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Welcome to Questro Technology first quarter 2025 financial results conference call. Please note that English simultaneous interpretation will be provided for management prepared remarks. This English line will be in listen only mode. I'll now turn the call over to Mr. Matthew Zhao, VP of Capital Market and Investor Relations at Questro Technology.

Thank you for waiting. The conference will recommence shortly.

Thank you, everybody. Good evening and good morning to everyone. Welcome to Kuaishou Technology First Quarter 2025 Financial Results Conference Call. Joining us today are Mr. Cheng Yixiao, Co-Founder, Chairman, and CEO, and Mr. Jinbin, Chief Financial Officer. Before we start, please note that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ from those discussed. The company does not undertake any obligation to update any forward-looking information, except as required by law. For all important information about this call, including forward-looking statements, please refer to the company's public information or the first quarter 2025 results announcement called March 31, 2025, issued earlier today. During today's call, management will also discuss certain non-IFRS financial measures. These are provided for additional information and should not replace IFRS-based financial results. For a definition of non-IFRS financial measures, a reconciliation of IFRS to non-IFRS financial results and the related risk factors. Please refer to our first quarter 2025 results announcement. For today's call, management will use Chinese as the main language. A third-party interpreter will provide some English interpretation in the prepared remarks session and the consecutive interpretation during the Q&A session. Please note that English interpretation is for convenience purposes only. In case of any discrepancy, management statements in their original language will prevail. Lastly, unless otherwise stated, all currency units mentioned are in RMB. I will hand the call over to Yixiao. Hello, everyone. Welcome to Q1 2025 earnings conference call. In Q1, despite a complex and evolving global macro environment, we achieve a solid financial performance through the continued integration of AI technology across our businesses. These intelligent upgrades strengthen both our content and business ecosystem. Across our platform, users and content creators enjoy better experience, and our merchants, online marketing clients' operational efficiency improves. As a result, our average DAUs on the question app reached a record high of $480 million in Q1. Our total revenue grew by 10.9% year-over-year to $32.6 billion RMB. GP margin approached 55%. Adjusting net profit reached $4.6 billion RMB with a 14% adjusting net margin. Our new businesses have continued to deliver promising results, demonstrating strong momentum for a second growth curve. Clinging AI and maintaining its global leadership in advanced technology while accelerating the use of commercialization, generating over $150 million in revenue in Q1. Our strategic focus on core international markets is also beginning to yield tangible results for our overseas business. After two years of execution, our overseas business delivered its first-ever quarter of operating profit in Q1 with steadily increasing revenue growth. Next, I'd like to elaborate on how to progress our key business segments in Q1. First, AI strategy. CleanAI will continue to advance the quality and effectiveness of our large video generation models while launching more innovative features to meet a diverse range of user needs. In April, we launched the CleanAI 2.0 video generation model, marking a significant upgrade to the large model and its global debut, and setting new global benchmarks in motion quality, semantic responsiveness, and visual aesthetics. This latest version also marked the official debut of our breakthrough concept of interaction, multi-module visual language. Building on this foundation, we introduced a multi-module editing feature that allows users to combine various inputs, such as images, videos, voice, and motion paths, to produce customized views that better reflect their creative intent. Creators can also add, remove, or replace visual elements in generated videos by using image or text prompts, giving them greater creative control throughout the editing process. CleanAI's relentless pursuit of the state-of-the-art large model video generation technology and performance has earned it widespread recognition from subscribers and corporate clients around the world, contributing to rapid revenue growth. In Q1 alone, revenue from Cling AI reached 150 million RMB. Today, Cling AI is being used across a range of industries, from advertising to marketing to animation and foreplay. This growing adoption reinforces our belief that Cling has the potential to become the foundation of infrastructure. We have integrated AI technology across our businesses, embedding AI capabilities for our content and business ecosystems. Large models have deepened our understanding of content and user interest, allowing us to precisely match user demand with content value. In turn, this increased user time spent and activity on our platform. AI technology is also embedded across our online marketing solutions. AIGC marketing material production, marketing placement agent, large marketing recommendation models, and large bidding inference models have all improved and boosted our clients' marketing conversion efficiency. In Q1, average daily advertising spending on AIGC marketing materials remained 30 million. We also introduced a real-time interaction feature for our digital human live streaming rooms, which led to an increase in conversion rates. In the e-commerce scenario, we heightened matching accuracy between users and merchandise based on large model structured understanding of product attributes. Tools like AI intelligence, customer service, trial, smart product presentation fortified e-commerce merchants' marketing capabilities, reducing their operating costs and amplifying operational efficiency. Second, user growth and content ecosystem. In Q1, average DAUs on a question app reached 480 million and MAU, 712 million. up by 3.6% and 2.1% year-over-year, respectively. Average DEUs on equestrial apps set a new record, exceeding 400 million for the third consecutive quarter. The average daily timestamp per DAU on QSHA app was 133.8 minutes, while total user timestamp rose by 5.9% year-on-year in Q1. Our refined user growth strategy lowered average user acquisition costs. For example, we increased the user's rate of opening the app by optimizing the push strategy and product form, among other measures. On top of that, with a steady supply of rich, high-quality content, ongoing improvements to our traffic distribution system, and diverse community features, we elevated the content consumption experience with a better user retention rate. Chinese New Year has always been a key period for user growth and brand marketing. For the 2025 Chinese New Year holiday, we created a festive online celebration for our 400 million users, offering engaging interactive features and extensive content matrix. Interactive elements effectively sparked the greater social interactions across the platform. During the campaign, the pairs of average daily mutual followers soared by over 40%. and the number of active daily private messages among users with mutual followers grew by 100%. Our extensive Chinese New Year's content lineup, including online festive fairs, Kuaishou Spring Festival Gala, and Liaoning TV Supreme Festival Gala delivered a deeply immersive content to consumption experience. The continent generated over 15 billion live streaming views and over 200 billion short video views, with a focus on Kuaishou's traditional stronghold in northeast China. And through a series of events such as the Kuaishou Winter Olympics, Liu Langgang Grand Stage, and the Northeast Comedy Show, we also entered the penetration of a characteristic native continent and its influence in the dominant region. In sports, we entered a new phase of strategic collaboration with NBA China and continuing to be an official short video platform and video content creation community for NBA China. Together, we're building a diversified content matrix, including short videos of game recaps, NBA themed variety shows, and micro short plays and interactive live stream programs with NBA stars, bringing users more engaging content and interaction. Third, online marketing services. In Q1, revenue from online marketing services grew 8% year-on-year to 18 billion RMB. By integrating AI across our online marketing solutions, we enabled clients from content consumption, e-commerce, local leads, and other sectors to improve their brand marketing efficiency and achieve better conversion outcomes. This, in turn, led to more budgets from marketing clients. We also applied large language models, content understanding, and reasoning capabilities to improve the results of our marketing content recommendations. With combined off-chain thought reasoning based on user behavior, this enhancement further improved the conversion efficiency of marketing materials. In Q1, external marketing services remain a primary growth driver for online marketing services, with particularly strong contributions from the content consumption and the local service sectors. For the content consumption sector, marketing spanning from short plays experience a strong year-on-year growth. We encourage marketing clients to align their campaigns with native and platform content operations, such as short plays, minigames, and novels, which increase the content value and foster users' thickness, while also deepening the platform's understanding of user preference. For the local service sector, we provided solutions and algorithm optimizations that were better aligned with customers' various needs. For example, we offer multiple lead-based solutions, including native private messaging and lead form collection, helping them to reach customers and improve conversion rate. In Q1, marketing spending from local service industry jumped over 50% year-on-year. In terms of intelligent product placement solutions, the penetration rate of UX placement solutions continued to rise, making up more than 60% of total external marketing spending in Q1. Additionally, we actively explore and refine our closed-loop marketing solutions to support e-commerce merchants in building more intelligent omni-domain operations on Kuaishou, heightening their operational effectiveness. In a pen-shelf-based e-commerce segment, we introduce merchants' high-quality content and products through optimized marketing placement to sales funnels. and our enhanced algorithm strategies improve the matching efficiency. These endeavors increase merchants' marketing budgets in terms of intelligent efficiency enhancement. Our Omni platform marketing agent 4.0 delivers greater stability in merchants' Omni domain ad placements, offering a richer variety of control tools and enabling more convenient operations in Q1 e-commerce merchants using the Omni platform marketing agent 4.0. Our smart hosting products contributed 6% of total closed-loop marketing spending. Fourth, e-commerce business. In Q1, the e-commerce GMB grew by 15.4% year-on-year to $332.3 billion RMB, with the number of e-commerce monthly average active paying users reaching 1 to 35 million. We continue to optimize the consumer shopping experience. We empower more merchants and KOLs to expand their operations on quite a bit, capitalizing on the omni-domain synergies between content-based scenarios and pen-shelf-based e-commerce. In Q1, small and medium-sized merchants on Questro grew rapidly, mainly driven by our ongoing efforts to enhance support for the new merchants and application of large models across various scenarios. The number of newly onboard merchants rose by over 30% year-on-year in Q1, benefiting from early-stage traffic support and a series of cost-reduction policies for new merchants. Moreover, we continue to align incentives and subsidy options to merchants' key growth cycles. In particular, we launched five major programs, including fast-track access, targeted promotions, subsidy incentives, and more, to assist the export-restricted companies to tap into the domestic market. At the same time, we advanced the use of AI large models across the merchants' operations. In Q1, we provided live-streaming merchants with a full set of intelligent streaming tools, including AI-generated scripts, description prompters, smart audio commentary, and intelligent product selection. The adoption of these tools has helped more merchants achieve operational breakthroughs. In Q1, we advanced our KOL e-commerce by establishing dedicated merchandise operation centers to support KOLs in distributing high-quality products at a greater scale, further strengthening our control over merchandise selection and supply. We also deployed KOL and operational resources across our platform. to engage and socialize the brands through structured platform endorsed groups. During the Chinese New Year shopping season, we launched a New Year blockbuster initiative to focus on high demand product categories and integrate platform wide selling capabilities by introducing premium products at competitive prices. We also fortified the price advantage of individual items by providing subsidies on top of the affordable prices helping KOLs enrich their product selection in their live streaming rooms, lowering the threshold of order, placement, conversion, and increasing sales. For small and medium-sized KOLs, we supported their efficient growth through initiatives like our Rising Star initiative. By offering traffic initiatives, cash support, and city-level operation support, we successfully expanded our medium-tiered KOL base. During the Women's Day promotion day, GMB from chaos rose by 30%, and the GMB from small to medium-sized chaos surged by over 50% on a year-on-year basis. In terms of diversified scenarios, we continue to enhance our three-in-one business model that combines live streaming, shopping mall, and short video. In Q1, pen-shelf-based e-commerce GMV once again outperformed overall GMV growth, accounting for about 30% of total e-commerce GMV with steady improvements on both the supply and demand side. In Q1, average steady active merchants grew by over 40% year-on-year, driven by our proactive efforts to tap into industrial zones to attract quality merchants. enrich our supply base and broaden our product selection. We also benefited from enhanced traffic support across recommendations, search channels, and stores. During the Women's Day promotion, a pen-shelf-based e-commerce GMV and search-induced e-commerce GMV soared by 51% and 108% year-on-year, respectively. For video e-commerce, GMV also saw strong momentum, increased by over 40% year-on-year, as we made e-commerce content more expressive and engaging by embedding short video into live streaming. A synergy between the short video display advantage and live streaming's high conversion efficiency increased content diversity and drove more efficient user conversion. Furthermore, our large AI model expertise has elevated the overall service capabilities of e-commerce merchants. By utilizing large model agent technology and multi-model capabilities, the resolution rate of our intelligent customer service increased to 80% in Q1. This lowered merchants' costs and shortened the average response time, improving the overall user experience. Our AI capabilities continue to upgrade our e-commerce infrastructure. AI has deepened intelligent applications in product information construction, recommendation algorithm optimization, and content creation tools, strengthening the customer product matching and simplifying content production for merchants. And these advancements injected incremental momentum into our e-commerce system. Next, regarding our live streaming business, In Q1, live streaming revenue returned to a positive growth trajectory, increasing 14.4% year-on-year to 9.8 billion RMB, propelled by a firm focus on diverse top-tier content. We made consistent efforts to build a healthy, stable live streaming ecosystem to amplify the value of live streaming content consumption. We further strengthened our operation in core categories, including multi-host and group live streaming. By the end of Q1, the number of our partner talent agencies had grown by over 25% year-on-year, and talent agency management streamers increased by over 40% year-on-year. We also doubled down on developing premium grand stage content to help streamers and KOLs efficiently retain followers and unlock more monetization potential. At the same time, we introduced targeted support policies and optimized traffic mechanisms, bringing offline entertainment and cultural consumption formats online and fostered organic offline-online interactions. We enhanced users' interest and engagement in high-quality live streaming content. We continue to strengthen our gaming content ecosystem by deeply integrating short video live streaming and community operations with how the game developers break through traditional promotional barriers. We also collaborated with major EE sports events on live streaming copyrights and co-operated IP-based events while operating our own sports team, KSG. These endeavors drove more exploration and innovation aimed at combining gaming and entertainment live streaming content. Beyond content, our live streaming plus strategy continued to empower traditional industries. In QRR daily, number of users submitting resumes on quite higher increased by over one in 10%. Number of matches grew by over 300% year on year. In ideal housing, the daily lead generation surged by one of 50%. Finally, in terms of our overseas business and local services progress, In Q1, our overseas business continued to make steady progress, with revenue rising by 32.7% to 1.32 billion RMB. Online marketing services maintained strong year-on-year momentum. With effective cost and expense control, our overseas business achieved quarterly operational profitability for the first time. We further improved overseas customer acquisition efficiency by focusing targeted promotion on high-value demographics. This contributed to steady DAU growth in Brazil, one of our core international part markets. Following the tremendous success of sponsoring the Brazil reality show BBB last year, we doubled down our strategic partnership to become this year's exclusive official short review partner of BBB 2025. This boosted KWAI's brand visibility in Brazil and delivered richer pen entertainment content and interactive experience to local users supported by our sustained algorithm and traffic optimization. The average daily time spent per DAU in Brazil continues to grow steadily, both year-on-year and quarter-over-quarter. On the monetization front, we leverage our strong base of extensive local content to help advertisers in building a new content-driven marketing approach that uses multiple product formats to reach their target user groups. At the same time, our e-commerce business in Brazil saw healthy growth in order volume, supported by disciplined ROI management. In Q1, our local services business deepened its presence in lower tier cities. We refined our operations around city clusters, leveraging our user base to offer high value for money local products and services. Through dedicated small city projects, we further expanded our presence in these markets and driving local services GMV to sustain rapid year-on-year growth in Q1. Over 65% of its growth came from lower tier cities. Category-wise, in-store dining services remain the backbone of our local service business with steady growth. The general in-store business has seen balance the development across the on-site retail, leisure, entertainment, and other categories. On the supply side is the number of active merchants and available merchandise grew by 81% and 71.3% year-on-year, respectively, in Q1. We also encourage merchants to adopt the self-operated live streaming, which together with the employees' promotions and KOI distribution. With the support from AIGC-driven content creation tools, this allowed us to scale both the quality and the volume of content more efficiently. helping merchants gain high-quality traffic exposure. Greater product and content supply drove user transaction conversion, with the number of average monthly paying users increasing by 73.1% to YOY in Q1. Regarding monetization, we further optimized our local advertising products, improving the native operation of leads and traffic allocation strategy, which reinforced the effectiveness of merchants' marketing placements. As a result, local service revenue rose twofold year-on-year. In addition, our due engine promotion strategy combined a large-scale campaign with targeted small scale promotions improved both the marketing efficiency and effectiveness of their subsidies, leading to continued loss narrowing for our local service business. To conclude, facing a complex and evolving marketing environment, we will remain committed to our founding mission and user-centric approach. Through AI technology, we're fortifying questions, content, and business ecosystems while pushing the boundaries of monetization. We're confident that by being focused on a long-term technology investment and delivering real user value, we will be able to rise above short-term cycles while improving user experience, empowering industries, and giving merchants and marketing clients more tools to drive quality and efficiency. We will create more value for our shareholders. This concludes my remarks, and now the financial part. Thank you, Yixiao. Hello, everyone. During the first quarter, we advanced our iterative upgrade of our clean AI launch model to further strengthen our core competitiveness. Meanwhile, we enhance the user experience and help online marketing clients and merchants improve operational efficiency and expand their businesses with rich content and continuously optimize the traffic coordination mechanism. These efforts result in healthy and steady growth in both our operating metrics and financial performance, laying a solid foundation to support our full-year goal. In Q1, our total revenue increased by 10.9% year-on-year to 32.6 billion RMB, and adjusted net profit reached 4.6 billion RMB, representing an adjusted net margin of 14%. In particular, our overseas business delivered its first-ever quarter of operating profit in Q1. Let's take a closer look at our Q1 financial performance. Our total revenue grew 10.9% year-on-year to $32.6 billion on Q1. The increase was driven by growth across each of our core businesses, including online marketing services, e-commerce, and live streaming. Online marketing services revenue increased by 8% to 18 billion RMB in Q1 from 16.7 billion in Q1 last year. This increase was driven by the full process application of AI technology in our online marketing solutions, which significantly enhanced our marketing materials conversion efficiency and led to increased consumption from marketing clients. Revenue from other services, including e-commerce, 4.8 billion in Q1, up 15.2% from 4.2 billion RB in the same period last year. This increase was mainly attributable to the growth in e-commerce GMB, which boosted e-commerce commission income. Leveraging our refined Omni domain operations and AI empowerment across various scenarios, we further elevated the number of e-commerce monthly active paying users and monthly active merchants in Q1. We also provided merchants and KOLs with richer marketing tools and more diverse traffic incentives, helping them grow rapidly and expand their businesses. In Q1, our live streaming revenue was 9.8 billion RMB, an increase of 14.4% from 8.6 billion RMB in Q1 last year. Resuming positive year-over-year growth, we're committed to building a long-term and sustainable live streaming ecosystem. By refining our operations and consistently developing diverse content categories, we further increased user engagement with high-quality live streaming content. Cost of revenue increased by 11.5% year-on-year into 1 to 14.8 billion RMB, accounting for 45.4% of total revenue. The increase was mainly due to increased revenue sharing costs and related taxes in line with our revenue growth. partially offset by decreases in depreciation of property and equipment and the right of use, assets, and moralization of intangible assets. In Q1, the gross profit grew by 10.4% year-on-year to $17.8 billion. The GP margin was 54.6%, an increase of 0.6% each point sequentially. Moving to expenses, selling and marketing expenses increased by 5.5% year-on-year to $9.9 billion, accounting for 38.4% of total revenue, dropping from 31.9% Q1 last year. The increase in selling and marketing expenses was mainly due to increased spending on business promotions, including online marketing services and e-commerce businesses. while the decline as a percentage of total revenue was attributable to our improved operational efficiency. R&D expense was $3.3 billion, rising by 16% year-on-year, accounting for 10.1% of total revenue. But in 3D, the expense has increased by 79.2% year-on-year to $828 million R&D, accounting for 2.5% of total revenue. The increase in R&D administrative expenses was mainly due to higher employee benefit expenses, including related share-based compensation expenses. Group-level net profit for Q1 was 4 billion RMB. Group-level adjusted net profit rose 4.4% year-on-year to 4.6 billion RMB, with an adjusted net margin of 14%. Our balance sheet remains robust. with cash and cash equivalents, time deposit, restricted cash, and wealth management products totaling 94 billion RMB as of March 31, 2025. We generated positive operating net cash flow of 3.3 billion RMB in Q1. Additionally, we actively delivered on our commitment to shareholder returns. By the end of March of close today, we repurchased an aggregate of approximately 1.42 billion Hong Kong dollars, or 29.19 million shares, which accounted for about 0.68% of our total shares outstanding within the year 2025. Looking ahead, we will remain focused on our user needs, promoting healthy and prosperous development of our content and business ecosystem. In addition, we will firmly execute our AI strategy and explore diverse growth avenues while fortifying our existing business, driving consistent business development and creating long-term value for users, partners, and shareholders. This concludes our prepared remarks. Operators, please now open the call for questions.