Tencent Music Enter Gr (NYSE:TME) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Tencent Music Entertainment Group reported a 7% year-on-year revenue growth for Q1 2026, driven by a 12% increase in music-related services revenue, including a strong performance in offline concert-related services.

The company is strengthening its strategic initiatives in response to AI-related challenges, focusing on copyright protection and expanding its multidimensional commercialization model.

Future guidance highlights potential volatility in membership and advertising revenue growth due to competition and AI-driven content issues, while maintaining optimism about long-term IP-based monetization strategies.

Operational highlights include deepened partnerships with major artists and the successful launch of new initiatives like fan club memberships and innovative content offerings.

Management emphasized the importance of original human creativity, premium music IPs, and leveraging AI to enhance production efficiencies without replacing human elements.

Full Transcript

OPERATOR

Good evening and good morning and welcome to Tencent Music Entertainment Group's first quarter 2026 earnings conference call. I'm Millicent Tu, head of IR. We announced our quarterly financial results earlier today before the US Market opened. The earnings release is now available on our IR website and via news from IR services. During today's call you hear from Mr. Kashanpong, our executive chairman and Mr. Ross Liang, our CEO who will share an overview of our company strategies and business updates. Then Ms. Shirley Hu, our CFO will discuss our financial results before we open the call for questions. Before we continue, I refer you to the Safe harbor statement in our earnings release which applies to today's call. As we make forward looking statements, please note that we'll discuss non IFRS measures today which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in our earnings release and filings with the SEC. All participants are muted at this time. After management's remarks, there will be a Q and A session and please be advised that today's call is being recorded. With that, I will now turn the call over to Kashan, Executive Chairman of tme. Kashan please.

Kashanpong (Executive Chairman)

Thank you Millicent hello everyone and thank you for joining our call today. Despite an increasingly competitive landscape in the music streaming industry, we delivered a steady performance overall this quarter. Our growth is increasingly driven by diversified monetization across the music value chain with the offline concert related business achieving another quarter of triple digit year over year growth. We will continue to accelerate the development of our multidimensional commercialization model which is deeply rooted in our commitment to cultivating arrival and legitimate music ecosystem. While AI is rapidly expanding the supply of content, it is also introducing significant market noise and new industry challenges. The proliferation of unauthorized AI generated content not only creates headwinds for our music subscription growth, but also undermines creators rights and dilutes the long term value of the music ecosystem as a whole. In response, we are working closely with creators, rights holders and regulators to lead and champion robust copyright protection efforts. While the nature of these challenges is unique to the AI era, we have successfully navigated major copyright and IP transitions before and have consistently been at the forefront of those efforts. We remain confident in our ability to adapt, lead by example and help shape the future framework for intellectual property protection in the age of AI. This commitment has further sharpened our focus on what truly drives long term value and sustainable growth today. We are now convinced more than ever that ever that original human creativity and premium music IPs are the ultimate differentiators. That's why we are evolving beyond traditional streaming services into an integrated music ecosystem that further unlocks the value of every piece of ip. This holistic approach is designed to deepen engagement and expand user wallet share. Against this backdrop, we have further optimized our catalog, ensuring that our licensed and proprietary content offers valuable emotional responses reasonably that uses content. Let me share two examples. First, we further enhance our classic music catalog, capitalizing on the enduring demand and extended life cycles of timeless hits. We recently renewed contracts with label including JVR Music, Linfair Records and Rock Mobile Music Ltd. Securing continued access to iconic catalogs from artists such as J Chao, Zhou Jielun, Karen Mok, Momen Wei, Harleen Yu, Yu Chengqing and Angela Zhang Xiaohan. Further reinforcing our leadership in premium copyrights. We also deepened our strategic partnership with TF Entertainment, providing users with a 30 day Head Start benefit for upcoming releases and exporting collaboration across physical products, live performances and other IP related opportunities. Second, the streaming share of our in house new releases has seen a steady rise, reflecting our ongoing efforts to enhance production capabilities. A notable example is our collaboration with Sony Pictures on the Chinese theme song the Starflixes for the scientific blockbuster portrait Hail Mary performed by Jo Sun. The song granted strong traction upon release, quickly topping multiple charts across our platforms. Across our business, AI has become a key enabler, accelerating time to market, improving production efficiencies and enhancing user experience. Importantly, it complements, not replaces human creativity and further reinforce the scarcity and value of premium IPs. Let me walk you through how we are actively embracing AI to further enhance our content ecosystem and in turn unlock additional value from legacy IPs. First, we provide creators with tools to reshape every stage of the creative process. For instance, our one stop AI music production tool Venice simulates the full cycle songwriting process of professional musicians, from lyrics compositions and arrangement to vocal performance and mixing. This empowers creators to produce high quality work more efficiently and at lower cost. Second, as we bring more legitimate AI generated music onto our platform, we are pleased to see that high quality AI works can in turn revitalize classic IPs and endure them to younger generations. Some AI covers of classic hits are often among the most popular tracks. By reimagining iconic songs with innovative styles and vocals, these reinterpretations sparked renewed interest, driving listeners back to the original versions and amplifying the visibility and commercial value of legacy IPs. As more premium IPs thrive on our platform, they serve as a powerful engine for our broader commercialization efforts. By building his top holistic Pan IP related music experiences, he continues to lead industry consumption and grow at scale. Whether through immersive live performances or innovative fan based economy, we are elevating music's influence while deepening wallet share specifically. First, our highly loyal user ecosystem continues to attract leading artists and IPs seeking deeper collaboration. By strengthening strategic partnerships, we extend IP value chains through integrated virtual and physical offerings. A key example is our collaboration with Jay Chow on his digital album Children of the sun where we launched a package that offerings combining the album, SVIP memberships and physical collectibles. Supported by a nationwide online campaign across 45 cities, the release achieved a strong viral traction, topped the major charts, surpassed 1000 million renminbi in sales and drove meaningful SVIP conversions. We also deepened partnership with leading artists including Kuan Cai Xukuan and Roy Wang Wang Yuan whose recent releases delivered a strong fan engagement and commercial performances. Second, we also continue to strengthen cross culture reach through deepen offline partnership with leading domestic and international labels and artists. This quarter we delivered multiple flagship concerts which drawing over 10,000 attendees, maintaining a strong execution standard in live performances. Notably Baby Monsters concert in Taiwan, China and NCT Wish concerts in Hong Kong, China attracted both core fans and broader audience expanding their reach. Third, we are cultivating our premier artist Roses to amplify the global footprint of Chinese music. This is exemplified by Silence Wang Wang Sulong's debut world tour across Asia and North America and Guy Zhou Yuan's first large scale show in Singapore. Domestically, concerts by RIU Pan, Weibo, Tia Wei, Yuan Yawei, Angela Zhang, Zhang Xiaohan, Jane Zhang, Zhang Liangyin and Zhang Yuan further dependent fans engagement. Before concluding I would like to share our ESG progress. In April we published over our 2025 ESG report. Over the past years we stepped up in creative empowerment, product inclusively and value changed sustainability. This efforts reinforce the long term value and resilience of our ecosystem as reflected in the ESG rating upgrades and external recognition. In closing, we are encouraged by the progress we have made amid the challenges. We are elevating the strategic priority and reinvestment in copyright governance, taking a more resolute stance to safeguard the long term health of the music industry. We remain committed to advancing the broader creative economy, unlocking new opportunities and driving enduring long term value. Now I would like to hand the call over to Ross for an update on our overall platform development. Ross, please go ahead. Thank you.

Ross Liang (Chief Executive Officer)

Thank you Karsha hello everyone. In increasingly competitive landscape we are building a more resilient platform powered by our content and the platform, dual engine driven user differentiation, engagement and lifetime value as we strengthen our competitive edge and further differentiationate our offerings, we are transitioning to a membership based model that goes beyond content subscriptions to deliver more immersive music experiences. I will share more details shortly. For today's call, I would like to primarily focus on two areas, user growth and monetization. Efficiency improvement resulting from better services on the user front, maintaining a health top of final remains our foundation. Let me share some updates. First, we are excited to further deepen our integration with the WeChat ecosystem to broaden reach and streaming line user convention. By embedding a pathway within video accounts, we facilitated a seamless transition from short video music discovery to full track playback on our platform. This also elevates musician exposure helping them convert casual short videos into a live fan base on our platform. Second, for Kugou where competitive pressure is a bit more acute, we allowed barriers to enter through more freemium and ads memberships. Third, we leveraged AI to drive engagement. With improved recommendation system efficient discovery enabled by AI agents and easier playlist creation growth in music assets boosted engagement. We also saw exponential growth in both AI driven Messenger and the playback dao. At the same time, personalized features such as theme avatars, player innovations and interactive tools led to a deeper sense of belonging on our platform. Turn to how we are unlocking greater IP value and the increasing user lifetime value. We continue to execute existing tailed plans. As I mentioned earlier, we launched a new initiative to transition to a membership based concept with enriched content under rights offerings. Although still in its early stages, we see stronger long term potential in IP driven offerings through enhanced benefits and integrated rights. First, SVIP membership continue to stay stronger adoption and retention thanks to our refined operations and innovative benefits. For example, we appoint VCG Tanjianci as our first cross platform SVIP family brand ambassador. This TTG partnership significantly enhances the persona value and public awareness of our premium offerings. In addition to further diversion aid over SVIP premium offerings, we continue to expand fan base benefits and audio privileges. On the content front, we introduced China Limited edition digital albums combined with physical collectible for leading K Pop artists such as Blackpink, Esso and Ivy. On the platform and the product front, we launched the TME Connect enabling hi Fidelity audio transmission across multiple devices. Kugou Music launched Live House Sound Effects and QQ Music further deepened the collaboration with Dolby to become the first music platform in China to support Dolby SA4 audio format. We also extended this immersive experience to Dolby House, an offline audio experience space for artists like Charlie Pulse, Silence One, Wang Sulong and Blackpink. Second, we pioneered more IP centric memberships to capture diverse user demands. A key milestone this quarter was the launch of our inaugural fan club Romantique Universe with Silence one one so Long offering priority ticket access, unique content and artist centric perks that resilients well with fans. At the same time we continue to expand artists reach on. Baidu welcomed Shurui Qi as Baidu's first Sony Music Artist and enhanced product features such as in chat search functionality with further strengthened user engagement and retention. Last but not least, we are unlocking incremental growth by scaling IP driven offline offerings, particularly with artist merchandise. For instance, we served as the sole distributor for Transformers Project Top Deng Lung Shao, Nian Zhuo He's debut physical album and other sold out merchandise such as Yuqi Song, Yuqi Tsukigi, New Year Gift Box and Hu Xia super plus collectibles. Beyond merchandise, we brought the Idol City of Senses China. They built exhibition to life in collaboration with Cube, delivering a multidimensional immersive experience for fans. To conclude where challenges remain, we are confident in our path forward. We will continue sharpening our competitive edge to strengthen our vibrant platform, one that attracts users, deepens engagement and unlocks new monetization opportunities. With that, I would like to turn the call over to Shirley over CFO for a deep dive into our financials.

Shirley Hu (Chief Financial Officer)

Thank you Ross and greetings everyone. Let me now turn to our financial results in the challenging environment. We have delivered steady financial Results in the first quarter of 2026 with 7% year on year revenue growth. Revenues from music related services grew 12% year on year driven by solid growth in revenues from membership services and offline performances related services supplemented by growth in revenues from advertising services. Revenues from membership services were RMB 4.6 billion up by 7% year on year in the first quarter of 2026. This quarter we started to presenting membership services revenues to be better reflected the nature of our membership business. Revenues from membership services primarily consist of membership fees paid for membership benefits and privileges within music related services. Over time, some IP related benefits such as artist merchandise and offline performances have emerged as key drivers of SVIP adoption. Additionally, our newly launched fan club membership further enriches fan experience and is a great example for innovation, integrated product, voice content and the platform strategy. These collaborations we have built with the strategic artists across music promotion, offline performances, artisan related merchandise and band club membership provide more immersive appearance for fans and help enrich privileges of our membership programs, building win win relationships for everyone. Additionally, we delivered solid year on year growth in advertising revenues driven by growth of ad supported model and sponsorship advertising. Our increased number of paying users and the churn of casual users created more challenges for our advertising business in the increasingly competitive market. We have taken actions and improved ads exposure, lowered entry batteries and often more engaging interactive ads tasks for users as our engage growth engine offline performances related services have achieved Strong results in Q1. We have positioned our strategic artists such as Willpan, Silence Run and Guy on high profile stages across the master and overseas markets, effectively expanding the global influence and further unlocking the long term commercial value. Also, we have hosted the flagship concerts with leading K pop groups including BabyMonster and NCT Wish. Revenues from Social Entertainment Services and others were only 1.4 billion down by 11% year on year. Our gross margin in Q1 2026 was 44.9% up by 0.8 percentage points year on year. The year on year increase was primarily due to increase in revenues from membership services and advertising services along with decreased channel fees. Additionally, we are happy to see cost efficiency improvement for IP related services in the long run. We are confident that our gross margin will remain competitive in the industry, although it may fluctuate quarter over quarter due to seasonality. Moving on to operating expenses, they amounted to RMB 1.2 billion representing 50.3% of our total revenues in Q1 2026 compared with 15.5% in the same period of last year. Selling and marketing expenses will be 271 million up by 36% year on year. In response to the competition and to mitigate the impact of user churn, we increased channel spending this quarter. Operationally, we have improved the relevance of target audience while keeping high ROI level in the industry. Going forward, we expect to dynamically adjust our channel spending strategies according to evolving market conditions with ROI requirements. Meanwhile, we expect to increase content promotion and continue to provide high quality content to our users which concurrently helps guru users on our platform. General and Administrative expenses were RMB114 million and remained relatively stable compared with the same period of 2025. Our net profit attributable to equity holders was RMB 2.1 billion compared with RMB 4.3 billion in the same period of 2025. As we have recognized again of RMB 2.4 billion are deemed the disposal of an associated in the first quarter of 2025. Our diluted earnings per ADS this quarter were only 1.34. This quarter we started disclosing non FIS metrics. Adjust the EBITDA to better reflect our core business operation. Results For Q1 2026, our adjusted EBITDA was RMB 2.8 billion, up by 10% year on year. Non obvious net profit attributable to equity holders of the company was RMB 2.3 billion, up by 7% year on year. As of March 31, 2026, our combined balance of cash equivalents, term deposit and short term investment was RMB 41 billion as of March 31, 2026 as compared to RMB 38 billion as of December 31, 2025. This combined balance was affected by changes in the exchange rate of RMB to USD at different balance sheet dates. In March 2026, we declared a cash dividend of per ordinary share or USD 0.24 per ADS for the year ended December 31, 2025 and the cash payment for the dividend of US dollar 317 million was made in April 2026. In addition, as part of our long term commitment to shareholder returns, we plan to complete the two year stock repurchase program that we announced in March 2025 on time. Finally, I'll conclude with some remarks on the outlooks looking ahead. While challenges exist, our long term strategy and commitment to investment in content and technology remain unchanged. We continue to focus on IP development for the long run, health of our business and industry and through comprehensive collaborations with our strategic partners, we will continue to bring new benefits and privileges to our users and create more innovative products. All these factors enable us to build a richer and more dynamic music and entertainment ecosystem. This concludes our prepared remarks. We are now ready to open the call for questions.

OPERATOR

Thank you Shelley. If you are dialing in by phone, please press 5 to ask a question and then 6 to unmute yourself. If you are accessing the call from the Tencent Meeting or Vote meeting application, please click the raise hand button at the bottom left for the participant. For the benefits of today's call, please limit yourself to one question and then if you have more you can go back to the queue. The first question comes to the line from Lincoln Kung from Goldman Sachs and Lincoln. Your line is open.

Lincoln Kung (Equity Analyst)

You take a holistic approach of the ecosyste. Thank you very much for giving me this opportunity to ask first question just now. First of all, congrats on the good performance in Q1 and just now you said you're going to take a holistic holistic approach. Also make two use of whole ecosystem to improve our business. My question first of all is about the revenue guidance for the remainder of 2026. Give us an outlook on the member and non member ship business and what are key drivers for future growth and especially as we know that the completion remains intense especially for the membership businesses. And speaking of the ecosystem, we have noticed that the SAMR approval still has been approved by the regulator and can give us some update on how it can improve our performance in the whole ecosystem. Thank you Lincoln for a question. First, I want to say a few words about the guidance for the remainder of 2026. Despite a challenging environment to achieve steady performance in Q1, this is attributed to our content plus platform due engine strategy which has helped us build an irreplaceable one stop music entertainment system. This quarter non membership growth was robust and our performance related businesses once again achieved a triple digit year on year growth. However, competitive pressure remains significant. Disorderly price competition within the industry coupled with the rampant issue of pirated content driven by AI has introduced uncertainties regarding future revenue growth of traditional framing services. Moving forward, our operational focus will center on three key areas. First of all, strengthening enforcement to prevent AI from becoming excused for infringement. In response to industry chaos, we have established a dedicated rice production mechanism to resolutely safeguard the legal interests of our platform copyright owners and creators. We welcome tech innovation, but we'll do everything in our power to suppress song-washing and other infringing behaviors. . Second, expanding top of funnel traffic through deeper integration with the tencent ecosystem April this year we entered into a deep strategic partnership with WeChat channels integrating short form video with music consumption. WeChat channels users can now jump directly to QQ music with one single click when they discover music they like. This creates a seamless connection from discovery to legitimate listening, collection and high quality consumption while providing music creators with greater promotion and exposure opportunities. Third, leveraging our flourishing IP ecosystem to solidify the one stop music consumption mindset. Years of accumulation have provided us not only with a massive library of premium content, but also with the creators behind the hits and the loyal fan base that follow them. To fully unlock the long term value of this ecosystem, we're broadening our competitive advantage through two dimensions, IP expansion and value deepening. First, expanding the IP matrix while continuously expanding our matrix of partner artists. We're also building our in house artist system. Currently our ecosystem features numerous talented artists. The second is extending value chains. Establishing an in house artist system allows us to flexibly integrate entire industrial chain from music creation to commercial licensing and brand collaborations, significantly improving IP monetization efficiency. Taking our strategic partnership with the Silent Swan as an example, our collaboration has evolved from early digital release rights to organizing concert tours and selling physical merchandise. This quarter we also co launched our first fan-based membership service, building a dedicated artist centric fan experience that includes priority entry and unique fan benefits. Looking at a year as a whole, we expect some short term volatility in a growth rate of our membership and advertising business due to competition, but we will try to be proactive in safeguarding our copyright try to divert more traffic from the ecosystem. In the long run. We remain optimistic about our comprehensive IP based monetization and which we expect to maintain steady growth. We just received a notice for the approval from SAMR and along with the Tencent Group, TME and Tencent Group will follow strictly the requirements of SANR and honor all the commitments to ensure the transaction will be proceeded accordingly and legally.

OPERATOR

Thank you. And the next question comes from Alicia Yap from Citigroup. Alicia Peace. Alicia, your line is open.

Alicia Yap (Equity Analyst)

Are you. Are you with us? Oh, hello. Yeah. Can you hear me now? Yes we can. Okay, So thanks management for taking my questions. My questions is related to subscription can management shared some detailed about the subscription tiering split. What is the growth status for the advertising subscription user and also what are their retention rate and the contribution and the growth potential from those newer subscription like the fan club and bubble? Will this become a meaningful driver for the blended ARPU growth in the future and then with the pending approval of the Himalaya transaction, any preliminary planned on the long form audio subscription plan, you know in the future. Thank you.

Ross Liang (Chief Executive Officer)

First of all, tthe posratesioning of TME this year is to make a one stop music service platform. Kugou Music and QQ Music has been developing for over two decades and over tthe years we have been expanding our business based on music. For years we have evolved from doing tradratesional streaming business to a broader category of business. As to your question about user retention for different tiers of users, we have not disclosed this number but in general rates's very stable. Tthe design of a multi tier member system is to meet demands of different kind of users. For light users or not those very active users, we're using like free and ad supported approach to improve retention and tap ttheir commercial value. Basic music service is mainly for tthe users who have a relatively high demand for music and also for those sticky users. For those deeper value users like our products like Fan Club and Bubble are for those users who have a more diversified demand. I believe in tthe future tthe IP based music subscription not just a music Subscription but also tthe audio subscription business including like book listening or kids audios. This IP based content will create a bigger commercial opportunratesies and also improve our retention rates. All in all in tthe future we will continue to build IP based one stop music service platform and wratesh all of this we can continue to improve user retention and tap more business opportunratesies. And this is tthe very part that provides tthe most value compared wratesh our competratesors.

OPERATOR

Thank you. And the next question comes from Wisdom Yang. Your line is open.

Wisdom Yang (Equity Analyst)

Thank you very much. My question is about member services. We noticed that this quarter, if you look at where year on year growth that's fairly good. But if you look at quarter over quarter it's going down slightly. I'm just wondering what is the reason behind because as far as I can tell this business doesn't seem to have a very strong seasonalities and probably I guess it's because Q1 is a relatively low season. But apart from the seasonalities is there any other possible reasons like competition? Some churns of users or some higher value users are changing their packages from high packages to some cheaper packages. And could you also give us some like guidance of the future quarter over quarter growth for this business? Well first I want to respond to your question by saying it's not because some SVIP members have chosen some lower or cheaper packages or because of the churning of users. As you can tell that our SVIP member is still growing steadily so our medium to high value users are still there. Well, as you mentioned, this quarter over quarter slight decline is mainly because of the competition on the streaming music streaming business and especially for those free and ad supported members. We've observed some phenomenon in the market that deviate from the business essence. Some other competitors are using AI to quickly fill their music libraries and trying to use the aggressive strategy to divert traffic and users into their platform and they're also fighting for those lite users. Well, we noticed that this is a very important moment for the industry because such behavior is an exhaustion of the economic value of this industry and also they are consuming their own business value. Amid this environment. As we said in the beginning we will stay focused on building a one stop comprehensive music service platform. We provide monthly subscription music services on two music platforms, Kugo and Kiku Music. But users on Kugou platform is more price sensitive and promotion sensitive and well in face of multiple choices and these kind of users are easily flown away. Well, this will have some impact on the new membership growth on Kugou Platform. In this context we have used a free and ad supported mode to reduce a barrier to entry. Kugou concept version is also posting very robust growth in first half of this year because we're adopting a more flexible pricing and content to retain these live users. YouTube Music is relatively more comprehensive platform. So the overall operational data on QQ Music platform is steady and healthy. The overall value of users on this platform is even increasing. The recent release of the collaboration between WeChat channels and QQ Music will further consolidate our competitive edge. Lastly, our offline performance or experience or multi device user experience and scale remaining to be our competitive edge which provide a solid base for us to further tap commercial opportunities.

OPERATOR

Thank you. And the next question coming from Mizuho Huawei where your line is open.

Mizuho Huawei

To be Sangha. Cost ratio one time. Well thank you very much. We noticed that the gross profit margin this year actually has grown a little bit quarter over quarter. I'm just wondering in this case would you change your overall year's guidance on gpm? Because I remember last quarter's quarter is that the overall year's gross profit margin will stay flat or even decreasing slightly. And we also noticed that the sales selling expenses actually increased a bit. You said because of the like the deeper collaboration with tencent ecosystem. I'm just wondering this cost ratio is it one off or.

Shirley Hu (Chief Financial Officer)

She didn't post-war that the commodity? Well if you look at yoy in Q1 we've had a very good GP margin mainly because of the following reasons. Number one is in Q1 we see a continuous growth of membership and as business which contribute positively to our market. Well despite the fact that the IP related business is growing very rapidly in terms of the overall contribution to the revenue and especially if we look at our brokerage business is growing exponentially and its proportion overall contribution to the revenue is also going up. And you can also tell that our offline performance and event business through that we expect accumulated lots of experience and improved the operational efficiency. So overall the IP related business impact on the gross profit margin is close to zero. The rigid cost control also generates very good results overall. Well if you look at quarter over quarter the rise of GP margin is mainly because of the seasonality of it related business because if you look at Q1 the contribution from this business is far lower than Q4 last year. Because it generates some positive impact over gross profit margin and also offsets the impact of the seasonality reasons of membership and advertising business. Well as to our expectation over future revenue growth we expect to have a gross profit margin on par with last year in Q2. In the long run we expect some slowdown of the growth rate from membership and advertising business. But we will adopt a very rigid cost control measures by reducing our resource allocation to low value, less effective content and plus the reduction of channel fees from Apple Store. And all of this will provide enough room for the resiliency of our profits. Well as our IP related business is growing robustly, which will have some structural pressure on our overall gross profit margin. But we will keep optimizing our cost and adopt project basis product basis measures to control cost. And also we'll use our content plus platform strategy online plus offline and also improving increasing the percentage of contribution of our own proprietary IP business. And with all of these measures we can maintain a steady profit. In the long run. We are very confident to stay at the front line for margin in the industry. Well, as to the question about selling expenses, in Q1 it went up by 36% year on year. That's mainly because of the intensifying competition in the industry. And in face of such intensifying competition, we have strategically increasing our expenses in user acquisition for our music platforms. We're using different channels like bytedance to acquire higher value users and we're also using the like art of artists to acquire more high quality, high value users. In the meantime, we're also promoting our proprietary content, increase the music exposure and also increase the core competitiveness of our own content. With all of these measures, we try to increase the stickiness of our users. With the tencent ecosystem. This year we will allocate some strategic resources with WeChat channels and we will help WeChat channels establish its own music system. We will work with the top tier musicians, singers and studios and we will do some joint promotions and even releases with them so as to create and improve the overall efficiency of our collaboration. We expect that in the future with the materialization of the WeChat channel's music platform plus our own content contribution and we will achieve win win results on two platform. For the whole year. The selling expense will have a reasonable rise which will be in line with our previous year guidance. In the falling, of course it will not be growing as fast as 36%.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.