(WB)
Q2 2022 Earnings-Transcript
Sandra Zhang - Investor Relations
Gaofei Wang - Chief Executive Officer
Fei Cao - Chief Financial Officer
Miranda Zhuang - Bank of America Securities - Analyst
Ashley Xu - Credit Suisse - Analyst
Operator
Good day, and thank you for standing by. Welcome to Weibo's Second Quarter 2022 Financial Results Call. [Operator Instructions] Please be advised that today's conference is being recorded.
And now I'd like to hand the conference over to Ms. Sandra Zhang from Weibo IR team. Thank you. Please go ahead.
Sandra Zhang - Investor Relations
Thank you, operator. Welcome to Weibo's second quarter 2022 earnings conference call. Joining me today are our Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on the Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the safe harbor statement in connection with today's conference call.
During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. We will assume 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 occurring as of the date hereof. Weibo assumes no obligation to update such information, except as required under applicable law.
Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which excludes 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 and losses, and other items that are not expected to result in future cash payments or are non-recurring in nature or 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's prepared remarks, we will open up the lines for a brief Q&A session.
With this, I would like to turn the call over to our CEO, Gaofei Wang.
Gaofei Wang - Chief Executive Officer
[Foreign Speech] Thank you. Hello, everyone, and welcome to Weibo's second quarter 2022 earnings conference call.
[Foreign Speech] On today's call, I will share with you highlights in Weibo's user product monetization in the second quarter of 2022.
[Foreign Speech] On the user front, Weibo's MAU reached 582 million, and the average daily users reached 252 million in June 2022, adding approximately 16 million and 7 million users year-over-year, respectively. In June, 95% of Weibo's MAUs came from mobile.
[Foreign Speech] Our monetization in the second quarter, the COVID resurgence together with lockdown measures in certain areas of China adversely affected the ad placement by clients. And most of our clients postponed or cut their marketing margins since the beginning of the second quarter.
In June, with Shanghai and Beijing ended lockdown step by step, this is gradually came back into operation. As the June '18 e-commerce event key cost, advertisers gradually resumed their online marketing campaigns.
In this quarter, our total revenues reached of US$450.2 million, a decrease of 22% year-over-year or 19% year-over-year on a constant currency basis. Our ad revenues reached US$385.6 million, a decrease of 23% year-over-year and 95% of our ad revenues came from mobile.
This quarter, our non-GAAP operating income reached US$145.3 million, representing a non-GAAP operating margin of 32%, up from 29% in the prior quarter.
[Foreign Speech] Next, let me share with you our progress made in product monetization in the second quarter. On product front, given the current market conditions, we continue to focus on enhancing Weibo's competitiveness to improve operating efficiency, maintain user scale and drive user engagement.
[Foreign Speech] On channel front, in the second quarter, we continue to implement optimization strategies on channel investment and focus on improving channel ROI. In the first half of this year, our user acquisition costs decreased by about one third from a year ago, as we continue to reduce budget for low ROI channels and deepen our cooperation with high-quality channels and increase user acquisition efficiency.
With the strategic channel partners, we have been innovating our cooperation on product and content front in order to reach more users with Weibo's hot trend, social content and services and to promote Weibo as a essential application in their ecosystem.
In the first half of this year, we stepped up our cooperation with channel partners based on hot trends, making Weibo hot trends available in more key portals. These initiatives significantly increased user acquisition efficiency and strengthen the influence of Weibo's hot trend. Channel users related to hot trends in June this year increased by more than 50% from last December.
In addition, we have been actively trying more corporation approaches with channel partners, including our monetization to jointly improve user scale, brand influence and monetization for both sides. These attempts shall deliver notable results in the second half of the year and further improve overall ROI channel investment.
[Foreign Speech] On social attributes, we continue to enhance the social features of our products and increase the scale and engagement of our core users on relationship-based feed, while maintaining stable traffic. We put more emphasis on optimizing the traffic mix of relationship-based feeds to allow more exposure of content that can drive distribution and interaction.
To this end, on the one hand, we linked towards the distribution of high-quality content generated by KOLs. On the other hand, in the communities dominated by high-quality UGC. We increased user engagement via optimizing algorithms to distribute more community nodes and content in the relationship-based feed. We're encouraging users to consume our community content establish relationships and make interactions more efficiently in the feed. Such adjustment on the traffic mix has shown notable progress.
In June, the traffic of the relationship basically maintained steady growth from March with user interaction increased by more than 10% with improved social stickiness.
[Foreign Speech] On the community products, we continue to enhance super topic products and its content distribution mechanism in the main feed. In June, we upgraded product with super topic as an independent tab at the bottom of the main page of Weibo to make users need to make consumption and build relationship based on interest and locations.
In June, the users deal, the number of users group posted and the number of the tenants of the community remained double-digit growth from March this year. In the current market environment, the increase in user engagement in the community further enhances users stickiness on Weibo. It has also gradually improved the distribution system of relationship-based feed, which benefit the long-term healthy development of our social products and the platform itself.
[Foreign Speech] On the content front, this year, we focused on content and accounts of key verticals and improve our operation operating efficiency. In the first half of this year, we increased resources and traffic support to key accounts that can similarly user engagement and interaction on the platform.
In general, it made clear progress, the traffic from these verticals and key accounts grew double digits from last December. For example, in the gaming vertical, we focus on e-sports in the first half of this year. We definitely impact cooperation with e-sports events and club. Our operation fully covered influential events in China and abroad, as well as domestic club with over 90% of players verified their account on Weibo. Our investment around the content ecosystem for gaming and e-sports vertical further improved our monetization capability in the gaming and e-sports verticals.
In the sports vertical, after the winter Olympics, we continue to focus on operation to encourage engagement of these top athletes on Weibo. The traffic and interaction of these top athletes on Weibo more than doubled from last December, which also promoted their monetization capability
On the video account front, the number of video accounts and its viewership continue to grow, benefiting from platform social attributes, more traffic has shifted to their high-quality video account, resulting in a double-digit growth in video views in June compared to last December. We are glad that our initiatives have made way for a mass test platform for top users to operate in the current competitive landscape for social platforms.
[Foreign Speech] Moving on to monetization. Despite a challenging market environment in the second quarter, we saw a positive signal of incentive policies on the macro economy being implemented, such as China's policy support towards domestic new energy vehicles.
In the meantime, we saw client new placement trends driven by pandemic. For example, brand advertisers increased ad budget in e-commerce and performance-based ads. This new industry trends and marketing models create new opportunity for us to obtain budget.
As such, in the second half of this year, we focused on beefing up the competitive edge of our brands performance ad offerings in key verticals. To elaborate, we will step up our efforts to address these trends and make [Indecipherable] both on the technology and sales front, aiming to further integrate brand trust performance ads with content operations to device more mature marketing solution company, which enable us to maintain our core competitiveness and capture higher ad value share amid intense market competition.
[Foreign Speech] On industry marketing. In the second quarter, a series of lockdown and prevention in Shanghai and Beijing significantly disrupt production, logistics sales off-line activities, et cetera. which directly weighed on the end market, especially on e-commerce and the cosmetic industry.
During the regional ad launch of the June Beijing's e-commerce event, this year's climb significantly reduced the ad budget. As for auto industry, despite COVID headwinds and industry-wide problems such as the supply chain the new energy vehicle industry gradually resumed growth benefiting from policy support. In response, we offered a more integrated marketing plan of the online release.
For example, upon launching the Li Auto Airline, we organized KOLs and media to generate and operate topics on Weibo from prelaunch to release and then impact interpretation stage, while amplifying the organic distribution effect with hot trends.
Coupled with brand performance ads in just 36 hours costs related to airlines were viewed 1.2 billion times and discussed 800,000 time. The success story with Li Auto demonstrates again we work in comparable capability of content marketing and blockbuster creation to more industries.
In addition to the traditional brand plus performance models, Weibo is capable of recognizing media and KOLs to produce topics and content and combining hot events to amplify topic dissemination and discussion, enabling customers to build brand momentum beyond the industry.
After the airline release, more digital auto, FMCG and luxury brands chose to launch their product on Weibo. They significantly increased their original budget for Weibo recognizing the marketing effect of the new product launch.
In addition, the game related - in addition, the game-related industry maintained rapid growth in the second quarter as we kept on expanding the marketing model of integrated brand cost performance ads with constant operation in the past 2 years, which reinforce Weibo's capability to capture ad budget.
[Foreign Speech] Entering into the third quarter, advertisers still seem to be conservative on their ad budget in general. On the upside, the auto and luxury verticals have gradually exhibited recovery trends and return to the growth strategy in the industry development and thus branding campaigns, with ease of the pandemic and the policy support that resulted in pickup in consumption.
Currently, we are encouraged to see a notable sequential ad growth and capture higher ad value share in these two sectors. The average was differentiated integrated content marketing offerings that resonate really in the market. Besides, on the gaming sector, despite that the gaming license approval has not fully recovered, we still maintain solid market share of the game ad budget.
On the flip side, customers in the e-commerce and daily care and cosmetic sectors continue to be cautious in ad sentiment, meaning that it still takes time for a full recovery. For instance, during the COVID resurgence, customer in the cosmetic and personal care industry have shipped their ad budgets toward sales promotion to fill their existing inventories amid challenges in the production and logistics.
In light of that trend, we will step up our efforts to make breakthrough on the ad technology and sales execution front accordingly to elaborate to fulfill sales promotion needs for this industry and customers. We will focus on pushing forward with cooperation between certain e-commerce platforms, coupled with investment in ad products in order to optimize customers' e-commerce conversion results and thus capture higher performance-based ad dollars.
For personal care and cosmetic category, we have witnessed demand pickup from prior quarters, but still face challenges on a year-over-year comparison due to the tough comp of last year with Olympic-related budget.
And meanwhile, we will continue to enrich our content marketing scenarios, expanding the previous entertainment focus on to more diversified elements such as media content, policy-based, et cetera. Our differentiated ad playbook fixing topic operation and across Internet influence enable us elevate our capability to capture ad budgets, serving as the cornerstone in further strengthening our competitiveness in the market.
[Foreign Speech] Before moving to financials, let me briefly share some color on Weibo's initiatives and achievements in the cost and expense optimization front. As we mentioned in the last earnings call, this year, we will continue to optimize cost expenses and improve operating efficiency, achieving solid results in the first half of this year.
In the second quarter, despite the disruption from COVID resurgence weighed on the top line, our non-GAAP operating margin reached 32%, which remained at a relatively decent level in the industry with non-GAAP sales and marketing expenses decreasing 27% year-over-year and its percentage of revenue decreasing 2% versus the same period last year.
That said, we'd like to highlight that the cost and expense control is now simply cutting down orders, but rather allocating more resources to our advantages areas against the backdrop of the current macroeconomic situation and the competitive landscape.
For instance, we have beefed up our cooperation with strategic channels, evolving in more users acquired with high ARPU. On product operation, we deepen partnerships with strategic content partners, solidifying our strength around hot events and vertical areas such as e-sports and sports.
While our monetization, we set up content marketing service and investments to extend our leading edge. And meanwhile, we cut that investments in non-advantage fields that have certain underperforming channels, content in non-core vertical fields, as well as R&D expenses in non-core products. We will keep up with this efficiency initiative in the second half of the year, building Weibo's long-term competitiveness.
[Foreign Speech] With that, let me turn the call over to Fei Cao for financial review.
Fei Cao - Chief Financial Officer
Thank you, Gaofei, and hello, everyone. Welcome to Weibo's second quarter 2022 earnings conference call. Let's start with user metrics. In June 2022, Weibo's MAUs represent 582 million, representing a net addition of approximately 16 million users. Average DAUs reached 252 million, representing a net addition of approximately 7 million users year-over-year. This was achieved through our disciplined channel marketing strategy demonstrating Weibo's core value proposition to users.
Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP result. All monetary amounts are in U.S. dollar terms and all the comparisons are on a year-on-year basis, unless otherwise noted.
Now let me walk you through our financial highlights for the second quarter of 2022. Weibo's second quarter 2022 net revenues were $415.2 million, a decrease of 22% and or 19% on a constant currency basis.
Operating income was $145.3 million, representing operating margin of 32%. Net income attributable to Weibo reached $109.7 million, representing a net margin of 24%. Diluted EPS was $0.46 compared to $0.79 last year.
Now let me give you more color on revenues. Weibo's advertising and marketing revenues for the second quarter 2022 were to $385.6 million, a decrease of 23%. Mobile ad revenue was $364.5 million, contributing approximately 95% of total ad revenues.
The second quarter of 2022 post the challenging as we expected with the [Indecipherable] Omicron outbreak disrupting economic activities, resulting in broad-based headwinds across the overall advertising market for the second quarter 2022. Our leading verticals in terms of ad revenue contributions were FMCG, first lead products and gaming.
In terms of growth, gaming, food and beverage and electronic vehicle sector continued to trend up against the tough market conditions. Benefiting from relatively resilient ad demand from this sector, we are pleased to capture incremental ad value share from plans in these sector, leveraging the wide adoption, our integrated social marketing solutions by customers and our solid sales execution.
On the flip side, discretionary conception categories, such as apparel and cosmetics underperformed due to logistic disruption and weak consumption sentiment. E-commerce platform [Indecipherable] also turned increasingly conservative in their marketing spend amid lukewarm June 18 sales and regulatory challenges.
From the ad product perspective, promoting fees continued to be the largest part, followed by social display ad and search and topic ad offerings. As in second half 2022, we have seen signs of advertising market bottoming out in the second quarter and a gradual recovery on a sequential basis.
However, in light of COVID resurgence and macroeconomic uncertainties, the recovery trend in the second half could be gradual and be more drawn out [Indecipherable] cycle post-COVID in 2020, considering the more fluid COVID situations and wider regions impacted.
Looking forward, we have lots of experience in navigating through challenging market environment and coming out stronger from the downturn. We remain confident in our long-term monetization opportunities. That's our unique value proposition and a diversified content ecosystem will unlock.
Ad revenues from Alibaba for the second quarter decreased 41% to $23.7 million, primarily attributable to its own conservative marketing strategies and cost optimization initiatives amid weak consumption and lockdowns as mentioned earlier.
Value-added service, VAS revenues was $64.6 million in the second quarter, a decrease of 10%. The decrease of VAS revenues was mainly due to less revenue contribution from membership service and game-related services.
Turning to cost and expenses. Total cost and expenses for the second quarter were $304.9 million, a decrease of 13%, demonstrating our initiatives to counter cost and expenses while enhancing operating efficiency. The decrease was primarily due to a 27% reduction in sales and marketing expenses, received the channel investments and reduced the off-line activities.
Operating income in the second quarter was $145.3 million, representing operating margin of 32%, exceeding our expectations as it factors in operating deleverage, [Indecipherable] business and our initiatives for expense optimization.
Turning to income tax and the GAAP measure. Income tax expense for the second quarter was $17.5 million compared to $36.9 million last year. Net income attributable to Weibo in the second quarter was $109.7 million, representing a net margin of 24% compared to 32% last year.
Turning to our balance sheet and cash flow items. As of June 30, 2022, Weibo cash, cash equivalents and short-term investments totaled $3 billion compared to $3.1 billion as of December 31, 2021. In the second quarter of 2022, cash provided by our premier activities was $83 million. Capital expenditures totaled $14.8 million, and depreciation and amortization expenses amounted to $14.1 million.
Before turning to the Q&A session, I would like to provide an update on our ESG initiatives. In August, we released our first ESG report, which details our policies, initiatives and performance in key ESG areas for fiscal year 2021. The ESG practices described in the report demonstrate our long-term commitment to sustainable development and social responsibility with the vision of making the world a better place with the power of Weibo. You may visit our IR website to obtain more information of our ESG disclosure.
With that, let me now turn the call over to the operator for the Q&A session. Thank you.
Operator
Thank you. [Operator Instructions] Our first question comes from the line of Miranda Zhuang from Bank of America Securities. Please ask your question.
Miranda Zhuang - Bank of America Securities - Analyst
Thank you for taking my questions. My question is about the advertising. Can you share more color on outlook for the ad spend in the second half and the measures that you're taking to address the new trend and demand in the brand advertisers that you discussed before and to get more spend amid this weak macro and COVID uncertainties? Thanks.
Gaofei Wang - Chief Executive Officer
[Foreign Speech] So in general, if we look at the second half of the year and if we look at the revenue structure of Weibo, we see that two thirds of our revenue is related to consumption-related industries, for example, FMCG or cell phones or consumer electronics and also e-commerce. So those things are highly related to the recovery trend of the macro economy.
[Foreign Speech] So currently, I think for - part of the industries, there are already some stimulus policies. For example, the NAV industry and also, there have been some issuance of the consumption coupons that brings us some stimulation to the macro economy. But it takes time for the policies to pass on to the economy for the economy to recover, and then it gets reflected in the advertising industry.
But we still think that the trend of the consumption upgrade will continue. And also, the habits and behavior of the consumers are already shifting from offline to online, and that brings some structural benefit to the advertising industry.
For example, some of like the automotive industry and some other industries are already shifting their strategies, and they are already putting some of their product releases online, and those are very favorable for our industry.
[Foreign Speech] So in the mid-term and short term, of course, the economic recovery trend is real, but the speed of recovery for different industries are quite different.
[Foreign Speech] So actually, since the COVID is here. So we saw that for some of the brands and for some of the advertisers, actually, they are shifting their budget from offline to online. For example, the automotive industry, luxury industry, as well as the FMCG industry. We saw very obvious trends from those industries. And compared to 2020 when a lot of cell phone brands are actually shifting their product releases, especially the new product releases online, the trend is quite similar.
On the other hand, for some of the brands, actually, they are actually investing in certain areas like for Weibo, we're very good at taking a media and also gathering the stars and KOLs and try to work out and bring up the social chatter on certain topics. And in this area compared to the traditional media, we definitely have the advantage over them. So in the second half of the year, we will definitely focus on that advantage of ours.
[Foreign Speech] Okay. So for the cosmetics industry, due to the COVID situation in Q2 and some smaller outbreaks as COVID in Q3 for the cosmetics and e-commerce industry, actually, they're spending more budget on their promotions and also some other marketing activities to reduce their inventory.
So in that area of marketing, actually, this is not our strong suit. But we still have the advantage in our users and our traffic. And those two things are still steadily growing for us. So we do have the advantage in the traffic inventory, as well as the pricing of our traffic.
So we want to optimize some of our algorithms to improve our outcome and the performance-based ads. And we also would like to help in that area. But for that area of the marketing approaches, actually, it may benefit us in the mid-term or long term, but it will not benefit that much for us in the short term.
[Foreign Speech] And in the latter of the year, our strategies are pretty clear. So in the e-commerce performance-based ads and marketing, we would like to improve the efficiency and also improve the algorithm to improve the conversion rate for the customers. But of course, that's not our key in the second half. Our key in the second half is still to improve our content marketing, including the brands plus - the brand performance-based ads to improve our capability in that area, especially for the brands to release the products.
And in that area, we hope that we can help our customers because we have clear advantage in bringing up the social chatter on certain topics. And also, we have strong capability to break the circle to really let some of the topics and accounts go viral, and we would like to improve in that area.
[Foreign Speech] So actually, for the latter half of the year for Weibo, we see several aspects for the first part, in the latter half of the year, there are still going to be some new product releases for the industries with normal sales, for example, the cell phone industry, the [Indecipherable] industry, especially represent the automotive ministry.
In Q3, there will be very dense product releases. So for our - since we have the advantage in content marketing with our brand plus performance-based ads, we will still see very good growth and may be higher than the industry average.
But on the other hand, there are some other industries like FMCG or e-commerce in the latter half of the year due to the economic situation, they will still face some pressure, and they want to reduce some of their inventory and they want to product some promotions and campaigns. So even though we still have very good inventory in our information free-ads and in the - but still, in order to keep our long-term momentum and also we need to take a look at the taste of our users. So we don't want the users to see the discount everywhere. So we would look at the long tail effect, but still, we will not sacrifice our core scenario, especially for [Technical Issues] and apparel industry. For those industries, we still may see a slower recovery.
Miranda Zhuang - Bank of America Securities - Analyst
[Foreign Speech] So I think that's it. Thank you.
Operator
Thank you. Our next question comes from the line of Ashley Xu from Credit Suisse. Please ask your question, Ashley.
Ashley Xu - Credit Suisse - Analyst
[Foreign Speech] My question is related to our efficiency optimization and cost control. What types of measures would be in place for second half? And what's the financial impact? Thank you.
Gaofei Wang - Chief Executive Officer
[Foreign Speech] So for Q2, actually, as I have already mentioned, our profit margin was around 32%, which is similar or even 3% higher than that of Q1. And actually, starting from the beginning of the year, we already foresaw some of the impact from the macro economy. It was just that we didn't expect the impact of the COVID outbreak.
So back then, we already started to make some approaches, and actually, our marketing fee actually went down by 27% year-on-year and went down by 9% compared to the last quarter. But still, at the same time, the user acquisition cost for our customers went down by one third.
So with similar user acquisition scale, the quality of the user vision actually got better. And also for some of our non-core businesses with that cash flow, we tried to peel them off. And at the same time, we continued to invest in our core business scenarios.
[Foreign Speech] So actually, we see that the optimization of our operational efficiency is not just from the financial perspective. Actually, we do the things based on the judgment of the market competition landscape, as well as the industry trend.
So if we were to scientifically look at the COVID situation, some may say that the lifting of the control policies may bring benefit to the industry. But in the mid-term and short-term, we think that, that kind of judgment may be a little too optimistic because the outcome was not that optimistic.
Actually, for our cost reduction and efficiency improvement approaches, actually, we were focusing on two things. One is to improve our operating efficiency. The other is to bring up our core competitive edge. So it may be reflected in our approaches to cut the cost and improve the efficiency. But actually, our two targets are to improve our operational efficiency, as well as our core competitive edge.
[Foreign Speech] So actually, I can give two examples about the operation efficiency improvement in respect of our approaches to cut the cost and improve our efficiency. So for our China strategy, actually, as I said before, in marketing expense and channel cost, we are reduced by 20%. But actually, at the same time, we improved the channel ROI by a lot. So that means for RMB 1 spent on the users, how much time it takes for us to get that cost return.
So the normal payback time for us in the past was 1 year because that the cycle for the users is 1.5 years. But now since for the key channels, we actually invested even more in the key channels and we conducted some strategic cooperation with very important channels as well. So now actually, the payback time is just 6 months. And for some of the very special channels like for cell phone, the payback time is just 3 months.
So actually, the efficiency is much better. And actually, it's not just about improving that efficiency. Actually, we are looking at the mid and long term of the industry. Because even if the industry go bad, we wouldn't have to worry about negative ROI or in other words, even if the economy gets worse, we won't have to give up certain channels because of the bad ROI because we already have very short payback time.
And for other apps, actually, they cannot get the - normally, they cannot get the cost back within a user cycle. So that means we have the advantage. And afterwards, if the economy gets better then that means for us, we can easily increase our user base with a very good quality user acquisition, and that means we can even improve our margin even better.
[Foreign Speech] And at the same time, we also have some other approaches in our core competitive edge. For example, for the verticals that we have advantages in, for example, the gaming industry, e-sports, sports and the news and information, actually we are cooperating much better with the official media platforms, and we took advantage of our content marketing so that we can offer very mutually complementary solutions to those media platforms. So we actually multiplied their income several times compared to the previous year.
And at the same time, the cooperation also benefited us because that adds to our advantage in our content marketing. So compared to other platforms, we are more differentiated and we get the endorsement of the official platforms. So that adds to our core competitive edge. And in the latter half of the year, we will definitely continue to invest more in those areas.
[Foreign Speech] So in the latter half of the year, in respect of our core competitive edge, actually, we are using the cost reductions to help our teams, especially the R&D teams to focus on areas where we have - where we can improve the efficiency and where we have the advantage, for example, we can generate more cooperations with more platforms and also we can improve our market - content marketing.
So in respect of our margins, we are trying to maintain a solid level to the base credit line and the [Technical Issues]. And in the long term, we are always aiming at a higher gross margin level compared to our industry peers, and we are trying very hard to maintain high quality and high efficiency growth, as well as a very steady gross margin and cash levels. So those things are very important in a market conditions such as right now. So - and with all those approaches, we aim to have more flexibility financially.
Operator
All right. Thank you very much for your questions. We have now reached the end of the question-and-answer session. I'll now turn the conference back to Mr. Sandra Zhang for closing remarks.
Sandra Zhang - Investor Relations
Thanks, operator, for the conference call today. Thank you for joining us. We'll see you next quarter.
Operator