Good evening and good morning. Welcome to Tencent Music Entertainment Group's first Quarter 2023 Earnings Webinar.

TME announced quarterly financial results today after market close and earnings release is now available on our IR website at ir.tencentmusic.com as well as via newswire services. Today you hear from Mr.

Cussion Pang, our Executive Chairman, who will start the call with an overview of our recent updates. Next, Mr.

Ross Liang, our CEO, and I, Tony Yip, CSO, will offer additional thoughts on our product strategies, operations and business developments. Finally, Ms.

Shirley Hu, our CFO, will address our financial results before we open the call for questions. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call, as we will make forward-looking statements.

Please also note that the company will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in the company's earnings release and filings with the SEC. At this time, all participants are muted.

After management's presentation, there'll be a Q&A session. [Operator Instructions].

And please be advised that today's webinar is being recorded. With that, I'm pleased to turn the call over to Cussion, Executive Chairman of TME.

Cussion?

Thank you, Tony. Hello, everyone.

And thank you for joining our call today. We are off to a great start in 2023.

Our strategic emphasis on quality growth propelled strong growth of our online music revenues in the first quarter. As the revenue size of our online music services has now catch up with social entertainment services for the first time, it signifies that our long-term commitment to developing a sustainable online music business model is bearing fruit.

In addition to a healthy increase in our total revenues, our focus on efficiencies optimization also drove robust net product growth. Content is the bread and butter of our businesses.

We continue to deepen partnerships with top music labels and artists, so as to enrich our iconic music catalog and vertical content offerings as well as to expand our users benefit. We established a strategic collaboration with Rock Records forward-looking statements, providing users with iconic Chinese songs and original soundtracks of popular TV dramas, such as the works of Chenyue Chang, Emil Chau, Jonathan Lee, Wu Bai and Mayday.

We also strengthened our strategic partnership with Li Ronghao and Fenghua Qiushi whose managed artists include Lu Han and Black Panthers, as well as with HYBE from South Korea with artists such as BTS and SEVENTEEN on its roster. Additionally, with the feature of a seven-day head-start period, our partnership with JJ Lin for his new digital album was well-received among users.

The new album also broke his previous sales record in terms of GMV on our platform. On top of that, we also reached collaborations with well-known artists including KUN and Oaeen for head-start benefits on their new songs releases on other areas, such as merchandise sales, online and offline performances, and artist-fan interaction events.

As for music verticals, to satisfy the increasing demand for rap music among younger audience, we enriched our rap offerings by adding a number of new songs from heavyweight rappers such as Masiwei. Meanwhile, we reinforced our competitiveness in different genre verticals such as electronic music, gaming, and classical music, among others.

In parallel with our efforts to expand our content library, we have facilitated the production of high quality, original content, unlocking more opportunities in the growing music industry. We have taken it upon ourselves to foster creativity and nurture artists through a rich variety of support programs, stage performances and monetization opportunities.

We’re dedicated to amplifying the influence of musicians and their works with this goal in mind. We participated in and promoted artists growth through our Tencent musician platform, which offers abundant resources and diverse monetization avenues.

As a result, the number of active musicians and singers who released new songs kept growing sequentially on our platform during the quarter, adding to the vibrance of our ecosystem. For example, we unveiled a new initiative, the Emerging Force Program, to discover musicians with high potential and encourage the production of high class music.

The program offers a wide range of artist services, including traffic support, revenue sharing, and on and offline performance opportunities. By increasing the exposure and popularity of quality songs, along with amplifying artist influence, we enhanced the vitality of the musicians ecosystem on our platform.

As of the first quarter, we have assisted 260 up and coming musicians in reaching their first million streams and helped multiple artists make their debut performance on stage. Notably, after joining our Emerging Force Program, the folk singing songwriter Leezi and Slow-mo, both saw a surge in their followers and streamings.

Going forward, we will continue to discover our musicians with great potentials by bringing together artists, producers and music programs, particularly in events, rap and pop music legends. Recently, Tencent Music also launched a customized homepage for musicians [Foreign Language].

Through this page, musicians can access data and insights in terms of streaming, followers and comments. This can empower better management of song distribution and promotion.

In addition, this page also provides up to date support resources and policies of our platform. Tencent musician [Christy] (ph) [Foreign Language] was one of the many success cases that demonstrate our powerful ability to cultivate and promote artists.

In the first quarter, we signed her to our Tencent musician platform, elevating her profile and promoting new songs through a variety of internal/external resources. As a result, the number of her followers more than doubled, growing from 50,000 to over 100,000 within just two weeks of her onboarding.

With our diverse performance stage and all round support in music production, we have been dedicated to elevating the influence of Christy and other aspiring indie musicians alike. Furthermore, we team up with Billboard China to hold our first original music contest, THE ONE.

Our collaborative contest is designed to discover emerging artists with the ability to produce quality original Chinese music, as well as to help expanding their global reach. To that end, we invited excellent singer songwriters and renowned singers in China and abroad, including Greyson Chance, Lenka, MIKA and TIA RAY, among others, to inspire contestants to produce original music and assess their performances.

Through this cooperation, we will leverage Billboard's global resources, influence and high international standards to provide talented musicians with end-to-end services, ranging from talent evaluation, song list, worldwide promotions and all the way to customized performances. Upon the solid foundation of our Tencent musician platform, we are well positioned to effectively facilitate the production and promotion of original contents.

We are also excited to see that we produced a number of blockbuster songs, creating many mega hits in the first quarter. For instance, [Rose of] (ph) No Man's Land [Foreign Language] has accumulated streams over 100 million with his melody and [indiscernible] on our 5 singing platform.

Not only did this song make its way on to several music charts, but also it garnered additional market exposure via our writing [indiscernible] inspired by his lyrics on short video platforms. Artist in the first quarter included [OK Go] (ph) [indiscernible] Regret in the wind [Foreign Language], The wind we can’t hold [Foreign Language], Baby I love you [Foreign Language], Love on fire [Foreign Language], Sea and sky [Foreign Language].

Excelling in producing prime original content, we have played an integral role in expanding IP values across the entertainment industry. As a case in point, we have created quite a few musical works for iconic films, games, animations and other media.

In the first quarter, we co-produced Chosen’s Chinese cover of the film song Makoto Shinkai movie Suzume. This song ran in over 100 million streams within only three weeks of its release.

It also ran the first on the CMG Global Chinese Music Popularity Chart [Foreign Language] and topped 12 other music charts. As you may notice, this song is also the hold music for today's earning call.

Meanwhile, we continue to cooperate with the broader Tencent ecosystem, producing singles for 11 well-known games and 4 animations in the first quarter. Notable examples including Praying for the Mountain and the Sea [Foreign Language] for Honour of Kings [Foreign Language] and Light of Dawn [Foreign Language] [indiscernible] which meticulously enhances users gaming and listening experience.

Before I conclude, I would also like to highlight the progress of TME Live, our comprehensive online merge offline performance brand. Amid performance market recovery, we're exploring innovative ways to monetize and interact with users.

TME Live is well positioned to capture these market opportunities via our online merge offline capabilities, allowing us to provide users with superior audio-visual experience anytime and anywhere. In the first quarter, we hosted a total of 29 online and offline concerts, including online concerts for Justin Huang [Foreign Language] notably KUN’s and Richie Jen’s e-concert received widespread user acclaim, generating a total of 1.4 billion social media views and attracting almost 70 million unique visitors in the Tencent ecosystem.

We also provide fans with the option to purchase custom merchandise while enjoying the shows. TME Live unique performances formats, coupled with this high profile in the industry and reviews appeal to many well-known advertisers for sponsoring, such as PepsiCo, and JD.com.

We also continuously increase our presence in the offline performance, particularly as the traffic shows a growing interest for offline activities. In the first quarter, we organized tours in cities such as Shenzhen, Changsha and Hangzhou for musicians including Coola, Kafe.Hu, Pharaoh, Switch GodLes and the rock and roll band WhitePaper to foster closer and more engaging connections between musicians and their followers.

We encourage online audience to share their thoughts and feelings through online bullet charts during performances. Going forward, we will continue to explore the on and offline integrated performance formats, offering integral artist lineups and an exciting user experience, evaluating our content ecosystem and user engagement and first capture incremental monetization opportunities.

That concludes the updates on our growing content capabilities. Now I would like to turn the call over to Ross, who will share more about our platform strategies.

Ross, please go ahead.

Thank you, Cussion. Hello, everyone.

Moving on to our platform innovations. In the first quarter, we further refined users' musical consumption experience.

We're advancing audio live streaming services. In addition, by further exploring large language models, we energized our platform ecosystem with a broader range of AITC applications that are meeting users diverse and nuanced music taste in new and exciting ways.

On the front of users music consumption experience, our efforts to enhance sound quality and effects combined with our optimized operations in different listening scenarios have been well recognized by users. This further bolsters users' stickiness or monetization capabilities.

As a result, higher users engagement brought us a year-over-year growth of average daily time spent per daily active user who listening to the music on our platform. We have extended our premium sound quality and the effects to cover a wider range of scenarios during the quarter.

In addition to lowering the auto-mix sound effect, we also introduced customized sound effects for Teens in Times' album [Foreign Language]. This song effect highlights highlights vocal details and instrumental layers creating an air of a live performance.

A total of 2.3 million users have used this song effects in 170 million streams. Moreover, we extended our premium sound quality to in-car use cases.

For example, our QQ Music's Galaxy Sound Effect maximizes the performance of in-car audio systems as it can finetune its song effect to match many in-car audio systems of mainstream car models. This has further enhanced our users' listening experience.

In addition, we also offer a highly personalized and engaging music experience that caters to users' unique preference and tastes. For instance, we launched our 3D Music Player Interface and customized playlists with various design templates, where users may choose their favorite styles.

Beyond that, we tailored playlists to specific holidays and festivals, such as the Chinese New Year and the World Sleep Day to offer a listening experience for this special occasion and user's current state of mind. Thanks to our ongoing algorithmic upgrades and product optimizations, we are able to constantly advance our recommendation efficiency.

This bring us deeper insights into content on a user's behavior, allowing us to create a more personalized listening experience. In the first quarter, QQ Music and the Kugou Music recommendations stream menu together with the time spent per user increased year-over-year and quarter-over-quarter, taking the proportion of recommended streaming to a new high on our platform.

On the front of audio live streaming, it has become important growth driver for us as we offer a unique engagement venue for our users and performers with our differentiated content and interactive features, the driver is growth, enhancing user experience and attracting more vibrant audio anchors. In terms of content, we differentiated our audio live streaming content, offering with focus on audio categories of music, emotional healing and talk shows, highlighting our performers' exceptional talent.

Meanwhile, our vibrant audio anchor ecosystem also benefits our musician community as it provides them with a platform to showcase their skills and reach a wider audience. We have nurtured rising musicians on our QQ Music, live streaming platform.

For example, [Foreign Language], these four musicians contributed a total of 110 million song streams. Notable, upon the promotion in one of our audio live streaming programs, [Foreign Language] single Gold quickly made it to QQ Music's new song recommendation chart.

In the first quarter, the number of performers in audio live streaming continued to rise year-over-year and quarter-over-quarter. In terms of user interactions, we added new social interactive features to our platform.

This have created an additional user traffic and scenarios. And we are better serving users entertainment needs as important icebreaking tools beaten performers and users, these interactive features also drove year-over-year and quarter-over-quarter increases in daily time spent per user.

Going forward, we will keep upgrading and expanding our social interactive offerings to higher user retention and additional commercialization opportunities. Turning to AIGC our aim is how it empower us to produce content more efficiently as well as to create our increasing engaging user experience.

In the first quarter, we launched TME Studio [Foreign Language], an AI enabled smart tool for music production. We also introduced local producer [Foreign Language] With these tools musicians can be more efficient in lyric writing, composing music content, analysis and editing.

Such tools also have generate outstanding content by seamlessly binding users' original verses into different songs. On top of that, our first AI music companion, Xiaoqin, hosted a live streaming show of singing and dancing, providing an immersive entertainment experience.

Users were also able to interact with Xiaoqin's AI generated virtual gifts and personalized game plays. Furthermore, in fostering a more customized listening experience, QQ Music pioneered an AIGC empowered music player.

With various AI generated virtual styles, users can enjoy different things of music players. With that, I'd like to give the floor to Tony to reveal our business operations.

Tony, please go ahead.

Thank you, Ross. Hello, everyone.

During the first quarter, we have seen enhanced monetization in our online music services. We booked robust year-over-year growth in online music services revenues, driven by the advancement of both subscription and non-subscription businesses.

On the subscription side, a strong performance was propelled by the growing number of paying users and its ARPPU, which comes to 94.4 million and RMB 9.2, respectively. Notably, our online music paying ratio hit a record high of 15.9%, while our ARPPU expanded sequentially for the fourth consecutive quarter.

All these results reflect our refined content operations, users' higher willingness to pay for premium sound and effect features, as well as more effective promotions. In addition, our IoT service has been growing over the past few quarters.

Seeing its increasing importance to our overall business development, we began to include certain IoT devices in the disclosure of operating metrics for our online music services, starting from the first quarter. On the non-subscription side, it also delivered strong year-over-year growth.

Advertising revenue grew notably year-over-year, mainly due to lower revenues last year caused by COVID-19 impact, increasing interest from advertisers in our innovative advertising formats, as well as improved macroenvironment. In particular, we have seen an increasing advertising spend from advertisers in the e-commerce, gaming, travel and food and beverage industries.

Meanwhile, revenue from our ad supported mode also grew well as more users adopted this model. In addition to TME Live's advertiser sponsorship mentioned by Cussion earlier, we cooperated with Uni-President Soup Daren and Heineken in the first quarter to create customized brand zones, playlists, and music festivals, helping advertisers increase brand visibility without innovative ad formats.

On top of advertising, we also enhanced our ability to monetize through artist merchandise, long form audio and music distribution. In terms of artist merchandise, in the first quarter, we worked with well-known artists such Ren Allen, Lu Han [Foreign Language] to introduce collection cards, action figures ,T-shirts and more.

As a highlight, sales of the album Utopia by Teens in Times exceeded 1 million copies on our platform within two days of its release. In the future, we will keep expanding the offerings of artist merchandise on our platform and we also have a number of artist cooperation projects on the way.

In terms of long form audio, its revenues expanded year-over-year as we increased our offerings of popular content in the first quarter. For example, we introduced a new format that combines leading IP and radio drama.

During the quarter, we released Reunion : The Sound of the Providence, adapted from the original work of [Foreign Language]. Its streaming volume exceeded 340,000 in the first week after launch.

These distinguished content further complemented our music offerings and increased overall user engagement. Moving on to our social entertainment services.

Facing a tough market environment, we focus on product innovation to differentiate ourselves and gain user mindshare. For WeSing, based on our multi-person singing room in both video and audio settings, we upgraded our chorus features to chorus for all, which can support a real time chorus of 1,000 people, further enriching users' immersive experience.

In addition, we released extra interactive features in our singing rooms, such as score competition and red envelope sharing. These features allow the singing room's penetration rate to grow year-over-year for the fifth quarter in a row.

In the future, we will leverage these chorus and singing features to explore collaboration across different products on our platform, such as TME Live, artist/fan interaction events and sponsored advertising. In terms of WeSing membership, we expanded VIP privileges to include features such as customizable sound effects, recording interface themes and name tags, all resulting in year-over-year revenue growth in the first quarter.

Meanwhile, WeSing's revenue grew steadily in the overseas market. We will expand its presence further through both organic growth and M&A.

For live streaming services, although revenue from traditional live streaming remain adversely affected by the macroenvironment, our audio live streaming delivered double digit year-over-year growth rate in the first quarter. Audio has become a growth engine for our live streaming services as we keep providing differentiated content and interactive features.

We also strive to build a growth path for more live streaming performers, further tapping into their potential, whilst strengthening their connection with users, which in turn cultivates users' willingness to consume and pay for content. In the first quarter, Kugou Music rolled out its singing room feature following QQ Music's successful validation, delivering year-over-year revenue growth as well.

Lastly, we remain committed to fulfilling our social responsibilities through music. For example, TME provided care for people with autism through music for the seventh consecutive year.

We launched a caring program called If Music Has a Shape [Foreign Language]. We invited over 50 groups of singers and musicians from China and abroad, including Joker Xue, Sean Xiao and TIA RAY, and to perform in our program and share the love.

Simultaneously, we debuted at the caring through music theme song, Secrets Hidden in the Stars [Foreign Language], sung by LUCY, TME's first hyperreal virtual pop idol. This program's social media views have exceeded 500 million, raising awareness of autism among the public.

In conclusion, we started 2023 on a high note with innovations across content and platform. This establishes a clear path for our creative and sustainable development in the coming year and beyond.

Our progress in monetization efficiency, cost optimization, commercialization and user experience has also positioned us for ongoing business growth. Going forward, we'll continue to explore the intersection of music and technology, pioneering new forms of art and entertainment, while upholding our commitment to society and fostering a healthy, more diverse music industry.

With that, I would like to turn the call over to Shirley, our CFO, for a closer review of our financial.

Thank you, Tony. Hello, everyone.

Next, I'll discuss our results from a financial perspective. In the first quarter of 2023, our total revenue resumed the year-over-year growth and reached RMB 7 billion, up by 5% year-over-year.

With the success of effective cost control and improved operation efficiencies, our non-IFRS net profit margin reached 20.9% this quarter. In Q1, music subscription revenue continued its rapid growth and reached RMB 2.6 billion, up by 30% year-over-year and by 11% sequentially, propelled by rapid expansion of both online music paying users and ARPPU.

Specifically, monthly ARPPU in Q1 was RMB 9.2, increased by RMB 0.9 from last year and RMB 0.3 from last quarter, recording four consecutive quarter of expansion. Online music paying user grew to 94.4 million, up by 18% year-over-year, representing a 5.9 million net adds sequentially.

The strong ARPPU and paying user growth resulted from high quality content and services, attracting member privileges and more effective promotions. As we extend use cases and the service offerings, we are seeing growing demands on our key services and expect more opportunities to monetize these in this area in the future.

Therefore, starting from this quarter, we have updated the definition of online music MAUs and include certain IoT device users in our online music MAUs. Additionally, revenue from advertising achieved a strong growth year-over-year due to strong performance from our ad-based relationship model as well as low as lower advertising revenues for comparison in Q1 2022 due to the impact from COVID-19.

We are pleased with such results and remain confident about long term growth potentials in advertising business. Social entertainment services and other revenues were RMB 3.5 billion, down by 13% year-over-year due to the evolving macro headwinds and the competition from other platforms.

To adapt to the changing environment, we are focused on cultivating talented performers and differentiating our contents to stabilize the revenue skew of the traditional live streaming and making efforts in increasing our competitiveness through ongoing product innovation and new initiatives in social entertainment services, such as audio live streaming, real-time interactive periods and international expansion. Gross margin in Q1 was 33.1%, up 5.1 percentage points year-over-year, primarily due to the strong growth of online music revenues, our effective control of content costs, as well as improved operational cost efficiencies.

Now moving on to operating expenses. Total operating expenses for Q1 were RMB 1.2 billion or 17.5% as a percentage of total revenues, down by 2.7% from 20.2% as a percentage of total revenues in the same period last year.

Selling and marketing expenses were RMB 212 million, down by 36% year-over-year. Overall, the reduced spending on user acquisition had impacted on our MAUs.

Our core music subscription service delivered strong growth. We continued to take measures to improve expenses, closely monitored our each promotion channel, added nice extra promotion channels, and leverage our [indiscernible] to attract users and promote our products.

When elaborating the healthiness of business and assessing ROI, we focus more on measures such as level of engagement, user retention rate, et cetera. General and administrative expenses were RMB 1 billion, which was relatively stable compared to the same period of 2022.

We continue to closely manage employee related expenses by improving headcount efficiencies and invest in research and development to further empower music-related content creation, enhance production efficiency and improve sound quality and effects. Our effective tax rate for Q1 2023 was 12.2%.

For Q1 2023, our net profit and net profit attributable to equity holders of the company were RMB 1.2 billion and RMB 1.1 billion. Non-IFRS net profit and non-IFRS net profit attributable to equity holders of the company were RMB 1.1 billion and RMB 1.4 billion, respectively.

Diluted earnings per ADS was RMB 0.73, up 97% on a year-over-year basis. Non-IFRS diluted earnings per ADS was RMB 0.89, up 65% on a year-over-year basis.

Such results demonstrate our commitment and the continued success of our operating efficiency improvement, as well as the impact from share repurchase program were integral to provide high quality investment returns for our investors and shareholders. And we remain confident about our financial performance, the development of our business and the overall industry.

As of March 31 of 2023, our combined balances of cash, cash equivalents and term deposits were RMB 28.5 billion as compared with RMB 27.4 billion as of December 31, 2022. The increase was primarily due to our healthy operating cash inflow of RMB 1.9 billion for the first quarter of 2023.

Such combined balance was also impacted by the change in exchange rate of RMB to USD at different balance sheet debts. In conclusion, we started 2023 with strong revenue growth momentum.

And the revenue side of our online music services caught up with social entertainment services for the first time. Going forward, we continue to expect balanced the growth of both ARPPU and paying users and remain confident in the growth potential of our advertising business.

Social entertainment service continued to face evolving macro headwinds and competition from ad platforms and we will continue to differentiate our content and entertainment from peers and create a more high quality content [indiscernible] stabilized revenue [indiscernible] for social entertainment services. Meanwhile, we're continuing to invest in new products and services, high quality components and technologies, especially in areas such as IoT, gaming, singing room and original content, and the AIGC to build up a solid foundation for our healthy long term growth.

This concludes our prepared remarks. Operator, we are ready to open the call for questions.

Congratulations on very strong results. My first question is regarding our music subscriber growth business.

5.9 million net adds is a record high number and it's been accelerating from the last two quarters. Can management explain the drivers behind this?

And how should we think about the net adds growth outlook for rest of the year?

The subscription revenue, which is very much our focus, as we are seeking for a balanced growth between both paying user as well as ARPPU, subscription revenue grew at a 30% rate on a year-over-year basis, which as you pointed out is an accelerated pace compared to previous quarters. This can be attributed to a number of factors.

First, the quality as well as the value of our subscription service continues to improve. It was a long term effort in the making.

And we're providing more and more attractive content and features within that subscription service. Secondly, as a result of our long term effort and focus, users' willingness to pay for premium features such as sound quality, as well as sound effects continue to increase.

Thirdly, we continue to improve the promotion of those high quality content and product features. And finally, more effective as well as targeted promotional discounts around new subs, as well as better retention programs also helped drive ARPPU higher.

And as a result, we continue to expect a very strong growth in our subscription revenue looking forward.

I would like to get some update if management could provide us on how are we thinking about overall growth outlook, especially for online advertising, and also the music subscription, if you can give some color as well on the social entertainment as well.

Overall, we continue to expect that 2023 to be a year of positive growth for both top line revenue as well as bottom line net profit. In addition, most likely from the second quarter, we expect our quarterly revenue from online music services to exceed social entertainment services to become a primary source of revenues.

In terms of online music, specifically, we expect subscription revenue to continue to deliver quality strong growth, driven by both paying users and ARPPU. In addition, combination of advertising, long form audio, artist merchandise and IoT services are expected to contribute to the growth meaningfully.

In terms of social entertainment, while traditional video live streaming will continue to face competitive pressure, our audio live streaming and international business can partially compensate. Combining all of that, with our continued focus on cost management to improve efficiency, we expect net profit margin to continue to improve, resulting in net profit growth that are likely stronger than previously expected.

Congrats on the strong set of results. My question mainly on music gross margin.

Can you give us some updates on your music gross margin in the fourth quarter? And how should we see the trend going forward?

It seems we have a better outlook on our sub and the music business for the rest of year.

About music gross margin, we don't give the very specific detail number of this business. We will talk about the whole gross margin of our business.

Gross margin is 33.1% in Q1, increased by 4.1%, year-over-year. Now, there are some positive factors as follows.

One, there's the strong growth of monthly ARPPU and net adds of new subscriptions. And two, the growth of advertisement revenue.

And the third, even social entertainment revenue faced downside pressure and the revenue mix change also had the negative impact on our gross margins. The revenue sharing costs of live streaming has been [indiscernible] they decreased the in event promotion activities and increase operational efficiencies.

We focus on good performers and high quality content. And the fourth, we will optimize the content cost model of ROC and increase the ROC requirement.

We also benefit from the development of our inhouse original content production. And the fifth, we will optimize the technology and operational strategy related to bandwidth and storage capability and improve the utilization of our service and the equipment.

And looking forward, in Q2 in 2023, we expect the subscription revenue and advertising revenue will continue to be strong growth. And we will continue to increase our operational efficiencies and monitor our costs.

We expect our gross margin increase sequentially in Q2.

You guys mentioned just now that you've seen good recovery in offline and also in the performance market. So just wondering if management could elaborate on how we can participate more and potentially benefit from the offline event opportunities?

And could these offline events generate meaningful incremental revenues for us and contribute to the better growth of our music segment this year? Or do they have synergies with our online music subscription business.

After reopening, the live concerts and music festival market has been really successful and promising so far. Our unique positioning will be both of our online and offline capabilities.

And we will be also focusing on the quality rather than the quantity of the shows. So we will continue to upgrade and also improve our TME Live IP by more in depth partnership with our potential partners in the show's content, co-production, etc.

And also, we will definitely bring additional revenues to us. And also, it will further contribute to the healthy development of TME's content ecosystem in the long run.

We're seeing the positive trend in industry driven by the increasing demand for live entertainment experience and also the willingness of consumer to spend money on tickets and events. But, however, it's also worth noting that, although the offline performances have been very promising so far, but this is also a low margin business for the organizers.

So with this in mind, our approach will continue to be ROI based, with a prudent investment mindset. But we will continue to think that it's going to be an exciting project for us in the long run.

Congratulations on strong performance. My question is about profit guidance.

How does the management view the challenge of OpEx and net profit in 2023 and in the long term? Is it possible to share some guidance?

Last question, I guided on gross margin. So, I will talk about the operational expenses.

And in 2023, we will continue to focus on improving our efficiencies. Q1 selling and promotion expenses, operating on low cost level, down by 36% year-over-year.

Overall, the reduced spending on user acquisition had impacted our MAUs. Our core music subscription service [indiscernible] channel growth.

And for the headcount management, we will continue to invest in product enhancements, our technology innovations, new products and new business, such as IoT, our [indiscernible] program, inhouse content productions. And meanwhile, we will pay more attention to improve the profitability of business and the products.

And Q1, the adjusted net profit margin is 20.9%, an increase on a year-over-year basis and sequentially. And looking forward to Q2, we expect our selling and promotion expenses and the G&A will be stable compared net of in Q1.

And with the growth of our revenue, we expect the adjusted net profit and adjusted net margin all will be increased.

Firstly, can you help update us on your super VIP membership program in terms of adoption? And secondly, I was just curious, how's your IoT monthly fee compared to your average mobile monthly fee?

First of all, we continue to add more and more attractive member privileges behind our super VIP package. While we're not ready to disclose specific numbers, we are pleasing to see the continued growth in the number of subscribers under the SVIP membership.

In terms of the IoT services, we are seeing very good growth trajectory, primarily in the in-car space. We continue to penetrate more and more car models.

For example, recently we penetrated into several notable Mercedes models. And in those models, we are offering subscription services.

And very often, you do see those offered at a full price point – at the full price as opposed to the discount price. And increasingly, you will be separating the price plan between the IoT services as well as the mobile device.

So, you have to actually pay a separate fee in order to access for IoT subscription, in addition to being able to access the subscription for mobile device.

My question is regarding the cooperation with Tencent, we see some really successful cooperation regarding the TME Live, so how should we deepen such cooperation? Do we expect we should expand the cooperation to more areas?

The WeChat music feature is actually powered by QQ Music, to a large extent. Our objective is to extend the QQ Music service onto WeChat to provide WeChat users with high quality music experience.

And this cooperation enable us to help music creators tap into the significantly broader reach that are offered by WeChat. And as a way to promote this service, WeChat users can enjoy our service for free for a limited time between now and June 30.

From July 1 onwards, to access certain premium content and features, users will be required to become a paying subscriber. We believe this cooperation will generate incremental revenues for TME as it will allow us to attract incremental subscribers in the long run.

And given the significantly broader reach of WeChat vis-à-vis TME, we are delighted to be able to work very closely with WeChat on this cooperation to bring our music service to more users and no doubt we will continue to deepen cooperation with WeChat as we go.

Can you give us some updates on a very hot topic recently on AIGC and how we can use this technology? And do we see this could help us to say, in general, have some cost control, obviously, OpEx?

Any updates or any feedback on AIGC topic?

[Foreign Language] We'll continue to deepen our research into the applications that are based on LLMs. One example of that is we'll be looking to develop a chatbot where users can chat to the chatbot about the kind of music they like to listen to and to discover new content.

We'll be cooperating closely with Tencent to develop application based on their LLMs as well as to work with open source LLMs to develop other applications such as those around image creation. Similar to Google's music LLMs, we will look to provide tools to help musician significantly reduce the barrier to music creation and lower the cost and to improve the efficiency, to help them with song creation, as well as lyric writing.

And then finally, in the areas of social entertainment, we'll look to create virtual items that will ultimately be used in live streaming type use cases

Thank you everyone for joining us today. If you have further questions, please feel free to contact TME's IR team.

This concludes today's call and we look forward to speaking to you again next quarter. Thank you.