Bona Film Group's (BONA) CEO Yu Dong on Q2 2014 Results - Earnings Call Transcript

Aug.29.14 | About: Bona Film (BONA)

Bona Film Group Limited (NASDAQ:BONA)

Q2 2014 Earnings Conference Call

August 28, 2014 8:00 p.m. ET

Executives

Yu Dong – Founder, Chairman and CEO

Jeffrey Chan – COO

Nicholas Zhi Qi – CFO

Analysts

Doug Creutz – Cowen Group

Jake Lynch – Macquarie

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter 2014 Earnings Call.

[Operator Instructions] I must advise you, this conference is being recorded today, the 29th of August, 2014.

I would now like to hand the conference over to your speaker today, Mr. Matthew Evanoti [ph]. Thank you. Please go ahead.

Unverified Representative

Thank you. Hello everyone and welcome to Bona Film Group Limited's second quarter 2014 earnings conference call.

The company distributed earnings press release earlier today, and you can find a copy on Bona's website at ir.bonafilm.cn.

On our call today are Bona's Founder, Chairman and Chief Executive Officer, Mr. Yu Dong; Chief Operating Officer, Mr. Jeffrey Chan; and Chief Financial Officer, Mr. Nicholas Qi. After the company's prepared remarks, management will be available to answer your questions.

Before we begin, please note that the discussions today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may differ materially from the views expressed today.

Further information regarding these and other risks and uncertainties are included in the company's annual report on Form 20-F for the fiscal year ended the 31st of December 2013 and in other documents filed with the U.S. Securities and Exchange Commission. Bona does not assume any obligation to update any forward-looking statements except as required under applicable law.

As a reminder, this conference call is being recorded. In addition, an audio webcast of this conference will be available on Bona's Investor Relations website.

I will now turn the call over to Bona's Founder, Chairman and CEO, Mr. Yu Dong.

Yu Dong

[Interpreted] Good day everyone and thanks for joining our 2014 second quarter earnings conference call.

I am pleased to report that Bona delivered another quarter of strong results in the second quarter of the year. We generated revenue of $44.9 million in the second quarter of 2014, representing year-over-year growth of 58.7%, with non-GAAP adjusted net income of $3.4 million, representing year-over-year growth of 69%.

Total box office in domestic China reached RMB135.7 billion in the first six months of this year, an increase of 25% over the first six months of 2013. Bona's year-to-date domestic box office through June outperformed the overall market by achieving a growth rate of 39% compared with the same period in 2013. As of the end of August, Bona's films have generated cumulative box office receipts of over RMB2 billion domestically.

Before discussing our operations, I'd like to take some time to introduce our new Chief Financial Officer, Mr. Nicholas Qi. Nicholas joined Bona in 2011. His capabilities and contributions to the company have been well-regarded by the Board, management team, analysts and shareholders. On behalf of the Board, I would like to welcome Nicholas, and I am confident that under his leadership we will continue to have strong overall financial management and internal controls and maximize value for our shareholders.

Now let's turn to our second quarter operational highlights. Our strong second quarter performance was driven in large part by another superb quarter in our film distribution business. During the second quarter we distributed two films theatrically, Overheard 3 and To Love Somebody. Together they have generated box office receipts of RMB310 million.

Overheard 3 has been a clear box office hit, with the best-performing installment amongst the three Overheard films. Following its debut on May 29, 2014, Overheard 3 has taken in over RMB307 million as of domestic box office, and HKD24 million in Hong Kong. These results surpass the sum of box office receipts for Overheard 1 and Overheard 2, making the Overheard franchise Bona's most successful film series.

The success of Overheard 3 also reflects our innovative marketing strategy, importantly, in line with our long-time partnerships with leading online platforms and new media websites, we entered into a strategic cooperation with Youku Tudou, the largest website platform for video in China, to jointly produce Overheard 3. We made several promotional videos and utilized new media broadcasting platforms to create online and offline interaction. Total clicks for the Overheard 3 trailer exceeded 10 million on the new media platform, contributing to the film's box office success.

We also utilized the successful online marketing strategy with Han Han's highly anticipated directorial debut, The Continent, formerly Duckweed, which was released on July 24. The Continent is a road trip comedy movie that features Feng Shaofeng and Bolin Chen. The film is an important step for our 'new director, new story' strategy and has generated RMB623.7 million in domestic box office since its release, taking in over half of the daily China box office for seven days.

We extended our success in new media marketing for The Continent, generating substantial industry buzz and making the film a hot online discussion topic. This was achieved by customizing messaging and marketing activities according to Han Han's great appeal and precisely targeting an audience born in the 1980s. As a result, total clicks for The Continent trailer exceeded 20 million on video websites, with total viewership of almost 20 million as of the end of August, breaking several records. Going forward, we will continue to increase our investments in online marketing as we believe it is one of Bona's competitive advantages.

The White-Haired Witch, a 3D epic drama, directed by Jacob Cheung and starring Bingbing Fan and Xiaoming Huang, was released on July 31st. The film is the first wushu film to combine 2D, 3D, IMAX 3D, 4D, Megascreen, Dolby Panoramic Sound Format that has been distributed theatrically in China. It scored a 24-hour gross of over RMB90 million on its opening day and has taken in RMB386 million in box office receipts as of today. The success of this film not only demonstrates our strong film distribution capability but also highlights our capability to achieve the highest level of quality in producing custom action films in China.

Turning to our theater segment, net revenues increased to $19.4 million, a 16% increase from the same period last year. Bona currently owns and operates 22 movie theaters with 182 screens. We expect to open six to eight new movie theaters with approximately 16 new screens, including two IMAX and four DMAX screens by the end of this year. These new locations include Wuhan, Sanya, Shenzhen, Wenlin [ph], Beilun and Liuzhou, among other important cities, with most theaters located in high-end commercial shopping mall in the downtown area.

In the second quarter we conducted several comprehensive upgrades to the information system at all our theaters, and expect to leverage the result from our new management network within a few months. Upon the completion of these upgrades, we will be able to collect over 50,000 pieces of information about moviegoers, including the film viewer's habits, age, gender and so on, which will be beneficial to improving theater operations and the marketing of our movie.

We also increased our efforts in online seat booking, group ticket sales, and high-margin theater food and beverage sales, and achieved very good results. We will continue to streamline our operations, lower our operating costs, and increase marketing activity and theater product sales and related churn.

Turning to film production, The Man From Macau 2 started principal photography on July 1st and expected to be completed in early September. As a sequel to Bona's well-accepted Chinese New Year blockbuster The Man From Macau, this second installment is directed by Wong Jing, produced by Andrew Lau, and stars international movie star Chow Yun-fat, best actor winner Nick Cheung, and best actress winner Carina Lau. Moreover, The Man From Macau 2 has added several family elements in order to attract a wider audience across many ages.

We may plan to produce The Man From Macau 3 upon the second installment earning accolades both from audiences and China's film industry. Our objective is to make The Man From Macau franchise the most successful family movie franchise in China and become one of the anticipated entertainment events during Chinese New Year.

The first co-production project between Bona and Fox International, Bride Wars, completed principal photography on August 8 in Shanghai, and is currently under post-production. This young romance comedy is directed by Tony Chan and stars two of China's most popular young actresses, Angelababy and Ni Ni. The film is scheduled for release in early 2015. Bride Wars is the first of five co-production projects for Bona with Fox International Productions, with the other four projects currently under preparation.

The period adventure film Secret Treasure, directed by Ronald Cheng and Gordon Chen, completed principal photography in July. The film tells the Chinese version of Captain Jack's legendary pirate story. To reflect the authenticity and more realistic visual effects of the film, Bona constructed the world's largest wooden [indiscernible]. With a length of 50 meters, width of 20 meters and height of 40 meters, we have applied for a world-record recognition for the ship.

In addition, the 3D wushu film The Sword Master, directed by Derek Yee and produced by Tsui Hark, is going to finish principal photography in September. We believe the collaboration of Derek Yee and Tsui Hark will make The Sword Master a highly anticipated film.

For the second half of 2014, we have a very strong film pipeline. In addition to the two domestic films already released, The Continent and The White-Haired Witch, we are also releasing two films from the United States, 3D action saga Pompeii produced by Lionsgate, which was released on the 15th of August, and action thriller Non-Stop, produced by Universal Pictures, which will be available to the public on the 19th of September. The Grandmaster 3D, directed by Wong Kar-wai and featuring Tony Leung and Zhang Ziyi, is currently scheduled to release this October. We believe audiences will be thrilled with this new cinematic version.

The Dead End, a crime drama directed by well-known mainland Chinese director Baoping Cao and starring popular mainland Chinese actors Chao Deng, Yihong Duan, Tao Guo and Luodan Wang, is scheduled for release on November 21st.

The 3D war film The Taking of Tiger Mountain, directed by Tsui Hark, is scheduled for release on December 24th. Tsui had spent five years preparing this film, and we expect it will become one of the most anticipated films of the year, and has the potential to become Bona's best film. In this film, Tsui Hark tells one of the most well-known Chinese stories of the revolutionary period from a modern perspective, and incorporates the most advanced 3D and computer graphics technology to make this a visually spectacular film.

We've also added a new film titled Emperor Holiday into our film pipeline, directed by Wang Yuelun, Emperor Holiday started principal photography in August. This film features five celebrity father-child pairing, including singer-actor Jimmy Lin and his son Kimi, actor Guo Tao and his son Stone, former Olympic diving champion Tian Liang and his daughter Cindy, supermodel Zhang Liang and his son Tiantian, and director Wang Yuelun and his daughter Angela, as well as Korean actor Song Il-Song [ph] and his son who joined the first season of the Korean TV reality show Under The Same Name.

Lastly, Bona will continue to leverage its advantages in Hong Kong films, while expediting our market expansion in Chinese films through our 'new director, new story' strategy. Bona is the only U.S.-listed Chinese film company with an integrated business model encompassing film distribution, film production, film exhibition and talent representation. Using this comprehensive platform, we aim to become an integrated content provider both online and offline in the multiscreen era. Our strategic partner Fosun and I increased our ownership positions in Bona during the second quarter.

I would also welcome Mr. Donghui Pan, Vice President of Fosun Group, to our Board. Mr. Pan's valuable insight and experience in media and the entertainment industry will make great contribution in achieving Bona's strategic goals. Bona and Fosun are planning to utilize all their strengths to create business synergies and develop new partnerships across the broadest spectrum of entertainment and culture.

Now I would like to turn the call to our Chief Operating Officer, Jeffrey Chan, to give you more details on our operational highlights.

Jeffrey Chan

Thank you, Mr. Yu. Good evening to those of you who are in the U.S. and good morning to those of you who are in the China time zone.

Our performance in the second quarter once again demonstrated that we have the right strategy. The breakaway [ph] success of The Continent, the directorial debut for the iconic writer cum rally racer Han Han has once again showed that [indiscernible] China cinemagoers whose profiles are still steering towards the post '80 to '90s generations these days are hungry for refreshing local stories and characters they can resonate with. It's therefore not surprising that the film reaped more than RMB624 million in box office as of August 26. And we will surely continue our efforts in identifying local materials, filmable [ph] properties, and [indiscernible] projects with more local elements and aspiring local talents for our future lineup [ph].

As mentioned earlier, our third quarter also -- we're also benefiting from the strong performance of The White-Haired Witch, directed by Jacob Cheng, starring Fan Bingbing and Huang Xiaoming. The film took in a total box office RMB386 million as of August 26.

Now let me recap and give you once again a summary of the latest [indiscernible] films in our pipeline. The Taking of Tiger Mountain successfully completed principal photography in April and is planning to release in December this year. Shot by Tsui Hark in cutting-edge 3D technology, the film is based on a true heroic story that took place in 1946 and was captured in the late 1950s [indiscernible] which has subsequently influenced generations of people in China. We believe The Taking of Tiger Mountain is going to create record box office for Bona.

Director Derek Yee's first [ph] 3D The Sword Master is going to finish principal photography in early September. Produced by Tsui Hark, referred to by international film critics as the [indiscernible] of Asia, this film is meant to recreate Gu Long's [ph] wushu fantasy Swordplay World [ph], with Tsui Hark's guru master in state-of-the-art filmmaking technology, and through the gripping drama as well as heartbreaking romance signatory [ph] of Yee's directorship. The legendary [indiscernible] character is played by up-and-coming mainland heartthrob Lin Gengxin with Taiwan actor Peter Ho, and mainland actresses Jiang Yiyan and Jiang Mengjie as co-leads. Targeted for summer in 2015, the project is not only being developed as a movie but also a [indiscernible] to create synergy and cross-promotion [indiscernible].

Period adventure film Secret Treasure also completed principal photography in August and is in post-production. The film is co-directed by Gordon Chan and Ronald Cheng, starring Ronald Cheng, Dayo Wong and Fala Chen. To reflect authenticity and more realistic visual impact of the film, we made the world's largest wooden ship for this film. The film is currently targeted for summer 2015 too.

Bride Wars, our first co-production with Fox, has just finished principal photography earlier this month. The film is targeted for late 2014 or early 2015 release. Directed by Tony Chan of Hot Summer Days and starring Angelababy and Ni Ni, two of China's most popular young actresses, the film borrows the proven story structure of the successful 2009 comedy of the same title, but is tailored to the taste of today's young domestic Chinese audience. We believe that this new take will ride on the growing popularity of the genre in China to become a big crowd pleaser [ph]. Our other cooperation projects with Fox are underway.

With the successful experience of developing our franchise, we are developing The Man From Macau 3 [ph]. The second installment, The Man From Macau 2, is going to finish principal photography in mid-September. The film is again directed by Wong Jing and produced by Andrew Lau. In addition to Chow Yun-fat remaining as the lead, we have the 2013 Shanghai Film Festival Best Actor winner, Nick Cheung, Carina Lau, Shawn Yue and Angela Wang [ph]. The [indiscernible] Yuelin Wong [ph], one of the father-child pairings in the famous Hunan TV reality show Dad, Where Are We Going? The film is targeted for theatrical release during 2015 Chinese New Year holiday.

Speaking of Dad, Where Are We Going? we have just started principal photography of a film starring the same five celebrity father-child pairings. While tentatively titled Emperor Holiday, this is not a TV show at feature length but a proper theatrical film currently scheduled for release in early 2016.

This finishes my part, and let me pass it on to our CFO, Nick Qi. Nick?

Nicholas Zhi Qi

Thank you, Jeffrey, and hello to everyone in the call. I would now like to provide a brief overview of our financial results for the second quarter of 2014. Please note that all numbers I'll discuss today are in U.S. dollars unless otherwise noted.

Net revenues for the [first] quarter 2014 increased 58.7% year-over-year to $44.9 million. The increase in net revenues was primarily attributable to the increase in revenues from the company's movie theater and film distribution segments.

Second quarter 2014 total net revenues from our film distribution segment was $25.5 million, an increase of 340%, compared with $5.8 million in the second quarter of last year. Second quarter 2014 total net revenue from our investment and production segment was $15.3 million, an increase of 104% compared with $7.5 million in the same period a year ago.

Further, net revenues for the movie theater segment amounted to $19.4 million in the second quarter of 2014, an increase of 15.5% compared with net revenues of $16.8 million in the second quarter last year.

Gross profit for the second quarter of 2014 was $23.5 million, an increase of 56.2% year over year. This increase in gross profit was primarily attributable to strong performance from the company's film distribution segment, along with the maturing of our movie theaters. Gross margin for the second quarter of 2014 was 52.3%, compared with 63.2% in the second quarter of 2013.

Total operating expenses, including participation expenses, general and administrative expenses, and selling and marketing expenses, increased 60.9% in the second quarter, of $23.7 million from $14.7 million in the second quarter of 2013. The year-over-year increase in operating expenses was primarily due to an increase in film participation expenses, along with general and administrative expenses, due to an increase in share-based compensation and bad debt expenses. Film participation expenses mainly consist of the worldwide net income of the films invested by Bona Film Fund which was founded in September 2013.

Operating income for the second quarter of 2014 decreased 17.7% year-over-year to $1 million from US$1.2 million in the second quarter of 2013. Second quarter 2014 operating margin was 2.3%, compared with 4.4% in the second quarter of 2013. The year-over-year decrease in operating margin was primarily due to incremental operating expenses.

Net income attributable to Bona Film Group Limited for the second quarter of 2014 was $0.8 million, compared with $1.8 million in the same period one year ago. Net income attributable to Bona Film Group Limited per ADS for the second quarter of 2014 was $0.01 basic and diluted, compared with $0.03 basic and diluted a year ago.

Excluding share-based compensation of $2.7 million, our non-GAAP net income for the second quarter of 2014 was $3.4 million. Non-GAAP net income attributable to Bona Film Group Limited per ADS for the second quarter of 2014 were $0.06 per basic and $0.05 per diluted ADS. Excluding interests, tax, depreciation and amortization, our adjusted non-GAAP EBITDA was $5.5 million for the second quarter of 2014, which compared with $4.1 million for the same period last year.

Cash, cash equivalents and restricted cash as of the 30th of June 2014 stood at $73.1 million. Net cash used in operating activities for the second quarter of 2014 was approximately $32.8 million, compared with net cash used in operating activities of $9.6 million for the second quarter of 2013. The change in cash from operations was mainly attributable to the increase in investment in films scheduled for release in 2014.

Now, turning to our guidance. Based on current market and operating conditions, we expect a non-GAAP net income for the third quarter of 2014 to be between $7.5 million to $8 million.

This concludes our prepared remarks. I would now like to open the call for any questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]

Your first question comes from the line of Doug Creutz from Cowen Group. Doug, please ask your question.

Doug Creutz – Cowen Group

Yeah, thanks. Could you maybe talk a little about how the -- what the competitive environment is like in terms of the number of films being made in China and maybe pressure on being able to get the kind of screen counts you want? Thank you.

Yu Dong

[Chinese language spoken]

Nicholas Zhi Qi

[Interpreted] Okay. Thank you, Doug. This is Nick. I will have the translation.

Okay. Mr. Yu mentioned that this year it will be the boom year for the whole industry throughout whole China. And the total box office throughout whole China will be around RMB20 billion and will have the potential in achieving to RMB30 billion.

And you know, together with the five biggest non-state owned film companies throughout -- through from January to August, Bona is one of the five biggest one. And together with another one called Enlight, both these two companies, the total box office for all the films distributed has achieved RMB2 billion for each of the company till the end of August.

But compared with Enlight, actually we have better return because actually we are -- for all the distributed film, Bona is taking -- Bona and Bona Film Fund is taking the majority of the aggregate for the investment. But the Enlight is taking the minority interest in that part. Let's say, there's one film in the film festival of this year distributed by Enlight called Daddy, Where Are We Going? they are taking around like 10% to 20%.

And talking about the state-owned companies like China Film Group and other state-owned companies, they are just performing just so-so for this year. And the total box office of the highest non-state owned companies, the total box office of the other films they distributed is over RMB4.7 billion. And Bona and Enlight is far away beyond the third one. Actually the third one is Wanda and it's taking only half of the total box office of Bona. And Huayi ranks number five.

And throughout the whole year that Bona, that we have strong confidence and we will have huge potential to be number one of the market. And we hope that the total box office for all the films distributed this year, we're hoping it can be reaching RMB3 billion -- RMB3 billion for us, taking around 10% all of the China.

Doug, over to you.

Doug Creutz – Cowen Group

Great. Thank you.

Operator

Your next question comes from the line of Jake Lynch from Macquarie. Jake, please ask your question.

Jake Lynch – Macquarie

Hey, Yu Dong [indiscernible]. My question is on the movie theaters. Two parts. First, can you give us a sense of, of those that are now open, how many are breaking even?

And the second is, there's a fair bit of competition in the market right now to open new theaters, including Korean and domestic competitors. Can you give us a sense whether there's any pressure as you are negotiating new theater contracts with the mall operators, whether there's any pressure on the pricing, effectively the revenue share that you've got to get back to those malls? Thanks.

Yu Dong

[Chinese language spoken]

Nicholas Zhi Qi

Okay. Good morning, Jake. I will help do the translation.

Okay, first, for this year, the performance of Bona theaters is very, you know, is showing a strong momentum in the net profit for this year. And the gross received of -- the total gross received of all the Bona theaters we are hoping it can be reaching over RMB5 million. And we are very confident in this part.

And talking about the theater's experience, whether it has profit or loss, let me [indiscernible]. The first one is we're earning a very good profit, one based on Tongzhou [indiscernible] Beijing. And starting from the opening period, it has been two years and a half, and we have collected all the original investment. And till now, from January to August, the total box office of this Tongzhou theater has reached over RMB20 million. And compared to the whole year of last year, it was -- sorry, it was RMB22 million both from the August -- from the January to the August of this year, and the total box office for the last year, it was only RMB20 million.

So, looking forward for this theater, the total box office of the whole year of this theater we're hoping it can reach around like RMB28 million.

And talking about the theater that we have lost, in total we have two theaters that they're operating a lot, and all of them are based in -- all of them are based in Tianjin. And we are now doing the reorganization and restructuring of the management team to replace the old people and to make it more efficient. And actually it works because actually the loss has been less compared to the last year, is being like 20% lesser.

And talking about for this year the new theater strategy, that we're still on record and we're still on track. Till the end of this year we're going to open six to eight new theaters, and we have a long-term strategic cooperation with other real estate [ph] that are very big like [indiscernible]. So for -- and also Yintai [ph].

And talking about our, you know, the new strategy, we have increased [ph] all the equipment investments and we have a stronger budget control, and we also increased the [indiscernible] of the IMAX and DMAX. Actually among all our projects, we increased two new screen IMAX and four new DMAX screens which are under construction.

So, talking about the total, looking forward, the future two years, we have signed [ph] almost like 20 projects, contracts with the real estate [ph]. So looking forward over the next two years, for every year we're going to do increase half -- around 10 new theaters to be opened. So by the end of 2016 we are hoping the total gross box office of all of Bona theaters will be reaching RMB1 billion.

So, Jake, over to you.

Jake Lynch – Macquarie

Okay. Thank you very much.

Operator

Your next question comes from the line of Na Yu [ph] of IBC International [ph]. Na [ph], please ask your question.

Unverified Participant

Good morning, Mr. Yu, Jeffrey and Nick. Thanks for taking my questions.

Rather quick here. First, we think that Fosun Group has become the second largest shareholder after you [indiscernible]. Can you share with us in what are and what synergies are Fosun Group working with Bona to improve in the future [indiscernible] producing -- co-producing film contracts between you and Fox, will you continue working with Fox and [indiscernible] in the future?

And second is a broader question for Mr. Yu. We noticed that the film companies are increasing their efforts on investing in new media business like around video, mobile games. How do you see the trend for the traditional film companies' transition? And also what process Bona would take to improve? Any merger/acquisition targets that you are working at?

[Chinese language spoken]

Yu Dong

[Chinese language spoken]

Nicholas Zhi Qi

Okay. Morning, Yu Na [ph]. Mr. Yu is saying that he was very confident and very confident for the synergies and future big cooperations between Bona and Fosun. As you know, Fosun is the most active investor and conglomerate in China and also globally. And Fosun has a lot of resources in real estate, in many industries, including the culture sector like entertainment, real estate and also insurance.

And as you might know that Fosun has announced a press release several days ago that [indiscernible] by investing in an independent studio in Hollywood called Studio 8. And we are working closely with Fosun now to see if any -- we can have any synergies in the global including Hollywood expansion strategy.

And except that, we are still looking forward to have more synergies and cooperation with Fosun, like theme park, like real estate, all those things. And as we announced just yesterday that Mr. Pan is now sitting in our Board and Mr. Pan, Andy Pan, is in charge of the culture [ph] sector in Fosun. So we are looking forward, between Fosun and Bona, our strategy globally and also in China are aligned. Thank you.

Yu Dong

[Chinese language spoken]

Nicholas Zhi Qi

Okay. And you know, Fosun is also -- have lots of resources in the real estate investment. Mr. Yu is talking about one project which Fosun is doing in Bund financial center, which will be in the south side of the Bund in Shanghai. And we are working closely with Fosun on this project because there's a big shopping mall, and we are looking forward that we can cooperate with Fosun in this project, because Shanghai is very important for us because the box office is taking a very big stake throughout China.

So -- and we are also looking forward to have more cooperation in the real estate side, together with Fosun. Thank you.

Jeffrey Chan

Okay. [Chinese language spoken]

I'll just briefly respond to the question about the five-film co-production and cooperation with Fox International. To my understanding, that is not predicated on 21st Century Fox being a shareholder of Bona but rather on the distribution capability and also production management activities of Bona in China, and that we have [indiscernible] we have the specific [indiscernible] I'm hopeful and confident that we are going to have more cooperation with Fox in the very near future.

Yu Dong

[Chinese language spoken]

Nicholas Zhi Qi

Okay. Mr. Yu mentioned a lot of things, so I'll just concentrate on the beginning [ph].

Okay. [Indiscernible] recently [indiscernible] doing a speech on the Shanghai Film Festival, saying that, okay, that [indiscernible] going into the film industry, including [indiscernible] engagement in [indiscernible] debt capital and also the [indiscernible] the operational level. And right after that, within three months, we have noted that there are a lot of cooperations and merger and acquisitions between network companies and the traditional film and TV series production companies. And you know, for this year is a very key year for the film industry. And all the expectation of film and TV production companies is all thinking how to introducing the concept of the network. And starting from the [indiscernible] starting from like the TV and film production like [indiscernible] and also there are a lot of serious, very new creative devices.

And we see that there will be some small companies in smaller scale of film and production -- production companies will be merged or acquired. And just like Bona, we have very less scale, just like us, we're considering how to be feeling in this new area of multi-screens. So we're considering how to enlarge our content supply like video, including short one and long one online, to the online users, and also for the TV stations.

And in fact, the Bona footprint [indiscernible] in Hollywood, we are very focusing to develop the local films with the localized content and with the new directors to provide more content, but not excluding [ph] only to the big screen, including the content to the online users.

And Mr. Yu also commented that the reason that why the network is engaging in the film industry is it's because they want to enlarge their channel to monetize the content. He is taking Youku for example. So far Youku has around 900 million users, but the advertising income or revenue or something will be over like several billion RMB. So when they are going to the industry, they can enlarge their monetizing channels, like how to convert all those users to like to do the ticket buying or like movie buying online, like pay per click model.

So, talking about Bona, we are an integrated -- we have integrated business model and we have long-term cooperation with that. And we are still working on that. And we are looking forward to the future cooperation with them in a strategic way.

And also Mr. Yu mentioned that we are actually enlarging our monetizing channels like sales, online ticket sales. And we look forward to working [indiscernible] deeper, including the big data development and how to convert [indiscernible] users to our, you know, to enlarge our monetization [indiscernible]. Thank you.

Unverified Participant

Thank you.

Yu Dong

Okay. Thank you.

Unverified Representative

Okay. Thanks for joining --

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