Qutoutiao Inc (NASDAQ:QTT) Q2 2020 Earnings Conference Call - Final Transcript
Sep 21, 2020 • 09:00 pm ET
Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Zoe Deng of KeyBanc Capital. Please ask your question.
Thank you management for taking my questions. I'm asking the questions on behalf of Hans Chung. So I have two questions. My first question is about third quarter guidance. So the third quarter guidance is much lower than the consensus because of the CCTV Report issue. But even when we add back to two weeks run rate due to the temporary removal of Qutoutiao app on Android app stores, third quarter guided revenue is still well below consensus, so could you elaborate on the causes for that. Does ARPU get impacted because we clean-out those non-compliant ads.
And then my second question is, although this quarter revenue is guided down quite a bit from the second quarter, operating loss is still expected to be flat sequentially. So where are we cutting the most in expenses. Thank you.
Thank you, Zoe. These are very important questions. So regarding your first question on Q3 guidance, I think as we have said in the prepared remarks, both us and our advertising partners are quite cautious post the CCTV Report and we took extraordinary measures to make sure that our content and ads are compliant. I would say that we went above and beyond what the laws and regulations as well as industry practice would normally require in China. And the second reason and I believe more important reason is, as we have said repeatedly in previous earnings calls is that we want to take a more balanced approach between profitability and growth.
So this means three things. Firstly that, because we took and will continue to take a modest prudent approach our investment, especially on the marketing side and we would require a good ROI for every marketing dollar we spent. So we are likely to see a more subdued growth trend in terms of both revenue increase and user base expansion in the near term rather than the neck-breaking speed we have experienced back in 2018. Second, we want to make sure that we get to a breakeven on some profitability by the end of this year and this is the key priority for us and we will continue to see topline growth going into Q4 and beyond, but the more important target for us right now is to get a positive bottom line. And the last but not least, we want to further shift the user base mix to our users attracted to our platform by content, be it newsfeeds, short videos or novels and etc, we want our loyalty program to stimulate and encourage our users to stay engaged with us, but we don't want them to be on our platform purely for the loyalty points. So as we have said before, we believe content and recommendation algorithms are the key pillars for our future growth and the user base built out these