Tencent Music Entertainment Group

Good evening, good morning, and welcome to Tencent Music Entertainment Group's first quarter 2025 earnings conference call. I am Alison, the head of IR. We announced our quarterly financial results earlier today before the US market opened. The earnings release is now available on our IR website and via Newswire services. During today's call, you'll hear from Mr. Kaxion Pan, our executive chairman, and Mr. Ross Nyang, our CEO, who will share an overview of our company strategies and business updates. Then, Ms. Shirley Hu, our CFO, will discuss our financial results before we open the call for questions. Before we continue, I refer you to the safe harper statement in our earnings release, which applies to this call as we made for looking statements. Please note that we will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in our earnings release and following with the SEC. All participants are muted at this time. After management's remarks, there will be a Q&A session, and please be advised that today's call is being recorded. With that, I'm very pleased to turn the floor over to Kaxion, executive chairman of TMB. Kaxion?

Thank you, Melissa. Welcome. Hello, everyone, and thank you for joining our call today. We kicked off 2025 with a strong first quarter performance, demonstrating robust top-line growth and stronger profitability. This underscores the successful execution of our high-quality growth strategy with the solid foundation we have built, a thriving music ecosystem, and healthy financial position. We are well-equipped to navigate global uncertainties with confidence. As music becomes more accessible and personalized, we see user preferences becoming increasingly diverse. Our platform is uniquely positioned to inspire deeper and broader music consumption through enriching our ecosystem and expanding suite of services. Let me share some of the key highlights. First, we strengthened our partnerships with record labels to further enrich our classic music library. Notably, we renewed the multi-year contracts with Sony Music Entertainment, bringing 360 reality audio sound privileges to SVIP members. We also extended collaborations with Empire Entertainment Group and Rock Records, enhancing the listening experience with immersive Dolby M.O. sound. Also, we partnered with dream music group, Zhong Meng Music, to further broaden our selection of popular music rap, which has strong growing engagement and positive feedback from our users. Meanwhile, our self- and co-producer proprietary content is gaining increasing traction among music fans, offering a differentiated user experience that sets us apart from other music platforms. As for some highlights, in the first quarter, we partnered with CCTV News to produce The Time 静时光 for Zhou Shen, which ranked number one on the Kugou Minglan chart and number four on the QQ Music Minglan chart. We also produced One-Fourth to Eternity 一念风神, the theme song for the popular Tenshin game Crossfire 穿越火线, which quickly topped the multiple charts and resonated with both music lovers and gamers. Second, through our insights on contents and user evolving preferences, we deepened and reverberated content consumption across different genres. While Chinese songs remain the mainstream choice, we are seeing increasingly popularity of Korean, English, and Japanese tracks. In this regard, we renewed the contract with top South Korean labels Starship Entertainment and YG Entertainment, maintaining our leadership in Korean content while also launching merchandise collaborations, such as collectible Star Cards, our extended partnership with Japan's top ACG label Kadokawa Corporation. At the thousands of including popular anime theme songs, further expanding genre coverage for the fans. Third, we fulfilled the users' demand for collectibles and providing them new ways to express their passion and appreciation of artists. Recent highlights included the 10-day head start pre-sale of Beyond Utopia 三重楼 by Tenshin Times 时代商量团, which rose to number one on the 2025 physical album bestseller chart and number two on the all-time chart during this period. Another example is the physical album producer for Silent Swing 安静人, 100,000 Volts 十万福特, which quickly became a favorite among his dedicated fans. We also collaborated with K-pop icon G-Dragon to resell official light sticks and other products in mainland China. For fans who purchased his digital albums, we offered the privilege to buy China Limited Special Edition merchandise, which achieved an impressive sales performance. Fourth, we offered the user more engaging and interactive music experience both online and offline. In the first quarter, we stated nearly 40 well-known artists and groups, including JCT Tan Jianchi, World Rank Wang Yuan, Silent Swing 三重楼, Wang Sulong, and Legends of Phoenix 凤凰传奇 in our annual Music for Passion 超级巅峰之夜 event in Chengdu, attracting tens of thousands of passionate fans. We debuted Asper's first ever exhibition and Babymonster's pop-up store in mainland China, offering fans limited collectibles, interactive displays, and -the-scenes content to deepen fan connections with the artists. Online, we invited artists such as Xin Liu, Liu Yuxin, Sean Tang, Tang Hanshao, and Zhuo Yuan from to engage directly with fans in the comment sections, sparkling waves of enthusiasm among their fan communities. Before I conclude, I also want to briefly touch on our ESG progress. In April, we released our 2024 ESG report to offer stakeholders enhanced transparencies and insights into our operations. The report details our practices and achievements in key areas, including intellectual property protection, user privacy and data security, product inclusion and accessibility, and the fostering of diverse music communities. As we continue to unlock the potential of music and technology, we remain committed to advancing sustainable growth and creating social value. In summary, our solid start to the year is a testament to the strength of our comprehensive content ecosystem and our operational excellence. These core capabilities, together with our strategic focus, ensure that we remain well positioned for sustainable growth in 2025 and into the future. Now, I would like to turn the call over to Ross for more details on our platform development. Ross, please go ahead. Thank you.

Thank you, Kaixin. Hello, everyone. Our consistent focus on high quality content and innovative product offerings has enabled us to build a dynamic music ecosystem that meets a wide range of user preferences. As a result, we have seen substantial enhancement in user engagement, illustrated by -over-year growth in both paying user base and ARPPU in the first quarter. This positive trend was further supported by continued strength in SYP adoption, reflecting the increasing recognition and engagement of our valued members. Here are some highlights to share. First, our premium sound quality and audio offerings remain a key attraction for SYP members, penetrating about 15% of our VIP user base. To illustrate, Kugoo Music introduced the industry-first Vapor External Amplification Enhancement Sound Effect, which intelligent optimized the sound depth and clarity when using external speakers. We also launched a dedicated audio effect for Apple, enabling users to enjoy the advanced audio performance of the new models without upgrading devices. Second, a range of unique perks have proven effective in driven SYP conversions, including unique album discounts, special badges, early access to merchandise and live events. As an example, at our Music for Patients event, SYP members enjoyed special privileges such as priority ticket purchase. Moreover, those who bought tickets through this channel were also provided with exclusive services such as reception and transportation. We also helped Fiona State, Xue Haiqi, stage her first ,000-seat concert hall in mainland China, offering SYP early ticket access and fun meetings and great opportunities. Additionally, we interest our system, enabling SYPs to unlock expanded rewards, deepening their sense of identity and community. Third, long-form audio content, particularly top IPs, contributed to boosting SYP retention. In the first quarter, we created the audio drama The Grave Robots Chronicles Dao Mu Bi Ji and co-developed it with original author Nan Pai Sanshu, star voice actors and top-tier producers. Benefiting from interactive activities such as live streaming with the author and in-character voice commentary by the leading voice actor, it quickly gained popularity, surpassing tens of millions of streams in just 14 days. On technology, we continued to use AI to elevate user engagement. One example was introducing an interactive commentary feature that transforms music charts into conversations, enhancing fun emotion. Users can also personalize music effects switching between different vocals and instruments with one single click. In parallel, we adopted the DeepSick LLM to help evaluate content quality and improve recommendation precision with user preferences. On the non-subscription side, our Tizen remains a key growth driver and continues to deliver thought -over-year growth across the board, thanks to diversifying AD formats. In particular, our innovative AD supported mode grew from strength to strength in the past quarter. We have also introduced a variety of interactive tasks for both paid and unpaid users, which saw an upward trend in engagement and adoption. Such positive trends provided us further confidence to continue to grow our advertising business as a whole, unlocking more potential in the future. Looking ahead, we remain committed to enhance our competitiveness and pioneering new ways to inspire deeper and broader music engagement. Ms. Satch, I would like to turn the call over to Shirley, our CFO, for a deep dive into our financials.

Thank you, Ross, and greetings to everyone. Let me now turn to our financial results. In Q1 of 2025, our effective monetization of online music services and operational efficiency management continued to drive robust financial results, with strong performance in our music subscription and advertising business. Revenues continued growth momentum and richer RMB 7.4 billion, with a 9% -over-year growth. Online music revenues increased by 16% -over-year to RMB 5.8 billion. The increase was mainly driven by strong growth of our music subscription revenues and advertising revenues, supplemented by growth in revenues from artist-related merchandises and offline performances. Music subscription revenues in Q1 of 2025 reached RMB 4.2 billion, representing a 17% increase -over-year and a 5% rise sequentially, driven by continued expansion of the SIP membership program and reduced promotional activity. Mostly, ARP increased to RMB 11.4 this quarter, compared with RMB 10.6 in Q1 2024. To meet the evolving needs of our users, we keep enriched rights and privileges of our SIP members, such as premium audio content, enhanced sound quality and effects, and early access to artist-related merchandises and live events. Advertising revenues also achieved strong -over-year growth, primarily due to the growth in AD-supported model revenues. With more interactive features and enriched benefits, we boosted the interest rate for AD-supported model advertising, enhanced the eCPM, and attracted more advertisers. Meanwhile, sponsorship advertising remains attractive to brand advisors. The success of our flagship music for passion QQ Music's Chao Ji Sen Dian Zi Ye event was a great example to this. Through offline event sponsorships, we've adjacent advertising partnerships while driving ecosystem monetization. In addition to milk subscription and advertising, we have also made good progress on artist-related merchandise sales and offline performance. In Q1, we started shipping the physical album of Xiao Zhan, released in Q4 2024, and the related revenues were recorded, resulting in a -over-year revenue increase from artist-related merchandise sales. In addition, with the increased opportunities in offline performance marketing, we've strengthened the partnership within the music industry and successful hosted concerts, featuring renowned artists, leading to revenue growth this quarter. Social entertainment services and other revenues declined 12% -over-year of R&B 1.6 billion. Starting this quarter, we have ceased disclosing operating metrics for social entertainment business on a quarterly basis. As we have shifted our strategic focus to our core music business, which has accounted for a growing dominant portion of our revenue, operating metrics for social entertainment business are no longer consistently the key drivers to our growth and prospect. Our growth margin improved to .1% and increased .2% points -over-year, driven by the following key factors. First, the strong growth of our subscription revenue, driven by increased monthly ARPPU and advertising revenues, has contributed to the growth of growth margin. Reminues from raising membership and advertising in social entertainment services has also positively impacted our growth margin. Second, the scaling of our own content further improved our growth margin. Third, for social entertainment services, the decline in revenue sharing fees outpaced the decrease in revenues. Fourth, with years of dedicated efforts and investments, we have established win-win relationships with labels and artists. This has enabled us to explore more partnership opportunities and monetization models with them and further improve our cost efficiency. On the operating efficiency side, we have maintained strict financial discipline and our eye-focused promotional spending management while directing investments toward long-term growth errors. Operating expenses as a percentage of revenue decreased of .5% in Q1 2025, compared with .8% in the same period of last year. Our effective tax rate for Q1 2025 was .2% compared to .9% in the same period of 2024. The lower ETR was primarily due to the impact from game on deemed disposal. We accrued with tax of RMB 118 million in Q1 2025. In Q1 2025, our net profit was RMB 4.4 billion and the net profit attributable to equity holders of the company was RMB 4.3 billion. This quarter, we have received a 2% equity interest in UMZ through a distribution income from an associate which was designated as financial assets at a few values through other comprehensive income and have recognized again of RMB 2.37 billion on deemed disposal of the associate. Non-advised net profit increased by 23% to RMB 2.2 billion and non-advised net profit attributable to equity holders of the company increased by 25% to RMB 2.1 billion respectively. Our diluted earnings per ADS this quarter was RMB 2.77 and non-advised diluted earnings per ADS was RMB 1.37 up by 26 -over-year. This results underscored our effective monetization, enhanced operating evasions and the benefit from our share repurchase program. As of March 31st 2025, our combined balance of cash equivalence and short-term investment were RMB 37.7 billion as compared with RMB 37.6 billion as of December 31st 2024. This combined balance was also effected by changes in exchange rate of RMB to USD different balance sheet dates. In March 2025, we declared a cash dividend of $0.09 per ordinary share for $0.18 per ADS for the year ended December 31st 2024 and the cash payment for the dividend of US$275 million was made in April 2025. Looking ahead, we will prioritize high-quality growth in our music business by expanding as VIP memberships, growing our advertising business and diversifying our offerings across the music value chain. We will continue to invest in original content production, high-quality content and innovative technologies globally to further improve user engagement, user experience and strengthen our ecosystem. We remain confident in the health growth prospects of the music industry and we are a part of and are committed to delivering high-quality investment returns for our shareholders. This concludes our prepared remarks. Operator, we are ready to open the call for questions.

Thank you Shirley. If you are dialing in by phone, please press 5 to ask a question and then press 6 to unmute yourself. If you're accessing the call from the tensor meeting or role meeting application, please click the raise hand button at the bottom left. For the benefit of all participants on today's call, please limit yourself to one question and if you have additional one, please re-enter the queue. If you ask your questions in Chinese, please repeat them in English. And the first question comes to life from Gorman Sachs Lincoln. Lincoln, the line is open.

Thank you management for taking my question. My question will converse on the very solid first quarter performance. So can management share a bit more comment around the look of our top line profit growth for the next quarter as well as for the full year 2025. Thank you.

Thank you Lincoln for your

questions. And actually we did a good job and achieved a strong result in Q1, which gave us confidence in the 2025 outlook. With our rich service offerings and also the comparing product experience as well as our long-term commitment in participating in the value chain of the music industry, we expect full year, year over year growth rate to accelerate from last year and we will continue to expand our margin as well. While the music subscriptions business remains our cornerstone with healthy growth, we continue to lead the way to encourage more music consumptions, which has allowed users to engage with a wider range of music entertainment services. Our SVIP subscription program continues to inject new energy and its unique offerings such as the artist's merchandise, non-fond audio content and concert etc. will further enhance our user engagement and ARPPU expansion. So all these achievements reinforce our confidence in the long-term potential of the music industry and also our commitment to ongoing investment. So in the conclusion, I think for the year 2025, for our subscription businesses, we will continue to deliver high quality growth driven by both of the subscriber gains and the ARPPU expansion. And for the long subscription businesses, improve the advertising performance and product innovation will continue to drive the steady advertising revenue growth, while deeper partnerships with music labels and artists will push the revenue for merchandise and concerts etc. Thank you.

Thank you. And the next question comes to the line from City Group Alicia. Please proceed.

Hi, good evening management. Thanks for taking my questions. Congrats on the solid results. Questions is on how do management think about the growth opportunity of podcasts in China? Can you also share a little bit detail the current long-form audio user metrics and also revenue contribution? Thank you.

Thank you very much. Thanks for the question. At least in domestic China market, when talking about podcasts, it could be interpreted in narrow sense and broader sense. When interpreting the podcast from the narrow sense, actually it's just like the normal podcast we mentioned. It is still be conducted in single person live streaming or multi-people dialogue. It is a way to voice one's own opinion. So it has everything to do with the KOLs. So we see that for podcasts in the rest of the world, especially in the US, it was developing very fast. But still in China, its coverage quite limited, but still maintain some growth. So we continue to keep an eye on podcast business. And for sure, regarding its commercial value, still there will be some challenge. So

for us, we have been emphasizing that we will focus on the long-form audio business. This is similar to Spotify. We are actually more concerned about the audio industry. Actually

for our company, we are going to emphasize we prioritize the long-form audio business. Just like what has been done by Spotify, we really would like to continue to advance the long-form audio business. So

in the field of audio, we should have a larger user scale, and at the same time, we can complement our music users. And our main focus is mainly on the content related to books, online literature, and children.

So

we think that the entire user scale is still relatively good. In our case, we are working hard to operate the audio-based user scale or the number of subscribers. We are still getting good results. At the same time, it has become a core driving force in the current SIP.

So with our concerted efforts regarding the long-form audio user, no matter for the user base or the subscriber base, we indeed registered a very nice performance. And it has also become a key driver to advance our SIP business. So in one word, we do believe our musical content and the long-form audio are going to play a complementary role to each other. It is also going to help to further enhance the quantity and quality of our entire DMP content library by providing our users a much better experience, even including the basic user.

Okay, then this question comes to the line from McQuirey. Ellie, your line is open.

Thank you, Melissa and management, for taking my question. I just have a question on SVIP progress. Can management share some kind of operating matrix or key KPIs for SVIP? What's the retention that we are seeing for the users that's being converted to the premium tier? And going forward, what would be kind of the ultimate kind of ceiling for the R2 expansion? Thank you.

First of all,

we are very satisfied with the overall progress of SIP so far. At the same time, we are also very happy with the progress of the R2 expansion. We are very happy to see that more and more artists and brands are coming out of the content library, including other media platforms, including overseas. In fact, we are all starting to embrace this new trend and start doing this kind of business.

Thank you very much. Thanks for your question. Actually, for the management team, we are quite satisfied with SVIP business progress now. At the same time, we are pleased to see at least from the content perspective, more labels and more artists and even the live streaming platform, including those ones from overseas market, started to embrace the trend of SVIP.

This high-end membership package not only provides users with a diversified music and entertainment experience, but also allows artists to interact with their fans and at the same time increase their chance of commercialization.

SVIP as a high-end membership package not only provides users with a diversified music and entertainment experience, but also allows artists to access their fans in multi-channels. It also increases the opportunity for commercial value monetization.

Currently, the penetration rate of SVIP on the platform and UP have shown a very positive growth. As we continue to improve our membership system, we will continue to launch more attractive exclusive rights and personalized services. We will also combine our more effective operation strategy. We believe that the number of SVIP members and UP in this quarter has actually achieved a sustainable growth

in this quarter. So, nowadays you can see for SVIP penetration ratio and ARPPU all demonstrate very strong growth momentum. We will continue to improve and polish our membership system, where at the same time we will also launch more attractive privilege and tailor-made service to our users. Along with our very effective operational strategy, we believe our SVIP paying user and ARPPU will continue to grow. At least for this quarter, our paying user and ARPPU all demonstrate very good sequential growth.

Yes, this is actually related to our strategic direction. In fact, one of the core goals of our promotion of SVIP is to improve our UP value. So, from the actual perspective, it has already started to show up in our UP. And it's a little faster than our previous expectations.

Actually, rolling out SVIP business is strategically aligned with our overall strategy. When we launch SVIP, a key reason is because we really want to leverage SVIP to continue to improve the ARPPU of our overall business. So, from this perspective, SVIP started to play a driver role in demonstrating great resilience. And the growth is even faster than what we expected.

So, we believe that the growth of our business will continue to be positive and optimistic. At the same time, we will continue to invest in high-value membership services and continue to work with our brands and artists to further enhance our SVIP's

credibility and customer satisfaction.

Thank you. The next question comes from Morgan Stanley Liu Yang. Yang, your line is open.

Thanks for the opportunity. I would like to ask about the ARPPU growth. The .5% Yang-Year growth looks pretty good. Could the management comment on the contribution from SVIP and also the contribution from the less promotion activities to the overall ARPPU Yang-Year growth? Thank you.

Actually, we can't really talk about the specific data. But we are very clear that Q1 is our holiday season. So, we have done a better operation during the holiday season. So, we have minimized some of our downfall. Thank

you very much. Thanks for the question. Actually, it's not appropriate for us to provide you the breakdowns. But let me just tell you, we are very clear. Q1 of every year would be a season with festivals and holidays. And we indeed continue to optimize our operations in Dubai. But at the same time, we also downsize the discount we provided to the market. And from the actual result, it indeed helped to further improve the ARPPU.

So, from the actual result, we are still looking forward to the growth of SVIP itself. It can play a more positive role in our future operations. Because the marketing strategy itself is now slowly reducing and continuing to promote the improvement of our basic members.

So, from the actual result, you can see, as I have already mentioned, we are still expecting the indigenous growth of SVIP businesses that can play an even bigger driver role to our overall ARPPU. Well, for the marketing strategy itself, and we have already started to further reduce it and continue to improve the ARPPU for our basic members. So,

for us, we will still closely monitor the feedback from the users and the changes in the market. So, in the end, we can ensure that we can also strengthen the growth of our user experience and the members' health.

Thank you. The next question comes from Alex Yao from JP Morgan. Alex, please.

Thank you, Benjamin, for taking my question and congrats on a solid quarter. So, my question is on the non-paying subscribers. So, basically, as we shifted towards this high-quality growth strategy, we'll be, I think, at least increasingly de-emphasizing the price-sensitive consumers who often come just for a deep discount. And once we cut the discount, these price-sensitive users tend to be just churned out of the membership user base. So, the question is that now we're probably need to de-emphasize more of those price-sensitive consumers. What is the monetization strategy on these non-paying users? In the past, a couple of years, we talked about advertising. So, any updates on monetization of these non-paying members on advertising? And then other than advertising, do we have any other strategy or thoughts to monetize these non-paying members? Thank you.

Thank you, Mr. Director. I have a question specifically for non-paying members. As we all know, for non-paying members, they are generally price-sensitive users. They come when the discount rate is higher, but when the discount rate is reduced, they may be lost. So, for these price-sensitive users, how should we think about them in the future? Especially for price-sensitive customers, what is the future monetization strategy? Especially in the past few years, I heard the company mentioned advertising. So, for these non-paying users, what is the monetization level of their advertising? Thank you very much. Thanks for your question. This question is indeed very complex. Because we have been talking about the non-paying users for a long time, because we do have some measures to those so-called free users or the non-paying users.

In short, all the key points we have just mentioned are still trying to transform the free users into our paid users. This is actually our greatest value. This is actually our top priority to consider. At the same time, it does bring us a more loyal user group and a continuous growth

of our revenue. So, from our operational perspective, our operational focus still hopes to convert those non-paying users into the subscribers. This might demonstrate the great value of the company and it is also the priority of the company. Because indeed, by so doing, we will be able to build the loyal user group and continue to grow our revenue in a sustainable way.

So,

for those non-paying users, what we are doing now is to leverage incentive-based advertisements. First of all, we may have some free to listen music model, but at the same time, we also have the online learning learning measures. By the two measures, we will be able to make sure we still retain the non-paying users. But be able to have a good advertising revenue from them.

Another important aspect is our revenue from the ad revenue. Whether it is digital albums, the fans' circle, or individual downloads and purchases, it is another aspect that we are working on to solve the non-paying users' opportunity to convert.

These are also ways to help us to monetize over those non-paying users.

So, generally speaking,

for those non-paying users, we do leverage the Earth-like performance. For example, like concept, like merchandise, like the play of the fancy economy, including the advertisement, to continue to generate good business opportunities from those non-paying users.

Okay, the next question comes from UPS Wei-Shiong. Please proceed.

Hi, good evening, management. Thank you for taking my question and congrats on the solid results. My question is about margins. So, our gross margin continues to expand sequentially this quarter. And management shared different drivers behind that in the prepared remarks. So, just wondering, out of these drivers, which ones do we see have higher potential for future, to further drive up the upside of gross margin going forward? And do we have a medium-term target for that? And also related to that, considering our efforts in cost discipline, Could you please also talk about the plans for OPAX this year and how should we think about the net margin trend as well? Thank you.

We just talked about the driving factors for gross margin. Of course, the most important driving factor is the growth of our revenue, especially the growth of our capital.

Thank you very much. Thanks for your question. Just now in the prepared remarks, we have already mentioned a few drivers for the ever-improving GDP margin. And I think the most important driver is still the growth of the revenue, where at the same time, we also see the revenue growth from the subscribers and advertising. And especially in the growth of the subscribers, the SBIP growth would likely to be a key driver for our future business improvement. Well, at the same time, another very important factor we have to consider is the cost initiative. We continue to well control the cost. And the cost management methodology is also the key. We continue to adopt ROC in managing our content cost. At the same time, we make sure the cost growth is always lower than the revenue growth.

We also have a partnership with the copyright party. We will gradually see that these investments will produce better results. Not only in terms of cost, but in fact, in terms of cooperation with the record company, there will be more ways to change the cost. This will increase the overall cost efficiency.

We forged a very strong win-win partnership with the IP holder for the copyright owner. So this investment has already generated very good yield. Not only helping us to well control the cost, we will be able to forge a debat with labels and artists. And therefore, it can help us to leverage multiple ways of monetization, which will also help to further improve our cost efficiency. So look into 2025 for the whole year or even the year beyond 2025. I believe the factors being mentioned in our prepared remarks will continue to play their due roles. In other words, we believe our GP margin will still have room to further grow.

In terms of operating costs, this year, we will continue to invest in the promotion of new users and content.

So

we predict that our sales costs will increase slightly. But the growth rate will probably be lower than the growth rate

of our revenue.

The management costs will basically remain the same.

So

our profit margin and profit margin should have a certain space

compared to last year.

Thank you so much for taking my question and congrats on a very solid quarter. So my question is on international opportunities, especially in Southeast Asia. We have a very small footprint there, the music app Jukes. And also we're going to host G-Dragon's Southeast Asia tour this year. So could management talk about your thoughts on the opportunities in the region and would that be an area of investment you take a look at this or maybe next year? Thank you.

Thank you so much. Thanks for your question. International market is always a very important part of our overall strategy. As now our group does have a very strong overall strategy, and the strategy includes the content as well as the platform development. We are going to adopt the same strategy for our international business. From the platform perspective, we will continue to advance the construction of our platform. And especially here now, we did a good performance in Southeast Asia market. But besides the product and the service improvement, we're also going to build the content ecosystem and continue to engage in the content creation in the overseas market, along with the offline performance opportunities being captured.

So on one side,

we continue to invest in our content ecosystem, and which will help to deliver high quality content to our overseas platform. Where at the same time, we also hope that we can engage in the music content, So

in the past few years, we have been continuously improving the operation and investment of our entire JOKES platform, and we will continue to expand our overall participation and investment

in the overseas market. For the past few years, we continue to improve our operational capacity of the platform, and also make huge investment on content. We will continue to engage the international market and make continued investment. Thank you.

Thank you. And the next question comes from Ms. Zhu Hou. Fang Wei, your line is open.

Okay, thank you. Thanks for taking my question and congrats on a good point. I got one on advertising. So if I look at the non-stop music segment, right, I recall last quarter there was some timing impact from offline events, and now this quarter we see a good acceleration, right? Of course, the micro condition has changed a lot. I was wondering if management can share any thoughts on the outlook for your advertising, and also the pipeline for offline events business for the rest of the year. It would be great if you could also comment on some of your initiatives in terms of expanding to, for example, newer advertising verticals and also optimizing your ad bidding system. Thank you very much.

Thank you.

This question is for two people. Let's start with the offline advertising segment. Because all of our advertising forms are currently included. From the position, we have two models, the flat advertising and the current激励 advertising.

Thank you very much. Thanks for your question. And let me first talk about the advertisement, especially online advertising. As I have already mentioned, we do cover a wide range of advertising formats. For example, we do have the splash screen advertisement, as well as the incentive-based advertisement. In the past one to two years, our advertising revenue does register a very strong white-white growth. It's mainly attributed to our innovative incentive-based advertising business.

We also found that the online advertising model has achieved the expected results of our advertising revenue.

The online advertising model actually be able to continue to advance, which will help us to make sure advertising revenue continues to go beyond our expectations. Regarding the advertising system, we are still adopting the advertising system from a Tencent group. No matter from its bidding capacity or from the advertiser expansion or the AI enabling, we do see the Tencent advertising system is making the industrial leading performance. And this can also help us to further grow our advertising-related revenue.

We are still keeping a positive attitude regarding the current advertising system. Whether it is the Q1 or the current operating situation, we are still keeping a positive attitude. For us this year, we are still keeping a positive attitude regarding the growth of advertising revenue.

Regarding the concert, we can see that the overall development is still very robust

in the past two to three years. In

this very developed and good trend, the most critical thing for TME is that we hope that we can develop our performance business in a more advanced direction.

We are with a very strong growth momentum for the applied performance. I think the priority for TME Group is to continue to improve the quality of our performance business.

After the two or three years of the festival, we are very happy to see that many of our partners, whether it is our strategic partners or different record companies, have given us a lot of support. We are very grateful to them.

For the past two to three years, we are also very pleased to see many of our partners, including the strategic artists we are working with, as well as labels and partners. They supported us a lot. We also would like to say thank you to all of them.

We are very happy to have a good cooperation with them. At the same time, we would like to give our fans and users a very good concert.

We are also very happy to have a good support. At the same time, we are offering the audience and fans a good opportunity to appreciate high-quality applied performance. In

addition, we hope that this year we will have a better performance in the three-stage event, especially in our IP, such as Tangxin Music, the Entertainment Festival, and the QQ Music Super Top.

At the same time, for our indigenous IP events, for example, like QQ Music for Passion, we do hope that we will be able to improve its performance for this year. We hope by organizing or help to sponsoring those Earthlight performances, we will be able to provide a comprehensive musical experience to all of our users. We are at the same time to play the 12-club of the SVIP privilege. In that way, we will be able to help to grow the SVIP subscriber base. Ultimately, we hope that the TME overarching strategy with one body, two groups will be fully demonstrated. In that way, we will create a greater value to the market and the society as a whole.

Thank you, Kaixin, and thank you everyone for joining us today. In the interest of time, please conclude today's call. If you have any further questions, please feel free to contact the IR team. Thanks again and look forward to speaking to you next quarter. Okay, bye.

Thank you.