Good day, and thank you for standing by. Welcome to the Weibo Reports First Quarter 2025 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 now being recorded. I would now like to hand the conference over to your speaker today, Sandra Zhang. Please go ahead.

Thank you, operator, and welcome to Weibo's first quarter 2025 earnings conference call. Joining me today are Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. This 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. 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. Weibo assumes 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. All the information provided in this press release is current 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 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 payments or are nonrecurring in nature, or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management prepared remarks, we will open the line for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang.

Thank you. Hello, everyone. Welcome to Weibo's first quarter 2025 earnings conference call. On today's call, I will share with you highlights on Weibo's product and monetization in the first quarter of 2025. On the user front, in March 2025, Weibo's MAUs reached 591 million and average DAUs reached 261 million. In the first quarter of 2025, Weibo's total revenues reached $396.9 million, flat year-over-year or up 1% year-over-year on a constant currency basis. Our total ad revenues reached $339.1 million, flat year-over-year, and VAS revenues reached $57.7 million, up 2% year-over-year. Our non-GAAP operating income reached $129.5 million, representing a non-GAAP operating margin of 33%. In 2025, the Company's overall strategy is to focus on the values of users, maintain our leading position in hot trends and the entertainment content ecosystem, and solidify the competitive edge of our social products. On top of that, we will prioritize enhancing our recommendation and search functions by integrating large language models and increasing investment in vertical and video content ecosystems to drive user scale and engagement. Next, let me share with you our progress made in the first quarter of 2025 from three dimensions: user growth, the competitiveness of our content ecosystem, and monetization. On user growth and engagement, we focused on the integration of social products and upgrades of our recommendation system, aiming to drive user growth and engagement. For relationship-based feeds, in the first quarter, we focused on enhancing user experience in social interactions and strengthening social stickiness between content creators and their fans. We achieved this by strengthening the synergies between the content distribution mechanism of relationship-based feeds and super topics, extending the distribution of high-quality content from super topics to the interest-based feed. This approach successfully drives consumption of interest-based community content within the relationship-based feed while also attracting more users to consume and interact in super topics. As a result, the interaction efficiency of the relationship-based feed, which is measured by engagement per 1,000 views, shows year-over-year growth in the first quarter. Simultaneously, we are preparing for the product upgrade of the information feed. We will further enhance the competitiveness of the interest-based feed by optimizing the homepage interface and enhancing recommendation capabilities powered by large language models, creating a better content consumption experience for users. The upgraded version is currently under internal test and is expected to open to users during the second quarter. Our content ecosystem, in 2025, our user product operation focuses on solidifying our leading position in hot trends and the entertainment sector while continuing to invest in vertical content and video content ecosystems. This strategy enhances our ability to attract and retain users while increasing user time spent. During the spring festival, a period with abundant entertainment content release, we leveraged our platform strength in the celebrity fan ecosystem, holiday-themed hot trend campaigns, and cross-vertical operations to drive users' consumption and interactions around spring festival-related content. On Chinese New Year's Eve, nearly 200 celebrities and KOLs discussed the Spring Festival Gala and sent electronic envelopes on Weibo, attracting over 30 million users to participate. In addition, as the Spring Festival Gala this year gained popularity among the public, the views of the Spring Festival Gala-related topic surpassed 60 billion impressions, and discussion around this topic exceeded 500 million on the Weibo platform, representing a 50% increase year-over-year. Weibo has achieved nice user growth during the season with DAUs on Chinese New Year's Eve increasing year-over-year, and the average DAUs and traffic during the spring festival season achieving substantial increases compared with the same period last year. Additionally, as our clients' perception of Weibo's hot trend marketing strengthened, we saw sustained growth of ad revenue from hot trend marketing during the season. To be specific, advertising revenue related to spring festival achieved double-digit growth year-over-year with an even more notable increase in the number of participating advertisers. In the first quarter, we started to see technological advancement driven by foundational large language models. AI-related topics continue to gain cross-platform traction on Weibo. For instance, topics related to emerging models like DeepSeek and Metas quickly went viral. Leading AI model companies, robotics firms, and intelligent agent developers have also opened accounts on Weibo and actively interpreted the tech trends and showcased their innovation. This has attracted many influential voices from the technology sector to engage and spark discussion, accelerating the shift of AI-related conversations from niche technical communities to the broader public. As a result, ordinary users have a better understanding of AI and are thus more willing to embrace the AI transformation, which in turn drives the integration of AI capabilities across platform products. Weibo has also actively explored and implemented AI technology in multiple business scenarios on the product side, gradually focusing on several strategic areas, including AI-powered search, social interaction, content ecosystem, content recommendation, and commercial advertising. In March, we integrated the latest open-source models into Weibo search, which delivered a significant upgrade in search capabilities. Weibo's intelligent search product is now able to organize and summarize information from multiple perspectives, including technical details and public sentiment while suggesting users with key follow-up topics. This has not only greatly improved the answer quality and user experience but also enhanced our competitive edge around trending topics. In April, we accelerated the evolution of our intelligent search product and rolled it out to all users. AI-generated results are now displayed across all trending and general search queries. We have also optimized landing pages with enriched image and video content as well as accelerated media sources. The upgraded product delivers a more comprehensive, reliable, and higher-quality search experience. In March, MAUs of our intelligent search product surpassed 30 million and both DAUs and daily search queries for intelligent search in March grew nicely on a sequential basis. Search satisfaction metrics also showed notable improvement, which further drove the user scale and queries of Weibo's general search functions. In addition, we are actively piloting AI application in social and advertising products. We are dedicated to investing in the AI transformation to strengthen the core competitiveness of our existing products. As foundational models advance and the cost of computing power declines, we look forward to sharing more updates with you on our progress and achievement in AI-powered application. Moving on to monetization. In 2025, our ad product and sales strategy focused on further establishing and solidifying customers' mindset of choosing Weibo as a go-to platform for content marketing across industries as well as enhancing ad product conversion capabilities. In the first quarter, Weibo's advertising revenues grew 1% year-over-year on a constant currency basis. Across the broader market, while micro policies to boost domestic demand and consumption are gradually taking effect, advertiser budget for 2025 remains cautious, with ad spend to be unlocked progressively based on the market feedback. Internally, for one thing, we strive to capture clients' marketing demand around new product launches, major events, and megatrends, leveraging our reinforced core strength in content and product launch marketing to deliver better performance in terms of distribution effect and client feedback. For another, we remain committed to investing in our real-time bidding information ad product and are pleased with the positive revenue results from the information fees, thanks to the improved capability to capture ad wallet. Looking at industry trends, benefiting from the consumption stimulus package, we are pleased to see solid growth across several industries. The automobile sector continued to deliver growth in the first quarter, driven not only by the contribution from the NEV brands but also by traditional OEMs accelerating their NEV rollout and increasing their budget allocation to Weibo. The momentum demonstrates Weibo's position as a key product launch and discussion hub for NEVs in recent years. Coupled with policy tailwinds, Weibo has maintained resilience in ad revenues from the ad sector, off the back of the consecutive years of robust growth. In the first quarter, the e-commerce, dairy product, and food and beverage sectors also booked solid growth, tapping into the key market window during the spring festival. E-commerce platforms, in particular, delivered robust growth in the first quarter. With e-commerce becoming a significant driver of domestic consumption and e-commerce platforms improving operating efficiency, we hope to see higher e-commerce ad spend on Weibo this year. We will beef up our efforts to seize high-certainty opportunities by partnering with clients around trending topics and key e-commerce shopping festivals, thus expanding marketing reach and capturing incremental budgets. As for the food and beverage sector, Weibo's celebrity-driven and new product marketing continue to gain traction among the client base. In the first quarter, both the number of celebrity and new product marketing projects as well as related revenues saw robust year-over-year growth. This showcased the scalability of Weibo's differentiated content marketing model across more industries. When clients have celebrity endorsement or new product launch needs, they are choosing Weibo for integrated brand and content marketing campaigns. On the flip side, the handset manufacturing sector saw a year-over-year decline in the first quarter, primarily due to the shift in product launch timelines of mid- to high-end models. Despite Weibo's already strong wallet share in this sector, we expect resilient full-year growth from this sector, benefiting from new product marketing and surge in device upgrades driven by trading subsidies. The online game sector continued to face year-over-year decline, which weighed on the overall growth of Weibo's advertising revenues. This was primarily due to a high base effect from major campaigns by top online game companies in the first quarter of last year, as well as a notable decrease in new and blockbuster games being launched starting from mid-last year. Looking ahead, we expect the online game industry to remain under pressure throughout the year, and we are actively exploring ways to address these headwinds. In the beauty and personal care sector, revenue decline narrowed year-over-year and booked sequential growth during the quarter. That said, the category's impact on overall ad revenue has been diminishing. For both the online game and beauty and personal care industries, we focus on refining our sales strategy according to market conditions and leveraging our competitive advantages. Meanwhile, we will continue to support more KOLs capable of generating high-quality content and strengthening synergies between our content and monetization ecosystems, aiming to increase the wallet share of content marketing revenues in these sectors. From the ad product perspective, ad revenues from our promoted fee offerings and the real-time bidding system booked notable year-over-year growth in the first quarter. The growth was primarily driven by enhanced product capabilities and a better understanding of client needs, resulting in significant progress with a selected client group. Moving forward, we will penetrate into a broader client base and better fulfill the needs of different advertisers, leveraging our ad product capabilities. In addition, we are committed to further integrating AI technology to enhance the user experience of ad consumption and streamline clients' ad placement, which will enable us to further capture performance-based ad budgets. To conclude, in the first quarter, with stable revenue performance, Weibo's operating margin remained healthy and improved year-over-year, thanks to our effective execution of efficiency initiatives. Improved operating efficiency, stable profitability, and healthy cash flow have enhanced our financial flexibility, enabling us to further invest in the AI transformation and strengthen the competitiveness of our Weibo ecosystem. These investments are cornerstones for us to further drive user growth, deepen engagement, and reinforce our monetization capabilities. With that, let me turn the call over to Fei Cao for a financial review.

Thank you, Gaofei, and hello, everyone. Welcome to Weibo's First Quarter 2025 Earnings Conference Call. Let's start with user metrics. In March 2025, Weibo's MAU and average DAU reached 591 million and 261 million, respectively, representing a net addition of 3 million and 6 million users on a year-over-year basis. Despite ongoing disciplined channel spending, we kicked off the year with both MAU and average DAU returning to a growth trajectory, demonstrating our efforts to attract and engage a vibrant user community. Importantly, our DAU versus MAU ratio remained healthy, indicating strong user engagement and platform stickiness. Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results. All monetary amounts are in U.S. dollar terms, and all comparisons are on a year-over-year basis, unless otherwise noted. Now let me walk you through our financial highlights for the first quarter of 2025. Weibo's first quarter 2025 net revenue was $396.9 million, flat year-on-year, an increase of 1% on a constant currency basis. Operating income was $129.5 million, representing an operating margin of 33%. Net income attributable to Weibo reached $119.5 million, an increase of 12%, and diluted EPS was $0.45. Let me give you more color on the first quarter 2025 revenue performance. Weibo's advertising and marketing revenues for the first quarter 2025 were $339.1 million, flat, or an increase of 1% on a constant currency basis. Value-added service revenue was $57.7 million in the first quarter, an increase of 2% or 3% on a constant currency basis. In line with our expectations, our advertising business continued to stabilize with diverging trends across our major ad vertical this quarter by industry. Our largest three verticals were FMCG, e-commerce, and 3P products. In terms of growth, e-commerce, Internet services, and automobile were the key contributors. The e-commerce platform, Alibaba, in particular, ramped up ad spend to amplify the Spring Festival marketing effect and capture surging consumer demand during the holiday season. We are also pleased with the healthy growth of the automobile sector, benefiting from the ongoing secular shift to electronic vehicles. FMCG as a whole decreased by low single digits year-over-year this quarter. Within the category, dairy, food, and beverage products demonstrated an upward trend, while beauty and personal care continued to face a year-over-year gap, but the segment showed a clear sequential recovery. On the other hand, the online game sector faced tough comps and declined sharply due to a lack of blockbuster releases this quarter. The handset manufacturers moderated their ad spend with us this quarter, mainly due to a seasonal slowdown in the product launch pace of mid- to high-end handset devices. These underperforming industries face meaningful top-line recovery. The ad product, promoted feed ad was the largest, followed by social display, topic, and search. Ad revenues from Alibaba booked robust growth of 89%, reaching $42.6 million in the first quarter. The strong momentum of ad revenues from Alibaba was primarily driven by its high-profile sponsorship of the Spring Festival Gala to promote its platform and e-commerce events, as well as incremental ad spend in promoting their AI-related products. Value-added service revenue was $57.7 million in the first quarter, up 2% year-over-year, primarily driven by growth in membership services. The increase in membership revenue was largely fueled by higher ARPU as our VIP membership offering resonates well with Weibo's premium user base. Turning to costs and expenses. Total costs and expenses for the first quarter were $267.4 million, a decrease of 1%, with a decrease in sales and marketing expenses offset by an increase in cost of revenues. Operating income in the first quarter was $129.5 million, an increase of 3%, representing an operating margin of 33% compared to 32% in the same period last year. Turning to income tax under GAAP. Income tax expenses for the first quarter were $24.3 million compared to $25 million last year. Net income attributable to Weibo in the first quarter was $119.5 million, an increase of 12%, representing a net margin of 30% compared to 27% last year. The increase was primarily attributable to operating efficiency and higher net interest and other income. Turning to our balance sheet and cash flow items. As of March 31, 2025, Weibo's cash, cash equivalents, and short-term investments totaled $2.08 billion compared to $2.35 billion as of December 31, 2024. The decrease of Weibo's cash, cash equivalents, and short-term investments was mainly the result of the purchase of long-term wealth management products in the first quarter of 2025. In the first quarter, cash provided by operating activities was $113.2 million, capital expenditures totaled $9.4 million, and depreciation and amortization expenses amounted to $13.6 million. Before turning to the Q&A session, we are pleased to announce that we have completed the distribution of the annual cash dividend of $0.82 per ordinary share for ADS for the fiscal year 2024, with an aggregate amount of approximately $200 million in May. In addition, we would like to provide an update on our ESG initiatives. In April, we released our first ESG report, highlighting our performance across key areas, including green operations, employee development, content ecosystem, social responsibility, information security, and technological innovation. The report underscores our long-term commitment to sustainability. For more information on our ESG disclosures, please visit our Investor Relations' website.

We will take our first question from Alicia Yap from Citigroup.

I wanted to ask about your progress with search. Weibo Zhisou has been performing well. Can you share your future strategy for this product? Will it continue to be part of Weibo to engage users, or could it become its own separate product in the future? Additionally, I’m curious about AI monetization. After integrating DeepSeek and other large language models, how has our advertising product improved? Specifically, have there been changes in ad formats, eCPM, or in how advertisers can deliver more targeted ads? Any insights on this would be appreciated.

Thank you very much for those questions. So I think that you have been asking two questions. The first one is about the AI search. The second one is about the relationship between AI and advertisements. The first question is that in Q1, as we have already stated, last year, based on the open-source models, we provided the preliminary model or AI search to the users. But after the spring festival in China, we saw the launch of DeepSeek. So we've been integrating DeepSeek into our whole facility and do see a very good improvement in our final effectiveness. So in March, we launched this particular DeepSeek-based AI search to the users and saw a very good boost in the number of MAUs. For instance, in March, the number surpassed 30 million, and this number will grow in April as well. So we believe that in the future, the number of DAUs and the volume of queries will improve because of this result. Okay. The second point I'd like to make is that according to user usage and feedback, we've seen a very good result, especially in the field of news and entertainment-related content. We've been using the intelligent search or Zhisou; in this particular area, we've seen a lot of user engagement. But in terms of general-purpose search, there is still a certain kind of improvement needed. However, this volume increasement was not as good as that from the news area, for instance. It is probably because of the natural positioning or feature of Weibo, which is primarily focused on entertainment and news-related topics. But of course, we see about 5% increase in terms of per capita search volume, and it does improve a lot on the per capita queries as well as user retention. So we have not officially started commercialization; many users are asking us about when we will commercialize this. Still, we think that even if this is not fully commercialized yet, we can see a very good support and boost to our revenues from commercialization and monetization. For instance, as I've said, the per capita query volume increase because of this, and we do see a very good differentiated competitive wedge that we've been building or enhancing in the field of hot topics, news-related, and entertainment-related content search. In terms of whether or not we have a plan to make this intelligent search an independent product, actually, we don’t plan to make it independent. However, this has further maintained our advantage in the intelligent search in the area of hot topics, news-related, and entertainment-related content. For instance, we found a very good effect of bringing users from other areas by collaborating with some of our partners. They have been aware of that kind of results. Previously, we've worked with a lot of headset makers here in China, and have preinstalled results of the hot search ranking list. Part of those contents are actually generated or directly quoted from Weibo's intelligent search results. So in the future, we hope to see more results related to this. Also, if in the future, research results are related to news, we will encourage more partners to quote intelligent search results from Weibo. This will help bring users to the Weibo platform. Regarding AI for consumers or the 2C part of AI, we've been seeing that for intelligent search, for instance. In terms of the total structure of this particular product within Weibo, we are still at a very primitive stage. So in the second quarter and the near future, we expect to see new user experiences using this intelligent search function of Weibo. For example, in February and March, it was primarily based on a Q&A format. However, we do have a trial on some of the new multimedia-generated results showing in the output, which has been very successful. The overall conclusion is that this year, in 2025, we will emphasize more on our investment in the intelligent search product to further boost user numbers and activity across our whole product pipeline, establishing much better differentiated competitive edges in the future. As for the second question regarding the relationship between AI and advertisement-related revenue, we see a very good facilitation that boosts advertisement revenue related to information-based feeds. We have seen a very good improvement in the CTR rate by about 10%, although for other indicators, we had only a single-digit improvement. Thus, in terms of the effectiveness of AI on advertising revenues, especially the information feed related to revenue, we had improvement, but the facilitation from AI technology is still fairly limited.

We will take our next question. Your next question comes from the line of Thomas Chong from Jefferies.

My question is about advertising. Can management comment on the Q2 ad spending sentiment and expectations, as well as the outlook for different industry verticals? And my second question is about the update on our advertising products and strategies.

Okay. So as for the overall trend, I think we've elucidated on this topic before. Our expectations for Q2 for this particular front are pretty much similar to the final result of Q1, especially those verticals that enjoy a very good consumption boost because of national subsidy policy. For instance, we've seen a very good performance improvement in the automotive industry and also the vertical of headsets. We expect a very good performance from the vertical of e-commerce as well in Q2. Just now we said that in Q2, we expect a very good performance from the vertical of headset and automotive. But still in Q1, we had a little bit decrease in revenue from the vertical of the headset due to the adjustment of marketing cycles of some of the manufacturers. However, this industry vertical of headsets will rebound to a better growth trajectory in Q2. Another very promising vertical in Q2 will be healthcare related due to a huge increase in demand and the aging society, as well as increased demand for cosmetic surgery. Also, last year, we observed a significant improvement in Q1 for some of the challenged verticals in terms of overall revenue contribution on a quarter-by-quarter basis. Still, we see a lot of pressure surrounding these areas. For some overseas brands, we experienced a revenue decrease, but this was offset by increases from domestic brands. Another challenging industry remains the gaming sector, which continues to face numerous challenges in the next quarter. We've noticed that the budgets from Tencent and NetEase have been reduced, especially evident in NetEase's recent financial statements. To mitigate this impact, we will fully leverage AI advertisements and performance-based ad increases, particularly with some Internet-based app-related ads, to compensate for the challenges in the gaming industry. Regarding our ad products, our core competitive edge is that we are already regarded as a platform focusing on new product marketing and content-based marketing. Over the past two years, we performed well regarding operations and this competitive advantage, especially while brands launch new products. In the future, we aim to further seize opportunities from brand new product launches and those hot topics, which are central to our competitive edge. We plan to continue this focus and increase our investment in this area to stabilize demand and capture the majority of budgets from the brands. Additionally, regarding performance-based ads, after 2023, we invested significantly in this area and have witnessed promising growth returning in the second half of last year. This is point number one. Point number two is for the information-based feed pricing-related ads, we will continue to focus here. By utilizing AI ads and other related technologies and products, we can increase awareness among users and our existing customers while attracting new ones into our client pool, in turn enhancing revenues from this part.

This concludes the question-and-answer session. I'll now hand back to Sandra Zhang for closing remarks.

Thank you, operator, and thank you all for joining us. We'll see you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.