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Millicent T.: Good evening, good morning, and welcome to Tencent Music Entertainment Group’s Second Quarter 2025 Earnings Conference Call. I’m Millicent T., Head of IR. We announced our quarterly financial results earlier today before the U.S. market opened. The earnings release is now available on our IR website and via Newswire services. During today’s call, you will hear from Mr. Kar Shun Pang, our Executive Chairman; and Mr. Ross Liang, our CEO, who will share an overview of our company strategies and business updates. Then Ms. Shirley Hu, our CFO, will address our financial results before we open the call for questions. Before we continue, I refer you to the safe harbor statements in our earnings release, which applies to this call as will make forward-looking statements.

Please note that we will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in our earnings release and filings with the SEC. All participants are muted at this time. After management’s remarks, there will be a Q&A session. And please be advised that today’s call is being recorded. With that, I’m very pleased to turn the call over to Kar Shun, Executive Chairman of TME. Kar Shun, please.

Kar Shun Pang: Thank you, Millicent. Hello, everyone, and thank you for joining our call today. We delivered high-quality growth in the second quarter, with solid year-over-year increases in both revenue and profitability. On one hand, our remains a core growth driver and continues to gain traction. On the other hand, we are also seeing impressive results from our expanding suite of music-related services. key initiatives like advertising, concerts and art sites, all achieved a rapid growth in the second quarter, and that strong momentum is carrying into the third quarter. By constantly enhancing our content ecosystem, expanding our offering and fostering new ways for artisans engagement, we are shaping a rise in one music service platform.

Now let me share some of the key highlights on the content business. First, we began cooperating with well-known Korean labels, the black label and [ H ] music for the first time. Further strengthened and differentiated our K-pop offerings, we also expand vision with renowned Chinese Artist, [ Wanghong ], offering both of his classics and latest work on our platform. Second, we continue to go for co-creation and our original content production to further enrich and diversifying our content offerings. From concept, originization, creations to production and promotion in every stage to build a more dynamic and innovative music ecosystem. A prime example is our recent collaboration with SM Entertainment on NCP’s [indiscernible] Special EP, Lucid, [ Tan ].

Our integrated promotions across music festivals, debut concerts and variety shows attract a large audience. 10,000 music locals participated in a single loan at the music festival and variety show clips generated over 1 million lights, highlighting the power of the end-to-end industry collaboration across borders and total exchange full music. We also work closely with artists to develop our regional pieces like the theme song for the [indiscernible], The Charts and garner the extensive praise from national media. Additionally, our strategic partnership with [indiscernible] satellite TV, [indiscernible] has further supplemented our music copyright portfolio of products such as the treasury voice, [indiscernible] and opened new opportunities for collaboration in content co-creation, musician, promotion and more.

We have also shown strong capabilities in staging and coming to them with the users through other music-related service offerings. These efforts have further energized our ecosystem, boosted user loyalty and cultivated content creation. Altogether, reinforcing our platform unique position in the evolving music industry. A few examples. First, we successfully hosted leading Korean artist, [ GE Dragon’s ] first major tool since 2017 in Macau, which attracted over 36,000 attendees to immerse in the cultivative atmosphere and the event merchandise was quickly sold out. This marked our first large-scale [ snow ] concept production, significantly pushing our industry reputation. Following a strong kickoff, we are scheduled to expand the tool into other regions this year.

Additionally, we organized as CEO as use of stadium concert for [indiscernible], helping them to reach a broader, younger audience. Due to the overriding demand, we quickly responded and worked with PRA to schedule additional shows to accommodate fan interest. Second, we have become an important partner staging and creating live performances for emerging [indiscernible]. In the first half of the year, we leveraged our proprietary IPs, City Life and Though Life to host over 300 off-line shows for nearly 100,000 musicians. Our cross-platform promotion to boost a number of works into trending, connecting them with a broader audience of music lovers. For instance, after we promoted [indiscernible] first why not race for the win [indiscernible] on soft video platforms.

They quickly went viral sparkling a wave of users generated content on social media and surprising 20 million streams on our platform. Third, we created more opportunities for music lovers to meet and interact with artists both online and offline. For example, buyers of [indiscernible] could win opportunities to attend his offline signing events such privileges not only different defense engagement, but also helps drive album’s outstanding performance. In late June, we partnered with [ DRU ], a global fan communication platform company to launch the interactive community bubble on QQ Music, bubble enables users to engage directly with hundreds of K-pop artists from labels such as SM, JYP and entertainment. Providing artist an avenue to share members only content.

To cater to a wider audience, we also plan to invite some popular Chinese artists to the community, allowing them to foster a deeper and more personal connection with their fans. Finally, reflecting our commitment to serving the music industry and supporting its healthy growth, we host the [ Further Wave Music Awards ], which was decided to honor the most outstanding Chinese music work of 2024. 15 top-tier music creators, including [indiscernible], presented the awards. The chart professionalism earned the industry-wide acclaim and endorsement, a market of 200 million social media viewers. This quarter, we also cooperated with professional institutions, music labels and artist leveraging AI technology to unlock the social value and hearing power of music.

For example, we launched the [indiscernible] project, featuring natural soundscape to enhance sleep quality. In summary, our dedication to diversifying music services and delivering well run the music entertainment has set the stage for long-term sustainability growth. With a strong foundation in place, we will continue to enhance our content and platform ecosystem, offer richer experiences and unlock greater opportunities for both music lovers and stakeholders across the music value chain. Now I would like to turn the call over to Ross for more details on our overall platform development. Ross, please go ahead. Thank you.

Liang Zhu: Thank you, Kar Shun. Hello, everyone. In the second quarter, our platform demonstrated robust growth driven by [indiscernible] to continuous product improvement and operational excellent. Online music recorded strong performance supported by a certain expansion in both our subscriber base and ARPPU. This positive trajectory was underpinned by our innovations across product stations, artist merchandise and artist fan interactions, which has further strengthened our peer among SVIP members. Overall, user average transplant reached a record high and SVIP subscribers exceeded 15 million, a new milestone that reflects the deep trust and loyalty within our user community. To enhance the SVIP experience we introduced a range of new and upgraded features during this quarter.

Here are some key highlights. First, high-quality sound quality remains the most popular SVIP membership benefits. This is effective in fulfilling robust demand for more and immersive listening experiences. In the second quarter, [indiscernible] Music is a bipartisan quality and 1 click audio enhancement to their — by delivering super audio [ vitality ] and louder speaker volumes beloved users easily transform their smartphones into portable speakers. We also upgraded voice extraction technologies with the industry-first AI [ chorus ] function. You can now plug in a loud concert, sing along experience anytime and without the [ Euro ] fast. Second, to further drive SVIP adoption artist-centric privileges became increasingly effective. Such artist are pulled by our deeper collaborations with labors and artists that unlock a wide range of compelling features for users.

Digital albums are a great example. Recently, [indiscernible] a new digital single, [indiscernible] we also launched [indiscernible] new album player by integrating — this album as I — sign of privileges may significantly posted [indiscernible]. Another example is priority excise to concert tickets for in-demand events. This quarter, [indiscernible] users had opportunities to secure tickets for G Dragon and Black Pink concert footfalls, the ones on our platform. Stacking significant [ bar ] among music fans. We also cooperated with both domestic and international artists include [indiscernible] to release [indiscernible] service. This initial successfully users growing demand for collectibles. Third, we elevated users’ engagement by introducing new ways for artists to connect.

For example, beyond launching Babu in May, we partnered with TI entertainment, [indiscernible] and transform projects [indiscernible] to concerts. This event gathered over 33 million viewers with SVIP members enjoying dedicated [indiscernible] to solo camera angles, bringing fans even closer to the artists. We also upgraded our virtual fan community, [indiscernible], meet-up more personalized. During the last one, [indiscernible] and the song releases we hosted funding activities and live voice coaching, attracting over 100,000 users to its airline page. Next, as our in-car music service, recognition from SVIP members we broaden our alliance with prominent automakers. For instance, this quarter, we formed our comprehensive partnership with GE and collaborated with Xiaomi on its first [indiscernible] model.

This partner service integrated [indiscernible] and the premium service some effects, animating users music listening, we also built an AI [indiscernible] music cabin for great [indiscernible] offering personalized on-demand features like AI vocal extraction and failing music playlist to facilitate a more enjoyable journey. Along the success of our SVIP offerings, the power of our platform and innovative performance later to accelerate advertising growth both quarter-over-quarter and year-on-year. In particular, we optimized interactive and task and reduction benefits significantly posting users engagement and receiving positive feedback from advertisers. Lastly, our ad-based membership in a positive momentum. It gives us more room to provide tailored solutions to advertisers and users with various needs.

Looking ahead, we see great potential in the music entertainment space and are committed to investing in new initiatives that create lasting value and the impact on music creation and construction. Along this journey, we will continue to post, fundraise, innovate and enhance user experiences to deliver more premium and immersive experiences to all of our users. With that, I would like to turn the call over to Shirley, our CFO, for a deep dive into our financials.

Min Hu: Thank you, Ross, and greetings to everyone. Let me now turn to our financial results in Q2 2025. Our total revenue hit a record high of RMB 8.4 billion, up by 18% year-over-year successfully overcoming the challenges from adjustments in social and 10 services in [indiscernible]. This was driven by continued strong growth in new subscription and advertising services as well as robust growth from artist related merchandise sales and off-line performances. Online music revenues grew 26% year-on-year to RMB 6.9 billion. Net [indiscernible] revenues grew 17% year-on-year to RMB 4.4 billion in Q2 2025, driven by continued expansion in subscriber base and monthly ARPPU. Monthly ARPU reached RMB demand consent this year compared to RMB 10.7 in the same period of last year, primarily driven by expansion in subcribers and ARPPU.

As discussed earlier, to enhance the SVIP member experience. We continue to broaden and strengthen SVIP benefits, including enhanced sound quality and effect. Artist presented privileges such as free shipping for our merchandise, priority access to concert tickets and artist-related merchant. [indiscernible] and achieve higher monthly active user this quarter. Advertising revenue continues its strong growth trajectory on both year-on-year and quarter-on-quarter basis, primarily driven by the following: First, our innovative AD formats, such as a supported model keeps the gaining trajection and significantly contributed to our advertising revenue growth. Second, the [ 618 ] shopping festival provides a great opportunity to show our recent product optimization results, leading to increased number of advertisers higher, entrance rates and eCPM.

Further, sponsorship advertising also had run growth this quarter, which benefited from include number of offline moments and performance rate. Additionally, after related to merchandise and off-line performance delivered robust results this quarter and further contributed to over revenue growth in music services. The shipping for the physical album of [indiscernible] this quarter, together with the offerings of artist-related merchandise, such as [indiscernible] offshore market speaks significantly enhanced the revenues from art related merchandise sales in Q2. While we continue our strategic initiatives in the off-line performance market. This quarter, making the ads that agent that is the first major tool since 2017, and we successfully crossed his concert [indiscernible] in Q2 with more locations to come in Q3.

We also hosted other high-profile concepts such as we open this quarter. Social entertainment services and other revenues were RMB 1.6 billion down by 9% year-on-year. The year-on-year decrease was mainly due to the adjustments to certain live streaming, interactive functions, more stringent compliant procedure framework. Our gross margin rose by 2.4 percentage points year-on-year to 44.4%, primarily driven by the following factors: first, strong growth in new subscription and advertising revenue. Together, we improved cost base thanks to our long-standing building relationships with labels and audience and benefit our gross margin. Second, as the market in GAP evolves, we successfully lowered our revenue service ratio for social and capital services with other material in packaging revenues.

Meanwhile, the growth in revenues from unrelated merchandise and offline performance, which require higher measurements and offset gross margin increase. Moving on to operating expenses. Sales and marketing expenses as a percentage of revenues was 2.6%, down from 2.9% in the same period of last year. General and administrative expenses as a percentage of revenues were 11.1%, down from 30.1% in the same period of last year. In our strong operating efficiency, majority of our sales and marketing spending continue in the category on promotion and the channel spending we will keep monitoring market conditions and increase spending as needed with measure discipline. Our effective tax rate for Q2 2025 was 17.3% compared to 19.4% in the same period of 2024.

We accrued withholding income tax of RMB 118 million in the second quarter of 2025. In Q2 2020, our net profit increased by 38% to RMB 2.5 billion and the line profit attributable to holders of the company increased by 43% to RMB 2.4 billion. [indiscernible] increased by 33% to RMB 2.6 billion reaching for historical high and the non-IFRS net profit attributable to expose of the company increased by 27% to RMB 2.6 billion. Our diluted earnings per ADS this quarter was 1.5, up by 45% year-over-year, and the non-IFRS diluted earnings per ADS was 1.66 up by 39% year-on-year. These results underscore our effective monetization, enhanced operating business and the benefit from our share repurchase. Our combined balance of cash, cash requirement, deposits and short-term investment were RMB 34.9 billion as compared to RMB 37.7 billion as of March 31, 2025.

This combined balance was also effect by a change in exchange rate of RMB to USD at least on the balance of the space. Going forward, we will keep focusing on expanding our SVIP membership, introducing more under enhanced interactive privileges such as high-quality content, market percentages improvement including early access to artist merchants and concerts. We will continue to invest in our product and innovative technologies globally, we remain optimistic in the health growth perspective of the music entertainment payment industry and are confident about the high quality growth of our business. This concludes our prepared remarks. Operator, we are ready to open the call for questions.

Operator: [Operator Instructions] The question comes from the line from Lincoln from Goldman Sachs. Lincoln can you hear us?

Lincoln Kong: So congrats on the risk on quarter. So my question is about — so given that the first half we have a very solid momentum. So how should we think about the second half in terms of our revenue and as well as the profit outlook?

Min Hu: [Interpreted] And actually, we are really encouraged by this quarter’s solid and well rounded performance with both of our top line and also bottom line coming in strong. While our music subscription business remain robust, we will continue to focus on the high-quality growth. As mentioned before, our subscriber base right now has already reached over 104 million, and the pace for the net adds may fluctuate from quarter-to-quarter, but we do have the confidence that we continue to have a high positive pole in a healthy and dynamic manner. And for the ARPPU, I think we are seeing a steady upward trend as we continue to enhance our offerings and the value we provide to users. We believe these efforts will further strengthen our value proposition and this willingness to pay over time.

So besides the good performance in the subscription business, I think the traction that we are seeing in our non-subscription services are also very exciting. On one hand, [indiscernible] continues to be an important growth driver, innovative and forced to different user cohorts are particularly welcomed by the advertisers. Now on the other hand, as we keep innovating and collaborating with more artists and labels the new revenue streams from concerts and artist merchandise are becoming more scalable. So in the second quarter, revenue were more than doubled from a year-over-year basis. which really validates our strategy of building a comprehensive music entertainment platform. So for the visibility, as you can probably understand, the concerts, for example, we experienced some short-term quarter-over-quarter fluctuations have been involving in a lot of things like scheduling, when new selections and other logistical coordination.

But overall, we are really optimistic and focused on driving a sustainable long-term growth. So in a nutshell, for the full year of 2025, I think backed by the solid performance year-to-date, we now see the revenue expected to come in higher than our expectations. With our focus on the operational efficiencies, we see more room for bottom line improvement as well.

Operator: The next question comes from Alicia from Citigroup.

Alicis a Yap: Congrats on the solid results. I have a question on [ bubble ] so can management share with us the tractions of your recently launched bubble? What is the user feedback and user spring so far for this new product and can bubble become a meaningful product in the coming future with potentially decent revenue contribution?

Liang Zhu: [Interpreted] The company has been very happy that we worked with DRU in this quarter to release the product named the bubble. Talking about the reason why we launched the surveys. The reason is because we have the feedback from the entire user group. There are some of defense groups. Right before bubble, it would be very challenging for them to communicate with audience. So music, we still would like to continue to enhance the user experience. So that’s the reason we continue to strengthen our cooperation with DRU of launching such a service in this quarter. So once the Babu community is being launched, and we continue to optimize its basic experience to the user, especially the translation and the language proficiencies within the South Korean language and Chinese.

This is a feature that we do see very wide recognition from the user feedback. So as Kar Shun stated in his statement, besides the South Korean audience from the 3 labels we are working now in the near future, we’re also going to introduce the Chinese artist to the Barbo community. In that way, we will be able in the Greater China region of providing the user experience that is within the human touch and the broad coverage and what the Babo used to have. But at the same time, we also have the bandwidth service for Babu and subscription and SVIP business. And we do hope such a Babu service would become a key growth driver. According to the existing user profile, we can see many of the pay-to-go user. They are still the young users. So in the near future, they also demonstrate a very high activity and confidence for the future user growth and commercialization.

As many of you may know, is a well-established social product in overseas market, and we surely believe having Barbo on board will help us to continue to consolidate our QQ Music and help TME to continue to launch socialized apps and the service in our existing music business. I fully believe as we continue to introduce Chinese artists into Babu community and we also have additional features, for example, like live streaming. In that way, we will be able to provide retail condition opportunities to our entire subscription business in the near future. I also would like to emphasize for Babu is a very important step for us to embrace the social entertainment. And because we do notice the customers need such a service, and we do believe it has a great potential for its future commercialization.

Operator: And the next question comes from Thomas Chong from Jefferies.

Thomas Chong: Congratulations on a very strong set of numbers. My question is about our recent deal with [indiscernible]. Can management comment about the synergies with [indiscernible] but the cost optimization enhancement in our product offerings and any aspect we can benefit the SVIP offerings as well?

Liang Zhu: [Interpreted] Regarding our deal with [ Himalaya ], according to the regulation in China, we’re still waiting for the further approval from the regulatory authorities. So now it would be very difficult for us to make any corresponding comments. But the reason why we go for the Himalaya deal is because for the management team and always believe in the value of long form audio. Long-form audio is a very important content form. To us it’s already played a complementary role to our existing music business. At least from our perspective, for the book listening, the individual members and also the long form audio content in different music apps, we do see that nice progress being made on the subscriber base as well as commercialization.

And we also see that consumption of the long form audio and its penetration ratio with SBI — so if the deal goes smoothly in the near future, I surely believe for the subscription revenues for the ad revenue, we will have every opportunity to continue to grow our user base. If there’s any further progress regarding this deal, we will also discuss the information to the market in due time.

Operator: And the next question comes from Morgan Stanley, Liu Yang.

Yang Liu: Congratulations for the very strong results. I have a question on the other music revenue. Does management believe that in the long run, this part of the business will for a bigger pile the total revenue. And what will be the impact to the gross margin because we understand that advertisement is a very high-margin business, but how about off-line performance concerts as the overall impact?

Liang Zhu: [Interpreted] Thank you very much. And the company is adopting the strategy of having content and platform at the same time, it is an all-in-one development. Regarding the early concert as well as the fans economy, I think it’s going to be a very important direction for us to go in the near future. It is also part of our strategic business. So in the long run, there are the music is going to be a key for our future development. Well, let’s talk about the fans economy. As you may see, it is actually subjected to the scheduling of artists as well as the merchandise treatment. From the revenue perspective, fans economy, the revenue continued to ramp up but it were addition, I mean the seasonal fluctuation. The same as a flight concert and events due to the artist scheduling as well as the venue selection, there might be some seasonal fluctuations.

Well, regarding the GP margin, I have to admit for fans economy and [indiscernible] concert. Indeed, both GP model are relatively low. So it will have some impact on the overall GP margin of the company. But generally speaking, on one side, we will continue to ramp up the GP margin. For example, we have ever increased subscriber base, and we also have more revenue from the advertising business, and we embrace the social entertainment where at the same time, all those factors are indeed less in our GP margin. So generally speaking, according to our existing observation of defense economy and the air flight concert, I have to see that compared with our existing online music, no matter for the subscription business, [indiscernible] business. The revenue contribution from defense economy of flight concert is relatively smooth.

As its revenue contribution is relatively small, so its impact over the GP margin is also small. I also mentioned about the revenue seasonalities for defense economy and the air flight concert. In certain reason, when the revenue from those cities are relatively high, it will surely fluctuate overall GP margin. But overly speaking, we’re still very confident on the operating trend of our GP margin. I also would like to make a comment on caution. And besides what has been mentioned by Shirley, I have to see that we never take air flight concept or even the fans economy and the merchandise and business. We take it as a business that can be complementary to our existing online business. So we actually leveraged the privilege generated from the air flight business to continue to support the healthy growth of our online music business.

To TME, as we have already mentioned, we have the content and the platform, the two-way in 1 body strategy, and we hope that in the near future, such there are more possibilities and a competitive edge. I also like to make a comment, I’m Ross. And I think in this quarter, we plan to launch the SVIP annual membership card for the shopping malls, especially for the merchandise product. In other words, provide a discounted offering of the merchandise we have in our shopping malls. Fundamentally speaking, it is within the same nature as the e-commerce membership cut. Whereby initiating such a great strategy, we will continue to improve the profitability of the merchandise.

Operator: And the next question comes from Alex Yao from JPMorgan.

Alex Yao: Congrats on solid quarter. Just want to follow up with this fancy economy development as you guys expand from online music distribution into the broader fans economy, including related merchandise, off-line performance, connectivity between artists and fans, et cetera, et cetera. Where do you see as the biggest opportunity? And what do you see as the biggest challenge, let’s say, on a 1 to 2 years’ view?

Liang Zhu: [Interpreted] Talking about the biggest opportunity, as Kar Shun has already mentioned. Fundamentally speaking, the company is still committed to building a comprehensive service platform, including bright content, the merchandise as well as the privilege. So we believe that fans economy is not separate. It’s already within our system. So for the company, what we truly care about is leveraging the merchandise as well as the air flight concept to continue to forge a deep bond between air flight and online platform. In that way, we will be able to continue to grow our subscriber base. This is something the company really counted on. So and with — is a comprehensive music entertainment strategy to our user. Regarding the challenge, and I think to some extent, we really need to make sure the size and development of the platform can help us to make sure we have integrated development for both content and privilege.

Another opportunity, I do notice that for the organized the concert for GDS stage in overseas countries and very likely to have actual stations in Southeast Asian markets. And at the same time, we also have the merchandise as a comprehensive service. This will help us to continue our international expansion.

Operator: The next question comes from Macquarie, Ellie Jiang.

Ellie Jiang: Congrats on the strong results. We are very encouraged to see all of these exciting developments and initiatives. So my question is really on our long-term positioning. Could management share how we foresee our longer-term revenue mix and how this could further evolve, especially it seems like we are expanding into more diversified kind of music offerings. And also taking a much longer-term view, how do you see TME positioned on the entire entertainment value chain?

Kar Shun Pang: [Interpreted] Regarding the overall positioning of the company has focused, we are still going to leverage our one body two wing strategy. That is the platform but the content ecosystem to continue to advance our strategy. As we have a very steady development for the live streaming music platform business, I do believe in the near future, the key source of the revenue and profit are coming from our online music business. Well, regarding the new advertisement business, it is also another highlight of our overall business. So in the longer run, I believe the advertisement revenue growth are even going to be kind of faster than the online music revenue growth. But indeed, those are all very important growth driver with our online music revenue.

Regarding the social entertainment, our revenue has already been stabilized. But in the near future, we will have new growth drivers. As Shirley and Ross has already introduced to you. Besides the content, we also have the performance, air flight concert fans economy, including the audience merchandise. Those will also continue to contribute revenue to the company with nice growth. So generally speaking, and for TME, we’re still going to take development for retention in the near future. Our key focus is to continue to develop the company based upon our existing model. Where at the same time, we were also going to keep our eye on the new business, for example, long-form audio as well as our international business expansion. I surely believe they will also provide actual acceleration for our existing business.

Operator: And the next question comes from Wei Xiong from UBS.

Wei Xiong: Congrats on the solid quarter. So earlier management mentioned the strong advertising revenue growth year-on-year, which was partly helped by a newly launched ad-based membership. So could management could share more detail about the revenue and subscriber contribution from this new membership and what’s the operational strategy to scale it up and maximize the revenue opportunity here without affecting the conversion to the standardized subscription plan?

Min Hu: [Interpreted] Actually, I think the fast growth of the advertisement business is coming from the online advertising rather than the ad-based membership growth.

Liang Zhu: [Interpreted] Therefore, in the near future, I think at least for the advertising business, incentivize-based advertisement is still going to be the key in the next few years. Different from the standardized freight advertising, the incentive-based advertisement is for older users. It is a content general incentive model to all users. So we are still confident in the future growth from the incentive-based advertisement business. Actually, with the existing user base of the invited [ pad ] business, about 2 months ago, we started a pilot on the advertising membership format. Just now I have already mentioned to ad-base members, the [ RX ] is relatively low, but it can provide a differentiated solution to different user groups.

So I think in the near future, for ad-based membership plus our standard member as well as SCIT is a 3-tier membership system. It can help us to continue to broaden the size of our subscribers and the user. So this is indeed a very important strategic operational directions for us to go. That’s the reason for the past 2 months, we actually attach great importance to the content of the platform but I have to say it’s still in the intensive stage. If there’s any nice progress in the near future, we will surely share it with all of you.

Millicent T.: I have some questions, then we’ll take the last 2. So Roger, on Parkway, your line is open.

Unknown Analyst: Congrats on a very solid quarter. So my question is on operating expenses. Of the last couple of quarters, our bottom line continued to outpace our top line growth, thanks to very successful cost reduction in terms of sales and marketing expenses and G&A expenses. Should we see this trend to continue for the rest of ’25 and ’26, given that we have identified so many growth opportunities management has talked about. How should we think about our operating leverage from this point on?

Min Hu: [Interpreted] Thank you very much. Thanks for your question. Our marketing expenses, especially the sales expense is actually being used through the promotion of the content as well as traffic gain for the channel. Well, for those, we were going to make adjustment according to the market competition. As of what we do is to continue our investment for the musical content promotion investment as well as the music channel promotion. Well, regarding the R&D expenses, we will always keep an eye on the new putting power management. to see how the new technology will bring the industrial innovation and the new opportunities. And we do foresee that compared with 2024 and the absolute of the operational expenses will grow compared with the baseline of 2024. But we will make sure we control the expenses growth would always be slower than the revenue growth. It will still leave enough growth for the net profit rate and the net profit.

Millicent T.: Okay. In the interest of time, we’ll take the last question from Maggie from CLSA.

Yifan Ye: Congrats on the very impressive set of result. My question goes back to online music subscription business. Can you share a bit more on the super VIP penetration. Is ARPU trend and the overall retention rate in this quarter and overall — we noticed that many of the drivers behind Super VIP penetration time-based or event-driven type of this. Just wondering how shall we think about the sustainability of such growth? What will be management’s top priority in driving a sustainable revenue growth in the superfan economy?

Min Hu: [Interpreted] Thank you very much. But first of all, I think there will be some misunderstanding here. I need to clear. And first of all, the key growth driver of SVIP ratio is not on time or not on any single event. It just happened to be when there’s a new sound or new app being released. There might be some marginal grows from this release.

Liang Zhu: [Interpreted] As already stated in our prepared remarks, we now have 50 million SVIP members and 124 million subscribers. And you can then calculate the SVIP penetration ratio. Where we’re also going to see the penetration ratio will continue to go up, including the ARPPU and retention, they are all ramping up and we very like and happy to see the growth trajectory is in line with our expectations. Well, actually, the key growth drivers are still coming from the premiere sound quality as well as the long-form audio content as well as the digital [indiscernible], where to some extent, we also have the regular members who has been converted into the SVIP. So the fundamental logic of SVIP growth are still coming from our well-consolidated business growth.

For example, let me just share a case with you. For example, the [indiscernible] new album and the sales of the base album with our SVIP is already hitting our expectation. We’re no longer to record it as a single album sales. So that’s was I think our SVIP will continue to grow in a very [ low ] manner. To the second part of the question regarding whether the fans economy business is going to be sustainable, as I have already mentioned, we did many preparations at least 6 months to 12 months before the event happened for the scheduling. In that way, we will be able to make sure we will be able to run the audience-related business in a more robust manner. One more additional comment to our team if there’s no major offline concept event happens, to maintain a rapid growth of the merchandise sales.

As you may see, we already have a steady growth on that. What we are committed to do is to make sure our fans economy revenue will continue to grow as we expected.

Millicent T.: Thank you, and thank you, everyone, for joining us today. If you have any further questions, please feel free to reach out to the IR team. This concludes today’s call, and thank you once again, and look forward to speaking to you next quarter. This concludes today’s call.

Liang Zhu: Thank you so much. Bye-bye.