for many different quarters, we had a lot of uncertainties for providing these expectations. So, we remain cautious and prudent in giving expectations for the whole year of 2024. So, in Q1, we do see a recovery of almost all the industries. However, still, there are a lot of uncertainties and also challenges relating to the consumption market as a whole.

Okay. From the point of view of demand, in 2024, there will be certain opportunities for some industries. For example, this year's Olympic Games and the events will benefit a lot of our consumer industries, as well as the release of advertising and increase in budget. This will benefit industries such as food and beverage, In fact, the decline of our video content in 2023 is mainly due to the Olympics in 2022, including the World Cup. Therefore, we expect that the average of the second half of 2024 will be better than the first half, because the Olympics will be held in July and August this year. In terms of gaming, with the good release rate of the board, we focus on the customer base. As we mentioned just now, the hot spot of Weibo, including the demand for Weibo content marketing, is gradually increasing. We should be able to play our own content marketing in the market. And also, in terms of the overall demand, in 2024, still we have seen some of the certainties for some industries. For instance, in terms of the sports, for instance, in the Olympics, which took place in July and also the beginning of August,

So this has boosted some of the budget of advertisement for the consumption market, for instance, from the food and beverages and also the apparels and also the footwear as well. So, of course, in 2022, we had actually a very high base because of the Asian Games and also the World Cup. But still, we expect to have a better second half of the year in 2024 than the first half of the year. And also in terms of the gaming, we do see a lot of uncertainties. So for instance, with the booming of the granting of licenses to those gamers, to the game developers, we do can leverage our advantages in terms of the content marketing. And then we would like to leverage this advantage and also help to explore and also help a lot of the new games to be exported, exploded. So in 2024, we expect to have a better gaming industry than that of 2023. Okay.

In some other industries, we will see that in 2022, we think that our competitiveness in the industry is relatively high, and our competitiveness is relatively strong. However, can these industries maintain the same growth rate as in 2023? It is still a challenge because of the situation of the industry itself. For example, the two industries of mobile phones and cars have maintained a growth rate of more than double in 2023. Our budget in this industry is also improved by two years in 2023. But in 2024, we will see whether the mobile phone can still have such a high increase as in two years. Although in the first quarter, we saw that the mobile phone export situation was much better than we expected, but for the whole year, we still feel that there is a relatively high degree of uncertainty. Then, in terms of mobile cars, of course, the advantages of new cars are still relatively obvious, And also in 2022, we did see the enhancement of our competitiveness

And also the percentage of the ad budget against the total revenue of, against the total budget of the ad of our customers is actually growing as well. But still in 2024, whether those industries are still going to enjoy the same momentum in Weibo, it is pretty much uncertain and also challenging. For instance, take the examples of the headsets and also the automotive industries. So, for instance, in 2023, we had a very good growth in terms of the headset industry, which was double-digit. And also, we had an increase of the total ad budget percentage allocated to Weibo in 2023. But still, in 2024, we still remain precautious in terms of maintaining the same momentum of the growth for headset industry versus that of 2022. Still, we have seen a better than expected shipment of the asset industry in Q1, but still throughout the whole year of 2024, there is a big uncertainty about this. And turning to the automotive industry, we have gained a natural advantage in helping to promote those products of new energy vehicles, but still due to the price war and the budget that decreased for the ads for the ICE vehicles, still we found it quite challenging to maintain the same momentum of the growth of our business in the automotive industry than out of last year. But still, overall speaking, we are still keeping a very good momentum of maintaining a very high competitiveness and also the attraction of a higher budget of the ads from our customers. Okay.

There are some other industries, such as the beauty and make-up industry. In the past two or three years, this industry has been a major hindrance to our entire performance. And then this is mainly because of this industry in the 21st year Because of the impact of the epidemic Plus our 21 years, whether it's traffic Or this kind of marketing for fish In terms of the whole business The highest point in this industry That's why the makeup industry is in our time The ratio in the big plate is still relatively high in 21 years 21 years and 22 years are still relatively high In the past two years, we have also seen On the one hand, it's because of a lot of the competition in the makeup service industry Uh, it's just that the price stop has been relatively sharp. And then customers are in the front of the brand budget. The front is down. And then you also see, uh, like Tianmao, including this traditional e-commerce platform. Many of its customer budget and customer marketing also turn to live broadcasts. This will actually create a lot of pressure for the placement of brand ads and e-commerce marketing for platforms such as Weibo. The decline in this industry itself is also due to the growth expected last year itself not being completed, which is a major reason. That 24 years of our original plan, we originally expected to talk about it. Can this industry be more stable in 24 years? But from the first quarter of the situation, it is still not very optimistic. Yes, because although we say that our international brands haven't fully recovered yet, but domestic brands are already starting to grow. But domestic brands are not so big that they need to greatly increase the brand budget. And also, last but not least, I would like to share some of the colors on the industries of the beauty and cosmetic products. In 2022 and 2023, we had suffered from some of the challenges

because of the industry itself. So in 2021, because of the COVID and also because of our high concentration in promoting the entertainment and also the traffic attraction, so we had a pretty good year in 2021 and also 2022. But reasonably speaking, there are a lot of challenges going on and headwinds going on in the cosmetics and beauty products industries. For instance, the high competitiveness and also the price war engaged by almost all the brands. And also they were decreasing their allocation of the ad budget overall speaking. And also you can see that there are a lot of transfer of those budgets, the budget from the commercial or the traditional e-commerce industry to the live stream. So this gave us a lot of pressures in terms of the allocation of a budget to the brand-based performance, brand-based ad or the e-commerce-based ad. So still, you know, there are still a lot of challenges. And also in 2024, originally we wish to have a stabilized performance of the beauty and cosmetics industry at an allocation of ad budget. But still in Q1, we thought that was less than expected and also less than optimal and optimized. So you can see that for those international brands, still they are a little bit far away from their full recovery. And also, we do see the recovery of the domestic brands, but still, it is not the time for them to increase their ad budget. So, of course, overall speaking, we still wish that we could have a very stable vertical like the cosmetics and beauty products. But still, up to now, we think that this industry is still the most challenging industry of our total business portfolio.

Okay. So from our overall strategy, as Scribd mentioned earlier, we will continue to strengthen our IP hotline, including our investment in content marketing. This improves the share of our brand in the customer brand wallet, and our competitiveness is the most helpful. This will continue to increase our investment. In the same way, we will continue to increase our users and scale. In this way, we will be able to continue to stabilize the traffic of our variable-effect advertising information. As for the customer's brand budget,

And also, lastly, I want to say that in terms of the overall strategy, as we have already stated in our prepared script, you can see that our focus of this year will be still emphasizing on those IP hot trends. and also the content marketing so that we can increase our competitiveness and also gain more money and also budget from the total budget of our customers. And also, second of all, we would like to further enlarge the user base and also the total scale of that and focusing on those monetizable traffic. So as a whole, in 2024, still very much a focus and also the main driver for us to grow further is to getting more budget from our customers, and also thus we can grow our overall business. Thank you.

Thank you for the questions. One moment for the next question. The next question comes from the line of Thomas Chong from Jefferies. Please go ahead.

Thank you for taking my question. My question is about our strategies in Transgender 4 with regard to users and our content ecosystem. And on the other hand, how should we think about our AIGC strategies? Thank you.

Let me briefly talk about the 24-year user strategy. In 2023, we will see that our entire market sales budget will be equal to the two-year average. At the same time, you will see that the total number of mobile phones in 2023 will drop, but in this case, our MAU will probably be about the same as the competition, or a little more than 10 million, and the DAU may be about 5 million. On the one hand, we have a relatively close strategy with major mobile phone manufacturers. And also for this question, first of all, let me talk to you about the overall user strategy in 2024.

So in 2024, still, we are going to maintain the same budget for the marketing activities than out of 2023. So for the headset industry in 2023, we do see a decrease of our total shipment. But still, we had a net gain of MAU of over 10 billion, 10 million, and also over 5 million of net gain of DAUs because of a very deep strategic collaboration with the headset makers. so that you can see that we can have a very low user acquisition cost. And also, overall speaking, by focusing on the entertainment and also the hot trends and hot topics, we have also very good positioning in getting the users from outside of the whiteboard.

In 2024, we will see that our overall budget will increase by 6% in 2023. But at the same time, we estimate that in 2024, the entire culture and our entire social life will be further restored. This phenomenon is still relatively obvious from this year's spring festival. So I think at present, in fact, the growth of the size of the user this year should not be higher than 23 years, but it should be higher than 23 years. But from our own internal point of view, we have more challenges in how to take this flow from our Suwengyu and Hedent shift to the vertical field we are talking about, because these vertical fields are more effective for us to improve users' annuality, commercialization, and commercialization efficiency. Before the epidemic, in 2019, the overall flow structure of our entire vertical field was about 60% to 58% of the overall flow. In the past few years of the epidemic, there has been a relatively obvious decline to about 47% to 48% in the second year. And also in 2024, as a result, we had almost a flat

or a little bit more budget allocated to this area than in 2023. We do see a very good recovery of the social hot trend and also the entertainment industry and approved by the performance during the Chinese New Year period. And so thus, we are very confident to have a very good user gain and also user scale in 2024 than in 2023 and also a much better one. Also, the internal challenges still, um are that first of all you know we would like to focus on a shift of the traffic of entertainment and social hot topics to the verticals um because you know by having more traffic of the vertical or vertical traffics we are able to increase the user's thickness and enhance our monetization efficiency and also improve our competitiveness so before the covet before 2019 we had almost 58 percent of our traffic allocated to vertical traffics But still during the COVID period, we had a decrease to almost around 47 to 48% by the end of 2022. We had a very good strategy to recover that after that, but still it is still at a level of around 50%. So the next two to three years of time, by focusing on more efforts taken in this area, we hope to increase the total vertical traffic as the amount of the total traffic to about 60% and more. so that we are able to enhance the user's stickiness, the efficiency of monetization, and also our overall competitiveness as a whole. Okay.

In terms of AIGC, as I have said briefly in the past few reports, for Weibo, we are more open to using these AI models to improve our work in the application field. In fact, some of the attempts in the last two or three years have been more clear. On the other hand, through the AIGC model, which is similar to the Character AI model, we are able to increase the number of AI assistants in the head of our blog, and we are able to increase our excitement interaction, which is the efficiency of interacting with our fans. This year, our goal is to achieve the activity rate between these excitement interactions. Through AI assistants, we can achieve a ratio of 5% to 10%, which is achieved by AI assistants. And then the other one is for some special ones Just for some vertical areas For example, the makeup we talked about last year This year, we may expand to about four to five areas That through AIGC to assist in large-scale production content That was in the fourth quarter of last year In the makeup test When we are high, we can reach the content of 8% of the entire field So this kind of content to assist in production This kind of user reading and interaction that comes with it What about this year? We also set a target for each other inside About And also relating to AIGC, we have stated a few comments

already in the past annual performance or some of the quality performance announcements. Still, you know, now we would like to have an open-mindedness to use the LLMs and also focusing on the applications of those large language models. So, for instance, in 2024 still we have some of the directions of the application. First of all, in terms of the AI assistance, assisting the interactions between the new fans and followers and also the KOLs. we have been doing a lot to really enhance the interactiveness between the new fans and some of the followers and also their KOLs. So now we can see that around 5% to 10% of the overall interactions between the followers and KOLs are actually supported by the AI assistance. And also, second of all, in terms of different verticals. So last year, we pretty much focused on the verticals of beauty and cosmetic products. and also to facilitating the generation and the production of the content in this area. And also this year, we would like to further expand the application of the content generation to another four to five different verticals. So last year, 8% of the content in this cosmetics and beauty products area was generated by the AI tools. And also this year, we hope to have around 10% to 15% of the content generated by AIGC facilitation. which is still challenging to say. And also for the other areas, for instance, the AI robots and also some of the commercializations or monetizations using AI to support, it is still an experimental phase. So we don't have a very detailed target or figure to be shared with everyone. Okay.

Thank you for the questions. One moment for the last question. Our last question comes from the line of Xueqing Zhang from CICC. Please go ahead.

Thanks for taking my question. You notice that the company amounts special due this quarter. So with capital allocation and the shareholder return plan this year, can management share more on the share buyback and dividend plan in the future? Thank you. Hi, Xueqing. Thank you for your question. This is Fei. As mentioned in my prepared remarks, Weibo maintains decent profitability and relatively strong capability to generate operating cash flows. In 2023, our non-GAAP operating income reached $592 million, representing a non-GAAP operating margin of 34%. We generated operating cash flow of approximately $673 million in 2023, representing an year-over-year increase of 19%. So if you can remember last year, when they distributed special cash dividends for the first time last May, we talked about certain principles we would adhere to in use of our cash. First of all, we always prioritize supporting business growth and strengthening our platform's competitive advantages, such as investing in content ecosystems, in vertical areas and AIGC and any opportunities which closely related to our business. And then, in addition to investing in our own business development, we certainly need to ensure shareholder returns. So, as you know, our board of directors has approved the distribution of another $200 million special cash dividend. after we made the 200 million US dollar cash dividend last year. So going forward, we expect to continue paying out the dividends to our shareholders and gradually formulate an annual cash dividend distribution policy. The board would primarily set the dividend amount based on our company's profit performance in the previous fiscal year, while also considering factors such as our cash flow, our financial condition, and the capital requirements. So looking ahead, we will continue to explore various ways to reward our investors, our shareholders, including the dividend payouts and the stock repurchases. These measures will be carefully considered and land with our core objectives and subject to our board approval. We will communicate the progress with market and with our investor in a timely manner. So I hope this can address your questions. Thank you.

Thank you for the questions. There are no further questions at this time. I would like to hand the call back to management for closing.

Thank you all for joining us, and we will see you next time.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.