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Operator: 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. [Operator Instructions] 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.

Sandra Zhang: 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 occurring as 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 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.

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 MAU’s reached 591 million and average DAUs reached 261 million. In the first quarter of 2025, Weibo’s total revenues in the first quarter reached $396.9, flat year-over-year or up 1% year-over-year on 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 user, remain our leading position in hot trend and 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 increase 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 feed, in the first quarter, we focused on enhancing user experience on 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 feed 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 attract more users to consume and interact in super topics. As a result, the interaction efficiency of the relationship-based feed, which is measured by the 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 entertainment sector, while continuing to invest in vertical content and video content ecosystem. 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 celebrity fan ecosystem, holiday themed hot trend campaigns and cross-vertical operation and integrated hot topics, entertainment content and vertical content to drive users’ consumption and interactions around spring festival-related content.

On the Chinese New Year’s Eve, nearly 200 celebrities and KOLs discussed around 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 Weibo platform, representing a 50% increase year-over-year. Weibo has achieved a 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 increase 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, robotic firms and intelligent agent developers have also opened account on Weibo and actively interpreted the tech-trend 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 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 will suggest 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 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’s policies to boost domestic demand and consumption are gradually taking effect, advertiser budget for 2025 remain 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 the new product launch, major events and megatrends, leveraging reinforced the core strength in content and product launch marketing, we seek 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 a number of 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 accelerate 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 the NEV in the 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 a solid growth, tapping into the key market window during the spring festival.

E-commerce platform, in particular, delivered robust growth in the first quarter. With e-commerce becoming a significant driver of domestic consumption and e-commerce platform improved operating efficiency, we hope to see higher e-commerce ad spend on Weibo this year. We will beef up our efforts to seize their high certainty opportunities by partnering with clients around the trending topics and key e-commerce shopping festivals, and thus expand marketing reach and capture incremental budgets. As for the food and beverage sector, Weibo’s celebrity-driven and new product marketing continue to gain traction among 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 a celebrity endorsement or new product launch needs, they are choosing Weibo for integrated brand plus content marketing campaigns. On the flip side, the handset manufacturing sector saw a year-over-year decline in the first quarter, primarily due to shift to product launch time lines 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 the new product marketing and the 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 the number of new and blockbuster games being launched, starting from mid of 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 the overall ad revenue has been diminishing. For both the online game and the beauty and personal care industries, we focus on refining our sales strategy according to market conditions and leveraging our competitive advantages.

And 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 a 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 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 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 had 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 and deepen engagement, as well as reinforce our monetization capabilities.

With that, let me turn the call over to Fei Cao for a financial review.

Fei Cao: 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 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 would 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 increase of 1% on a constant currency basis. Operating income was $129.5 million, representing 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 were $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 was the key contributors. 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 digit 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 lack of blockbuster release this quarter. The handset manufacturers moderated their ad spend with us this quarter, mainly due to seasonal slowdown in the product launch pace of mid- to high-end handset devices. These underperforming industry with a meaningful top line recovery. The ad product, promoted feed ad was the largest, followed by social display and topic and search. Ad revenues from Alibaba booked a 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 cost and expenses. Total costs and expenses for the first quarter were $267.4 million, a decrease of 1%, with decrease in sales and marketing expenses, offset by increase in cost of revenues. Operating income in the first quarter was $129.5 million, an increase of 3%, representing 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 resulted from 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 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. With that, let me now turn the call over to the operator for the Q&A session.

Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Alicia Yap from Citigroup.

Alicia Yap: I wanted to ask about overall how you think about your search progressions. So Weibo Zhisou has actually been doing quite well. So if you can give us a little bit your future strategy or how you think about the product, will that still remain within the Weibo to help engage user? Or would that be actually potentially become a separate product down the road? And then second, on the AI monetization. So just wondering how after integrating DeepSeek and all other large language model, how our product — advertising product has improved in terms of, for example, the ad format or the eCPM or even how advertisers are able to put more targeted ads. So any colors on that would be helpful.

Gaofei Wang: 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. Second one is about the relationship between AI and also the advertisements. The first question is that in Q1, as we have already stated that last year, based on the open source models, we’ve been already providing the preliminary model or AI search to the users. But after the spring festival in China, we’ve been seeing the launch of DeepSeek. So we’ve been integrating DeepSeek into our whole facility, and do see a very good improvement of our final effectiveness. So in March, we’ve been — also, we’ve been launching this particular DeepSeek-based AI search to the users and seen a very good boost of the number of MAUs. For instance, in March, the number has been reaching over 30 million, and this number will be also growing in April as well.

So we believe that in the future, the number of DAUs and also the volume of query will be improving because of this result. Okay. Second point I’d like to say is that now according to the users’ usage and also the feedback from the users, we’ve been seeing a very good result, especially in the field of the news and also entertainment-related content. We’ve been using the intelligent search or Zhisou; in this particular area, we’ve seen a lot of usage of the users. But in terms of the general purpose search, still, there is a certain kind of improvement. However, this particular volume increasement was not as good as that from the news area, for instance. It is probably because of the natural positioning or the natural feature of Weibo, which is particularly focused on entertainment and news-related topics.

But of course, in terms of the user consumption, we do see about 5% of the increase in terms of the per capita search volume increase, and it does improve a lot on the per capita query as well as the user retention. So we are not starting officially the commercialization approach, and also many users are asking us about when we’re going to commercialize this. Still, we think that even if this is not commercialized fully yet, we can see a very good support and boost to our revenues of commercialization and monetization. For instance, the — as I have said, the per capita query volume increase because of this, and also we do see a very good differentiated competitive wedges that we’ve been building or we have been further enhancing in the field of hot topics, news-related, and entertainment-related content search.

So in terms of whether or not we have a plan to make this intelligent search an independent product, actually, we don’t have this plan to make it independent. However, still, this has further maintained our advantage of the intelligent search in the area of hot topics, the news-related content and entertainment-related content. For instance, we have been finding a very good effect of bringing users from other end by collaborating with some of our partners. For instance, they’ve been aware of that kind of results. Previously, we’ve been working with a lot of headset makers here in China, and do have preinstalled results of the hot search ranking list. And part of those contents are actually generated or directly quoted from Weibo’s intelligent search results.

So in the future, probably we can see more results related to this. And also if in the future, all kinds of research results are related to news, we are going to encourage more partners of quoting the intelligent search results from Weibo. And then from that sense, we can make the users click on that hot search ranking results, and this will direct the users to the terminal of Weibo. So this is also another very good way of bringing new users onto the Weibo platform. Also, as for the AI for the 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 and early stage. So in the second quarter and also in the near future, we are going to see new user experience of using this intelligent search function of Weibo.

For instance, in February and March, it was pretty much based on the Q&A format, generating text a majority of the time for those questions that the users were searching upon. But of course, we do have a trial on some of the new multimedia kind of generated — multimedia results showing in the output results, which has been very much successful. So the overall conclusion is that this year, in 2025, we’re going to emphasize more on the investment dedicated to the intelligent search product, so that we are going to further boost the number of users and also the activity of the users across the whole pipeline of our products, so that we can really build much better differentiated competitive edges in the future. As for the second question, the relationship between AI and to what extent can we have a better advertisement-related revenue?

Actually, we did see a very good facilitation to the boost of the advertisement revenue related to information-based feed. And also, we did see a very good improvement of the CTR rate by about 10% or so. But still for the other indicators, we did have only a single-digit improvement only. So in terms of the effectiveness of the AI on the advertising revenues, especially the information feed-related revenue increase, we had improvement, but you could see that because overall speaking, majority of our advertisements are effective based advertisements. So in terms of the overall advertising revenue improvement, still the facilitation and also the boosting effect from the AI technology is still pretty limited.

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

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

Gaofei Wang: Okay. So as for the overall trend, I think that we’ve been already elucidated on this topic before. And in terms of the future expectations, so our expectations for Q2 for this particular front is 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 on the automotive industry and also the vertical of headsets. And we are expecting a very good performance from a vertical of e-commerce as well in Q2. Just now we have said that in Q2, we expect a very good performance from vertical of headset and automotive. But still in Q1, we had a little bit decrease of the revenue from vertical of the headset, because of the adjustment of marketing cycles of some of the manufacturers.

But this industry vertical of headset will be rebounded to a better track of growth in Q2. And another very promising vertical in Q2 and near future will be healthcare related, because of a huge increase of the demand and because of the aging society nowadays and also a further boosting of the demand on cosmetic surgery, et cetera. Also last year, for some of the challenged verticals, we did see a very good improvement in Q1 in terms of the overall revenue contribution on a quarter-by-quarter basis. But still, we do see a lot of stress around those areas. And for some of the overseas brands, we had a decrease of revenue from them, but still this was offset by some of the domestic brands increase. And another very challenging industry is the gaming industry.

We are facing a lot of challenges still in the next quarter or so. We can see that the budget allocated by Tencent and NetEase has been reduced. And especially you could see that in the financial statement proposed by the NetEase in the recent sense. Also, of course, how to mitigate that impact, we are going to fully leverage the AI advertisements or the performance-based ad increase, and especially some of the Internet-based app-related ads to have an offset of the challenge from the gaming industry. In terms of our ad products, so our core competitive edges is that still in the users’ mindset, we’ve been already regarded as a platform focusing on some new product marketing and content-based marketing. So in the past two years of time, we did a very good job in terms of operation and also focus on this competitive advantage, especially while the brands are making the launches of the new products.

So in the future, we’re going to further seize the opportunities from the brand new product launch and those hot topics, for instance. And this is the very core part of our competitive edge, and we are going to be consistent in doing so and increasing our investment into this. So overall speaking, by doing this and focusing on the products of this kind, we are going to pretty much stabilize the demand and try to get most part of the budget from those brands. Also in terms of the performance-based ad, after 2023, we’ve been investing a lot into this area, did see a very good growth coming back in the second half of last year as well. So this is point number one. And point number two is that still for some of the information-based feed pricing-related ad, we’ll be focusing on this as well.

And by doing the AI ad and some of the other related technologies and products, we are able to increase the awareness among the users and our existing customers, and try to get new ones into the whole pool, so that the revenue from this part could be enhanced because of these efforts.

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

Sandra Zhang: Thank you, operator, and thank you, all, for joining us. We’ll see you next quarter.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.