Hello, ladies and gentlemen. Thank you for standing by for LIZHI INC.'s Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I'll now turn the call over to your host, Effy Kang, Head of Capital Markets for the company. Please go ahead.

Thank you very much. Hello, everyone, and welcome to LIZHI INC.'s Third Quarter 2023 Earnings Conference Call. We released our financial and operating results via newswire services earlier today, and they are available online. Participants on today's call will include our Founder and CEO, Mr. Marco Lai; and our Acting CFO, Ms. Chengfang Lu. Management will begin with prepared remarks, introducing business development and financial performance in the third quarter.

As a reminder, this conference is being recorded.

In addition, a webcast replay of this conference call will be available on the IR section of our website at ir.lizhi.fm.

Before we continue, please note that today's discussions will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements typically contain words such as may, will, expect, target, estimate, intend, believe, potential, continue or other similar expressions.

Forward-looking statements involve inherent risks and uncertainties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, many of which factors are beyond our control. The company, its affiliates, advisers, representatives and underwriters do not undertake any obligation to update these forward-looking information except as required under the applicable law.

Please also note that LIZHI's earnings press release and this conference call include discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. Please refer to LIZHI's earnings press release for a reconciliation of unaudited non-GAAP measures to unaudited GAAP measures. I will now turn the call over to our Founder and CEO, Mr. Marco Lai. Please go ahead.

[Foreign Language]

[Interpreted] Hello, everyone. Thank you for joining LIZHI INC.'s Third Quarter 2023 Earnings Conference Call.

[Foreign Language]

[Interpreted] In the third quarter of 2023, we further strengthened the execution of our online audio-centric globalization strategy. Leveraging our long-term technological assets, we consistently empowered the domestic business innovation while steadily advancing our global business, fostering a vibrant and a diversified ecosystem. In the third quarter of 2023, our revenue reached RMB 425 million.

Our total average mobile MAUs amounted to 42.1 million, and our average monthly paying users totaled 402,600. Despite macro headwinds, we steadfastly pursued the course we had charted, reinforcing our commitment to our long-term region.

During the quarter, we continued to reduce cost and increase operating efficiency to improve organizational efficiency and agility while also reinforcing our globalization capabilities to better support the development of our diverse spectrum of businesses.

Now let me go over our business developments during the third quarter.

[Foreign Language]

[Interpreted] In terms of our audio entertainment business, we remain committed to building a healthy and sustainable product ecosystem through proactive optimization of our operating strategies and meticulous refinement of our mechanisms for expanding and nurturing our content creator base.

We have enhanced the creator quality and increased the scale of our creator base while also solidifying our platform's competitive edges.

During the quarter, in addition to the continuous optimization of our content creator platform, we launched the [ Starlight ] challenge, a strategic initiative designed to cultivate mid- and long-tail content creators and motivate our top-tier contributors. This program empowered content creators to showcase their distinctive vocal talents, further unlocking their creative potential while also elevating the platform's appeal to the content creator community.

[Foreign Language]

[Interpreted] In addition, we [ strive ] to improve the user experience and attract more high-quality users through enriched content offerings and product innovation.

During the quarter, based on user preferences, we added a suite of carefully curated modules to enrich our content [ drivers ], providing our users with more diverse and engaging content options. Furthermore, we continue to iterate our product design and culture with new product features and engagement tools, harnessing cutting-edge technologies to introduce innovative audio-based interaction experiences. We sustained active user participation through a diverse area of marketing programs and [ singing ] events, augmenting both user stickiness and engagement.

[Foreign Language]

[Interpreted] As for our global innovative business, we are deeply invested in delighting our users with next-generation social networking products by integrating advanced features, including cross-device functionality, real-time capabilities, AIGC technologies and more.

We continue to refine our product interface and functionality. We leverage advanced technologies to empower product innovation, catering to diverse user needs. Meanwhile, we endeavor to improve user engagement by enhancing the network effect of our offerings, thereby fostering organic user growth. Organizational-wise, as we continue to boost our localization capabilities across product development operations and other key areas, we have also taken a collaborative cross-team approach to product innovation to increase innovative productivity.

Moving forward, we will continue developing international markets, reinforcing globalization capabilities and ultimately accelerating the expansion of our global footprint.

[Foreign Language]

[Interpreted] With respect to technological advancement, we continue to strengthen our R&D capabilities to provide more customized product support. This, in turn, empowers product innovation and drives progress across our global business.

We have also consistently deepened the integration and development of multi-model AIGC technologies into our innovative business framework. Through [ more enhanced ] model training and algorithm optimization, we are fortifying our AI assets, unlocking vast opportunities for ongoing product innovation.

On voice technologies, we have been constantly improving the stability and performance of automatic speech recognition and text to speech, or ASR and TTS, for both Chinese and English languages, adapting them for diverse scenarios.

We have also achieved breakthroughs in AI voice-changing technology, including a seamless integration into DOREME, our in-house RTC platform for real-time audio and video streaming. In the meantime, we further enhanced the quality of information transmission on our IM platform, VoderX, empowering our business with high performance, low latency and scalable, customized instant messaging capabilities.

In terms of our versatile technology platform construction, we further improved the data analytics and data management systems and applied AI technology to marketing and other fields.

Collectively, these initiatives have improved the overall operating efficiency. In general, we believe technological advancements are the cornerstone of business development. We remain committed to pursuing industry-leading technological standards and continually fortifying our core technology capabilities to empower the business development.

[Foreign Language]

[Interpreted] We are delighted to announce that last month, the company was lauded as one of China's top 100 Internet companies by the Internet Society of China. This marks the fifth consecutive year that we have received this honor, representing powerful recognition of our comprehensive capabilities by the Internet Society of China and the broader industry.

Going forward, despite the macro challenges, we will spare no efforts in proactively refining our business strategies and building a more competitive ecosystem.

We will continue to improve our core technology capabilities while also adopting and more deeply integrating AIGC and voice AI technologies [ throughout the ] business. Meanwhile, we will further streamline our operations and improve the effectiveness of resource allocation, propelling the company's long-term sustainable development with fresh momentum.

[Foreign Language]

[Interpreted] Thank you all. With that, I will now turn the call over to our Acting CFO, Ms. Chengfang Lu, who will discuss our financial results in more detail.

Okay. Thank you, Marco, and hello, everyone.

Our net revenues in the third quarter of 2023 were RMB 425.1 million. Despite the complex backdrop and market uncertainties that persisted, we remained steadfast in strengthening our core competitiveness through technological innovation during the quarter.

Moving forward, we remain committed to further enhancing organizational efficiency, developing globalization capability and enhancing overall agility, positioning us to deliver enduring value to our stakeholders.

Now I'd like to provide a brief overview of our financial results for the third quarter of 2023. In this quarter, our total net revenues were RMB 425.1 million compared with RMB 565.2 million in the same period of last year, primarily due to the decline in average paying users and user spending on our audio entertainment products. Cost of revenue was RMB 317.3 million in this quarter compared with RMB 376.2 million in the same period of last year, mainly attributable to the decreased revenue sharing fees, share-based compensation expenses, payment handling costs and other miscellaneous costs. Gross profit was RMB 107.8 million in the third quarter of 2023 compared with RMB 189.1 million in the same period of last year. Non-GAAP gross profit was RMB 107.9 million in this quarter compared with RMB 190.8 million in the same period of last year. Gross margin in this quarter of 2023 was 25% compared with 33% in the same period of last year. Non-GAAP gross margin in this quarter was 25% compared with 34% in the same period of last year.

Operating expenses were RMB 167.9 million in the third quarter of 2023 compared with RMB 176.6 million in the same period of last year. Research and development expenses were RMB 83.8 million in the third quarter of 2023, representing an increase of 7% year-over-year, primarily due to the increased salary and welfare benefits expenses related to increased severance pay to optimize the R&D efficiency, partially offset by the decreased expenses related to research and development services provided by third parties. Selling and marketing expenses were RMB 59.1 million in this quarter compared with RMB 71.2 million in the same period of last year, primarily attributable to decreased branding and marketing expenses. The company will monitor its discretionary advertising and promotion expenses and adjust accordingly depending on market conditions.

General and administrative expenses were RMB 25.1 million in the third quarter of 2023 compared with RMB 27.1 million in the same period of last year, mainly driven by decreased professional service fees provided by third parties, provision for litigation contingencies and other miscellaneous expenses. Operating loss was RMB 60.1 million in the third quarter of 2023 compared with operating income of RMB 12.5 million in the same period of last year. Non-GAAP operating loss was RMB 55 million in this quarter compared with non-GAAP operating income of RMB 20.2 million in the same period of last year. Other expenses were RMB 5.9 million in the third quarter of 2023 compared with other income of RMB 1.7 million in the same period of last year, mainly attributable to the remuneration fees to the depositary bank in relation to the ratio change of ADS on September 20, 2023.

Net loss was RMB 62 million in the third quarter of 2023 compared with net income of RMB 19.8 million in the same period of last year. Non-GAAP net loss was RMB 56.9 million in this quarter compared with non-GAAP net income of RMB 27.5 million in the same period of last year. Basic and diluted net loss per ADS were both RMB 11.01 in the third quarter of 2023 compared with basic and diluted net income of RMB 3.81 and RMB 3.79 per ADS in the same period of last year. Non-GAAP basic and diluted net loss per ADS were both RMB 10.07 in the third quarter of 2023 compared with non-GAAP basic and diluted net income of RMB 5.29 and RMB 5.26 per ADS in the same period of last year.

As of September 30, 2023, we had cash and cash equivalents and restricted cash of RMB 615.8 million.

Okay. This concludes all of our prepared remarks. Thank you once again for joining us today.

If you have further questions, please feel free to contact LIZHI's Investor Relations through the contact information provided on our website, ir.lizhi.fm, or Piacente Financial Communications.

Thank you. This concludes the conference call.

You may now disconnect your line. Thank you. Have a good day.