Renren's (RENN) CEO Joseph Chen on Q1 2014 Results - Earnings Call Transcript

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 |  About: Renren Inc. (RENN)
by: SA Transcripts

Renren (NYSE:RENN)

Q1 2014 Earnings Call

May 21, 2014 9:00 pm ET

Executives

Ashley Law -

Joseph Chen - Founder, Chairman and Chief Executive Officer

Hui Huang - Chief Financial Officer and Principal Accounting Officer

Jian Liu - Chief Operating Officer and Director

Analysts

Cynthia Jinhong Meng - Jefferies LLC, Research Division

George Meng - Macquarie Research

Binnie Wong - BofA Merrill Lynch, Research Division

Gregory Zhao - Barclays Capital, Research Division

Amanda Chen - Morgan Stanley, Research Division

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2014 Renren Inc. Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, the 22nd of May 2014. I would now like to hand the conference over to your first speaker today, Mr. Ashley Law. Thank you, sir. Please go ahead.

Ashley Law

Thank you, and welcome to our first quarter 2014 earnings conference call. Joining me on the call today are Joe Chen, Chairman and Chief Executive Officer; James Liu, Chief Operating Officer; and Hui Huang, Chief Financial Officer.

For today's agenda, management will discuss highlights for the first quarter of 2014. This will be followed by a question-and-answer session.

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.

Also this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Finally, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars.

I will now turn the call over to our Chairman and CEO, Joe Chen.

Joseph Chen

Thank you, Ashley. Good morning, good evening, everyone. Welcome to our earnings call. Let me provide to you update our core key businesses.

First, on Renren. In the past first quarter, we have made good progress on our strategy of refocusing on college students and the young generations in China. Our new product features, brand positioning, the off-line promotions and events, we have delivered [ph] a clear and consistent message that Renren is dedicated to this important demographic group. We're pleased to see some early signs of positive market response to this strategy. First of all, our monthly active users rebounded to 51 million in March compared to 45 million a quarter ago. Although this MAU number is still slightly below the one in the same period of last year, we consider it an encouraging trend, particularly given we have tightened up spending and reduced the e-mail recall campaign level compared to last year. Meanwhile, we also have more advertisers, agencies and other stakeholders approaching us to express interest in learning how to better understand and to serve the targeted young audience through Renren. That said, we're fully aware that the intense competition in the China -- Chinese Internet industry, in general, and in the social networking space, in particular, is still formidable. But uphill battle against the competition with some of the largest Chinese Internet companies is far from over. They will continue to pressure us on both user growth and engagement, as well as modernization fronts. Therefore, we're mentally prepared to continue to work very hard and to continue to invest substantially in Renren.

For example, in the first quarter, we released 14 new updates on Renren mobile apps across various operating systems. Among the new product features, a good example is Campus Plaza or [Chinese], which is a dedicated tab [ph] for college students. On this tab [ph], their functions, such as flea market for students to exchange second-hand goods on the same campus; or campus life, which is a BBS, Bulletin Board System, on which students from the same school can discuss topics of common interest. Our product is further differentiating now to be more mobile and youth-centric [ph].

While we're on the topic of Renren, let me also provide a quick update on our advertising business. The first quarter is traditionally a low quarter for online advertising business due to the Chinese New Year holiday and the winter low season for us. While we continue to see a year-over-year decline in advertising revenues due to the traffic migration to mobile and the competition, we're encouraged to see that mobile advertising continues to ramp up. Even though that [indiscernible] amount is still small, in Q1, our mobile advertising represented 11% of our total brand advertising revenue on Renren compared to 8% in the previous quarter in Q4 2013. And as we have entered Q2, we feel that interest from our clients on mobile advertising solutions has increased notably. If this trend continues, mobile advertising will represent a meaningful portion of our advertising revenues later this year.

Now let me shift from Renren to our other 2 businesses: gaming and 56. On gaming, we're now the first quarter into a turnaround process following our previous restructuring effort started in November last year. As communicated earlier, while the restructuring is necessary and beneficial to our gaming business's long-term prospects, we expect organic revenues will decline or stagnant for a few more quarters. Therefore, for the past first quarter and the second quarter so far, our gaming revenues continue to be under pressure. While we are aware of the significant impact our gaming business has brought to our overall financials, we have also learned to respect and appreciate the rules of the gaming business. It's very fee-driven, and it requires true expert talent, patience and sometimes a stroke of luck to produce or license fee titles.

Now let me update you on 56.com. We're pleased to report that 56 traffic continues to grow at a healthy pace, as daily unique visitors enjoyed over 60% year-over-year growth in the first quarter this year. In particular, we have seen very strong momentum in the amount of daily UGC videos uploaded, which almost doubled compared to a year ago. 56's consistent focus on UGC content has attracted a wide range of users to upload and share their personal videos on the site. The existing big library and the strong growth in UGC content on 56 will help it to better position in the mobile era, where videos are also moving to mobile rapidly. While 56 enjoys traffic and user growth, nonetheless, we have to acknowledge that its modernization is still lacking. For brand advertising, UGC content in the Chinese video industry is very under-monetized compared to professional content. It will take some time for more advertisers to adopt the concept of advertising on short UGC video clips, in addition to long TV series and the popular movies. Meanwhile, the monetizations through other services, such as the virtual talent show, has become so competitive that its economic structure has been changed rapidly. That said, we're very excited about 56 traffic growth, particularly given that overall online video industry in China remains ferociously competitive, and the professional content cost is still unreasonably high. I want to thank and congratulate our colleagues in 56 for achieving this. It's not easy to be a unique and a growing player in China's online video industry with a consistent UGC focus.

Before I finish my operational update, let me quickly touch upon Jingwei. We talked a bit about this professional social networking initiative in our last earnings call. Over the past 2 years, we have built a database of high-quality contacts through our Jingwei mobile business card reader service. We have since introduced social features to encourage more white-collar workers to interact, share and connect. Meanwhile, we have also added campus recruiting business by leveraging Renren's university demographics. So now Jingwei covers a comprehensive suite of career needs, from fresh college students to young professionals and to high-end management talents. While this business is still at an early stage, we're excited about its long-term potential and encouraged by some of the progress we have made. For example, the number of high-quality professional contacts in our database has now grown to 16 million. But as the overall professional SNS in China is still at a very nascent stage, we'll need to continue to invest to grow this business.

In summary, in the past quarter, we have executed largely according to our plan for our various businesses. For Renren, we refocused on college students and young generations and centered our product development and marketing promotion efforts around this focus. For gaming, while [indiscernible] expected consequence of previous restructuring, I remain committed to this business and the positive and the long-term prospects. For 56, our consistent focus on UGC has paid off in terms of traffic growth and achieving a unique position in the highly competitive video industry in China.

That concludes my operational update. Let me now pass it over to Hui for the financial review.

Hui Huang

Thank you, Joe. Hello, everyone. Let me provide you the financial highlights for the first quarter of 2014.

Our total net revenues for the first quarter were $24.9 million, representing a 39.9% decrease year-over-year. Now let me walk you through the major revenue components and the trends.

First, Renren segment net revenues, which include advertising revenues and IVAS, or Internet Value-Added Services revenues, were $12.2 million, representing a 17.3% decrease year-over-year. Online advertising revenues were $7.8 million, representing a 19.2% decrease year-over-year. IVAS revenues were $4.4 million, representing a decrease of 13.6% year-over-year.

Next, gaming segment net revenues were $12.7 million for the first quarter of 2014, a 52.5% decrease from the same period last year. The decrease was due to previously launched games having reached mature stages and the earlier discussed [ph] delay of games release.

Now gross profit. Gross profit in the first quarter was $8.7 million, a 65.2% decrease year-over-year. As a percentage of total net revenues, gross margin decreased to 35% in the first quarter compared to 51% in the same period of last year, primarily due to the decrease in net revenues.

Operating expenses in the first quarter were $38 million, a 16.7% decrease year-over-year. The decrease in total operating expenses was mostly due to the decrease in marketing-related expenses and promotions for online games, as well as reduction and a decrease in R&D and personnel-related expenses.

Next, loss from operations in the first quarter was $29.2 million compared to an operating loss of $20.4 million in the corresponding period in 2013. The increase in loss from operations was primarily due to the decrease of our revenues.

Our net income in the first quarter was $32.3 million compared to a net loss of $3.1 million in the same period of last year, which was primarily due to the $57.1 million gain on the disposal of our remaining asset interest in Nuomi.

Adjusted net income, a non-GAAP financial measure, was $36.1 million for the first quarter of 2014 compared to $0.5 million in the first quarter of 2013. Adjusted net income is defined as net income excluding share-based compensation expenses, amortization of intangible assets and impairment of intangible assets.

As of March 31, 2014, the company had a cash, cash equivalents and short-term investments of approximately $985 million as compared to $855 million as of March 31, 2013. The increase was mainly due to the sale of Nuomi and the realized gains on short-term investments. As of May 20, 2014, Renren has repurchased approximately $22.4 million ADS shares under the current repurchase program, with the total consideration of $68.4 million. The current share repurchase program will expire on June 27, 2014. Our board has recently authorized another share repurchase program of $100 million for 1 year effective from June 28, 2014.

Finally, let me provide you our top line guidance for the second quarter of 2014. For the second quarter, we currently expect to generate revenues between $21 million to $23 million, representing a 47.1% to 51.7% year-over-year decline. This forecast reflects our current and preliminary view, which is subject to change.

This concludes our prepared remarks. Now we would like to open the call for questions. Operator, please go ahead.

Joseph Chen

We would like to thank all of you.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Cynthia Meng from Jefferies.

Cynthia Jinhong Meng - Jefferies LLC, Research Division

I have a couple questions. First one is the percentage of advertising revenue now generated from mobile, can management give some metrics or feedback from advertisers that you could share with us? And also the percentage of online games revenue coming from mobile games app now, any revenue contribution from self -- the revenue contribution from self-developed games? And if management could also elaborate a little bit more about your strategy on mobile games, given the very fierce market competition, that would be great.

Hui Huang

Cynthia, thank you for your questions. This is Hui. I will take on your first question related to the mobile advertising. As we mentioned in the earlier prepared remarks, we do see a visible -- visibly increasing interest from our brand advertising customers in mobile advertising solutions. And from the numbers in the fourth quarter last year, that percentage for mobile advertising is about 8% for the total brand advertising revenues. And during the -- in the first quarter, I think we see 11%. And then right now, in the middle of second quarter, from the orders we have seen so far, we have seen a further increase. And also from all the anecdotes and all the inquiries of some various advertising customers, we clearly feel a more increasing interest in the mobile advertising solutions. And in terms of the format we provide to our customers right now, those are primarily top banners, sponsored newsfeeds and bottom banners. So those are the primary formats that we offer at this moment.

Joseph Chen

Yes, Cynthia, let me add one more point on that question, which is the mobile advertising. I think the biggest addition for the past quarter relative to before is the new advertising format, which is skewed towards helping small, medium startup [ph] companies or companies who want to have mobile presence online to promote their mobile apps. And that is a proven moneymaker for companies like Facebook. And we are just starting to add this line [ph] of business. It's self-service, and any app can basically deposit money and start promoting under you [ph].

Jian Liu

Cynthia, this is James. To your second question on mobile gaming. The first part of the question, today, the majority of the gaming revenue still comes from self-developed games. That's very consistent with our past because we relied very heavily on in-house developed games mostly over the past couple of years. This is still the case until the first quarter. In terms of mobile portion, a percentage of total gaming revenue, once again, we don't split it out, but we see an increasing portion of our revenue coming from mobile for sure. You're right about the competitiveness of the mobile gaming market. It's becoming increasingly competitive. But at the same time, it's also a market that's growing rapidly. What we have seen market trend is the market is actually, overall, mobile gaming market is going to grow between 100% to 150% compared to last year. And this trend is expected to continue into the next year, right? So we see this as a tremendous opportunity, and we're doing a couple of things accordingly to gear our strategy more towards mobile gaming. Number one, we are bringing in more talents in the gaming market, specifically in the mobile gaming markets, to beef up our team, especially after the restructuring that took place in Q4 last year and a little bit of that in the first part of Q1. The second thing is, historically, we have relied very much on in-house developed games for our gaming operations. We have decided that the current market, depending on who you ask, right, there's anywhere between 5,000 to 10,000, the studios out there. And amongst them, there's definitely a number of really high-quality, good studios out there. So we are actually -- we have decided to revise the strategy a little bit to include reaching out to third-party gaming companies and coming up with very flexible policies to work with these guys, from licensing to investing into these guys. This is part of our strategy for now, and we are executing games with this strategy aggressively as we speak. The third thing is we still believe the historic investment into the R&D is critically important because R&D -- with the R&D and our own in-house developed games as a key competitive part of our core competence going forward, so we will continue to emphasize that.

Operator

Your next question comes from the line of George Meng from Macquarie.

George Meng - Macquarie Research

My question is related to your IVAS revenue. So first of all, I wonder how much of your IVAS revenue in the first quarter is actually coming from Woxiu. And also extend that a little bit, I noticed that your second quarter guidance, the revenue guidance implies a quarter-on-quarter decline. I just wonder, which part of your businesses is actually you're seeing some weakness into the second quarter? Is that really related to the regulatory environment that caused the Woxiu business to decline into the second quarter because, traditionally, second quarter should be a strong quarter compared to first quarter in terms of advertising, right?

Hui Huang

George, this is Hui. Thank you for your questions. First of all, regarding your question on the first quarter revenue contributed by Woxiu, that's close to $3 million in the first quarter coming from Woxiu business. And in terms of your second question related to the second quarter guidance, if you look at our major revenue stream, at this moment, approximately half of our total revenues comes from games; and close to 30% from advertising; and the rest, close to 20%, comes from IVAS. So let's look a little bit deeper at each of the 3 major revenue streams. In terms of games, as both Joe and James mentioned early on, as well as expected and communicated previously, we are still going through the expected impact of restructuring, which may last a few quarters. Old games have matured, and we have not launched new games yet because I think any new game launched will be back-end loaded towards second half of this year. So as of this, the second quarter for gaming business will continue to see pressure -- downward pressure on the revenues. So given gaming contribute so much a portion of our total revenues, so maybe you can understand that if we see the decline on the gaming business, it will have a big impact on the total consolidated revenues of the company. So that's the first revenue stream, gaming. The second revenue stream is advertising, which was close to 30% in the first quarter. Majority of our traffic on Renren is on mobile, which is still at very early stage for monetization. Yes, we've been seeing some increased interest in mobile advertising, but nevertheless, in terms of absolute amount, that's still at a relatively small stage. So -- and also given competition, so we'll continue to see a gap between where's the traffic versus the monetization. So for advertising, we -- it's not growing as strong as we'd like it to at this moment. And then the last bit, which is close to 20%, comes from IVAS. The IVAS really comes from 2 parts: one is the virtual gifts and memberships [indiscernible] on Renren; and the other part is from Woxiu, the virtual talent show, and 56. Actually, majority of the IVAS is from Woxiu. While 56, in general, enjoys a very good traffic growth, but for Woxiu, given the intensified competition in this business model, as well as we mentioned earlier on that we see the whole sector -- the economic structure of the whole sector is being changed very rapidly. We may consider some new strategies for this business in order to help us gain more market share. But in the meantime, in the short term, we may have to decrease the monetization effort on that in order to further strengthen our leadership in that particular business. So as a result of all of this, that's why we offer the guidance for the same quarter, as mentioned in the call early on.

George Meng - Macquarie Research

Okay, cool. That's very helpful. And I have a follow-up question, if I may. So I just wonder for -- because you updated your mobile Renren app quite frequently. But do you see any incremental benefit in terms of cross-selling your mobile games using this as mobile Renren platform? I mean, previous, definitely, you are cross-selling, but is it -- in terms of cross-selling, is it going up or you are not really seeing any improvement, still focusing more on the user experience?

Joseph Chen

This is Joe. We're probably not cross-selling as much as we would like. I think there are a couple of reasons. One is that Renren platform is most ideal to promote social mobile games. And currently, we don't have any good titles on it. And we have some games we licensed from Korea and some [ph] -- with the social features. So we're promoting those in gaming center. But even though they are popular, but they don't make a lot of money. So in terms of cross-promotion, if we see something with the social feature that users would be able to fully leverage on the social platform of Renren; secondarily, if the ARPU is high enough, then we -- if these 2 conditions are met, we're going to promote the game really intensively.

Operator

Your next question comes from the line of Binnie Wong from Bank of America.

Binnie Wong - BofA Merrill Lynch, Research Division

I have 2 questions here. First is on the advertising business. Can you give us some color on the number of advertisers this quarter and also maybe, I guess, a rougher count on how the brand ad and SME split? And then second question is on the declining user base. Despite there's a slight rebound this quarter, what are any like strategic initiatives or how are management seeing the trend going forward to improve the users?

Hui Huang

Binnie, this is Hui. Thank you for the questions. Firstly, in terms of your question on advertising. Majority of advertising revenues come from brand customers, which historically and for this quarter is around anywhere between 80% to 90%. There's a little bit of fluctuation over the quarters, but most of the time, range by range. And the other 10% to 15% comes from SMEs, the smaller customers. So that's to your first question. The second question regarding number of advertising customers, typically, again, the number will vary across quarters, given the seasonality, but most of the time, our advertising customer for brands is around 90 to over 100 or 150 for big brand customers. This does not include hundreds of -- or sometimes thousands of smaller SME customers.

Joseph Chen

So, Binnie, this is Joe, answering your second question on the user base. So basically, our new updates nowadays are much higher quality than previous one, meaning that they have much less problem rates and rework. And user feedback has been very positive and also some promising college-centric features being launched [indiscernible] on that. But overall speaking, in market is really, really competitive. And we did pretty well in the early days of the social networking industry and also on PC. Ever since the industry moving into mobile and when social networking is forced to compete with mobile messaging and a Twitter type of service, the product advantage of being both a sharing and a communication platform is, generically, globally, is reduced for the very reason that communication service on mobile has even a bigger networking fact than PC because if somebody runs a dominant communication network on mobile, and it sucks up all your contact list in your address book, that's basically a native -- it's basically sort of like you're having a fight in a continent, and the -- basically, the battleground is leveled. And then you move to another continent, and then there's local tribes, someone will decide if they work for one particular group, right, and then you'll be -- and that particular tribe is the one I call address book. And different type of app leverage on address book in a different way. I mean, so basically, I've seen that's why our battle with major competitors has been so fearsome and causes so much pain. But on the other hand, given that and understanding the nature of this business, we think that refocusing college campus and high school students, which is -- which, overall, is a pretty large audience in China, probably to the north of -- definitely to the north of 150 million people, most active Internet users in China. If we somehow figure out a way to offer services that's particularly appealing to them on mobile, it's not necessarily -- it could not necessarily be a communication service. With a communication service, they might still use other services. But if the interest is to social and build communities among peers and finding out what's going on, on campus locally, and if we can do those type of things well, I think we're going to have a defensible barrier around our user base with multiple product features that's most relevant to them but not necessarily relevant for people outside of that demography. So that's our current thinking, that's why -- that's what drives most of the issue around here.

Operator

Your next question comes from the line of Gregory Zhao from Barclays.

Gregory Zhao - Barclays Capital, Research Division

I have one question about our advertising business. So first, could management share some -- the advertising -- what's the advertising categories of key advertising contributors to both our PC and mobile platform? And we are shifting our focus to the college students and the young generations. So have you seen some -- any changes of our advertising -- advertiser mix?

Hui Huang

Greg, this is Hui. Thanks for the question. In terms of our advertising customer mix, it's fairly consistent and similar to the mix in the past, i.e. predominantly, the customers come from FMCG, IT, daily care, apparels and then, to a lesser degree, from auto and financial service industries. And these 5 categories represent majority of our brand advertising business. Regarding your second half of the question, given our recent refocus on college students and the younger generations, yes, it does further crystallize our positioning in the young target demographs. And as such, it will naturally increase the interest from advertising customers who also serve or target this group. For example, in the past quarter, in 1Q of 2014, the percentage of our advertising business coming from FMCG has further increased because, as you may understand, a lot of FMCG products are targeting young people. So we see a further business increase from that particular category [ph].

Operator

Your next question comes from the line of Philip Wan from Morgan Stanley.

Amanda Chen - Morgan Stanley, Research Division

This is Amanda Chen asking on behalf of Philip Wan. I have very quick questions here. First is regarding your mobile games. Could management give us some guidance on your online game pipeline in 2014? And also as James mentioned, that you are going to increase some talents of your mobile games in 2014, so could you give us some guidance of the R&D and the G&A expenses in 2014?

Jian Liu

Yes, thanks for the question. For the first part of your question, the pipeline for the rest of the year, we are -- as we mentioned earlier, we have 2 parts of the strategy: one is continue to self-develop games from in-house; and the second part is licensing or basically finding development partners from third-party studios to get access to outside games. For our in-house developed games currently in the pipeline, we have visibility to 4 titles that are coming up. And historically, you'll remember one of our key differentiation factors is the so-called cross-platform games. So for most of these 4 new titles that we would be launching, we would have both mobile and PC version, and PC version being the web version. So to give you an idea of sort of the pipeline and the schedule, towards the end of the second quarter, within the next 30 to 40 days, we will beta launch 2 to 3 of them, especially the PC version. The web-based game version, and they -- the theme of the games range from strategy games -- strategy RPGs. One of them is a strategy RPG game. One of them is an action game. And another one is a casual fighting game, side-scroll and casual fighting game. And we also have one more game, which is an SLG, which is coming out very, very soon. It will be beta launched on Renren, to answer one of the earlier questions that Joe was talking about, cross-promotion from Renren platform to game in July, one of our own self-developed games will be promoted on Renren, beta testing on Renren to see how it goes. And beyond these 4 titles, we'll also have quite a few titles being planned as we speak. And [indiscernible] battle game is one of the most successful themes that people see in the market, and that's definitely in our plan as well. At the same time, we have signed up 2 to 3 third-party titles. We plan to do way more than that for the rest of the year.

Joseph Chen

So this is Joe. Let me add one more point to the gaming pipeline question that is more like a general observation. It's -- I think James mentioned earlier, that as we move into the mobile gaming era, the nature of the gaming development has changed primarily because of the relatively low production value of average mobile game versus comparable web game and desktop-based client game. So as the production value decreases, smaller studios who are independent has gained an advantage over bigger companies with multiple studios in-house. So that's one macro shift happening to this game. So that's why we're diversifying our R&D from purely in-house to include outside R&Ds, which basically means we are licensing other people's fully developed or half-developed games and basically investing in their companies, so on and so forth. So to do well in that new environment, I think that management team needs to have ability to quickly see whether a game can be successful or not. So it's really a combination of gaming know-how, as well as investment judgment. And so this is a new type of activity that will play a more important role going forward on this business. But in the long term, I believe that company internal research, the amount [ph] of benefit of that, not only that once in a while you have a really high ARPU, high profitability game every few years maybe, but most importantly, increase your knowledge base and deepen your understanding of how games can perform now [ph] and, therefore, directly and indirectly helping the licensing process. So this is something -- a new business model and the way we see our business growing, and that's how we're going to build a new managing team for gaming business as well.

Hui Huang

And regarding your second question, which I think is about R&D and G&A expenses of our operations, as you see from our first quarter results, our total operating expenses showed those year-over-year and quarter-on-quarter reduction as we tighten up the organization and it better suits our current situation. And going forward, for the next few quarters, based on our current plan, we will not see any significant increase or variation of our R&D and G&A expenses because we have done several initiatives in the past few quarters. So I think right now, we'll feel probably that's the right size effort on the R&D and G&A front. But for sales and marketing, it may vary from quarter to quarter, depending on whether the new games will be launched. And as a result of that, we may need to have more promotion efforts for the games, also for potential new marketing or promotion campaigns for new features and the products on Renren. So in terms of our total operating expenses, again R&D and G&A, I think, will be fairly stable to the current level, and sales and marketing may see some increase if we have promotions for games or for new Renren applications.

Amanda Chen - Morgan Stanley, Research Division

Okay. It's very helpful. And I also have another question regarding your mobile. If possible, could you please give us some operational data of mobile business, such as the percentage of traffic from mobile and the mobile MAU?

Hui Huang

In terms of the mobile traffic on Renren, the time spent still represents almost 80% of our total media time. So from that perspective, it's predominantly a mobile-centric media already. And on mobile MAU, it's similar to previous quarters as well.

Operator

Your next question comes from the line of Mai Yu [ph] from ICDC [ph] International.

Unknown Analyst

I have 2 questions for quick follow-up. First, the full year buyback, we noticed that your buyback was pretty [indiscernible] for you. And also you have confirmed another share repurchase approval program of USD 100 million. Can you discuss a bit regarding your cash usage and the plans to do with this? After that, I will follow on with my second question.

Joseph Chen

Yes, so thank you for your question. We do repurchase when we believe our shares are undervalued, and the stock -- the price that the stock trades, for the past few years, we think that they're undervalued to an intrinsic value. That's why we do stock repurchase. And also comparing to our cash balance, we think that amount spent on the share repurchase is fairly reasonable.

Unknown Analyst

Got it. And my second question, a much broader question for Joe, and can you discuss a bit on how you view the competitive landscape and what is happening in your sector? And also would you share with us about your macro strategy about the company's business for longer term, maybe some business initiatives besides the gaming, mobile gaming and social network, all of that [ph] advertising you have on this for longer term, your business initiatives [indiscernible]?

Joseph Chen

These are very good questions. I think I commented a little bit on the macro landscape of the social networking communication business, primarily on mobile, right. So clearly, mobile messaging, particularly in China, is a killer app. This messaging has been a killer app in China on PC unlike any other countries in the world. And in U.S., Facebook purchased WhatsApp as well. So that underscore my observation as well. So that put social networking service in a relatively more difficult position there on PC, where I stressed earlier, mobile phone, by nature, is a communication tool. People use that to communicate and the number one activity level. So when that happens and when you know that our mobile, it is an 800-pound gorilla, originally in China, monetizing the -- monopolizing the communications space and also, in the future, spreading to other verticals eventually as well, so this the way you see in the mobile payment space, which I think was probably a brilliant move on the Tencent side as well. So that you see -- you're going to see that happening. More and more of that happening, companies leveraging on their dominance in the biggest killer app and starting to move to other verticals and becoming also dominant in majority of the applications that can naturally be bundled together, right? So it's really a bundled competitive strategy, which is problematic in -- which could be problematic in other countries, but in China, that's totally legal. And so when that happens, we have to think, okay, what is the long-term strategy for us? I think that the company's root has been -- always been in 2 things. And in terms of understanding of the user demographics, I think the company management team [ph] and most of the product management folks understand that college students, high school students, particularly those students living in relatively larger cities, we understand their living conditions, what they like to do, what they're thinking. So that's always been our core and the customer use [ph] side, where the -- most of the customer uses [ph] are coming on. Number two is that we're being -- I mean, this team has been doing online communities for now more than 15 years. My first startup was online community channel back in -- started in '98, so it's been a long time, right? So we do see those core competencies being able to transform our mobile. And it's really about how do you build a mobile community with the latest product [indiscernible] available for you as weapons that you could fight a war with. And in early days of PC, it's just BBS, right? That was the most primitive, the first-generation communication tool. And then you had the -- and then Mop.com, which we acquired back in 2003, it was a website that innovated Bulletin Board System now, which virtualizes and to allow people to influence the content, how the content is being created and discovered through user interference. So that little invention allowed Mop.com to become one of the largest [indiscernible] site in those days. And then you had the invention of newsfeed, which is a true innovation by itself that created the social networking industry. So you do have those innovations, those from China and coming from abroad. I think that the latest invention -- or innovation here on mobile is group. I mean, you do see companies leveraging on group and location and being able to build a large audience. So every 1 or 2 years, with the new technology available, new type of communication tool and a community tool are invented, and then that allow you to pick and choose and build on community as a moat around a particular user base that you understand the most and also potentially have -- having high value. And so my latest thinking on how the business is going, we look at some other businesses, such as I'll go home [ph] and the SoFi [ph], now these are -- they started as BBS communities around certain verticals, and they do it really well. And if you look at -- just purely looking at technology barrier, it's actually probably not as high as in our business, but nevertheless, they are very successful. So that -- those facts and trends get us to think, and I think we'll probably be -- we have a lot of incentive to think really hard because we do have the strongest competitor. We have our shares [ph] of that strongest competitor in China, and so our need to innovate and think is probably the biggest. Unfortunately, we're not as talented as we'd like to be, but we -- nevertheless, we keep trying. We never give up. So that's on your macro comment on the industry particularly relevant. And then overall speaking, I think I mentioned a little bit that we're going to stick to what we know the best, and we're going to be leaner and meaner on each line of business because for us, if we lose money on a particular business, we'd do it. We'd do it because we are convinced, logically, we're investing for the future for that business, and that's the only condition when we do it. So that's how the company will look into new opportunities and look at existing businesses. We have a long-term perspective, and we also have a value perspective as well.

Operator

There are no further questions at this time, I would now like to hand the conference back to your presenters. Please continue.

Ashley Law

Okay. We would like to thank all of you for your participation on the call today. Feel free to contact us if you have any further questions. Operator, this now concludes our call.

Hui Huang

Thank you.

Joseph Chen

Thank you.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

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