Qutoutiao Inc. Reports First Quarter 2021 Unaudited Financial Results

June 1, 2021 at 7:00 AM EDT

SHANGHAI, China, June 01, 2021 (GLOBE NEWSWIRE) -- Qutoutiao Inc. (“Qutoutiao”, the “Company” or “We”) (NASDAQ: QTT), a leading operator of mobile content platforms in China, today announced its unaudited financial results in the first quarter ended March 31, 2021.

First Quarter 2021 Highlights

  • Net revenues decreased 8.6% year-over-year to RMB1,291.0 million (US$197.0 million), while slightly decreased by 0.9% quarter-over-quarter from RMB1,302.4 million in the previous quarter, and was at the high end of the Company’s guided range.
  • Net loss was RMB149.0 million (US$22.7 million), compared to net loss of RMB531.8 million in the first quarter of 2020 and net loss of RMB81.8 million in the fourth quarter of 2020. Net loss margin was 11.5%, compared to 37.7% in the first quarter of 2020 and 6.3% in the fourth quarter of 2020.
  • Non-GAAP net loss1was RMB55.4 million (US$8.5 million), compared to non-GAAP net loss of RMB388.1 million in the first quarter of 2020 and non-GAAP net profit of RMB50.8 million in the fourth quarter of 2020. Non-GAAP net loss margin was 4.3%, compared to non-GAAP net loss margin of 27.5% in the first quarter of 2020 and non-GAAP profit margin of 3.9% in the fourth quarter of 2020.
  • Combined average MAUs2 were 133.3 million, representing a decrease of 3.6% from 138.3 million in the first quarter of 2020; as well as an increase of 6.9% from 124.7 million in the previous quarter.
  • Combined average DAUs3 were 31.7 million, representing a decrease of 30.6% from 45.6 million in the first quarter of 2020; as well as a slight decrease of 1.9% from 32.3 million in the previous quarter.
  • Average daily time spent per DAU was 47.1 minutes, compared to 62.4 minutes in the first quarter of 2020 and 50.3 minutes in the previous quarter.

Mr. Eric Siliang Tan, Chairman and Chief Executive Officer of Qutoutiao, commented, "While we continue to maintain a balance between growth and profitability, we have stepped up our investments in driving Midu Novels forward following our latest financing round and have been pleased with the pace of progress so far this year. We expect the overall business to be stable with improving underlying profitability going forward."

First Quarter 2021 Financial Results

Net revenues in the first quarter of 2021 were RMB1,291.0 million (US$197.0 million), a decrease of 8.6% from RMB1,411.8 million in the first quarter of 2020, and a decrease of 0.9% from RMB1,302.4 million in the previous quarter.

Advertising and marketing revenues were RMB1,228.0 million (US$187.4 million) in the first quarter of 2021, a decrease of 10.0% from RMB1,364.0 million in the first quarter of 2020, primarily due to the Company’s strategy to prioritise optimizing operational efficiency and financial health. The Company has paid closer attention to the quality and the profile of its user base, rather than the absolute size or growth of it. As a result, the Company has narrowed its net losses and reduced its operating cash outflow despite the smaller user base compared with the same period in the prior year.

Other revenues were RMB62.9 million (US$9.6 million) in the first quarter of 2021, an increase of 31.7% from RMB47.8 million in the first quarter of 2020. The increase was primarily due to the increase in revenues from live-streaming and other new business initiatives.

Cost of revenues were RMB381.3million (US$58.2 million) in the first quarter of 2021, a decrease of 17.2% from RMB460.8 million in the first quarter of 2020, primarily attributable to the decreases in IT infrastructure costs, integrated marketing service costs which are in line with the decrease in integrated marketing service revenues; media content sharing costs; the decrease was partially offset by an increase in content and media procurement costs due to the Company’s ongoing investment in improving content quality.

Gross profit was RMB909.7 million (US$138.8 million) in the first quarter of 2021, a decrease of 4.3% from RMB951.0 million in the first quarter of 2020. Gross margin was 70.5%, compared to 67.4% in the first quarter of 2020. The increase of gross margin was mainly due to the decrease in integrated marketing services with lower gross profit margin, which resulted in higher mixed gross profit margin; the increase was partially offset by the increase in content procurement costs.

Research and development expenses were RMB186.7 million (US$28.5 million) in the first quarter of 2021, a decrease of 33.5% from RMB280.9 million in the first quarter of 2020 primarily due to a reduction in overall research and development headcount.

Sales and marketing expenses were RMB800.7 million (US$122.2 million) in the first quarter of 2021, a decrease of 25.5% from RMB1,074.5 million in the first quarter of 2020. Sales and marketing expenses as a percentage of net revenues were 62.0% in the first quarter of 2021, compared to 76.1% in the first quarter of 2020 and 52.2% in the fourth quarter of 2020.

User engagement expenses were RMB179.1 million (US$27.3 million) in the first quarter of 2021, representing a decrease of 64.7% year-over-year and an increase of 9.7% quarter-over-quarter. User engagement expenses per DAU per day were RMB0.06 in the first quarter of 2021, compared to RMB0.12 in the first quarter of 2020 and RMB0.05 in the fourth quarter of 2020. The decrease of user engagement expenses was primarily due to the Company’s ongoing efforts in optimizing user engagement expenses for its loyalty program, as well as the enhanced content algorithm facilitated by the Company’s AI platform that aims to match the content much more precisely with users’ personalized needs.

User acquisition expenses were RMB588.7 million (US$89.9 million) in the first quarter of 2021, an increase of 17.3% year-over-year and an increase of 48.3% quarter-over-quarter. User acquisition expenses consist of the costs of both word-of-mouth referrals and third-party marketing. The year-over-year increase was primarily the result of growing investment in Midu Novel and the development of new applications. User acquisition expenses per new installed user4 in the first quarter of 2021 were RMB5.78, compared to RMB7.89 in the fourth quarter of 2020 and RMB4.60 in the first quarter of 2020.

Other sales and marketing expenses were RMB32.9 million (US$5.0 million) in the first quarter of 2021, decreased 49.5% year-over-year from RMB65.1 million in the first quarter of 2020.

General and administrative expenses were RMB101.6 million (US$15.5 million) in the first quarter of 2021, a decrease of 5.5% from RMB107.5 million in the first quarter of 2020, mainly due to the deduction in overall general and administrative headcount and consequentially the decrease in compensation expenses, including share-based compensations; the decrease was partially offset by the increase in bad-debt provision for account receivables as we adopted ASC-326, Measurement of Credit Losses on Financial Instruments, effective January 1, 2020.

Loss from operations was RMB147.4 million (US$ 22.5 million) in the first quarter of 2021, compared to RMB504.7 million in the first quarter of 2020. Operating loss margin was 11.4%, compared to 35.8% in the first quarter of 2020.

Non-GAAP loss from operations was RMB53.7 million (US$8.2 million) in the first quarter of 2021, compared to a non-GAAP loss from operations of RMB361.0 million in the first quarter of 2020. Non-GAAP operating loss margin was 4.2%, compared to non-GAAP operating loss margin of 25.6% in the first quarter of 2020.

Net loss was RMB149.0 million (US$22.7 million), compared to net loss of RMB531.8 million in the first quarter of 2020. Net loss margin was 11.5%, compared to 37.7% in the first quarter of 2020.

Non-GAAP net loss was RMB55.4 million (US$8.5 million), compared to non-GAAP net loss of RMB388.1 million in the first quarter of 2020. Non-GAAP net loss margin was 4.3%, compared to a Non-GAAP loss margin of 27.5% in the first quarter of 2020.

Net loss attributable to Qutoutiao Inc.'s ordinary shareholders was RMB175.0 million (US$26.7 million) in the first quarter of 2021, compared to RMB543.5 million in the first quarter of 2020.

Non-GAAP net loss attributable to Qutoutiao Inc.'s ordinary shareholders was RMB81.3 million (US$12.4 million) in the first quarter of 2021, compared to a Non-GAAP net loss attributable to Qutoutiao Inc.’s ordinary shareholders was RMB399.7 million in the first quarter of 2020.

Basic and diluted net loss per American Depositary Share (“ADS”) was RMB0.58 (US$0.09) in the first quarter of 2021. Non-GAAP basic and diluted net loss per ADS was RMB0.27 (US$0.04) in the first quarter of 2021. Each four ADSs represent one Class A ordinary share of the Company.

Balance Sheet

As of March 31, 2021, the Company had cash, cash equivalents, restricted cash and short-term investments of RMB1,105.8 million (US$168.8 million), compared to RMB985.8 million as of December 31, 2020. The increase in cash, cash equivalents, restricted cash and short-term investments was primarily due to the improvement in working capital management. Cash flow generated from operating activities during the first quarter of 2021was RMB156.0 million.

While the Company continues to execute business plans to improve their liquidity position, the Convertible Loan which the Company issued with principal amounting to US$171.1 million (RMB1,192.0 million) will mature within one year from the first quarter 2021 earnings announcement date. Given the significance of the loan, there is uncertainty regarding the Company’s ability to repay the Convertible Loan upon maturity, which raises substantial doubt about the Company’s ability to continue as a going concern. The first quarter 2021 unaudited financial information does not include any adjustment that is reflective of this uncertainty.

Business Outlook

For the second quarter of 2021, the Company expects group net revenues to be between RMB1,150 to RMB1,200 million.

Conference Call

Qutoutiao’s management will host an earnings conference call at 8:00 A.M. U.S. Eastern Time on Tuesday, June 1, 2021 (8:00 P.M. Beijing/Hong Kong time on Tuesday, June 1, 2021).

Please register in advance of the conference call using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID by email.

Preregistration Information

Participants can register for the conference call by navigating to http://apac.directeventreg.com/registration/event/1275232 at least 15 minutes prior to the scheduled call start time.

Please dial-in at least 10 minutes before the scheduled start time of the earnings call and enter the Direct Event Passcode and Registrant ID as instructed to connect to the call.

A replay of the conference call will be accessible approximately two hours after the conclusion of the call until 09:59 A.M. U.S Eastern Time on June 9, 2021, by dialing the following telephone numbers:

United States:+1-646-254-3697
International:+61-2-8199-0299
Hong Kong:+852-3051-2780
China:400-632-2162
Replay Access Code:1275232

About Qutoutiao Inc.

Qutoutiao Inc. operates innovative and fast-growing mobile content platforms in China with a mission to bring fun and value to its users. The eponymous flagship mobile application, Qutoutiao, meaning “fun headlines” in Chinese, applies artificial intelligence-based algorithms to deliver customized feeds of articles and short videos to users based on their unique profiles, interests and behaviors. Qutoutiao has attracted a large group of loyal users, many of whom are from lower-tier cities in China. They enjoy Qutoutiao’s fun and entertainment-oriented content as well as its social-based user loyalty program. Launched in May 2018, Midu Novels is a pioneer in offering free literature supported by advertising and has grown rapidly to become a leading player in the online literature industry. The Company will continue to bring more exciting products to users through innovation, and strive towards creating a leading global online content ecosystem.

For more information, please visit: https://ir.qutoutiao.net.

Use of Non-GAAP Financial Measures

We use non-GAAP profit or loss from operations, non-GAAP operating profit or loss margin, non-GAAP net profit loss, non-GAAP net profit or loss margin, non-GAAP net profit or loss attributable to Qutoutiao Inc.’s ordinary shareholders and non-GAAP basic and diluted net profit or loss per ADS, which are non-GAAP financial measures, in evaluating our operating results and for financial and operational decision-making purposes. Each of these non-GAAP financial measures represents the corresponding GAAP financial measure before share-based compensation expenses. We believe that such non-GAAP financial measures help identify underlying trends in our business that could otherwise be distorted by the effect of such share-based compensation expenses that we include in cost of revenues, total operating expenses and net loss. We believe that all such non-GAAP financial measures also provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. They should not be considered in isolation or construed as alternatives to net loss or any other measure of performance prepared in accordance with U.S. GAAP or as an indicator of our operating performance. We mitigate these limitations by reconciling the non-GAAP financial measures to the most comparable U.S. GAAP performance measures, all of which should be considered when evaluating our performance. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.5518 to US$1.00, the rate in effect as of March 31, 2021 as set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Statements that are not historical facts, including statements about Qutoutiao's beliefs, plans and expectations, are forward-looking statements. Among other things, the “Business Outlook” section and quotations from management in this announcement, contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Qutoutiao’s strategies; Qutoutiao’s future business development, financial condition and results of operations; Qutoutiao’s ability to retain and increase the number of users and provide quality content; competition in the mobile content platform industry; Qutoutiao’s ability to manage its costs and expenses; the future developments of the COVID-19 outbreak; general economic and business conditions globally and in China; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Qutoutiao's filings with the SEC. All information provided in this press release is as of the date of this press release, and Qutoutiao does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

Qutoutiao Inc.
Investor Relations
Tel: +86-21-5889-0398
E-mail: ir@qutoutiao.net


QUTOUTIAO INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in RMB, or otherwise noted)

 As of December 31,As of March 31,
 20202021
 RMBRMB
ASSETS  
Current assets:  
Cash and cash equivalents494,474,891 730,065,142 
Restricted cash100,315,940 101,492,017 
Short-term investments391,033,374 274,245,408 
Accounts receivable, net737,789,173 931,202,324 
Amount due from related parties383,594,360 288,332,000 
Prepayments and other current assets365,108,503 319,252,432 
Total current assets2,472,316,241 2,644,589,323 
   
Non-current assets:  
Accounts receivables, non-current54,638,516 28,431,000 
Long-term Investments82,888,709 85,811,509 
Property and equipment, net17,212,799 15,011,504 
Intangible assets83,122,972 208,456,924 
Goodwill7,268,330 7,268,330 
Right-of-use assets, net50,318,882 35,002,343 
Other non-current assets148,091,140 8,859,589 
Total non-current assets443,541,348 388,841,199 
Total assets2,915,857,589 3,033,430,522 
   
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY   
Current liabilities:  
Short-term borrowings70,000,000 50,000,000 
Accounts payable448,980,738 461,174,606 
Amount due to related parties22,476,683 12,104,820 
Registered users’ loyalty payable72,626,546 66,156,768 
Advance from customers and deferred revenue140,776,350 129,638,961 
Salary and welfare payable149,703,938 104,970,877 
Tax payable97,143,585 74,416,325 
Lease liabilities, current20,760,421 16,680,811 
Accrued liabilities related to users’ loyalty programs100,087,815 98,913,472 
Accrued liabilities and other current liabilities763,434,272 1,039,846,862 
Total current liabilities1,885,990,348 2,053,903,502 
   
Lease liabilities, non-current23,755,721 18,536,887 
Convertible loan1,174,867,883 1,192,007,318 
Deferred tax liabilities18,825,416 18,224,606 
Other non-current liabilities4,255,931 3,659,294 
Non-current liabilities1,221,704,951 1,232,428,105 
Total liabilities3,107,695,299 3,286,331,607 
   
Total redeemable non-controlling interests1,093,526,058 1,126,942,304 
   
Shareholders’ deficit  
Ordinary shares46,817 47,609 
Treasury stock(142,228,779)(142,228,779)
Additional paid-in capital4,784,314,735 4,877,982,827 
Accumulated other comprehensive income84,319,590 71,331,666 
Accumulated deficit(6,007,226,873)(6,182,217,275)
Total Qutoutiao Inc. shareholders’ deficit(1,280,774,510)(1,375,083,952)
Non-controlling interests(4,589,258)(4,759,437)
Total deficit(1,285,363,768)(1,379,843,389)
   
Total liabilities, redeemable non-controlling interests and shareholders’ deficit2,915,857,589 3,033,430,522 



QUTOUTIAO INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (All amounts in RMB, except ADS data, or otherwise noted)

 For the three months ended 
 March 31December 31March 31 
 2020
2020
2021
 
 RMBRMBRMB 
     
Advertising and marketing revenues1,363,999,871 1,241,937,710 1,228,033,176  
Other revenues47,796,796 60,453,505 62,946,476  
Net revenues1,411,796,667  1,302,391,215 1,290,979,652   
     
Cost of revenues(460,755,006)(441,690,570)(381,275,238) 
Gross profit951,041,661  860,700,645 909,704,414   
     
Operating expenses:    
Research and development expenses(280,863,263)(199,688,448)(186,683,566) 
Sales and marketing expenses(1,074,527,955)(680,260,528)(800,693,513) 
General and administrative expenses(107,495,935)(94,388,918)(101,610,889) 
Total operating expenses(1,462,887,153)(974,337,894)(1,088,987,968) 
     
Other operating income7,117,280 23,545,402 31,929,244  
     
Loss from Operations(504,728,212 )(90,091,847)(147,354,310 ) 
     
Investment income/ (expenses), net(16,530,832)19,990,057 2,665,996  
Interest expense, net(3,412,695)(9,452,396)(7,804,047) 
Foreign exchange related loss, net(2,526,636)(1,570,785)(2,813,369) 
Other income/(expense), net(3,519,931)(1,032,721)6,047,582  
Non-operating income (loss)(25,990,094)7,934,155 (1,903,838) 
     
Loss before provision for income taxes(530,718,306)(82,157,692)(149,258,148) 
Income tax benefits/ (expense), net(1,101,528)349,080 224,346  
     
Net loss(531,819,834 )(81,808,612)(149,033,802 ) 
     
Net loss attributable to non-controlling interests206,973 250,212 170,179  
Net loss attributable to Qutoutiao Inc.(531,612,861 )(81,558,400)(148,863,623) 
     
Accretion to convertible redeemable preferred shares redemption value (11,865,025)(11,942,181)(26,126,779) 
Gains on repurchase of preferred shares- 14,841,680 -  
Deemed dividend to preferred shareholders- - -  
     
Net loss attributable to Qutoutiao Inc.s ordinary shareholders(543,477,886)(78,658,901)(174,990,402) 
     
Net loss (531,819,834 )(81,808,612)(149,033,802) 
Other comprehensive loss/(income):    
Foreign currency translation adjustment, net of nil tax(16,231,212)67,967,476 (12,987,924) 
Total comprehensive loss(548,051,046)(13,841,136)(162,021,726) 
Comprehensive loss attributable to non-controlling interests206,973 250,212 170,179  
Comprehensive loss attributable to Qutoutiao Inc.(547,844,073)(13,590,924)(161,851,547) 
     
Net loss per ADS (1 Class A ordinary share equals 4 ADSs):    
 — Basic and diluted(1.92)(0.26)(0.58) 
     
Weighted average number of ADS used in computing basic and diluted earnings per ADS:    
 — Basic283,632,888 297,045,912 299,548,372  
 — Diluted283,632,888 297,045,912 299,548,372  



QUTOUTIAO INC.
Reconciliation of GAAP And Non-GAAP Results
(All amounts in RMB, except ADS data, or otherwise noted)

 For the three months ended  
 March 31December 31March 31 
 202020202021 
 RMBRMB  
     
     
Loss from Operations(504,728,212 )(90,091,847)(147,354,310 ) 
Add: Share-based compensation expenses    
Cost of revenues3,484,267 1,982,055 995,965  
General and administrative52,481,244 44,713,522 41,086,463  
Sales and marketing21,687,394 39,252,233 2,310,612  
Research and development66,097,344 46,669,180 49,275,052  
     
Non-GAAP Profit / (Loss) from Operations(360,977,963 )42,525,143   (53,686,218) 
     
Net loss(531,819,834 )(81,808,612)(149,033,802) 
Add: Share-based compensation expenses    
Cost of revenues3,484,267 1,982,055 995,965  
General and administrative52,481,244 44,713,522 41,086,463  
Sales and marketing21,687,394 39,252,233 2,310,612  
Research and development66,097,344 46,669,180 49,275,052  
     
Non-GAAP net profit / (loss)(388,069,585 )50,808,378 (55,365,710) 
     
Net loss attributable to Qutoutiao Inc.(531,612,861 )(81,558,400)(148,863,623) 
Add: Share-based compensation expenses    
Cost of revenues3,484,267 1,982,055 995,965  
General and administrative52,481,244 44,713,522 41,086,463  
Sales and marketing21,687,394 39,252,233 2,310,612  
Research and development66,097,344 46,669,180 49,275,052  
     
Non-GAAP net profit / (loss) attributable to Qutoutiao Inc.(387,862,612 )51,058,590 (55,195,531) 
     
Net loss attributable to Qutoutiao Inc.’s ordinary shareholders(543,477,886)(78,658,901)(174,990,402) 
Add: Share-based compensation expenses    
Cost of revenues3,484,267 1,982,055 995,965  
General and administrative52,481,244 44,713,522 41,086,463  
Sales and marketing21,687,394 39,252,233 2,310,612  
Research and development66,097,344 46,669,180 49,275,052  
     
Non-GAAP Net profit / (loss) attributable to Qutoutiao Inc.’s ordinary shareholders(399,727,637 )53,958,089 (81,322,310) 
     
Non-GAAP net profit / (loss) per ADS (1 Class A ordinary share equals 4 ADSs):    
— Basic and diluted(1.41)0.18 (0.27) 
     
Weighted average number of ADS used in computing basic and diluted earnings per ADS    
— Basic283,632,888 297,045,912 299,548,372  
— Diluted283,632,888 300,659,508 299,548,372  


QUTOUTIAO INC.
Supplementary Operating Information
(RMB in millions, or otherwise noted)

 For the three months ended
 March 31June 30September 30 December 31March 31
 20202020202020202021
Net revenues 1,411.81,441.01,130.01,302.41,291.0
      
User engagement expenses5507.5457.2264.7163.2179.1
User acquisition expenses6502.0435.7385.9397.1588.7
Other sales and marketing expenses65.132.550.9119.932.9
      
Total sales and marketing expenses1,074.5925.3701.5680.3800.7
      
Combined Average MAUs (in millions)138.3136.5120.5124.7133.3
Combined Average DAUs (in millions)45.643.039.732.331.7
New installed users (in millions)109.2132.267.350.3101.8
      
Average net revenues per DAU per day (RMB)0.340.370.310.440.45
User engagement expenses per DAU per day (RMB)0.120.120.070.050.06
User acquisition expenses per new installed user (RMB)4.603.305.737.895.78

___________________________

1 For more information on the non-GAAP financial measures, see the section entitled “Use of Non-GAAP Financial Measures” below and the table captioned “Reconciliation of GAAP And Non-GAAP Results” set forth at the end of this press release.

2 “MAUs” refers to the number of unique mobile devices that accessed our relevant mobile application in a given month. “Combined average MAUs” for a particular period is the average of the MAUs for all of our mobile applications in each month during that period;

3 “DAUs” refers to the number of unique mobile devices that accessed our relevant mobile application on a given day. “Combined average DAUs” for a particular period is the average of the DAUs for all of our mobile applications on each day during that period;

4 “New installed user” refers to the aggregate number of unique mobile devices that have downloaded and launched our relevant mobile applications at least once.

5 We offer loyalty program for registered users of our mobile applications to enhance user engagement and loyalty and incentivise word-of-mouth referrals. “User engagement expenses” refer to the cost of loyalty points associated with taking specific actions, such as viewing and sharing of content, that encourage engagement and retention on our mobile applications. Such expenses are recognized as part of sales and marketing expenses in the consolidated statements of operations. “User engagement expenses per average DAUs per day” refer to such expenses incurred on an average DAU per day during a particular period.

6 “User acquisition expenses” refer to the sum of the cost of loyalty points associated with referring new users to register on our mobile applications and the cost of third-party advertising and marketing of our mobile applications. Such expenses are recognized as part of sales and marketing expenses in the consolidated statements of operations. “User acquisition expenses per new installed user” refer to the average cost of acquiring a new installed user from both word-of-mouth referrals and third-party channels.