Meitu, Inc. provided unaudited consolidated earnings guidance for the second half of 2018, ten months ending October 31, 2018 and year ending December 31, 2018. The company expects net loss for the second half of 2018 will be wider than that of the first half of 2018, which was RMB 127.4 million. For the ten months ended October 31, 2018, the company expects to record a net loss of between approximately RMB 950 million. For the year ending December 31, 2018, the company expects to record net loss of between approximately RMB 1,200 million. Based on information currently available to the Company, such expected increase in net loss is primarily due to the following factors: decrease in revenue from the Group's smart hardware segment due to reduction of shipment volume of smartphones as a result of launching less phone models in 2018 compared to 2017. The Group launched 5 phone models in 2017 and only 1 model in 2018; average selling price ("ASP") of the smartphones in the second half of 2018 has reduced as the company has lowered the selling price of the M-Series (our lowest-priced series that were launched in 2017) smartphones in response to the competitive environment which had become even more intense since the second half of 2018; as a result of lower ASP, gross profit generated from sales of smartphones has been decreasing rapidly in the second half of 2018. Although the company's gross profit from Internet businesses has continued to increase during the second half of 2018, the company expects such increase will not be able to offset the decline in the gross profits of the smartphone business, leading to a decline in overall gross profit for the Group. Given the intensity of competition of the smartphone market has further accelerated in the second half of 2018, it appears that its smartphone business is no longer profitable. The company anticipates that the bulk of the Group's incremental net loss in the second half of 2018 will be attributable to the company's smartphone business. However, the company expects that these losses will not be recurring after the quantity of the Cooperation Smartphones sold reaches a specified quantity under the Licensing Arrangement with Xiaomi; increase in sales and marketing expenses, in particular, a one-off sponsorship of certain reality show and related marketing expenses, which amount to approximately RMB 200 million. Such expenses are related to the brand building of the Group's social platform and smartphone business.