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00:18 Thank you, operator. Hello, everyone and thank you for joining us today.

Our earnings release was distributed earlier today and is available on our IR website at ir.cootek.com and on PR Newswire. 00:35 On the call today from CooTek are Mr.

Karl Zhang, Chairman and Chief Technology Officer; and Mr. Robert Cui, Chief Financial Officer.

Mr. Zhang will review business operations and company highlights followed by Mr.

Cui, who will discuss financials and guidance. They will both be available to answer your questions during the Q&A session that follows.

01:03 Before we begin, I would like to kindly remind you that this conference contains forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of nineteen thirty four as amended. These forward-looking statements are made under the Safe Harbor provisions of the U.S.

Private Securities Litigation Reform Act of nineteen ninety five. 01:30 These forward-looking statements can be identified by terminology such as will, expect, anticipate, future, intends, plans, believes, estimates, confident, and similar statements.

CooTek may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. SEC and its Annual Report to shareholders in press releases and other written materials and oral statements made by its officers, directors, or employees to third-parties.

02:12 Any statements that are not historical facts, including statements about CooTek’s beliefs and expectations are forward-looking statements that involve factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. 02:33 Such factors and risks, include but are not limited to the following CooTek’s mission and strategies, future business development, financial conditions, and results of operations, the expected growth of the mobile internet industry and the mobile advertising industry, the expected growth of the mobile advertising, expectations regarding demand for and market acceptance of the company’s products and services, competition in the mobile application and advertising industry and relevant government policies and regulations relating to the industry.

03:16 Further information regarding these and other risks, uncertainties and factors is included in the company’s filings with the U.S. SEC.

All information provided on this call is current as of the date of this call and CooTek does not undertake any obligation to update such information except as required under law. 03:39 It is now my pleasure to pass the call to Mr.

Karl Zhang, Chairman and Chief Technology Officer of CooTek. Karl, please go ahead.

03:52 Thank you, everyone for joining our third quarter twenty twenty one earnings call. We have reported our third quarter twenty one results with net revenue of fifty one point one million dollars and non-GAAP net income of point four million dollars.

As consistently mentioned, we have been implementing a [two-way] [ph] development strategy focused on our literature and mobile games segment. 04:25 The balanced approach between growth and the profitability has been partially impacted by the persistent uncertainties in the Chinese domestic advertising market, but we remain focused on the achievement of the group level profitability.

04:44 In addition, we have rapidly increased our exposure in the overseas mobile games and on our literature segments. And the revenue contribution from overseas business was seventeen percent in the third quarter of twenty twenty one, compared to twelve percent in the second quarter of twenty one.

05:04 We expect that the revenue contribution from our overseas business will continue to increase. As a special note, for our mobile games business, the continuous optimization of product portfolio and pipeline resulted in a stable contribution to the overall profitability of the group.

05:27 In the third quarter of twenty twenty one, CooTek, our invested game studio launched a Truth Runner, another [indiscernible] game following the lead of Catwalk Beauty. A week into [indiscernible] Truth Runner topped the US iOS game chart.

The other expected hit, match-3 game, Love Fantasy, has also started to gain momentum in the app ranking. 05:58 The enrichment of the match-3 game will also further increase the life cycle of the product, which can help increase the sale of the revenue and net income of the mobile games business.

We’re also encouraged by efficiency achieved in the development of the new mobile game products. 06:22 We developed and accomplished fourteen new mobile games in the third quarter of twenty twenty one and has the pipeline of fifteen to twenty games in the fourth quarter of twenty twenty one.

And we have secured a relationship with more than twenty third parties to provide game publishing and operation service. We are continuously dedicated to increase the scale of the third-party game in publishing business.

06:53 Coming back to our online literature business, for Fengdu Novel, our free online literature product in a Chinese market. It is a constituted stable contributor to the revenue and the gross margin of the group.

07:10 With the continuously increasing buying orders and original [countries books] [ph], we have we can keep an engaging and active platform for our users. In the third quarter of twenty twenty one, Fengdu Novel has launched a new online community for book lovers where readers can comment on novels and authors can get instant feedbacks on their works.

This new community will boost the authors creativity and the readers engagement. And further create momentum to the development of Fengdu Novel’s content ecology.

07:54 Building a high quality content ecology has been the primary goal of Fengdu Novel. Since the beginning of the year, Fengdu has further improved its novel quality and the reader engagement by hosting a series of creative events, including contents, new writer support programs, and new media content anticipation.

08:20 At the same time, we have been moving forward the IT operation business with licensing of e-books. Audible book production and the short drama production.

The revenues from the IT business are Fengdu online literature platform, recorded another [one hundred and fifty five] [ph] percent high quarter over quarter growth in the third quarter of twenty twenty one. 08:45 For our overseas online literature product, the business fundamental has been consistently improving.

In addition to the expansion in the Southeast Asia and the north of African market, the ROI and the user engagement level in the U.S. markets has demonstrated very positive improvements.

We are confident that the product will become the next growth driver of the group. 09:17 Most recently, we have announced our Metaverse and NFT plan and a form and internal work group to study and implement such [attack] [ph].

Our Metaverse plan takes full advantage of our two dominate business, online literature and the gaming to create new world of entertainment. 09:42 On the one hand, our online literature apps have produced the quality original content, which is numerous exceptional novels emerging from different categories such as fantasy, war, and the science fiction.

The immersive experience provided by this works, is essential to the creation of the Metaverse. 10:10 We can also talk about the original digital books and the visualized virtual items of the books, such as weapons and dresses to be NFT allowing those NFT’s to be collected and traded both within and outside of our apps.

10:30 On the other hand, our full-stack global operation and distribution capability has enabled us to launch dozens of chart-topping games, including Catwalk Beauty and Truth Runner. With the emergence of Metaverse, we are well-positioned to leverage the strengths from this two businesses to create synergy.

10:55 As we integrate the two business to construct our own Metaverse ecosystem, the boundaries between novels and the game work gradually much to create a unique user experience of reading up a novel and playing games. 11:13 Readers can interact with the characters and other readers in the form of games, with the possibility of adjusting their rules, appearance, skills, and props.

All these virtual items can be turned into NFTs, allowing users to take them to other story world for continuous usage. We are confident in creating such a highly immersive Metaverse.

11:44 Going forward, we will use our best endeavors to execute our strategic roadmap in building our content reach and the user rented ecosystem. 11:57 With that, I will hand the call to Robert, our CFO, who will walk you through our financial results for the quarter.

Thank you.

12:11 Thank you, Karl. Hello, everyone.

Thanks again for joining us tonight. I'm going to brief our third quarter of twenty twenty one.

Net revenues were fifty one point one million dollars, a decrease of fifty two percent from one hundred and five point seven million dollars during the same period last year, and a decrease of thirty nine percent from eighty three point two million dollars during the last quarter. 12:38 The decrease compared with the same quarter of twenty twenty was primarily due to a decrease in mobile advertising revenues.

The net revenues are mainly generated from three categories of our content rich apps. Mobile games accounted for approximately fifty six percent, online literature accounted for approximately thirty nine percent, and a scenario based content apps accounted for approximately four percent of total revenues.

13:08 DAUs of the company's portfolio products were eighteen point seven million, a decrease of thirty two percent from twenty seven point seven million in September twenty twenty. MAUs of the company's portfolio products were fifty seven point two million, decreased from ninety four point eight million in September twenty twenty.

DAUs of the company's online literature products were five point zero million, decreased from ten point zero million in September twenty twenty. 13:40 MAUs of the company's online literature products were thirteen point five million, decreased from twenty nine point five million in September twenty twenty.

The average daily reading time of the key product Fengdu Novel's users was approximately one hundred and fifty three minutes in September twenty twenty one, which remains stable compared with one hundred and fifty three minutes in June twenty twenty one. 14:07 Our gross profit margin was eighty two point two percent, compared with ninety three point six percent in the same period last year and eighty nine point four percent last quarter.

Cost and expenses were about fifty point one million dollars, a decrease of thirty nine percent sequentially and the decrease of sixty one percent from the same period last year. 14:34 Sales and the marketing expenses were twenty eight point seven million dollars, a decrease of seventy three percent from the same period last year, and a decrease of fifty two percent from last quarter.

14:48 As a percentage of total revenues, sales and the marketing expenses accounted for fifty six percent, compared with one hundred and two percent during the same period last year and seventy two percent last quarter. 15:02 The sequential and year over year decrease in the sales and the marketing expenses as a percentage of total revenues was primarily due to the continuous transition of the strategy in relation to the acquisition of new users and the retention of the existing uses, which resulted in the reduction of the user acquisition costs.

15:24 R and D expenses increased by twelve percent year over year and decreased by five percent sequentially. The sequential decrease was primarily due to a decrease in salary and payroll expenses associated with the technology R and D staff and share based compensation expenses and was partially offset by increase in third party outsourcing fee.

15:47 The year over year increase was primarily due to an increase in salary and payroll expenses, associated with technology R and D staff and was partially offset by decline in share based compensation expenses. As a percentage of total revenues, R and D expenses accounted for eighteen percent, compared with eight percent during the same period last year and twelve percent last quarter.

16:14 G and A expenses increased by eight percent year over year and a decrease of eighteen percent sequentially. The sequential decrease was mainly due to a decrease in listing expenses and bad debt provision and was partially offset by a rise in share based compensation.

16:32 The year over year increase was mainly due to an increase in salary and payroll expenses associated with G and A staff and bad debt provision and was partially offset by decline in listing expenses and professional service fee. As a percentage of total net revenues, G and A expenses accounted for eight percent, compared with four percent during the same period last year and six percent during last quarter.

17:03 Net loss was zero point four million dollars, compared with net loss of twenty two point zero million dollars during the same period last year and a net income of zero point three million dollars last quarter. Adjusted net income was zero point four million dollars, compared with adjusted net loss of twenty point five million dollars in the same period last year and adjusted net income of one point one million dollars last quarter.

17:35 The sequential decrease of profitability compared with the adjusted income in last quarter was mainly due to the decrease in revenues. The achievement of profitability compared with the adjusted net loss the same quarter last year was mainly due to the decrease in the sales and the marketing expenses as a percentage of total revenues, driven by the continuous transition of the strategy in relation to the acquisition of new users and the retention of existing users.

18:06 As of September the thirty, twenty twenty one, we had cash, cash equivalents and restricted cash of about thirty six point two million dollars, compared with thirty nine point zero million dollars as of June thirty, twenty twenty one. 18:24 Operator, we are now ready to take questions.

18:58 Thank you and thanks for the question and congratulations on the recent Metaverse announcement. I had a quick question about or at least to have your thoughts on the impact of the Metaverse initiative in terms of the R and D behind it or the operating costs behind that?

And how the launch of this new strategy will work in conjunction with the previously announced plans to balance growth with profitability and just whether the Metaverse changes you're thinking along those lines? Thank you.

19:35 Okay. Thank you.

I will take these two questions. So, the recently announced Metaverse and MFT plan does not constitute a change in the existing business, and also in relation to the financial strategies.

We will keep our balanced approach between growth and profitability despite the recent uncertainties in the Chinese mobile advertising markets, which impacted the revenue growth of the group. 20:04 So, we started to concentrate on products, with long product cycles and high ROI performance in the Chinese market and we expanded our exposure in the mobile games and online literature segments in the overseas markets, which supported the continuous achievements of the group level profitability.

20:25 So, this new Metaverse and NFT plan is a natural strategic move to fully utilize our resources in the IP, original contract books, and mobile games, aiming at the execution of the fully synergistic business combination involving long-term Metaverse and MFT vision. So we started to form as mentioned an internal work group to evaluate the reasonable action plan and we believe that our current core business segments offer significant potential to extract the value in relation to Metaverse and NFT.

21:04 However, in the short-term, we don’t expect significant R and D expenses to implement such plan. It is a long term and strategic path with further development of the existing business model.

Thank you.

21:21 Okay. Thanks for that color.

21:33 Good evening. This is Vivian from Diamond Equity Research.

So, my question is also regarding your newly announced Metaverse plan, can you give us some more color on this new business model and your monetization strategy for us? Thank you.

21:52 Thank you. And I'm going to take this one.

Yes we have been implementing our two [indiscernible] developed strategy focus on online literature and mobile game segment to build up our [pen entertainment] [ph] ecosystem. So the strategy has achieved significant results in both the domestic and [Technical Difficulty].

22:14 So we will speak with this strategy, continue to invest and grow in the global online literature and the mobile game segment. And our new build Metaverse plan is actually a part of this strategy.

There is natural connection between online literature gaming and the Metaverse. The Novels creates virtual worlds and stores and our sometimes even the [indiscernible], which can be further visualized through game and user be able to interact, explore, trade, and living such virtual settings.

22:54 So, the high level of immersion and the all-round and open social structure created by the novel based gains consistent with the concept of Metaverse. So, as could have integrate the two business to construct its own Metaverse ecosystem, [indiscernible] between novels and the games will gradually merge to combine user experience of reading a novel and playing games.

23:25 So readers can interact with the characters and other readers in the form of games with the possibility of adjusting their roles, appearance, skills, and prop to all of these virtual items will be in that piece. And allowing users to trade and take them to other story world.

So, let me give you an example of how we visualize. And extend on novels to online games.

23:53 So, our new hit, match-3 game Love Fantasy is obtaining very strong growth momentum recently. It hit top three ranking position on both Google Play and apps store in U.S.

So, actually, this innovative and interactive game, it’s storyline is created from an online novel. So, it is a testament to link novels with games and the possibility to construct and unique Metaverse.

24:26 And on the other hand, we are also looking into the potential disrupt that MFT could bring to the entire content industry. So, we believe that NFT brings new opportunities for us to benefit our content ecosystem and expand the monetization.

So, our internal Metaverse working group is integrating a product, which [capitalized] [ph] digital books and the visualized virtual items of the books such as the, [indiscernible], props, weapons, castles, and so on and so forth. 25:04 So readers who are fascinated by the book get a chance to collect and trade those in MFT.

So this MFT will be tradeable within outside of [indiscernible], as long as the book gets more and more popular the MFT holders enjoys the appreciation. One day a new game is produced on top of the story, the book’s story line, they can bring MFT to the game to play and trade.

25:36 So, with the emergence of Metaverse, we believe that we are well positioned to leverage our two dominated business to create synergies and expand our success. Thank you.

25:54 Thank you for additional details. Those are my questions.

26:15 Thank you, operator. In closing, on behalf of the entire management of CooTek, we would like to thank you again for joining us today.

If you have further inquiries in the future, please feel free to contact us at [email protected] or [email protected]. Thank you.

Bye, bye.