Earnings Call: Q4 2019

Mar 17, 2020

Welcome to the Joy, Inc. 4th Quarter and Full Year 2019 Earnings Call. At this time, all participants are in a listen only mode. After the management's prepared remarks, we will have a question and answer session. Please note this event is being recorded. I'd now like to hand the conference over to your host for today, Mr. Matthew Zhao, IR Director of the company. Please go ahead. Thank you, operator. Good morning and good evening, everyone. Welcome to Joy's 4th quarter and full year 2019 earnings conference call. Joining us today are Mr. David Xueling Li Chairman and CEO of Joy CFO, Mr. Bing Jin and COO, Ms. Jing Li. For today's call, management will first provide a review of the quarter and then we will conduct a Q and A session. The Q4 and full year 2019 financial results and webcast of this conference call are available at ir. Yy.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 apply to this call as we will make forward looking statements. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in the meeting. I will now turn the call over to our Chairman and CEO, Mr. David Shieling Li. Please go ahead, sir. Okay. Let me do the translation. Thank you. Okay. Thank you, Matthew. Hello, everyone. Welcome to our earnings conference call today. Hope everyone stays safe and sound and healthy in this particular coronavirus period. On December 20, 2019, our shareholders approved the name change of YY to Joy, which stands for Joyful and Useful. This name change reflects our commitment to bring joyful and useful experiences, not only to those inside China, but also to those around the world as we continue our global expansion. In line with our mission to connect people around the world and enrich their lives to video, we continue to make steady progress on both the domestic and international fronts in the Q4 of 2019, expanding our user base, upgrading our products and further advancing our monetization capabilities. Notably, our better than Notably, our better than expected top line performance for the Q4 full year of 2019 has illustrated our success in driving growth both at home and abroad. In addition to this strong financial performance, our video based products and services, including LIKELY, Bigo Live, HAGO, YY LIFE and HUYA have all become leaders in their respective markets. Such success is the result of our dual engine expansion strategy, which enable us to pursue the simultaneous development of both our short form video and live streaming business segment to construct a truly global video centric social media First, let me share with you the progress we have made in developing our short form video growth engine, LIKI, as we continue to supercharge LIKI's growth through geographic expansion, product updates and monetization enhancements. During the quarter, LIKEA maintained its robust user base expansion momentum, which was largely driven by the growing user base throughout Southeast Asia and developed world. Its total mobile MAUs swelled to 115,300,000, dollars representing an increase of 208.3 percent on a year over year basis and 15.1% on a sequential basis. In addition, NIKE continued to make headway in target markets such as Indonesia and Russia, capturing a substantial share of the markets during the period to catch up with the leading player in both countries. Beyond growing our short form video coverage to geographic expansion, laiQI further enriched its features and content offerings to enhance its user stickiness. For example, we rolled out the Face Magic function during the Q4 to augment LIKI's user experience and stickiness. FaceMagic was developed using our proprietary AI technology to provide users with both face swapping and image cropping features. The addition of FaceMagic and other similar features enable millions of LaiQI users around the world to create and share short form videos with their friends. On the monetization front, LaiQi continued to make progress in the areas of brand partnerships and advertisement campaigns during the Q4. In December, for example, LaiQi formed a partnership with a top Indian film studio to promote one of its most highly anticipated films. As part of this campaign, Nike utilized its online distribution network to help promote the movie throughout India, garnering over 275,000,000 views across social media. This initiative in a market with high growth potential is very encouraging as it has not only enabled us to establish a unique cultural identity, but also created a valuable monetization case study, which we plan to promote going forward. In the same vein, we have completed the initial development and testing for LYT's advertising system, which we plan to launch in the Q1 of 2020. Leveraging this system, litee will enable advertisers to place ads within Likey's short form video feeds, allow content creators to promote their feed based content across the platform and ultimately unleash another stream of monetization in addition to our live streaming virtual gift monetization. Next, please allow me to share how we view overseas live streaming business, the 2nd growth engine, by expanding the global footprint of Bigo Live and Hago in the Q4. In addition to our success with short form videos, we also continued to expand our global live streaming ecosystem through Bigo Live, our flagship international live streaming platform outside China. In particular, during the Q4, V Go Live maintained its remarkable growth trajectory in developed worlds around the world. As a result, the revenue generated by V Go Live in developed markets such as the U. S, Japan, Europe and other regions represented 31% of V Go Live's total revenues in the 4th quarter. Notably, this revenue growth was driven by a 50% increase in Vivo Life's paying user base in developed countries in December 2019 as compared to June 2019, resulting from our focus on the cultivation of the platform's operational efficiency, localization capabilities and cultural sensitivity in regional markets. During the Q4, Bigo Life also focused on promoting social features to enhance user engagement. In particular, our efforts to develop Bigo Live's bar feed produced encouraging results with 42% of users on Bigo Live using that feature in the Q4. Beyond short form video and live streaming, HAGO, our casual game oriented social media platform, also maintained its healthy growth trajectory through the introduction of new games and enhancement of social features. During the Q4, Hago continued to enhance user stickiness and foster new social interactions between users on its platform. For example, HAGO's interest based user groups have become a key feature for users to initiate social interactions on the platform. The average daily penetration rate of HAGO's interest group function improved by 22% on a sequential basis in the quarter. Meanwhile, the highly social nature of the platform has enabled us to accelerate the development of our innovative monetization capabilities, as seen in our virtual gifting features for both voice chat rooms and interest based user groups. As a result of these monetization upgrades, HAGO recorded a 20% plus increase in revenues on a sequential basis in the Q4. Importantly, India has become hardware's 2nd largest market to date. Going forward, we expect that hardware's monetization capabilities will continue to grow in 2020. Lastly, while we expanded rapidly overseas, we also maintained our leadership position in the domestic market as YY Live continues to fortify its leadership in China's entertainment live streaming industry. As we closely monitor users' constantly evolving demands and preferences for live streaming environment, we further uncovered the growing user preference for variety shows with celebrities. Beyond our partnership with Walkie Zhang, Da Zhangwei, which we mentioned on the previous earnings call, Wai Live hosted 28 shows with other celebrities in the Q4. Additionally, we also hosted our 2019 YY Annual Awards in Shanghai in January. This event collected more than 24,200,000 views with an average user viewing time of 63.9 minutes and a total of 180,000,000 bullet comments sent throughout the event, further showcasing the strength and scale of our live streaming social media ecosystem. Notably, we utilized our experience from the past 7 years and replicated the success of our YY Annual Awards in overseas. Bigo Gala Awards 2020 in Singapore in January served as a prime example. This event featured the attendance of approximately 1,000 of Beagle Live's top performers from around the world and successfully attracting more than 1,600,000 fans who turned in to watch the event online. In summary, we continue to focus on the growth and development of our short form video and live streaming products to fuel our dual engine growth strategy during the Q4 full year of 2019. Importantly, this expansion strategy has enabled us to transition from a leading live streaming platform in China to a global video based social media platform in domestic and international markets. Moreover, as we continue to cultivate synergies between business segments, operate our products through cutting edge technology and enhance our localization capabilities, we are supercharging the network effect of our product metrics. As such, our ability to attract, create, distribute and monetize content both at home and abroad will continue to blossom, further enabling us to deliver long term value for our shareholders. With that, I will now turn the call to Bin Jing, our CFO, to go through the details of our financial results. That concludes David's prepared remarks. Now as Joy's CFO, will talk about the financial results. We maintained our strong momentum and delivered our robust financial and operating metrics during the Q4 of 2019. Our total net revenues for the Q4 increased by 64.2 percent year over year to RMB7.62 billion, exceeding both the high end of our previous guidance range and the consensus. In particular, our live streaming revenues for the Q4 increased by 62.7 percent year over year to RMB7.15 billion, driven by RMB5.51 billion in live streaming revenues from both our YY and Huya segments and RMB1.64 billion contribution from Bigo. Other revenues in the 4th quarter increased by 89% to RMB471,600,000 driven by higher advertising revenues from Huya and Bigo. Cost of revenues for the Q4 increased by 69.3 percent year over year to RMB5.1 billion. Revenue sharing fees and content costs increased to RMB3.73 billion in the 4th quarter from RMB2.56 1,000,000,000 in the same period of 2018, which was in line with the increase in live streaming revenues. Bandwidth costs increased to RMB 50 5,000,000 from RMB246,500,000 in the same period of 2018, mainly reflecting the continued expansion of our global user base. Gross profit for the Q4 increased by 54.6 percent year over year to RMB2.52 billion. Gross margin in the Q4 of 2019 decreased to 33% from 35.1% in the same period of 2018. The decrease in gross margin was primarily caused by the fact that Huya and Vivo segments had lower gross margins, but contributed significantly greater portion of our net revenues in the Q4 of 2019 as compared to the corresponding period of 2018. Operating expenses for the Q4 increased to RMB2.3 billion from RMB931.2 million in the same period of 20 18, primarily due to the increase in sales and marketing expenses, which reached RMB1.03 billion in the same period. The increase in sales and marketing expenses was primarily attributable to our increased efforts in sales marketing activities in overseas markets as well as the impact of depreciation and amortization related to the consolidation of Bigo. Our R and D expenses for the Q4 increased to RMB802.3 million from RMB332.5 million in the same period of 2018, mostly due to the increase in salaries caused primarily by the consolidation of Bigo. Our GAAP operating income for the Q4 was RMB362.2 million compared to RMB718.6 million in the same period of 2018. Operating margin for the Q4 decreased to 4.8% from 15.5% in the prior year period. As a result of a lower gross margin, the impact of depreciation and amortization related to the Bigos consolidation and other O and P expansion initiatives. Our non GAAP operating income for the 4th quarter, which excludes share based compensation expenses, impairment of goodwill and investments, amortization of intangible assets from business acquisitions, as well as gain on deconsolidation and disposal of subsidiaries was RMB781.3 million compared to RMB 888,500,000 in the same period of 2018. Our non GAAP operating margin for the 4th quarter was 10.3% compared to 19.1% in the same period of 2018. GAAP net income compared to RMB694.7 million in compared to RMB694.7 million in the same period of 2018. Net margin was 2.3% in the Q4 of 2019 compared to 15% in the corresponding period of 2018. Non GAAP net income attributable to continuing interest of Joy Inc. Was RMB600.8 million compared to RMB846.9 million in the same period of 2018. Non GAAP net margin in the Q4 of 2019 was 7.9% compared to 18.2% in the same period of 2018. Diluted net income per ADS in the Q4 of 2019 was RMB1.87 compared to RMB10.54 in the same period of 2018. Non GAAP diluted net income per ADS was RMB6.7 compared to RMB13.03 in the same period of 2018. Now turning to our results for the full year of 2019. Our total net revenues increased by 62.2% year over year to RMB25.58 billion, driven by the same factors that led to this quarterly increase. Our net income attributable to controlling interest of Joy Inc. For the full year of 2019 was RMB3.45 billion, compared to RMB2.21 billion in 2018. Our non GAAP net income attributable to controlling interest of Joy Inc. For the full year of 2019 was RMB2.25 billion compared to RMB3.27 billion in 2018. Non GAAP net margin for the full year of 2019 was 8.8% compared to 20.8% in 2018. Diluted net income per ADS for the full year of 2019 increased by 69.5% year over year to RMB 43 point 1 from RMB25.38 in 2018. And non GAAP diluted net income per ADS for the full year of 2019 was RMB 27.11 compared to RMB 50.07 in 2018. Looking forward to 2020, we are faced with immediate challenges of COVID-nineteen epidemic. In response to the outbreak, we announced a cash donation of RMB22 1,000,000 to procure medical supplies and equipment from all over the world for the hospitals in Hubei and Guangdong provinces that were involved in the treatment of COVID-nineteen patients. Our hearts goes out to all those who have been impacted by this epidemic. Especially in times like this, we remain fully committed to our mission of connecting people and enriching their lives through video. Beyond entertainment, many of our users are utilizing our live streaming services for regular casual and work related communication purpose during this epidemic. We are formulating a support program to help our hosts and other performers to weather this challenging environment. We plan to continue leveraging our video based social media platform to help mitigate the impact of the disease, value charitable support, uplifting people's spirits and enrich their lives. At the current stage, we expect our net revenues in the Q1 of 2020 to be between RMB6.75 billion and RMB6.85 billion, representing a year over year increase between 41.2% to 43.3%. We currently have limited visibility surrounding this epidemic's long term impacts on our business and the markets in which we operate. Therefore, 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. Thank you so much, presenters. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Thomas Chong from Jefferies. Congratulate the strong performance. Hey, Thomas. Could you just please answer the question in Chinese firstly, then translate into English? Thank you. Thanks management for taking my questions And congratulate the strong growth momentum of Bigo. I have a question about the 2020 outlook for Bigo, in particular the revenue and the user trend across different geographies? And also any expectations in terms of the timeline for leveling the losses and achieving breakeven? And how should we think about the spending for Bigo across different geographies during the year? Thank you. Thanks, Thomas. Let me address those questions. So first, on the trend for monetization under different markets, Bigo has different components. I think let me talk about Bigo Life first. Bigelife has enjoyed tremendous user growth and monetization in 2019 and we expect the similar pattern continue in 2020. The key driver coming from the developed markets. As you can see from the Q4 number, the developed markets accounts for more than 31% of the total revenue on the Bigo Life. That compares with 26% in the Q3 and 22% in the Q2. You can see obviously continuous increasing trend, and we expect that trend to continue across different developed markets, including U. S, Europe, Japan, Korea and other parts of the world. One of the beauty for those developed markets is that the paying ratio and ARPU tend to be very high. And also we have demonstrated that the paying ratio in the billboard has increased by 50% in December 2019 compared with June 2019. So that is itself is very encouraging. So we expect giga life will continue to focus on giga life world in 2020. That's on Bigo Life. On the NIKE business, we have also achieved a balanced approach, meaning traditionally we are strong in South Asia, particularly in India. Starting from last year and also continuously into 2020, we will be more balanced approach, meaning we'll focus more on developing into other non Indian markets, including Russia, Indonesia, where we are performing very well and catch up very quickly with the leading player. And also we are continuing expanding other parts of the world including the global world as well. So that's on the user growth for LaiQi. Now on the monetization of LaiQi, we will also ramp up the live streaming capability as Bigo's live streaming, as I said, is a middle end capability. It can be replicated in different parts of the apps. So, like you will benefit from Bigo Live's monetization efforts and ramp up the live streaming capability. On top of live streaming, we have also mentioned just now that, Litei has built up its own advertising network and system. So we expect to introduce feed based advertising campaigns within LaiKey. And hopefully, advertising will also gradually contribute more and more to LaiKey's ecosystem. So I think that's a long answer to your question. In terms of the spending, I think we have communicated with the market before that this year, 2020, we are looking at a net loss on the total Bigo segment basis is USD 150,000,000 loss. But as we can see that Bigo's total revenue is growing faster than expected to fall. Before we had telling market that the Bigo will grow the revenue will grow 50% in 2020. Now we are forecasting more than 60% year on year growth. So as a result, the net loss we mentioned will be narrowing compared with we communicated before. In terms of the breakeven point, we expect that total Bigo will be breakeven on a single month basis by end of this year. That remains to be the same. But I want to mention that we tend to be focusing more on ROI of the money spent and we tend to focus more on profitability, because I think that's one of the key differentiator for our overseas business compared with some of the leading players because we know how to monetize been adjusting and new user base across different parts of the world. Thanks. Thank you. Your next question comes from the line of Lei Zhang from Bank of America Securities. Please go ahead. Your line is now open, Lei. I will translate myself. 1st, I want to follow-up the overseas, especially on the LIKI's user trend. How should we look at user and monetization balance? And what's your target for lucky user in 2020? And secondly, on the competitive landscape of domestic live streaming, how should we think the competitors like short video platform, even Q2 Music want to can you give us more color on the updated competition? Thank you. Hi, thanks for question. So on the global expansion strategy for Nike, as I mentioned, we will focus both on in terms of the user growth and monetization. So I don't think your comment is right in a way that if we focus too much on monetization, we will focus less on the user growth. But as I said, we focus ROI. So as long as the user retention, meaning the 30 days, 60 user retention days is good in some of the markets we will continue to spend the money. But after we spend money, we also need to make sure that the user we attract can be converted to live streaming users. We also pay particular attention in terms of the conversion of live streaming within the shutdown video users in terms of the time spent, in terms of the gifting, etcetera. So that's for sure. And you would also expect in terms of user growth, you expect similar pattern that we have seen in 2019. If you track our quarterly performance, you can see that Leki is adding 15,000,000 to 20,000,000 users on a per quarter basis, and we expect similar pattern will continue. But as I said, we also need to make sure that the ROI makes sense and we will generate decent profitability for the IT business. So that's the answer to the first question. The answer to the second question, domestic competition is not a new thing. We have been operating under a highly competitive live streaming business in China for several years. However, we still continue to grow. Now, if you look at the prospect of 2020 Online Live segment, I would say the revenue will continue to grow at low single digit. The reason why it's low single digit because we cut down some of the business, including the PC game business, which we sold. And also, we have scaled down the domestic small lending business, given the uncertainty, particularly in the online lending business. So with those two business scaled back and scaled down, the Wallet Life's revenue will the growth rate will be down a little As we tell people before, it used to be 5% to 8% year on year growth. Now we're looking at low single digit growth, reflecting the close down of those two business. But for the main domestic live streaming business, I think it's still solid. We Online Live, you can treat it as a traditional kind of PC game where the user base is very sticky and will continue to come back. We have seen a very sticky time span and user behavior on our platform, both from the tipper perspective and from the broadcaster perspective. So I think even admit this domestic competition, YY Life will continue to grow. Okay. Can I have 2 follow ups? First, on HAGO side, given you shared more color in the prepared remarks, can you remind us where is the HAGO revenue book? Is that under YY Live, right? If haggle grows strong in 2020, so if that means the YY Live streaming actually are down on year on year basis? And also on the Hago side, what's the Ping Chongqian and the top of users view of Hago? Secondly, also on the domestic side, I know that e commerce live streaming is quite popular right now and even some of your competitors actually ask the host to do e commerce through a late stage live streaming. I know we have e commerce related case, but can you share more color with us on the e commerce live streaming side? Thank you. Sure, Zhongli. On the HAGO, it is booked on the YY Live segment. But given the absolute scale of HAGO's revenue, it's still very small compared with the total 4 line domestic live streaming. So, in terms of absolute dollar, it's not contributing that much yet. So if you strip out HAGO, YY Live, domestic market, I think the business is still stable, put it that way. And then for e commerce, we have been doing e commerce live streaming for a while. But again, our strategy is different from the others. Our e commerce is more focused on long standard products, meaning jewelries, art supplies, etcetera, calligraphies. And then we focus on introducing high quality broadcast to help improve the productivity of the traditional non standard product value chain. And hopefully, we'll create a winning situation for both the seller and for the users. So that part of this is ramping up very quickly. But at the right time, we will start disclosing the right metrics for the actual investor. At this point, we still think that this is relatively early. Okay. Thank you. Thank you so much. Very clear. Thank you. Your next question comes from the line of Brian Gong of Citigroup. Once again, please ask your question in Chinese first, then immediately translate your question in English. Brian, you may now ask the question. Okay. I will translate myself. So for LaiQi, wondering how should we see the competitive dynamics with TikTok in different regions? And I think Blackin probably made very limited contribution to Bigo's revenue in 2019, but I'm sort of wanting to see how much revenue contribution from Laki to Bigo for the BE in 2020? Thank you. Sorry, let me do the translation firstly. This is David. Let me answer your question. In terms of the LIKI business as well as the short form video competition in the global wide. So firstly, as a company and the founder or the management, we really look in favor of the short form Video's future, right? So if you look at the past few years, we're actually committed to continue to invest into the Lakis business. So rather than the profitability, we're seeing that the positioning as well as the market share for the short form video is more important for us. And in the past several years, although we continue to suffer the loss from the legacy business, but after our effort, we actually already got the entry tickets for the Xiaofeng videos, especially in the outside of China. At the beginning times, in terms of the technology as well as the investment scale, we are much less our competitor. But after 2 years effort currently, we actually have seen the kind of level as our growth competitors. So I actually believe the Lucky Business will enter to the 2nd stage, which means more healthy and more balanced the divide of the stage. So as we mentioned in the prepared remarks, so this year, like you will focus on the monetization. So hopefully, at the end of this year, the overall Bigo business will achieve the single month breakeven. If that goal could be achieved, it means in the future we have taken more dynamically to control of the investment cycle, especially in terms of the marketing or the user acquisition cost for the likely business. So that will help us to build up more healthy model business model paired with our peers and that can help us for the next 5 to 10 years long run competition for the Xiaofeng Video Business Global Wide? Thank you. Yes. Let me handle that question. I think we are still observing the progress, but I think at this point, it's somewhere around 10% of Beagle's total segment will be coming from Nike. But that number can be changed depending on the progress. Okay, got it. Thank you very much. Your next question comes from the line of Daniel Chen of JPMorgan. I will translate myself. So I have a housekeeping very healthy balance sheet and a very rich net cash of over US1 $1,000,000,000 And so what is our key strategy in cash management in 2020? Thank you. Let me address the question. Thanks, Daniel. In terms of cash, offshore, we have around US900 $1,000,000 which will put into different charge of savings and investment. I think it generates a decent return. And meanwhile, we're also observing the latest market turmoil. And obviously, our stock recently is very undervalued and particularly in the recent turmoil continue to go down. So we will seriously consider share buyback and other methods of returning some of the cash to the shareholders. Your next question comes from the line of Lee Jong from Goldman Sachs. Your line is now open. Mr. Zhang? I'll translate myself. So thank you, management, for taking my question. So I have two questions regarding the impact of the COVID-nineteen in overseas markets for Bigo. So the first question is, have you observed any similar surge in user time spent or engagement in the development markets given the fast spread of the virus? And the second question is on whether that will give us any refreshed thoughts on user growth strategy or new monetization methods? Thank you very much. This is David. Let me answer your question. So firstly, in terms of the COVID-nineteen impact for outside of China, so we can look at the practice in China for the last quarter. So for Huawei's business in China, we don't see that significant of the negative impact from the COVID-nineteen's operating in China. So from the China's practice, we actually forecast the overseas business also won't see any of the significant impact from the COVID-nineteen in the short term period. Bigo Life currently in a very healthy growth stage. As I mentioned in the prepared remarks, rather than the monetization, actually people also focus on the social features, especially its community operation has become one of the key focus for the Bigo Live in the recently stage. 42% of the users have started to use the Bigo's spa or the friends moments of the functions within of the platform. So going forward, it's up on the revenue growth. The Bigo Lab also will see the continuously user growth in the future. And for legacy business, we as I mentioned before, except for the very rapidly user number growth, we also will be more focused on the monetization for this year. If the 2 part can build up a more healthy cycle for the business, definitely we will be more confident for the overall overseas business development for the future. Thank you. Thank you very much. Your next question comes from the line of Thomas Chong from Jefferies. Thanks management for taking my follow-up questions. And my question is about the domestic market. Given a lot of our peers are entering into the lower tier cities and have we thought of developing other applications to penetrate into Tier 3 and Tier 4 cities going into the future? Thank you. Thomas, thanks. Let me address the question. So you're right that on top of YY Live as a main app, we are also developing different products. For example, we have audio based live streaming products, several of them that's focused on 3rd tier cities and even to 6th tier cities. We also have, as I said, e commerce live streaming product. We're also developing other social media products, all based on our MVVM also audio base because that's our core competence, but we're trying to penetrate into different demographics and trying to penetrate different cities. Some focus on low tier cities, some focus on the 1st tier cities. So, but many of those products are in initial stage, so we haven't systematically disclosed to the excellent investor about the metrics, but we will do so at the right time. So, you're right, we got a story of different products. And by the way, I also mentioned that we have continued to partner with other big traffic platforms such as Xiaomi and we have right now partnered with 2 and 3 additional big traffic platform, which I call export our core revenue competence and the revenue share with those traffic platforms. So with that, I also hope that we can continue to enhance our monetization capabilities through our different platforms. Thank you. Next question comes from the line of Yu Ang from CICC. Your line is now open, Yu Ang. Thanks, management. I'm on behalf of Nan Li Wu. We have two questions. The question the first one is that, could management share some color on the promotion of LIDI? What's your plan for the investment in content and user acquisition this year? And the second question is, could the management share some color on the margin outlook for the domestic live broadcasting business of LiveX Core this year? Thank you. Thank you. Let me address those questions. First, in terms of the sales reposition for the LIKI, regarding content, as we said before, LIKI focused on UGC user generated content. So by nature, we encourage the user to voluntarily create and upload their short form video content. As a result, we don't tend to spend that much money to acquire the PGC. But we will do so in some of the key markets to partner with some celebrities to produce, but I don't think that will cost that much money. We will also partner with some of the song copyright owners to sign a kind of long term contract so that live broadcaster can live broadcast the songs, etcetera. So that will cost some money. In terms of the direct use acquisition, again, we will closely track the KPI, meaning user retention rate. And then typically in those markets, they are much lower than in China in terms of per user acquisition cost. Plus, after user is attractive, we have to convert them to machine learning to realize, as we said many times, to realize for machine learning business. So that will create a confident loop for the user and the client value. So that's on IT. On the domestic margin, if you look at 2018, our operating margin was less than 1 on line, I think this is around 24%, percent. 2020, we're looking at somewhere above 20%. There might be some further decrease of the margin for OR Life. But again, it's not only about domestic, but because OR Life segment also showed the responsibility of Haggle and other overseas expansion. So we will continue to spend some of the sales and marketing, plus we'll continue to recruit some of the high caliber AI expert technologies with R and D as a percent of revenue and sales marketing as a percent of revenue will increase a little bit, resulting to somewhere like 20 something percent for the margin operating margin domestic for the micro segment. Thanks, Lin, for sharing.