Alico Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 14, 2024

There are 3 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to Weibo Reports 4th Quarter and Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to turn the call over to the 1st speaker today, Ms. Sandra Zhang from Weibo Corporation. Thank you. Please go ahead.

Speaker 1

Thank you, operator. Welcome to Weibo's 4th quarter and full year 2023 earnings conference call. Joining me today are our Chief Executive Officer, Fanfei Wang and our Chief Financial Officer, Fei Hung. The conference call is also being broadcasted on the Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the Safe Harbor statement in connection with today's conference call.

Speaker 1

During today's conference call, we may make forward looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward looking statements. We will obtain no obligation to update the forward looking statements in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's Annual Report on Form 20 F and other filings with the SEC.

Speaker 1

All the information provided in this press release is occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law. Additionally, I would like to remind you that our discussion today includes certain non GAAP measures, which exclude stock based compensation and certain other expenses. We use non GAAP financial measures to gain a better understanding of Weibo's comparative operating results, performance and future prospects. Our non GAAP financials exclude certain expenses, gains or losses and other items that are not expected to result in future cash payment or are non recurring in nature or are non indicative of our core operating results and outlook.

Speaker 1

Please refer to our press release for more information about our non GAAP measures. Following management's prepared remarks, we'll open the lines for a brief Q and A session. With this, I would like to turn the call over to our CEO, Gaofei Wang. Thank you. Hello, everyone.

Speaker 1

Welcome to Weibo's Q4 and full year 2023 earnings conference call. On today's call, I will share with you highlights on Weibo's product and monetization, review the progress made in 2023 and elaborate our strategies for 2024. Starting from our financial performance in the Q4. In the Q1 of 2023, our efforts to improve user acquisition and engagement of high value users continue to pay off. In addition, we beef up our initiative to further recover the vertical content ecosystem, strengthen content operations and enhance our ability to serve content marketing.

Speaker 1

As a result, despite the overall sluggish end market, our total revenue in the 4th quarter reached US463.7 million dollars an increase of 3% year over year and 5% quarter over quarter. Our total ad revenues reached $403,700,000 an increase of 3% year over year and 4% quarter over quarter. On a constant currency basis, both our total revenues and ad revenues in the 4th quarter would have increased 5% year over year. Our non GAAP operating income in the 4th quarter reached US145.9 million dollars representing a non GAAP operating margin of 31%. Turning to our full year financial performance.

Speaker 1

In 2023, due to uncertainties of the macro and industry environment, the recovery of ad demand was a bit volatile. It resulted in lower than expected annual marketing budget for some clients in key industries compared with our expectation at the beginning of the year, which weigh on the growth of our ad business. For full year 2023, our total revenues reached US1.76 billion dollars a decrease of 4% year over year. Our total ad revenues reached US1.53 billion dollars a decrease of 4% year over year. On a constant currency basis, both of our total revenues and ad revenues would have increased 1% year over year.

Speaker 1

This year, we focus on improving our products' core competitiveness and enhancing operating efficiency to navigate through challenges from external environment. For full year 2023, our non GAAP operating income reached US592.1 million dollars representing a non GAAP operating margin of 34%. On the user front, Weibo's MAU reached 598,000,000 and average DAUs reached 257,000,000 in the 4th quarter, adding approximately 11,000,000 and 5,000,000 users year over year respectively. Next, let me elaborate on progress made on product operation and monetization in the 4th quarter and our key strategies for 2024. Looking back to our strategies in 2023, in the first half of the year, we started to recover user traffic in the post pandemic era.

Speaker 1

In the second half of the year, while maintaining our core competitiveness in sports culture, entertainment and sports, we strengthened the development of vertical content ecosystem through traffic support for vertical content, which enhance the competitiveness and health of Weibo's overall ecosystem. On the channel front, in the Q4, we maintained cooperation with manufacturers to increase channel investments for acquisition of high value users. Through more accurate algorithm and targeting capability, our user engagement has been improved, which laid foundation for monetization. On social attributes, in the Q1, we continue to execute strategies to focus on development of content verticals. On the one hand, we continue to optimize content structure for relationship based feed to reinforce the distribution of content from key verticals and recover the overall content ecosystem.

Speaker 1

On the other hand, we continue to enrich the way vertical KOLs interact with their fans and improve their interaction efficiency. As a result, KOLs from vertical areas continue to gain more traffic and user interactions and became more willing to generate content. In 2023, the number of daily interactive users and the number of interactions in the relationship based feed continue to grow year over year. For Super Topic, we launched the new functions for users to post and interact, boosting user engagement in the community. In particular, for the entertainment vertical, we further enhanced the super topic social attributes and interaction for users' in-depth discussion and content recreation in the entertainment sector, leverages improvement of the overall sector.

Speaker 1

As a result, user engagement in the entertainment vertical increased significantly in 2023 versus 2022. The number of DAUs of Super Topic increased year over year and the number of users who post per day and interaction of the Super Topic increased over 20% year over year. On the constant front, in the Q4, on top of retaining the competitiveness of hot topics, entertainment and other advantages key IP related verticals, we leaned our traffic toward verticals to support the industry market. For example, we increased investment in digital, automobile, online games, fashion and beauty and healthcare verticals to enhance industry partners' perception of the platform's value and further enhance the competitiveness of our company ecosystem. On IP related company persistence, in the Q4 for entertainment vertical, we continue to boost the engagement and interaction of top celebrities and increase the discussion around their works to strengthen our competitiveness in the fans and entertainment work related company ecosystem.

Speaker 1

In 2023, the traffic and interactions in the entertainment vertical increased year over year. In particular, top deleverage translation and post increased over 30% year over year. With a better environment for entertainment work production and release, the traffic around the promotion of entertainment work and discussion around these works have increased significantly year over year with total discussion increasing by more than 50% year over year. The traffic and discussion around TV series on Weibo reached a record high. In terms of callbacks, we encourage national media to organize discussion of hot trends in the vertical area, facilitating media's hot trends coverage from social news to vertical hot trends to increase the media engagement in the vertical hot trends and stabilize user demand for consumption and discussion of the social hot topics.

Speaker 1

On industry related content verticals, we continue to invest more resources across the platform in the Q4. First, we strengthened the traffic distribution of high quality vertical content, increased the proportion of vertical content on the platform and promoted the development of top KOLs in each content vertical. 2nd, we adjusted the product mechanism to enhance traffic support to vertical hub content that creates hot trends effect, improving the perception of industry related hot options. 3rd, we improved the operation of industry related vertical topics and events, leveraging Weibo's advantages in cross vertical operation to guide media and top cross vertical POLs to post and engage with the vertical conference. All these measures contributed to the continuous growth of the traffic and interaction in industry related verticals compared with the Q3.

Speaker 1

For example, since October, we have seen a surge in this interest in various respiratory diseases such as influenza and macoplasma. We encourage the media accounts to actively post content of popular science and also promote related content sharing from vertical KOLs from across verticals. As a result, the total consumption of the related hot topics has exceeded 2,000,000,000, attracting a large number of doctors to join and engage on Weibo. It has quickly increased Weibo's interest in the medical industry and established user habit of discovering, consuming and discussing hot topics in the healthcare vertical on Weibo. Moving on to monetization front.

Speaker 1

In the Q4, thanks to the e commerce shopping festival, the year end promotion and tailwinds from game license approval, Weibo's ad revenues grew 3% year over year and 4% quarter over quarter, leveraging Weibo's strength in hot chain marketing. By industry, revenues from the automobile and the handset sector sustained solid year over year growth in the 4th The growth was mainly attributable to Weibo's differentiated advantage of content marketing in new product launch as well as favorable discussion like in the areas of digital technologies and new energy vehicles. In addition, the online games and healthcare industries booked a double digit growth year over year in the Q4. As for the healthcare sector, we are pleased to see steady growth trajectory of both our industry influence and monetization with a surge of user interest in the healthcare industry post the reopening. Our increased investment in vertical content ecosystem of healthcare also gradually bear fruit.

Speaker 1

In terms of the online game industry, we feel wins from game license approval and better reformation of our content marketing solution among customers, we captured the opportunity to promote the new blockbuster titles for key clients in the Q4, delivering sustained year over year revenue growth. For example, in the Q4, Tencent's Dream Star and Netty's Party spent heavily on Weibo for new game campaign, With budget allocated mostly to hot trend and content marketing, we have delivered strong branding effect, beating clients' expectation, entertained by our unique content marketing and service capability of building market hype for the new games. Ad revenues from the e commerce sector also booked the year over year and quarter over quarter growth in the Q4, thanks to the mega e commerce shopping festivals. On the fleet side, for the beauty and personal care industry, even with strong traffic support to entire content generation, top clients were still growing out inventory during the Double 11 shopping festival, resulting in continued body shift towards performance based platforms. Therefore, the recovery pace of the beauty and personal care industry still fell short of our expectations, which has become the major drag for the overall ad growth in 2023.

Speaker 1

For one thing, driven by ad budget shift from offline to online during the pandemic, revenue contributions from the beauty and personal care industry increased significantly in 2020 2021, which created a high base at that time. This is exactly for another since 2022 customer has been shifting their sales channels to our e commerce live streaming platform leading to a decline in ad volume share of social media and traditional e commerce platform. Additionally, we also need to further beef up our investment to strengthen Weibo's competitiveness in the content vertical of beauty and personal care. We hope to resume positive ad growth in this sector this and or next year with further recovery of content ecosystem and normalization in customers' sales channel adjustment. Looking back on 2023, we faced challenges from rapid shift in user interest in the post pandemic era.

Speaker 1

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

Speaker 1

Overall speaking, although revenue from certain industries fell short of expectation and drive the total revenue growth, We delivered decent operating profit, which further improved from last year. That's the solid execution of our efficiency initiatives. Leveraging improved operating efficiency, stable profitability and healthy cash flow, we further elevated our financial flexibility, giving us ample room to invest in vertical content ecosystem and drive user growth and engagement. In view of the challenging competition landscape of vertical content, we will take gradual steps to restoring our competitiveness of vertical company ecosystem, while focused on solidifying our advantages areas. It may take 2 to 3 years to drive up the traffic share of vertical content on the platform.

Speaker 1

In this way, we could further reinforce Weibo's market influence, achieve healthy development of the content ecosystem and thus, make solid foundation to enhance our monetization efficiency. In 2024, we will focus on growing our business community and engagement, strengthening the competitiveness of our content ecosystem as well as further enhancing our operating efficiency. In light of the current market conditions, we strive to maintain steady revenue growth and improving the overall efficiency in the meantime. On the operation front, we will beef up our efforts to reinforce the competitive edge of content and IPs and revitalize our vertical content vertical ecosystem at the same time. On the monetization front, we aim to optimize our content marketing and performance based ad products.

Speaker 1

We believe execution of these strategies will lay solid foundation for our top line recovery from user, content and monetization side, enabling us to capture market opportunities once the macro economy gets better and brand ad demand improves. In 2024, our product operation will focus on 3 aspects. First, we are continuing to operate closely with strategic set of partners. We focus on improving high value user acquisition and usage frequency. 2nd, we emphasize on optimizing the structure of social products and further enhancing the recommendation efficiency of information feed in the hope of driving user scale, social interactions and engagements.

Speaker 1

3rd, we refined the product life and user experience of hot trend products in order to reinforce the mindset and market influence of hot search users. Meanwhile, we will also try to create more health trends based products, enabling the users to discover more topics and trends under public discussion and thus grow the user scale and engagement of hot trend products. Our company ecosystem will also highlight 3 aspects in 2024. First, we will continue to reinforce our leading position around the ecosystem of entertainment and sports events. In particular, as for the entertainment sector, we'll strengthen the celebrity flow ecosystem to increase user interaction and focus on strengthening our strategic cooperation with the promotion and distribution platform of movies, TV series and variety shows.

Speaker 1

This will not only solidify the competitiveness of entertainment work based ecosystem, but also drive platform traffic and user engagement. Taking the movie promotion during the 2024 Screen Festival as an example, leveraging our cooperation with movie IP holders around the hot trends operation of movie plots, celebrity flowers interactions and extended vertical topics. We are pleased to see a 50% increase in topic discussion year over year, giving us confidence in becoming the go to platform for Movie promotion this year. 2024 also marks the year of Olympics. Our years of cultivation around the sports vertical will pay down with opportunity to achieve new record high in sports related traffic and discussions.

Speaker 1

2nd, we'll continue to solidify our leading position around hot trends. We hope to resume the steady growth of society and the media related hot topics. The key is to better engage the media and hot content creators in a distribution and discussion of hot topics around vertical trends, enabling the build out of mega hot topics. These efforts would hopefully consolidate Weibo's market consolidate market influence in the hot trend area and facilitate user acquisition at a large scale. 3rd, we'll further strengthen the cultivation of vertical ecosystem in key industries.

Speaker 1

To elaborate, we will grow the number and engagement of Golden and Orange verified accounts, boosting the discussion of vertical hot topics and thus reinforcing the synergy between company ecosystem and the monetization ecosystem, which forms a virtuous self reinforcing cycle. Finally, on the operating efficiency, we'll step up our efforts in enhancing our monetization competitiveness. We will continue to strengthen the recognition of Weibo's content and IP marketing among more industries and clients and thus improve our competitive edge in capturing clients' budgets. In terms of the ad products, we have standardized and scale up the sales of our content and IP marketing offerings. As for performance based ad, we strive to improve our service capability around ad performance and content with focus on optimizing evaluation of ad performance of key industries and top clients.

Speaker 1

For instance, the renowned Down Jacket brand, Boston capitalized on its 2 product concepts, lightweight and thin and reshaping classics in winter campaign of 2023. Leveraging a combination of celebrity endorsement and content marketing on Weibo Broadstone deeply bonded with hot topics around this brand ambassador, Liangzhu, tapping into real time winter related trends such as temperature drop and white snow to firmly associate the brand with staying warm in Busudong. At the same time, Boston leveraged the celebrities' popularity to drive e commerce traffic online, while promoting its opening of the promoting its opening of the onefourteen flagship store as a brand event offline. As a result, the sales performance boosted dramatically in the Q4 with sales volume increasing 40% year over year. This year, we will standardize our ad products and service providers to timely integrate popular IP such as entertainment and sports events with the campaign goal of our clients, which will further promote the monetization value of Hot Trends.

Speaker 1

On top of these initiatives to drive top line growth, we will also continue to effectively discipline our cost expenses, strengthen the level of platform management and further improve the overall operating efficiency of our platform. With that, let me turn the call over to Fei Hao for a financial review of the Q4 of 2023 full year financial results. Thank you, Dolce, and hello, everyone. Welcome to Weibo's 4th quarter fiscal year 2023 earnings conference call. Let's start with user metrics.

Speaker 1

In December 2023, Weibo's annual average GAU is 598000000 and 257000000, respectively, represent a net of 11,000,000 and 5,000,000 users Turning to financial, as a reminder, my prepared remarks will focus on non GAAP results. All monetary amounts are in your dollar term and all the comparisons are on a year over year basis unless otherwise noted. We experienced headwinds to our financials due to the volatility of free exchange rate throughout the year. Since our business primarily operates in China, while we report our financials in U. S.

Speaker 1

Dollars, our financial performance was affected by a foreign currency movement. Let me now walk you through our financial highlights for the Q4 fiscal year 2023. Vifor's Q4 2023 net revenues were $463,700,000 an increase of 3% or 5% on a constant currency basis. Operating income was $145,900,000 representing operating margin of 31%. Net income attributable to Weibo is $76,400,000 and diluted EPS was 0.35%.

Speaker 1

Dollars For full year 2023, total revenues reached $1,760,000,000 a decrease of 4%

Operator

or an increase of 1% on a

Speaker 1

constant currency basis. An increase of 1% on a constant currency basis. Operating income was $592,100,000 dollars representing operating margin of 34%. Net income attributable to Weibo reached 415,600,000 and diluted EPS was $1,880,000 Operating cash flow for full year 2023 reached $672,800,000 an increase of 19%. Let me give you more color on 4th quarter and full year 2020 revenue performance.

Speaker 1

Weibo's advertising and marketing revenue for the Q4 2023 were $403,700,000 an increase of 3% or 5% on a constant currency basis. Mobile ad revenues were $379,200,000 contributing approximately 90 4 percent of total ad revenue. Full year 2020 advertiser advertising and marketing revenue reached $1,600,000,000 a decrease of 4% or an increase of 1% on a constant currency basis, with mobile ad revenues contributing 94% of total ad revenue. Regarding our Q4 performance first, consistent with our expectations, advertising business booked a solid growth overall with divergent performance across our tailored ad verticals. By industry, our largest of 3 verticals were 3C Products, FMCG and e commerce.

Speaker 1

In terms of growth, we are encouraged to see strong momentum of handset sector continued throughout the year. Handset sector continued throughout the year. The handset sector delivered a double digit growth for both year over year and quarter over quarter as customers embrace our platform to reach high up users and build market path. The e commerce and the game sectors also demonstrated a robust recovery trend with double digit growth, leveraging favorable dynamics with competition landscape and launch of blockbuster titles. On Smith's side, the SMC category continued on the same trajectory.

Speaker 1

The food and beverage sector faced a high comparable base because the warm cap campaign season in 2022. Meanwhile, the cosmetic and the personal care sector remained under tighter, suffering from soft sales and suspension marketing expense come through among our multinational customers. Also, we continue to see ad budget shift overall to those platforms to serve the marketing purpose of inventory clearance during the e commerce season. Moving on to full year time competitor performance. Due to macro uncertainties and consumption weakness, the recovery pace of our advertising business in 2023 proved to be rough on a constant currency basis.

Speaker 1

Our advertising and marketing revenue increased 1% versus 2022. By industry, our largest of 3 verticals were FMCG, 3rd party products and e commerce. With respect to growth, 3C Products was the largest contributor to year over year growth, followed by e Commerce and also mobile among major categories. However, discretionary consumption categories such as cosmetic, entrepreneurial care, luxury, apparel, face the broad based having strong demand side. The ad product, promotional fees was larger, followed by social media ads and topics and search in 2023.

Speaker 1

In light of our traffic advertising demand, we focus on revitalizing content ecosystem with high monetization potential such as SSD products and automobile. This effort has enabled us to further strengthen our company's marketing offering and enhance our market differentiation. Ad revenues from Alibaba for the 4th quarter were $44,900,000 an increase of 6% or 8% on a constant currency basis. Then for modest recovery of consumption market, I mean intensified competition during the mega shopping festival. Full year ad revenues from Alibaba were $111,600,000 an increase of 4% or 10% on a constant currency basis, consistent with Alibaba's moderate pickup in marketing Alibaba stepped up marketing plan this year amidst sluggish consumption environment as well as heightened competition in the e commerce sector.

Speaker 1

Before turning to web segment, let me share some preliminary color on the trend entering 2024. With the economy in a state of transition and geopolitical uncertainty in 2024. The macro conditions and consumption sentiment are turning even harder to predict. Despite limited visibility of demand side due to macro uncertainties, we are cautiously optimistic on further recovery of our advertising business in 2024. We hope to further leverage tailwinds in Weibo's competitive sectors as well as a series of mega sports events.

Speaker 1

Our team will be up sales execution to further unlock the long term strategic opportunities, underpinned by our unique value proposition and diversified the content ecosystem. Value added service VAS revenue was $59,900,000 in the 4th quarter, an increase of 4% or 6% on a constant currency basis, mainly due to higher revenue contribution from game related business. Full year 2020 SERVAS revenue decreased 6%, or 1% on a constant currency basis to $225,800,000 Turning to cost and expenses. Total cost and expenses for 4th quarter was $370,800,000 an increase of 7%, mainly attributable to higher G and A expenses. The increase of G and A expenses was primarily resulted from lower G and A expenses booked in the Q4 of 2022, mainly related to the reversal of compensation expenses for Xiamen Technology based on the contingent payment arrangement system.

Speaker 1

Full year cost and expenses totaled $1,170,000,000 a decrease of 5%, primarily attributable to the unfavorable foreign exchange impact on the reported number as well as the decrease of personnel related costs. This decrease was partially offset by the increase of G and A expenses, mainly related to the recognition of compensation expenses of G and A Technologies as mentioned above. Operating income in 4th quarter was $145,900,000 representing operating margin of 31% compared to 34% during the 30 period last year. Operating income for full year 2018 was 792,100,000 Turning to income tax and the GAAP measure. Income tax expense for the 4th quarter was 72,600,000 compared to an income tax benefit of $18,700,000 last year.

Speaker 1

The increase was primarily due to 2 factors. First, we booked a reversal of tax liability recognized in the Q4 of 2022 relating to uncertain tax provisions. 2nd, we paid and accrued withholding tax related to earnings, remittance from the wholly foreign owned enterprise, Wubi, to Weibo Hong Kong Limited. The earnings distribution from onshore to offshore would fund our demand for U. S.

Speaker 1

Dollars in business operations and payments of dividends and debt, etcetera. Full year income tax expenses were $145,300,000 compared to $30,300,000 last year, mainly resulted from increase of tax expense in 4th quarter adjusted was $76,400,000 representing a net margin of 16% compared to 40% last year, primarily due to the aforementioned impact from income tax. Net income for full year 2023 was $415,600,000 representing a net margin of 26% compared to 29% in last year. Turning to our balance sheet and cash flow items as of December 31, 2023, Weibo's cash, cash equivalents, and short term investments totaled $3,230,000,000 compared to 3,170,000,000 dollars as of December 31, 2022. In the 4th quarter, cash provided by operating activities was 218,200,000 dollars dollars and depreciation and amortization expenses amounted to 58,500,000 to the planning sector, I would like to let you know that we completed an offering of $330,000,000 covered for bond in December last year.

Speaker 1

The bond is due to 2,030 with an annual coupon rate of 1.375%. This plan to use the net proceeds from the note offering to risk advance a portion of the outstanding 3.5% senior notes during July this year. Upon the convertible note issuance, we are pleased to announce that our Board of Directors has approved a special cash dividend of 0.82 dollars per ordinary share of ADS to our shareholders. The aggregate amount of the dividend will be approximately US200 $1,000,000 with payment state expected to be in May. Looking ahead, we remain highly committed to embracing long term growth opportunities, while generating more returns to shareholders and boosting market confidence.

Speaker 1

With that, let me now turn the call over to the operator for the Q and A session. Thank you.

Operator

Thank you. We will now begin the question and answer Our first question comes from the line of Timothy Chow from Goldman Sachs. Please go

Speaker 2

ahead. Thank you, management, for taking my question. My question is regarding our advertising business. Could you imagine elaborate more on your outlook for the advertising revenue growth for this year, including the Q1? And specifically regarding the advertising products, what is our key strategies for this year?

Speaker 2

Thank you. Thank you for this question. So first of all, because in 2023 for many different quarters, we had a lot of uncertainties for providing this very good expectations. So we remain precautious and prudent in giving expectations for the whole year of 2024. So in Q1, we do see a recovery of almost all the industries.

Speaker 2

However, still there are a lot of uncertainties and also challenges relating to the consumption market as a whole. And also in terms of the overall demand, in 2024, still we have seen some of the certainties for some industries. For instance, in terms of the gaming, I mean, the sports, for instance, in the Olympics, which took place in July and also the beginning of August. So this has boosted some of the budget of advertisement for the consumption markets, for instance, from the food and beverages and also the apparels and also the footwear as well. So of course, in 2022, we had actually a very high base because of the Asian Games and also the World Cup.

Speaker 2

But still, we expect to have a better second half of the year in 2024 than the first half of the year. And also in terms of the gaming, we do see a lot of uncertainties. So for instance, with the booming of the granting of licenses to those gamers to the game developers, we do can leverage our advantages in terms of the content marketing. And then we would like to leverage this advantage and also help to explore and also help a lot of new games to be exploded. So in 2024, we expect to have a better gaming industry than that of 20

Speaker 1

23.

Speaker 2

And also in 2022, we did see the enhancement of our competitiveness and also the percentage of the ad budget against the total revenue of against the total budget of the ads of our customers is actually growing as well. But still in 2024, whether those industries are still going to enjoy the same momentum in Weibo, it is pretty much uncertain and also challenging. For instance, take the examples of the headsets and also the automotive industries. So for instance, in 2023, we had a very good growth in terms of the handset industry, which was double digit. And also, we had an increase of the total ad budget percentage allocated to Weibo in 2023.

Speaker 2

But still in 2024, we still remain precautious in terms of maintaining the same momentum of the growth for Heissei Industry versus that of 2022. Still, we have seen a better than expected shipments of the asset industry in Q1, but still throughout the whole year of 2024, there is a big uncertainty about this. And turning to the automotive industry, we have gained a natural advantage in helping to promote those products of new energy vehicles, but still due to the price war and the budget decrease for the adds for the ICE vehicles, still we found it quite challenging to maintain the same momentum of the growth of our business in the automotive industry than that of last year. But still, overall speaking, we are still keeping a very good momentum of maintaining a very high competitiveness and also the attraction of a higher budget of the ads from our customers.

Speaker 1

Okay.

Speaker 2

And also last but not least, I would like to share some of the colors on the industries of the BGN cosmetic products. In 2022 and 2023, we had suffered from some of the challenges because of the industry itself. So in 2021, we because of the COVID and also because of our high concentration in promoting the entertainment and also the traffic attraction. So we had a pretty good year in 2021 and also 2022. But recently speaking, there are a lot of challenges going on and headwinds going on in the cosmetics and beauty products industries, for instance, the high competitiveness and also the price war engaged by almost all the brands.

Speaker 2

And also they were decreasing their allocation of the ad budget, overall speaking. And also you can see that there are a lot of transfer of those budgets, the budget from the commercial or the traditional e commerce industry to the live stream. So this gave us a lot of pressures in terms of the allocation of a budget to the brand based performance, brand based ad or the e commerce based ad. So still there are still a lot of challenges. And also in 2024, originally we wish to have a stabilized performance of the beauty and cosmetics industry at an allocation of our ad budget.

Speaker 2

But still in Q1, we thought that was less than expected and also less than optimal and optimized. So you can see that for those international brands still they are a little bit far away from their full recovery. And also we do see the recovery of the domestic brands, but still it is not the time for them to increase their ad budget. So of course, overall speaking, we still wish that we could have a very stable vertical like the cosmetics and beauty products. But still, up to now, we think that this industry is still the most challenging industry against of our total business portfolio.

Speaker 2

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

Operator

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

Speaker 2

Thanks management for taking my question. My question is about our strategies in 20 24 with regard to users and our content ecosystem. And on the other hand, how should we think about our AIGC strategies? Thank you. And also for this question, first of all, let me talk to you about the overall user strategy in 2024.

Speaker 2

So in 2024, still we are going to maintain the same budget for the marketing activities than of 2023. So for the handset industry in 2023, we do see a decrease of total shipment. But still, we had a net gain of MAU of over 10,000,000,000 yen 10,000,000 yen and also over 5,000,000 of net gain of DAUs because of a very deep strategic collaboration with the asset makers. And so that you can see that we can have a very low user acquisition cost. And also, overall speaking, by focusing on the entertainment and also the hot trends and hot topics, we have also very good positioning in getting the users from outside of the And also in 2024, as a result, we had almost a flat or a little bit more budget allocated to this area than in of 2023.

Speaker 2

We do see a very good recovery of the social hot trends and also the entertainment industry and approved by the performance during the Chinese New Year period. And so that we are very confident to have a very good user gain and also user scale in 2024 and that out of 2023 and also a much better one. Also, the internal challenges still are that, first of all, we would like to focus on a shift of the traffic of entertainment and social topics to the verticals because by having more traffic of the vertical or vertical traffic, we are able to increase the user stickiness and enhance our monetization efficiency and also improve our competitiveness. So before the COVID, before 2019, we had almost 58% of our traffic allocated to vertical traffics. But during the COVID period, we had a decrease to almost around 47% to 48% by the end of 2022.

Speaker 2

We had a very good strategy to recover that after that, but still it is still at a level of around 50%. So the next 2 to 3 years of time, by focusing on more so that we are able to enhance the user stickiness, the efficiency of monetization and also our overall competitiveness as a whole. Okay. And also relating to AIGC, we have stated a few comments already in the past annual performance or some of the quarterly performance announcements. Still, now we would like to have an open minus to use the LLMs and also focusing on the applications of those large language models.

Speaker 2

So for instance, in 2024 still we have some of the directions of the application. First of all, in terms of the AI assistance, assisting the interactions between the new fans and followers and also the KOLs, We have been doing a lot to really enhance the interactiveness between the new fans and some of the followers and also their KOLs. So now we can see that around 5% to 10% of the overall interactions between the followers and KOLs are actually supported by the AI assistance. And also second of all, in terms of different verticals, so last year, we pretty much focused on the verticals of beauty and cosmetic products and also to facilitating the generation and the production of the content in this area. And also this year, we would like to further expand the application of the content generation to another 4 to 5 different verticals.

Speaker 2

So last year, 8% of the content in this cosmetics and beauty products area was generated by the AI tools. And also this year, we hope to have around 10% to 15% of the content generated by AIGC facilitations, which is still challenging to say. And also for the other areas, for instance, the AI robots and also some of the commercializations or monetizations using AI to support, it is still an experimental phase. So we don't have a very detailed target or figure to be shared with everyone.

Operator

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

Speaker 1

ahead. I noticed that the company announced special dividend this quarter. So with capital allocation and the shareholder return plan this year, can management share more on the share buyback and dividend plan in the future? Thank you. Hi, Xiaoting.

Speaker 1

Thank you for your question. This is Fei. As mentioned in my prepared remarks, Weibo maintained a decent profitability and relatively strong capability to generate operating cash flows. In 2023, our non GAAP operating income reached $592,000,000 representing a non GAAP operating margin of 34%. We generated operating cash flow of approximately $673,000,000 in 2023, representing an over year year over year increase of 19%.

Speaker 1

So if you can remember last year, when they distributed a special cash dividend for the first time last May, we talked about certain principles we would adhere to in use of our cash. First of all, we always prioritize supporting business growth and strengthening our platform's competitive advantages such as investing in content ecosystem, in vertical areas and AIGC and any opportunities which closely related to our business. And then in addition to investing in our own business development, we certainly need to ensure shareholder returns. So as you know, our Board of Directors has approved the distribution of another $200,000,000 special cash dividend after we made the 2 100 $1,000,000 cash dividend last year. So going forward, we expect to continue paying off the dividends to our shareholders and gradually formulate annual cash dividend distribution policy.

Speaker 1

The Board would primarily set the dividend amount based on our company's profit performance in the prior fiscal year, while also considering factors such as our cash flow, our financial condition and the capital requirements. So looking ahead, we will continue to explore various ways to reward our investors, our shareholders, including the dividend payouts and the stock repurchases. These measures will be carefully considered and land with our core objectives and the subject to our Board approval. They will communicate the progress with market and with our investor in a timely manner. So I hope we can address your questions.

Speaker 1

Thank you.

Operator

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

Speaker 1

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

Operator

That does conclude today's conference call. Thank you for your participation.

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Earnings Conference Call
Alico Q4 2023
00:00 / 00:00
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