JOYY Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Joy Incorporated's third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question and answer session. I'd now like to head the conference over to your host today, Jane Shi, the company's senior manager of investor relations. Please go ahead, Jane.

Thank you, Operator. Hello, everyone. Welcome to Joy's Third Quarter 2021 Earnings Conference Call. Joining us today are Mr. David Schilling-Lee, Chairman and CEO of Joy, Ms. Ting Lee, our COO, and Mr. Alex Liu, the General Manager of Finance. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. The third quarter 2021 financial results and webcasts of this conference call are available at ir.joy.com. A replay of this call will also be available on our website in a few hours. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as well as we will make forward-looking statements. Finally, please note that unless otherwise stated, All figures mentioned during this conference call are in U.S. dollar. I will now turn the call over to our chairman and CEO, Mr. David Strelin Lee. Please go ahead, sir.

Hello, everyone. Welcome to our third quarter 2021 earnings call. Despite the increasing uncertainty due to COVID-19, we had another solid quarter as we grew our total quarterly revenues by 21.7% year-over-year to $651 million, while biggest revenue increased by 60.1% year-over-year to $569 million. Notably, we attended non-GAAP profitability at the group level for the first time since we deconsolidated YY Live and booked 35.1 million in non-GAAP net profits. This was mainly attributed to Beagle's margin expansion and improved operating leverage at the group level. During the quarter, Beagle's non-GAAP net profit expanded to 49.6 million, while its non-GAAP net margin improved from 3.3% to 8.7% in the previous quarter. The persistent execution of our globalization strategy has enabled us to deliver steady progress across multiple aspects, including, one, the continued expansion of our global business. Two, diversify content offering on various products that are neutral interest-based interactive social connections. Three, and better synergy among multiple products that drive steady improvements in profitability at the group level. Next, let me share greater detail on some quarterly updates for each of our core product lines. Let's start with BeagleLive. Despite global economy uncertainties and other challenges posted by the resurgence of COVID-19, our business demonstrated resilience as we entered the post-pandemic era. Big O Live's live streaming revenue increased by 8.6% year-over-year in the third quarter. Our efforts to cultivate a global diversified content pool has been effective in further expanding the product reach of Big O Live. As Big O Life's MAU increased by 10.7% year-over-year to 31 million in the quarter, the continued execution of our localized operation strategy has contributed a gradual buildup in the paying behaviors of our users, as the number of paying users increased by 60.1%. year-over-year. We also continue to deliver a robust performance of Big O Live in multiple regions. In particular, on a year-over-year basis, revenue and paying users from Europe increased by 50.6% and 26.7%, respectively. while revenues and paying users from Southeast Asia and other emerging regions increased by 29.6% and 31.7% respectively. As we expand Big O Live's operation into multiple regions, our revenue mix continued to diversify, avoiding reliance on any individual market. Looking at the development of the global live streaming industry, we believe that the penetration rates for live streaming remains at very low levels, leaving us with tremendous growth opportunities ahead. Going forward, we will continue to deepen penetration in multiple key markets, including North America, Europe, Middle East, and Eastern Pacific regions, and dedicate more resources toward the emerging markets as well. In doing so, we will further solidify our leading global market position in the social and entertainment live streaming sector. With regards to our content efforts, in the past few quarters, we have been enlarging our talent pool of content creators and expanding our localized premium content library via various cross-industry partnerships and a series of localized operational activities. We have focused on a handful of categories, including Penn Entertainment, Gaming, and Lifestyles, and further expanded our product reach. For example, for the Penn Entertainment category, the first live broadcast country music competition, Voice of Beagle. wrapped up recently achieving a huge success in Thailand, attracting more than 100,000 Pico concurrent viewers for its final event. In North America, PicoLive launched a new channel feature and attracted many influencers to create their own personal channels on the platform, covering some of the hottest topics and pop culture, including Canadian singer Chrystia Turner's finance channel, Sam Eskhar's fitness channel, and American variety star and singer Sarah Abraham's mental health channel. On the other hand, we provide a platform for those influencers to showcase their talent and creativity. On the other hand, we leverage our influencer to promote content diversification and high-quality engagement on Big O Live platform. In the gaming category, we partner with two mobile game heavyweights July, further enriching BeagleLive's gaming content. In France, BeagleLive partnered with a popular mobile RPG, Sincere Accords, which was published globally by G-Target and hosted a series of incentive events for BeagleLive's gaming content creators. Through our cooperation with Greenup, we hosted and streamed the Free Fire League, a national level esports tournament in South Asia. As a result, we further enriched our gaming UGC during the quarter. We are also further expanding our connections while unlocking new interactive sectors. In the lifestyle category, we made our initial foray into e-commerce live streaming in Southeast Asia. In August, we launched the Bigo Marketplace channel in Indonesia, Malaysia, and Thailand. And we conducted a controlled beta test of the in-app shop feature, which enabled a small group pilot users to compete their purchases through punch-out links with registered third-party merchants. While Beagle Marketplace is still in its infancy in terms of development, it has the potential to expand our product reach by providing a diversified interactive experience for our users. During the quarter, we continued to introduce innovative product features on BeagleLive to further improve our user experience. New features include picture-in-picture new live streaming modes supporting 12 simultaneous streamers for multi-user channels. and more. As a result, the number of streamers of multi-user chat rooms increased by 2.3%, and the average duration per live streaming session increased by 5.3% sequentially. In addition, we updated BeagleLive's non-real-time content sharing feature, BAR. and improved its user engagement further, achieving an 8.1% sequential increase in average user time spent viewing bar postings. Also, by optimizing its content recommendation algorithm with more precious user profiling, is the BeagleLive user discovery of interest-based content beyond live streaming rooms, increasing its next-day user retention rate by 0.5%. Going forward, we plan to further enrich our localized content offerings. We believe that it will help our users establish small, fulfilling, interest-based social connections, further expand our products reach to our user base extension, and ultimately help build a driver's inclusive global community. Next on likey. In line with our emphasis, long-term growth and sustainability, we have been fine-tuning Leike's marketing strategy since the first quarter of this year and prioritizing our investment on our content and the social ecosystem. As a result, Like its overall, MAU experienced some short-term flow mutations and declined to 76.8 million. However, we are starting to see a slowdown in the downward trend. especially in the Gulf states from the Middle East region. Therefore, LACIS live streaming revenue grew further by 58.1% year-over-year, mainly driven by the Middle East region, as revenues from the Middle East increased by 1.5 times year-over-year. In the past quarter, our efforts have been centered on identifying cultivating and supporting talent content creators to cultivate a friendly and vibrant content creation community. We launched a series of incentive programs offering both user traffic and other economic rewards to influential content creators with more than 10,000 fans. At the same time, we continued to uncover the most talented content creators through a variety of localized stems, events, and challenges. As a result, the number of certified creators increased by 17% sequentially in the third quarter. As part of the Incentive programs likely introduce new product features called Silverlight in Russia, Indonesia, the Middle East, and other regions. With the new feature, users are able to obtain Silverlight either through purchasing or viewing in-app commercials and then grant them to their favorite creators and short videos. Essentially, SilverLac enables creators to engage with a large range of same group in non-real-time manner, stimulating social interactions and adding a diversified monetization tool for creators, motivating the production of more premium content. As a result, in Russia, for example, launch of Silver Lake guaranteed widespread, garnered widespread interest from the creatures. And the evidence by 7.1% month to month increased the number of certified creatures joined the lychee community. Looking ahead with the recruitment recruitment of an increasing number of talented creators, we should be able to augment Leike's rich and dynamic content ecosystem and pave the way toward the revival of its user base extension. Lastly, on HAGO. HAGO's live streaming revenue continued its rapid growth momentum as its revenue rose by 78.7% year-over-year, and its number of paying users increased by 1.5 times. In terms of product development over the last few quarters, we made some strategic changes to Hargo's positioning, transitioning from the interactive platform primarily focus on casual games to audio and video multiplayer social interaction and entertainment platform. We made a successful, successive launches of features updates in the past few quarters, including the Hargo 4.0 update with a major revamp of its channel feature focus being on the improvement of multi-user social interactive activities. The virtual family group function and most recently, the came out audio live streaming service for mobile games. Those new features enable user continual meetings in entertainment and interactions needs for our users. Following the series of adjustments, we have achieved a preliminary transformation in HAGO's traffic structure, driving significant improvements in user interaction. On a sequential basis, channel penetration rates increased by 4.0%. In the penetration of our virtual family group, function increased by 9.9%. The average duration of voice chat room increased by 40.3% to 80 minutes. While the penetration rates of TeamUp audio live streaming service for mobile games increased significantly from 0 to 4.4%. In the future, we will continue to provide users with a more diverse multiplayer interactive entertainment experience and cultivate an interest-based social entertainment community. All in all, during the third quarter, despite the recent volatility in the macro and the increased uncertainty due to COVID-19. Our persistent execution of our globalization strategy help us to achieve substantial progress in multiple fronts. Our efforts of enhancing our diversified and localized content ecosystem have helped BeagleLive further expand its product reach and user base while continuing the cultivation of talented content creators and effectively increasing engagement levels in LACI's content community through the combination of improved synergy among various products, enhanced operation leverage, and Prudent marketing strategy, we have achieved a steady expansion in profitability for both Beagle segment and for the entire group. Going forward, we will continue to cultivate our localized content and social ecosystems, nurture interspace, interactive social connections, and pursue long-term sustainable growth for our global business. Lastly, in light of the current market condition, on top of the current US dollar 200 million new share purchase plan announced in September 2021, our board of directors had just authorized an addition share purchase plan under which the company may purchase up to US dollar one billion of our shares till November 2021 to demonstrate our confidence in the company's long-term growth prospects. and to reward our shareholders for their long-term support of the company. This concludes my prepared remarks. I will now turn the call to our General Manager of Finance, Alex Liu, for a more detailed explanation of our quarterly financial results.

Thanks, David. Hello, everyone. As Joy's financial general manager, I will talk about the financial results. Since a majority of our revenues and expenses are now denominated in USD, starting from January 1st, 2021, we have changed our reporting currency from RMB to US dollar to better illustrate our operational results. Please note that the financial information and non-GAAP financial information disclosed in our third quarter earnings press release is presented on a continuing basis, unless advice specifically stated. As the sale of VAVA Live was substantially completed on February 8, 2021, with certain customary matters to be completed in the near future, The historical financial results of VavaLife are reflected in the company's consolidated financial statements as discontinued operations accordingly, starting from the first quarter of 2020. During the third quarter of 2021, despite the recent volatility in the macro environment and increased uncertainty due to COVID-19, we continued to deliver promising financial results. Our total net revenues for the third quarter increased by 21.7% year-over-year to USD $650.5 million from USD $534.4 million in the same period of 2020, primarily attributable to the continued paying users' growth of legal, In particular, our live streaming revenues for the third quarter increased by 19.7% year-over-year to USD 612.2 million. And other revenues in the third quarter increased by 66.8% to USD 38.4 million. Through the combination of improved synergy Among multiple products, enhanced operating leverage, and prudent marketing strategy, we have achieved a steady expansion in profitability for both ego segment and for the entire group. Cost of revenues for the third quarter increased by 16.1% year over year to USD 439.8 million. Revenue-sharing fees and content costs increased to USD 290.1 million in the third quarter from USD 234 million in the same period of 2020, which was in line with the increase in live streaming revenues. Bandwidth costs decreased to USD 19 million from USD 27.6 million in the same period of 2020, primarily due to their company's improved efficiency and determination of bandwidth usage for Indian users after the Indian government's ban of Chinese apps in late June 2020, partially offset by user-based expenses outside India. Gross profit increased by 35.5% year-over-year to USD 210.8 million. Gross margin in the third quarter of 2021 improved to 32.4% from 29.1% in the same period of 2020. Obliging expenses for the third quarter decreased to USD 208.7 million from USD 249.4 million in the same period of 2020. Among the operating expenses, sales and marketing expenses decreased to USD 106.3 million from USD 134.6 million due to disciplined spending on user acquisition via advertisement for certain products, including Leaky and Hargo. Our gap operating income for the third quarter was USD 6.9 million, compared to operating loss of USD 89.3 million in the same period of 2020. Operating income margin for the third quarter was 1.1%, compared to operating loss margin of 16.7% in the same period of 2020. Our non-GAAP operating income for the third quarter, which excludes share-based compensation expenses amortization of intangible assets from business acquisitions, as well as impairment of goodwill and investments, and the gain on disposal of subsidiaries and business was USD 31.3 million in the quarter, compared to non-GAAP operating loss of USD 39.5 million in the same period of 2020. Our non-GAAP operating income margin for the third quarter was 4.8% compared to non-GAAP operating loss margin of 7.4% in the prior year period. GAAP net income from continuing operations attributable to controlling interest of joy in the third quarter of 2021 was USD 7.5 million compared to net income of USD 191 million in the same period of 2020. Net income margin was 1.2% in the third quarter of 2021, compared to 35.7% in the corresponding period of 2020. Our net income was higher in the same period last year, mainly due to the gain from the partial disposal of equity interest in Huya Non-GAAP net income from continuing operations attributable to controlling interest of Joy was USD 35.1 million in the third quarter, compared to non-GAAP net loss of USD 26.6 million in the same period of 2020. Non-GAAP net income margin was 5.4% in the third quarter of 2021, compared to non-GAAP net loss margin of 5% in the same period of 2020. This means that we have attained non-GAAP profitability at group level for the first time this quarter since we deconsolidated YY Live. Notably, Beagle continued to achieve a positive non-GAAP net income for three quarters as its non-GAAP net income expanded to 49.6 million in the third quarter, with non-GAAP net income margin improved to 8.7 from non-GAAP net loss margin of 2.1% in the prior year period. Diluted net income for ADS in the third quarter of 2021 was USD 0.07, compared to USD 2.22 in the same period of 2020. Non-GAAP diluted net income per ADS was USD 0.42 compared to non-GAAP diluted net loss of USD 0.33 per ADS in the same period of 2020. In addition, in accordance with our quarterly dividend plan approved on August 11, 2020, And on November 16, 2020, we will be distributing a dividend of USD 0.51 per ADS for the third quarter of 2021. This is expected to be paid on December 23, 2021 to shareholders of record as of the close of business on December 10, 2021. We would love to provide an update to our execution of the share repurchase program. Announced in August 2019 and later extended in May 2020, the Board of Directors has authorized a share repurchase program in which the company may repurchase up to USD 300 million of its shares till August 2021. as of September 30th, 2021. Such share repurchase program already expired. The company had almost fully executed this share repurchase program and repurchased approximately USD 300 million of its shares. In September 2021, The company announced that its board of directors has authorized a new share repurchase plan, on which the company may repurchase up to USD 200 million of its shares till September 2022, as of September 30th, 2021. The company had repurchased approximately USD 16.7 million of its shares under this program. Earlier today, our board of directors has authorized an additional share repurchase plan in which the company may repurchase up to USD 1 billion of our shares until November 2022 to demonstrate our confidence in the company's long-term growth prospects and to reward our shareholders for their long-term support of the company. As David just mentioned, we will continue to further expand our global market rates, cultivate our highly engaged user community, and enhance our high-quality content offerings. We will also continue to actively explore other ways to maximize shareholder value. Beginning in the second quarter, we have anticipated some negative impact on users online social entertainment activities from the gradual lift of pandemic-related lockdowns in certain countries. We expect our net revenues for the fourth quarter to be between USD 652 million and USD 661 million, representing a year-over-year increase between 14.7% to 16.3%. on a constant currency basis, excluding the revenue contribution from our lives in the same period of last year. We currently have limited visibility surrounding the COVID-19 epidemic's long-term impacts and geopolitical uncertainties on our business and the markets in which we operate. This forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change. That concludes our prepared remarks. Operator, we would now like to open up the call to questions. Thanks.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. When asking a question, please state your question in Chinese first, then immediately repeat your question in English. Thank you. Your first question comes from the line of Thomas Chung from Jefferies. Please ask your question.

The first one is related to the recent pandemic. It will continue to affect the behavior of users, from time spent, engagement, and on the borderline. We can share more about the specific effects. Then, from the impact of by geography in different countries, we can explain further. The second question is about our Q4 guidance. can break down the structure of the guidance, and the trend of different metrics. The third question is about our rate of death, which is the expense line. Thanks, management, for taking my questions. I have three questions. The first question is about the COVID situation And how would that impact the user behavior in terms of the time spent, engagement, and how that actually affects our monetization? And can we talk about how that impact these metrics? And then my second question is about the Q4 revenue guidance. Can management elaborate a bit more about the trend? for different business lines. And my first question is about the cost and expense trend, how we should think about it going forward. Thank you.

Yes, let me answer your question. I think the first one is that last year, our revenue growth was very fast. It was often more than 100%. Yes, so I think this year, based on this, I think our growth is indeed stressful, because the epidemic has brought a lot of performance fluctuations. From the second quarter, I think on the one hand, a part of the country has solved the epidemic policy, and then a lot of users' online entertainment activities have been reduced, and outdoor online entertainment activities have begun to increase. In the other part of the region, the epidemic has been repeated, and the macroeconomic situation is very unstable, and it has caused some impact on the payment of users. Therefore, in different regions around the world, there should be good and bad. In our experience of introducing diversified content and continuously optimizing products, BGOLIVE's user market and storage rate in the key market are basically stable. However, in some regions, such as North America and the Middle East, the short-term change rate has indeed caused some fluctuations. The current impact of the epidemic is not clear yet. We estimate that the Q4 group's revenue has increased by 14.7% to 16.3%. We will update you further after further clarification.

Thank you, Thomas. I will answer your first question. So if you recall, last year we realized very substantial growth in our global business. Our year-over-year growth in many quarters have actually surpassed 100% for multiple quarters. So on top of that, when COVID, there has been some short-term fluctuation caused by COVID-19, it has put some extra pressure for us to realize or maintain such a high level of growth continuing this year. So you can see that starting since the end of second quarter, we have encountered increased uncertainty due to COVID-19. On the one hand, you see some countries gradually lifting lockdown bans, and there has been negative impact on users' online social entertainment activity. And on the other hand, with the resurgence of COVID-19 in certain areas, we've seen weakened consumer confidence on the economy, which has negative impact on users' paying behavior. And this varies across different regions as well. But we have seen that with our efforts to continue to introduce diversified content, and new product features which have improved user engagement, we see Bigo Live's user time spent and retention rate in key markets have remained stable. But there has been some short-term fluctuation of Bigo's monetization capability, such as paying ratio in our pool in certain regions, such as US and the Middle East. So, so far, we do have limited visibility into the precise impact related to COVID-19. That's why we have provided a relatively conservative estimate for our Q4 revenue, which implies a year-over-year growth of 14.7% to 16.3% at group level. We will provide further updates once we have better visibility.

Okay, Thomas, for your question about Q4 and the trend of next year's cost and profits, let me answer it. Considering that Q4 has more annual operations, the investment in content costs and market sales will increase significantly. We expect that Q4 Beagle's non-GAAP profit and profit level will be slightly lower than Q3. As of Q3, Beagle has achieved non-GAAP profit in three consecutive seasons. Overall, At the non-GAAP level, we believe that Beagle will achieve a good profit. From the perspective of 2022, in terms of short video business, after several seasons of adjustment to the investment strategy, Lackay's growth model has been gradually developing in the direction of good. We will continue to observe Lackay's user activity, storage situation and content ecosystem progress, and flexible adjustment of Lackay's investment strategy in the future. In general, we will continue to follow a stable growth path in 2022, and we will consider the growth and profit of global business, and we will consider the appropriate expansion of investment in market sales, and further expand our global operating team and resources. From now on, we believe that the revenue of the BGO version in 2022 will continue to grow steadily and will continue to maintain profit. In the long term, as the group's multiple product lines gradually realize a positive cycle, the overall profit rate will gradually increase steadily. Thank you.

And this is Alex. I will answer your second question. As there would be an increased number of marketing and operating activities in Q4, we expect our content costs and sales and marketing expenses to increase modestly in the fourth quarter, both in terms of absolute amount and expense margins. over the third quarter level, resulting in a slight decrease in our gross margin and non-GAAP net margin for Beagle segments in Q4 on a sequential basis. But as you can notice, Beagle has achieved non-GAAP net profit for a consecutive of three quarters. So for the full year, we believe that Beagle segments will achieve a low single-digit non-GAAP net margin And for year 2022, after a few quarters of marketing span adjustments to Lyte, we have seen some positive preliminary results to the product. We will continue to observe Lyte's user engagement level, retention rate, and content ecosystem progress, and flexibly adjust Lyte's marketing spend in the coming year. So overall speaking, we will ensure a steady and balanced growth strategy, balanced growth and profitability of our global business in 2022, and increase investment in sales and marketing activities, and further expand our global localized operational team. We expect BeagleSegments to achieve steady growth in terms of revenue and will remain profitable in 2022. And in the longer term, with the group's multiple products gradually moving towards break-even, we believe that the overall profit margin will be gradually increased. Thank you.

Thank you.

Your next question comes from the line of Alex Poon for Morgan Stanley. Please ask your question.

Thank you, Manager, for accepting my question. Congratulations on your good performance and this new recovery plan. I have two questions. The first question is about BGO Live and Likey. What new content and new features are there in this period? Are there any feedback from users and contributions of income that can be shared? Thank you. The second question is about the progress of the deal with Baidu. Thank you. My first question is related to Beagle Live and Leiki. Can management share some of the new features and content, the user feedback, revenue contribution from these features in Q3? And going forward, what new features and content are we looking forward to expand into? My second question is related to our deal progress update with Baidu. Thank you very much.

Okay, thank you for your question. I think the first one is that we are still trying new content and functions in BeagleLive and Likey. For example, in August, in Malaysia, BeagleLive's night view function got a good response. The average number of visits in the live broadcast room reached 150,000 to 200,000 times. At the end of August, we officially launched Beagle Marketplace in Indonesia, Malaysia, and Thailand. In some areas, the number of people watching the live broadcast has reached 25%. Currently, the Beagle Marketplace is still in the early stage of testing. We have not yet received the merchant's commission. The main purpose is to provide diversified content and product experience for users. There is no contribution to revenue in the short term. In terms of new features and regulations, Q4 will further promote the ecological activity of one-step content on the bar of Beagle Live. As we shared before, at the end of August, we launched Super Like in countries such as Russia, Indonesia, the United States, the Middle East, and other countries. Currently, the penetration rate of the first month has reached 7.7%. Due to the fact that Super Like can deliver positive content and help creators and business fans. So in the short term, it is expected that the Super Like function will not make a special contribution to revenue. Because the function has just been launched, the data is relatively limited. We will continue to observe the feedback of users. In addition to Super Like, in the fourth quarter, we will surround Thank you, Alex.

This is David. I will answer your question. So both for Beagle Live and Nike, we have been trying out new content and new product features in the past few quarters. So in early August, I've just mentioned that for Beagle Live, we have beta-tested Beagle the Beagle Passam Alam, which is the night market e-commerce live stream channel in Malaysia, and received some preliminary positive user reaction, with average user views per live streaming session reached 150,000 to 200,000 per live streaming session. In the response, in late August, we officially launched the Beagle Marketplace channel in Malaysia, Indonesia, and Thailand. The viewers' DAU penetration rate was as high as 25% in certain regions. While Beagle Marketplace is still in its infancy in terms of development, it has the potential to expand our product outreach by providing a diversified interactive experience for our users. We did not charge the merchants any commission at this stage yet, so there would be no contribution to revenue at this stage. In Q4, we would be launching gifting functions under our non-real-time content community, the bar feature, to further improve the engagement level of bar feature. And for Nike, as I have just mentioned in my prepared remarks, we introduced a feature called SuperLike in Russia, Indonesia, Middle East, and also in the US in late August. We have seen SuperLike MAU penetration rate reach 7.7% in the first month in certain regions. So as the creators could actually obtain the revenue share from SuperLike, we believe that the feature could motivate the production of more premium content and help creators better engage with their fan groups. So as of today, as there is a few limited views available, revenue contribution from SuperLike at this stage is very limited, and we will continue to monitor our users' feedback. And in addition to SuperLike, in Q4, we're planning to launch subscription feature under Likey, to continue our support for the KOLs and to help them pursue content creation as a lifelong career.

As for the update of the YY Live deal, there hasn't been new information since our previous communication.

As mentioned in the SEC filing that the company released, we have substantially completed the sale of our wildlife to Baidu, and there are still customer matters in progress. So both sides have agreed to extend the launch update of the proposed transaction to a date mutually agreed upon by the parties. So if there is any further updates, we will disclose it when and as required by applicable security laws. Thank you.

Thank you, Mr. Lin. Thank you, Jane.

Your next question comes from the line of Yuwen Zhang from China Renaissance. Please ask your question.

Good morning, Ms. Guo. Thank you for your question. I have two questions. First, I would like to ask about LIKE. I just mentioned that we are a more flexible investment strategy. Can you share what factors are involved in this? For example, the competition pattern, the cost of goods, or some other factors? In 2022, will there be a judgment on the price trend of like in the beginning of 2022? The second question is, I would like to ask Mr. Guo to share his current opinion on the competition pattern of overseas live broadcasts and short videos. Then I will translate it myself. So the first question you're regarding Nike marketing, you mentioned it's more like flexible marketing strategy. Can you share more care around this? That is dependent on the landscape or the user acquisition cost or other factors. And what's our preliminary thoughts on the Nike marketing trend into 2022? And then secondly, can you give us an update on the overseas live streaming and short video competition landscape? Thank you.

Okay, thank you for your question. I want to separate this question into two markets. The first one is about the live broadcast business. The second one is about the live streaming business. The first one is that I think the whole market is actually afraid of the live broadcast business. It will think that the live broadcast business will be hit by the live streaming platform in the future. And then this is the biggest concern for everyone. But in fact, from China's operating data and operating status, in fact, for everyone to see, in fact, this large-scale social platform, in fact, the transmission of live broadcasts is not efficient. Yes, the efficiency of doing live broadcast transmission, in fact, you have already seen a lot of numbers of competitors. I don't need to talk about it anymore. You can clearly see that the efficiency of live streaming is far lower than the efficiency of advertising. So for a large-scale social platform, live streaming itself is not a good deal in terms of the whole strategy. It's not a good return on investment. So I think in the short term, live streaming may be under some pressure. But in the long term, I think the live broadcast business itself is a live broadcast business income. The social platform's advertising income is still the core income model of the social platform and the most continuous income model. So between these two income models, I don't think it will be a direct competitive relationship. So I am very confident in the long-term health growth of our own live broadcast business. I'll translate it first.

First of all, I'd like to separate two questions and begin with some thoughts on live streaming first. We've got the impression that the market is actually very concerned about the potential negative impact live streaming platforms might have from the mega social platforms with huge traffic. but actually based on our observation of the Chinese peers and also competitors' data, we've seen that for these larger-scale social platforms, their monetization efficiency via live streaming is actually very low. It's lower than Figo Live, and it's lower than their own advertising business. That's why you never see... for these social platforms to put live streaming business as their priority of growth engine because they would believe that the efficiency and the ROI is actually lower than them pursuing an advertising-driven model. So what we'd like to emphasize here is that for these mega, relatively larger-scale social platforms, they do not actually compete with our business directly because that is by nature of priority of their business growth model. And we believe that we will still be able to obtain a longer term sustainable growth from our live streaming business.

关于这个Likey呢,我就觉得因为Likey 我们从今年年初调整了这个市场投放策略, It has also adjusted our user strategy. In the entire market, I think LINE Key has developed a completely different development direction from competitors. LINE Key is mainly to encourage the growth of private traffic, to encourage the outside celebrities, or netizens, or other organizations with traffic, such as game unions and various organizations, can establish their own private flow in Likey. So, our Super Likey actually looks like a reward for users. In fact, we help celebrities or influencers to find the fans who are willing to pay from all their users. Right? This is a... I think in the future, we will put... Uh... not to encourage or hit the private traffic, right? Because the traffic of their platform is distributed by the platform. If private traffic enters, it is equivalent to the platform losing control of this part of the traffic. Yes, but I think the strategy of Likey is to encourage private traffic, to encourage all kinds of people to pull their fans to the Likey platform, and the Likey platform provides a large number of transformation tools, including e-commerce transformation tools, including Super Like, virtual tips, subscription, Yes, because we don't have many private streaming platforms that provide such a good interface tool in the market. So I think that this year, not only did we reduce the investment strategy from the investment strategy, but also avoided direct competition with competitors. Secondly, I think our achievement is that Lyte has created some good best models, which has greatly reduced our losses and greatly increased our income. In the future, we want to establish a stable and stable private traffic flow. In this way, we will be able to manage and transmit from various platforms, including those with influence and fans, to likey platforms.

As for Lykey, what I'd like to emphasize is that we've not only adjusted the marketing spend of Lykey, we've also changed our product strategy as well. You can see that as compared to our competitors, we're actually going through a different direction. We are advocating private traffic, enabling KOL celebrities gaming companies with existing or established fan groups to establish or to attract their fan groups onto Likey and also to be able to monetize their fan groups via the platform. If you look at the appearance of SuperLike, it looks like a gifting feature in its own, but actually in nature, it's about helping these KOLs, helping these influences to be able to locate the fan groups who are willing to pay for their content and be able to enable these KOLs and influencers to monetize their fan groups. And the introduction of the new feature subscription is also one of the monetization tools that we will provide for these KOLs. if you look at our competitors' platforms, you can see that a lot of the traffic distribution is prioritizing the public domain, centering, emphasizing the platform's control over traffic distribution and diminishing the KOLs and influencers' own personal influence on their fan group. So what we would like to do is the opposite. We would like to advocate private traffic, help these users, help these KOLs and influencers to drive their own established fan groups from other products or platforms to Leike. And by providing such diversified monetization tools, including the existing live streaming, super likes, subscriptions, and even e-commerce, a diversified monetization toolbox to these KOLs and influencers so that we will be able to drive the further growth of Likey. So all in all, you can see that we'd love to see a big change to Likey's business model, where not only the marketing strategy is adjusted, but also we have go for a differentiated product strategy, which avoids direct competition with other platforms. So going forward, you'll be able to see that we'll be able to continue to grow Likey's revenue with narrowing loss. And in the future, by continuing centering private traffic domain for these KOLs, we'll be able to further empower these KOLs and influencers and be able to drive further expansion both for our user base and monetization level. Thank you.

I would now like to hand the conference back to the management for closing remarks. Please continue.

That concludes the end of this call, and we look forward to speaking with everyone next quarter. Thank you.

As this concludes today's conference call, thank you for participating. You may now disconnect.