Science Group Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 16, 2024

There are 6 speakers on the call.

Operator

Thank you for standing by, and welcome to the IKEA First Quarter 2024 Earnings Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer I would now like to hand the conference over to Ms. Chang Yu, IR Director of the company. Please go ahead.

Speaker 1

Thank you, operator. Hello, everyone, and thank you for joining IT's Q1 2024 earnings conference call. The Company's results were released earlier today and available on the company's Investor Relations website at ir.ice.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO Mr.

Speaker 1

Jun Wang, our CFO Mr. Xiaohui Wang, our CCO, Chief Content Officer Mr. Wenfeng Liu, our CTO, Chief Technology Officer Mr. Yuqiao Duan, Senior Vice President of our membership business Mr. Shanghai Yang, Senior Vice President of Moody's and Overseas Business and Mr.

Speaker 1

Gang Lu, Senior Vice President of Brand Advertising Business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. After the prepared remarks, the management team will participate in the Q and A session. Before we proceed, please note that the discussion today will contain forward looking statements made under the Safe Harbor provisions of the U.

Speaker 1

S. Private Securities Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but not are limited to, those outlined in our public filings with the SEC. IQIYI does not undertake any obligation to update any forward looking statement, except as required under applicable law.

Speaker 1

I will now pass the floor to Mr. Gong. Please go ahead.

Speaker 2

Hello, everyone. Thank you for joining us today. We kick off the year with a strong Q1 as we continued to execute our high quality growth strategy and achieved multiple historical highs in key financials and operational results. The non GAAP operating income and its corresponding margin both reached record highs with income and RMB1.1 billion and the margin was 14%. The expanding margin is a natural result of high quality growth.

Speaker 2

For our membership services business, the monthly ARG grew to an all time high, which capped the 6th consecutive quarter of sequential growth. We are satisfied with the progress and continue to believe that ARM remains one of the key drivers for unleashing the long term value of membership services. In our advertising services, revenue from the performance ads achieved a double digit annual growth and hit historical high in Q1. We anticipated the momentum to continue as it directly benefited from the growing adoption of generative AI, which as expected, drove greater returns on investment for advertisers. Content distribution revenue hit historical high as well, reached RMB928 million and grew 27% annually.

Speaker 2

This clearly illustrates that our growing content production capabilities are creating more high quality content that is recognized by television stations and other buyers. While we delivered impressive financial performance in the quarter, we maintained our dominance in content. The data from Enlightened shows that our total viewership across major content categories, such as dramas and movies, maintained the top spot in the market in Q1. Multiple. In the crucial genre category, we have held the number one position for viewership shell for 9 straight quarters.

Speaker 2

Aside from our domestic achievements, we are also excited by the amplified reach and the influence of our content and brand in the overseas markets. Now let's dive deeper into the performance of core business segments. Starting with membership services, we are committed to offering our users superior content, the finest user experience and the enhanced member privilege and benefits, which we believe will fuel the sustainable long term growth of our membership services revenue. Our focus expands beyond merely the quarterly subscriber numbers as a revenue result ultimately reflects all the collective components contributing to that performance. With that set, we believe the way we show the development of our membership business would be aligned as well.

Speaker 2

Starting in Q1 of this year, we will stop reporting the quarterly average subscriber numbers and We will provide updates on key milestones related to subscriber growth as they are achieved. In the Q1, we delivered membership revenue of RMB 4,800,000,000, flat sequentially and down 13% from a year earlier. The year over year fluctuation was primarily due to the high band effects created last year with the release of our mega hit, The No Code. The surge in travel and offline entertainment during the very first Chinese New Year holiday of this year post COVID also partially dilute the online activities. Currently, among the various factors contributing to the revenue performance, we are intently focusing on enhanced arm and extending the lifespan of each membership, which serve as our principal areas of focus.

Speaker 2

We remain highly confident in the long term growth potential of our membership business. Our confidence is supported by the success of our ARM strategy, which reflects 6 consecutive quarters of sequential growth. The strong performance is driven by our ongoing efforts to improve operations, enrich products offering and enhance membership benefits, all of which have bolster the value proposition of our members, Given that our membership fees are affordable and the effective arm remains modest, We have the opportunity to further refine our pricing strategy, emphasizing the exceptional value of our premium content and services. We have been working on improving RMB by introducing exciting services that add substantial value, It takes express package, for example, cash purchase for the drama, a lonely warrior, Sanadu, reached a new high. The express package not only brought in more revenue, but it also increased the popularity of the title.

Speaker 2

In fact, just one day after we launched this package, the drama hit its peak on the iQIYI popularity index score. We are making good progress in bringing additional value to our members, while concurrently driving revenue and popularity. In summary, our strategy for our membership business involves consistently delivering premium content and streaming streamlining operations and making efforts to attract and engage users. We also intend to adapt our membership offering to suit diverse user preference and bolster our loyalty program to motivate commitment to long term premium subscriptions. Such initiatives are designed to foster loyalty and enhance customer lifetime value.

Speaker 2

Munyao Pu content maintained market leadership in key content givers has reinforced our reputation as diversified and high quality premium content powerhouse. For 9 consecutive quarters, our drama viewership shells have topped the industry. The quarter's newly released title highlighted the extensive range and depth of our offering. We achieved meaningful advancements in the realistic genres, distinguishing ourselves from competitors' strong quality dramas, infused with varied creative elements. This strategy has successfully broadened our content creation expertise.

Speaker 2

Original programming remains the cornerstone of our content strategy. IQIYI Originals accounted for over 70% of our key new dramas launched in the Q1, covering diversified themes. In particular, one off phase, Pifeng Zhuo emerged as the 1st drummer in this year and 13th in history to surpass an iQIYI popularity index call of 10,000, setting it apart from other warm feed shows. War of Faith, historical period setting with financial intrigue, suspense and other creative elements, demonstrates our commitment to innovation as we continue to push general boundary and introduce unique storytelling perspectives. The well received drama Always on the Move, Netline Beiwang, which was released during the Chinese New Year holiday, recorded viewership show of over 27% at his peak, according to Enlightened.

Speaker 2

It also set a new record for drama viewership on CCTV 8 and the SIT popularity index score was 9900 and 59, just shy of 10,000 landmarks. After establishing our industry leadership in suspense gyro with light arm shelter, we have continued to swine in the comedy genre, introducing 3 new titles under the Love on theater brand this quarter. This includes our parallel universes, Shao Yihuo and The Great Nobody, both of which are drama spin off of our hit variety show. Additionally, the new released soldier story, Goshong Pao, has brought iQIYI records for the highest popularity index score, highest revenue and the best ROI for life on seltar production. During the quarter, we also released a collection of diverse high quality farmers such as Burning Flames, For the quarter, our movie viewership outperformed competitors as reported by Enlightened.

Speaker 2

We released 24 major films across genres like Crime, Suspense and Action, including top grossing, sell article releases on our movie channel. Meanwhile, 32 movies debuted on our cloud cinema channel to positive audience reception. We also observed encouraging early responses to our new action master season and R Film Cinema, Wen Yuanqian brand releases. For variety shows, we made solid progress in both new releases and established IPs, become a farmer, Zhonggi Ba, to leverage the strong balance of the 1st season and achieved not only a notable boost in popularity and revenue, but also spurred by resurgence in viewership for the 1st season. In addition, 5 have 4 have a powerful season, Wuhan, with a high level of interaction among guests.

Speaker 2

Its underwriting index surpassed 8,400 and 8th peak. For animation, we got better at what we do and users responding well. Our original works, The Great Ruler, and against the Golf, Nicanxian Shen achieved the best performance for domestic animation on our platform. Our upcoming dramas feature send out titles, such as 4, Spirit, Matchmaker, Follow Your Heart, Yan Xingqi and as husband and as wife, Xiaofu Qi and our sales of recent releases, including and our slate of recent releases, including In the Name of Brother, Harbin, Dio, Sisi and others have bolster our reputation for delivering high quality and diverse content with great audience appeal. Most bullet CTO of the CTO, Bluestrong, become the highest retailed show during prime time on CCTV 1 this year.

Speaker 2

In particular, to the vendor, what other type exemplify our success in blending artistic merit with commercial success. The service adapted from literary prose and sped up with light committee With live comedy elements support our pioneer's active standard and offers cinematic experience that sets a new industry benchmark. Additionally, this service is the 1st to utilize our in house developed cloud based on-site production management system, enabling instant collaboration on daily, shorting footage remotely and largely boosting production efficiency. To the vendor has achieved profitability while together domestic and international acclaim. And the top star ratings on Douba this year become the first 8 episodes, many series to airing CCTV 1's prime time plot and was the 1st Chinese drama to be selected for the prestigious long form competitions competition at 10 serials.

Speaker 2

The light on filter is set to introduce 6 cycles in 2022, with notable ones such as the already released Hell no one, Fukuokauren and the upcoming Lost In addition, we are browsing our gyro focused seltzer mode with 2 new brands, Micro Cossen seltzer, Beijing, Utah, focuses on premium mini series that is for the nuance of everyday life. With To The Wonder being its first title, the masterpiece sector, On the other hand, offering adaption of esteemed literary works, We believe the theater mode will further enhance content performance and the commercial value. Our Q2 movie offerings include social relevance titles like Pigasus, Cess, featuring the snake and the pigeon, Zhou Tu, Tsun Han, Cloud cinemas will showcase a case from the Chinese New Year release window along with renowned director Zhang Yimou Article 20, and the action packet suspect Additionally, we are eager for the May 17th seltzer release of hardening blade, Pangfengjun, based on Keigo Higashi nodes and East Tim node. With our variety show, we have seen a strong return on our established IP, including the Detective Adventure Season 4 and The Dress of China 2024. We are also exploring new IPs in the reality show genre with I Play Basketball in Hanbian and Wonderland.

Speaker 2

Our original production capabilities for animation continue to improve. We expect the number of kids animation titles we release next quarter to increase in addition to sequels from existing carriers, we will launch new IPs such as Fire Stick around Xiaotiao, Angkompan. We also pressed forward with the sequels of new animation IPs like Phoenix, the Gardens, the Golden Cross Cruises, and the Blade Master will be Dawson in the material arts and fantasy genres. We recognize that the cost stress of the long form video industry lies on consistently delivering high quality content that strikes a balance between creative value and the economic success. Our edge in this industry is secured by combined elite talent and industry resources, rigorous content evaluation and management, sophisticated business intelligence and innovation technology.

Speaker 2

As we progressed soon 2024, our approach will focus on crafting top tier diverse content that leverage our leadership in drama category while exploring advancement in the genres. We will also refine our release strategy to align with the evolving taste of our audience. Moving on to the advertising business. In the Q1, ad revenue reached RMB1.5 billion, up 6% annually, which was driven mainly by the growth of performance ads. Performance ads are the highlight of the quarter.

Speaker 2

The record high revenue was propelled by the growing adoption of generative AI, which in turn improves ROI for advertisers. In fact, we have successfully integrated generative AI tools into IT's advertising platform, allowing advertisers to promote and create advertising materials on their own. These tools have been effectively reducing production costs while improving ad quality and boosting ROI. For gaming and the short drama advertisers, ads created with generative AI tools have seen an increasing increase in ROI by over 40% 50%. With the role of generative AI rapidly expanding, we are leveraging its broader potential to transform the world of advertising.

Speaker 2

On On brand ad business side, our premium content continues to attract advertisers with over half of the revenue stemming from content targeted ads. A great example to this trend is drama Always on the Move, Nana Bimang, which achieved exceptional ad sales performance. Additionally, the variety show become a farmer, Zhongbiba, which debuted in 20 23, has seen a notable 80% increase in revenue this year. By industries, the food and beverage sector stood out with solid increases in hand spending both annually and sequentially. The medical services and communication sectors also adjusted substantial growth in ad revenue, exceeding 20% on both annual and sequential business.

Speaker 2

Looking ahead, we expect to see a resurgence in brand ad spending as second quarter is a traditional high season for brand and business. And we have a strong lineup of variety shows, although we remain partially optimistic regarding the brand advertisement market for this year. We anticipate domestic brands to show faster recovery than their international peers. Moving on to technology and products. Our dedication to advancing technology innovation remains steadfast as it plays a crucial role in driving the industrialization of content production, improving user experience and boosting operational efficiency.

Speaker 2

We look forward to the advancement opportunities that AI presents across our business. We have been witnessing the revolutionary impact that the rest of AI technology is having on the evolving entertainment ecosystem. Other than the performance ad discount earlier, we also see the substantial benefit from integrating generative AI into the process of patent production and operations. Well, we are still at the initial stage of fully and live seeing the potential of general HFAI, it has meaningfully enhanced the industrialization of content production, contributing to the content quality improvements and the cost of selling. For example, we utilize our in house developed data driven platform, the IT content production management system, to meaningfully improve the hit ratio while enhancing content production and the operation efficiency.

Speaker 2

Our latest upgrades

Speaker 1

are extended

Speaker 2

its scope from dramas to include variety shows, animations and movies. And it is culturally continuously refined to improve production and manage tremendous capabilities. In addition, we have incorporated our broader range of AI tools into their system, streamlining everything from content selection to promotion. Our new AI features not only can summarize novel and scripts, but they also but they can also assist in crafting story outlines and character profiles, increasing producers rating efficiency by several times. Additionally, our system skillfully handles wise, restoration for factors in cost of production, which has been implemented in major projects beyond production, our marketing and distribution efforts have been upgraded as well.

Speaker 2

We are now better equipped to produce compelling promotional material and our smart video search function offers more accurate content recommendations by effectively responding to cloud oriented search and conversational commerce. The user product strong, we take great pride in our continuous commitment to improving the user experience. The introduction of Kids Mode on our smart TV app designed to create content suitable for children has resulted in increased parental trust and user engagement time. Last but not least, for our business performance in regions outside of Mainland China, We achieved solid annual revenue growth in the Q1. Membership revenue grew both annually and sequentially with nearly 80% annual increase in markets such as Hong Kong and the UK.

Speaker 2

We continue to amplify the reach and the influence of our content and the brand in the overseas markets. IQIYI Originals continue to gain traction to gain traction among overseas audience. The overall viewership of Swarm and Vell4, Xianxia, ranked 1st in all regions and categories on our overseas platform, top to popularity charts in Thailand, Vietnam and Indonesia. The 2nd season of our Malaysian original one path in Parkoo 2 continued as success of the 1st season boosted both traffic and the membership revenue growth on our Malaysian side. Leveraging our premium content, to develop local partnership to boost global penetration and monetization.

Speaker 2

We have strengthened health with telecom companies and the tourism authorities in Hong Kong and Thailand and launched an iQIYIZ drama slapped premium C Pop content to keep overseas market and accelerate the production of original premium content for local audiences. Meanwhile, we will persist in our efforts to promote 3 parts and local content through partnership with Southeast Asian TV Stations as we have our brand presence in key markets. We are also committed to deploying a variety of IP monetization opportunities. In summary, the strong performance in the Q1 demonstrated the successful execution of our high quality growth strategy. We recently celebrated our 14th anniversary.

Speaker 2

As we step boldly into the future, we are seeing more exciting opportunity ahead, especially when we assess the power of generative AI, which could potentially transform the landscape of entertainment. With this in mind, we are committed to leveraging the pioneering technologies to further enhance our ability to continuously provide high quality content and extend our lead in the industry. Now let me pass on to Goh Soon of financial performance.

Speaker 3

Thanks, Mr. Gong, and hello, everyone. We delivered a strong Q1 results with a record high operating profit and corresponding margins, improved cash flow and a healthier balance sheet. We believe we can utilize more tools to enhance shareholder value over time. Now let me walk you through the key numbers.

Speaker 3

In Q1, the total revenues were RMB 7,900,000,000. Membership services revenue reached RMB 4,800,000,000 and remained stable sequentially and decreased 13% annually. The annual decrease, as previously explained, was primarily due to the high base effect from the same period last year. For online advertising, revenue grew by 6% annually to RMB 1,500,000,000. The increase was primarily driven by the growth of performance ad revenue, which achieved double digit annual growth and hit a historical high in Q1 even compared with a high base from the last year.

Speaker 3

The accounting distribution revenue also hit all time high, reached RMB928 1,000,000 and grew 27% annually. Moving on to costs and expenses. Retirement cost was RMB4 1,000,000,000, down 5% annually, driven by our improvement in common strategy and operating efficiency. Total operating expenses was RMB1.4 billion, down 12% annually, primarily due to our discipline in the marketing spending and the reversal of allowance for credit losses. Turning to profits and cash flows.

Speaker 3

Our non GAAP operating income was RMB1.1 billion and its corresponding margin is 14%, reaching historical high. Furthermore, the operating cash flow totaled RMB 938,000,000, remaining positive for 8 consecutive quarters, reflecting the continuous improvement of our balance sheet. At the end of Q1, we had cash, cash equivalents, short term investments and long term restricted cash included in the prepayments and other assets of RMB 7,300,000,000 in total. Moving forward, we remain committed to creating long term value for our stakeholders. We aim to continue to generate sustainable profit and cash flow and to further strengthen our balance sheet.

Speaker 3

For Telia's financial data, please refer to our press release on our IR website. With that, I will now open up the floor for Q and A.

Operator

Thank Your first question comes from Zhijing Zhang from CICC. Please go ahead.

Speaker 4

Thanks management for taking my question. Congratulations on the strong results. My question is about the membership business. The company did not disclose subscriber numbers this quarter. What's the reason for that?

Speaker 4

And how should we think about the outlook for the membership business in the longer term? Thank you.

Speaker 1

The CEO, Mr. Gong, just explained why we didn't disclose the sub numbers in ARM, because this only partially indicates the progress of our entire business. So disclosing the numbers too much in detail probably would disturb some of the development of our overall business. So for the details, we'll invite Mr. Duan, who is in charge of the membership business, to explain further.

Speaker 1

After serious consideration, we decided no longer to disclose the subscriber and ARM data starting this quarter. At the same time, we believe many of you have already noticed that there is overseas streaming platform, which will soon cease the disclosure of these data as well. Our reasoning is in part similar due to the different rights and pricing associated with various membership products and tiers. Each user contributes a different economic value and therefore, to merely reflect business and financial progress through the number of subscribers at a specific point in time or over a period is actually incomplete and lacks objectivity. Since the beginning of 2022, we have always emphasized that the core goal of our membership business is to maximize long term membership revenue.

Speaker 1

And in the current stage of development of our membership business, the indicators for evaluating its growth and health are not limited to the performance of subscriber count. So therefore, the 3 drivers to revenue growth, namely ARM, membership lifetime and subscriber scale will ultimately be reflected in the revenue performance. So overall, we believe using membership revenue as the core indicator is the best way to help investors understand the business progress. In terms of the content performance, aside from revenue, actually there are other external real time indicators that can help investors understand our business performance, for example, including ITE's popularity index and third party data. We remain confident in the long term growth prospects of our membership business.

Speaker 1

In the future, we will continue to drive the long term healthy growth of our membership business through measures such as improving content quality and diversity, more optimized membership products and services and also better penetrate both user groups that are not fully served, for example, the elderly and the youth. Thank you. And last but not least, I wanted to remind everyone that for each company, actually, the way we track subscriber number is or the disclosure measures are a little bit different also. Thank you.

Operator

Thank you. Your next question comes from Maggie Yi from CLSA. Please go ahead.

Speaker 4

I'll translate myself. My question is related to our recently released So I noticed that this drama series represents very outstanding artistic qualities and is very different from traditional commercial productions. I'm just wondering what's the investment return look like for this type of similar projects? And is this indicative of the new direction for iQIYI's future content strategy? Thank you.

Speaker 1

Thank you, Maggie. We'll invite our CCO, Chief Content Officer, Mr. Xiaohui, to answer this question. To the Wonder actually has been a very much resounding success. We think it cannot be simply categorized as art drama or commercial drama.

Speaker 1

Rather, it also represents a new direction of our innovation and actually fully affirming our belief in emphasizing both content quality and commercial success. Indeed, it received the highest rating on Douban this year for domestic drama series, scoring as high as 8.8. And it also represented Chinese language series internationally for the very first time at the Cannes series, setting a very good, excellent start for iQIYI's new microcosm theater. In terms of content innovation, we adapted the story from a little early prose and spiced up with light comedy elements. This brings a new energy and rhythm to the drama with for a relatively strong literary quality.

Speaker 1

What's more impressive actually is that from a commercial perspective, this drama actually achieved profitability through diverse revenue streams, proving that the high quality content yields not only strong social influence, but also substantial commercial potential. Coming back to our content strategy, we will continue to balance content quality with commercial value, consistently producing high quality, diverse and commercially valuable content. We aim to solidify our core competitive advantage in the drama sector, while seeking more breakthroughs in other content dramas. Regarding our drama strategy, we will continue to consolidate our advantages in the realistic genre and strengthen our reserve of high quality ancient costume dramas. We are committed to cultivating high quality diverse content with the aim of gaining the broadest possible recognition from our audience.

Speaker 1

Our CEO, Mr. Gong, just added, actually, in our content strategies, cost control is very, very important. And just namely to the Wonder actually had a very good cost control, so that's why commercial aspect, it performed very well in this. Thank you.

Operator

Thank you. Your next question comes from Thomas Chong from Jefferies. Please go ahead.

Speaker 5

Thanks management for taking my question. My question is about online advertising. Can management comment about the advertising outlook in 2024, in particular, performance based advertising? On the other hand, can management also comment about how AI benefit our advertising business? Thank you.

Speaker 1

Thank you, Thomas. We will invite our CTO, Wenfeng, to answer this question related to our Performance Act. Performance ad has indeed achieved considerable growth in the 1st quarter. Actually, in the Q1, the ad revenue reached an all time high, contributing to over 40% of the total advertising revenue. And we expect to continue to see strong annual revenue growth in Q2 and also throughout this year.

Speaker 1

Also, we found that the application of generative AI has effectively driven the growth of our performance ad business. Compared to brand advertising, the impact of generated AI on performance ad actually is more significant and still holds tremendous potential to drive future ad revenue growth for us. And this is actually reflected in a few several aspects. Wenfeng actually mentioned the 3 aspects. First, in terms of ad material production efficiency, advertisers can use this AI tool to independently and automatically generate a wide range of image and video, materials, increasing production efficiency and lowering costs for advertisers.

Speaker 1

And second, regarding the quality of our material production, generative AI helps industries to create high quality materials that coincide with high quality video content on our platform, making ads more native and resulting in better campaign performance. And third, in ad placement, by relying on upgraded model architecture and evolving ad placement strategies, we can optimize ad performance to make ad placement more precise and personalized, helping advertisers achieve better results while enhancing the monetization efficiency of user traffic. Moving forward, we will continue to leverage generated AI capabilities to help advertisers to attract high quality users, achieve on platform and delivery synergy and also reinforce the value of exposure and enhance the advertising effectiveness. And looking at the performance by industries for Q2, we are optimistic about the development of sectors, including e commerce, online services, gaming industry and the fast growing sectors such as programmers, which all we believe will bring more opportunities for performance apps. Thank you.

Speaker 1

We will invite Mr. Weng Gang to who is the Senior Vice President of Brand App Business to add on the performance for the Brand Okay. For Q2, Q2 actually is the peak season for rent advertising. And with the enhanced supply of variety shows in the quarter, we anticipate a recovery in brand advertising both digitally and annually. And for this full year's outlook, we remain cautiously optimistic attitude towards the brand advertising business for the entire year.

Speaker 1

And looking at the industry's perspective, we are bullish on the food and beverage, medical services and telecommunication industries. We in general, we believe the future growth in brand advertising will still rely on the development of domestic brand advertisers. We think the rapid increase in smart TV penetration rates will bring more opportunities to the advertising the brand advertising business, helping advertisers to deeply engage with the highly commercial commercially valuable home scenarios. And currently, actually, we have industry leading user coverage on the large screens. Thank you.

Operator

Thank you. Your next question comes from Lincoln Kong from Goldman Sachs. Please go

Speaker 2

ahead. So thank you, management, for taking my questions. My question is pretty straightforward to ask about our future strategy, especially what are the areas that management are focusing on for this year and for longer term?

Speaker 1

Our CEO, Mr. Gong, is answering this question. So in the short term, actually, we will continue to improve our business operational efficiency to enhance team capabilities and including strengthening the business fundamentals and also for the financial perspective to improve the profits and cash flows. So from the mid to long term perspective, the very first one is to consistently enhance the quality and diversity and supply of stability of our premium content. And second, for generated AI, we will apply more broadly and more deeply into content creation and operations to raise our efficiency.

Speaker 1

3rd is to utilize all means to fight

Speaker 3

piracy.

Speaker 1

The 4th one is to improve the quality of our domestic market operations. And in terms of overseas business, we'll invest, I will say, carefully and then to properly invest into those market. In terms of future growth and actually beyond our matured relatively mature businesses, for example, the membership business and also the advertising business, we will utilize the generated AI and virtual reality, these innovative technologies to explain to new business opportunities such as franchise staff including also both online and offline. And in the future, we will also both better serve 2 demographics, for example, the elderly and the children by adopting product designs and content production to meet their needs, also to enhance their viewing experiences and very niche content preferences. For example, for elderly to increase their accessibility to content viewing and also for kids' content to provide them more healthy, safe and reliable content.

Speaker 2

Thank you.

Speaker 1

Thank you.

Operator

Thank you. There are no further questions at this time. I'll now hand back to management for closing remarks.

Speaker 1

Thank you, everyone, for joining the call today. And then if you have any questions, feel free to reach out to the IR team. Thank you.

Speaker 2

Thank you. Bye bye.

Operator

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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