Financial Data and Key Metrics Changes - Revenues for Q2 2020 were RMB 1,441 million, representing a 4% year-on-year increase and moderate sequential growth [22] - Daily Active Users (DAU) increased by 11% year-on-year, although Average Revenue Per User (ARPU) declined by 6% due to a weaker advertising market [22] - Non-GAAP operating loss narrowed to RMB 140.6 million, compared to RMB 506 million a year ago, with a non-GAAP operating loss margin of 9.8% [30] Business Line Data and Key Metrics Changes - Cost of revenues increased by 10.4% year-on-year to RMB 397 million, primarily due to rising content-related costs [25] - Sales and marketing expenses decreased by 29.6% year-on-year to RMB 922 million, representing 64% of net revenues, a significant improvement from 94.5% a year ago [26][27] - User acquisition expenses decreased by 44.7% year-on-year to RMB 436 million, reflecting optimized acquisition strategies [29] Market Data and Key Metrics Changes - The advertising market sentiment remains cautious due to the impact of the CCTV report, which temporarily removed the Qutoutiao app from major app stores [31][56] - The company expects Q3 2020 net revenues to be between RMB 1,130 million to RMB 1,150 million, reflecting the ongoing evaluation of the impact from the CCTV report [33] Company Strategy and Development Direction - The company aims to balance growth and profitability, focusing on sustainable growth while investing in technology and content [6][10] - A strategic cooperation with Midu Novels for short video series aims to leverage content and user traffic, enhancing monetization efficiency [11][12] - The company plans to shift its user base towards those attracted by content rather than loyalty points, aiming for a more engaged user mix [41][54] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the cautious approach due to the COVID-19 pandemic and the recent advertising compliance issues, emphasizing the importance of compliance with laws and regulations [6][31] - The company remains optimistic about recovery in Q4, expecting to achieve breakeven on a non-GAAP operating basis [34][48] - Management believes that content and recommendation algorithms are key pillars for future growth, with a focus on improving user engagement and experience [41][54] Other Important Information - The company has implemented measures to address compliance issues raised by the CCTV report, including stricter management of advertising content and enhancing user complaint channels [14][16] - The company is committed to building a better content ecosystem for all stakeholders on its platform, viewing recent challenges as opportunities for improvement [16] Q&A Session Summary Question: About the third quarter guidance and its impact on ARPU - Management explained that the cautious approach to advertising compliance and a balanced strategy between profitability and growth are reasons for the lower guidance, with a focus on ROI for marketing spending [39][40] Question: Strategy for user growth and cost reduction to achieve profitability - Management emphasized a disciplined spending approach, aiming for sustainable user growth while maintaining profitability, with a target of over 100 million DAUs [51][52] Question: Content cost trends and revenue sharing plans - Management confirmed that content costs are expected to increase as the company invests in high-quality content, with revenue sharing for news feeds remaining low and around 20% for Midu [60][61]
Qutoutiao(QTTOY) - 2020 Q2 - Earnings Call Transcript