Sound Group, Inc. Q1 FY2022 earnings call

• After becoming profitable on a GAAP basis in Q4 2021, the company optimized organizational structure and technology platform in Q1 2022, boosting operating efficiency. - Focused on building a competitive auto centric ecosystem, improving product functionality, and exploring overseas markets. - Enhanced audio entertainment by expanding user penetration rate, launching operational campaigns, and collaborating with brand IPs. - Refined TIYA's features, increased user engagement with improvements in time spent and messages sent. - Strengthened in-house technologies, aiming to achieve 100% application of VoderX in Q2, and integrated in-car audio into LEAP Moto's vehicle OS.

In the first quarter, LIZHI's revenue rose 4.4% year-over-year to RMB517 million. Gross margin increased by 700 basis points to 32%. Total average mobile MAUs amounted to 51.5 million, and average mobile MAUs of the order independent business increased by 11% year-over-year to 9.14 million. Average monthly paying users maintained year-over-year growth to reach 482,000. For the audio entertainment segment, the user penetration rate of the auto entertainment business expanded from 13.8% in the same period last year to 17.7%. In terms of the global expansion, for TIYA, the average daily time spent on the app for users increased by 42% year-over-year, and the number of daily messages sent per user rose 57% year-over-year. As of the end of March, the number of pairs of brand connections grew 3.87 times compared with the same period last year, and the group penetration rate grew 257% year-over-year while the number of active groups grew 3.77 times compared with the same period last year.

• Maintain effective operational strategies and tap into commercialization potential. - Leverage core technology advantages and localized operational strategies to explore overseas markets. - Deepen presence in the in-car audio market to provide more users with high-quality in-car audio experiences.

• Regulatory changes related to live streaming tipping could impact the audio live streaming sector. - Market uncertainties in overseas expansion and potential challenges in implementing globalization strategies.

Q: What does management think of the live streaming regulations on tipping and how does that impact audio live streaming sector and [Legion]? Amid cost optimization in China internet sector. How should we think of the balance of LIZHI between investment in overseas and domestic market?

A: For the live streaming regulations, they are beneficial long-term, promoting standardized operations and protecting minors. The company has optimized products/operations to meet compliance, like setting up exclusive content for minors. On the balance between overseas and domestic investment, domestic business is profitable and supports overseas, with overseas business focusing on organic growth through product optimization and operational strategy, and R&D to reduce expansion costs.

Q: About overseas business planning after establishment of headquarters? Differentiation of TIYA compared with competitive products?

A: Overseas business focuses on TIYA in the US, with Singapore HQ to attract talent. TIYA's differentiation lies in in-house technology, using VoderX and DOREME for customized features, simplified interaction pathways to enhance efficiency, and unique audio-centric social tools for younger users.

Q: Thoughts on gross profit margin improvement, when and how will they improve the revenue sharing code of audio entertainment?

A: Gross margin improved due to cost structure optimization. They plan to further reduce revenue sharing cost by adjusting incentive policies, motivating content creators through diversified activities, and innovating monetization models through new markets and products to enhance overall gross margin.