Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter and Full Year of 2020 Momo Incorporated Earnings Conference Call. [Operator Instructions] And please note that this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms. Cathey Peng. Thank you. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and thank you for joining us today for Momo's fourth quarter and fiscal 2020 earnings conference call. The company's results were released earlier today and are available on the company's IR Web site. On the call today from Momo are Mr. Wang Li, CEO of the company. Mr. Wang Yu, Founder and CEO of Tantan; and Mr. Jonathan Zhang, CFO of the company. They will discuss the company's business operations and highlights, as well as the financials and guidance. We will all be available to answer your questions during -- they will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties and factors is included in the company's filings with the US Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law. I will now pass the call over to Mr. Wang. I will translate for him. Mr. Wang, please.

Good morning and good evening, everyone. Thank you for joining our conference call today. 2020 was a tough year for all of us. I’m proud that my teams were able to navigate through the many challenges with relentless focus on our core mission which is to help users discover new relationships and built meaningful interactions. The commitment to that core mission also enabled us to make difficult, the right decisions in the past year for the long-term well-being of the company and our community. Getting through that bumpy journey was also a valuable growth experience for my team. I’m happy to see that we have finally come out of those temporary drawbacks, stronger and better poised to seize the growth opportunities ahead of us. My speech today consists of two sections. In the first part I'm going to review the key operating and business results for the fourth quarter and fiscal 2020. And then I'm going to run through our strategic priorities for the year 2021. And perhaps more importantly, how these near-term strategic priorities fit into our ambitions over the longer term horizon. First of all, a brief overview of the financial performance. For the fourth quarter 2020, total Revenue was RMB3.80 billion, down 19% year-over-year, but up from RMB3.77 billion last quarter. Q4 revenue came in better than our original expectation mainly because of the outperformance from Momo's almost live streaming business in the year end competition event. Adjusted net income for the quarter was RMB836 million, representing a 22% profit margin. Excluding Tantan's net loss, adjusted net income for the core Momo was RMB845 million or a 28% profit margin. Tantan's total revenue came in RMB341 million for the fourth quarter, up 100% year-over-year. Adjusted net loss of Tantan further narrowed down to 3.3 -- RMB8.84 million…

Thanks. So let me briefly review Tantan's operational and business developments in the past quarter and our next step plans. First, a quick review of the user trends and related metrics. Total paying users were impacted by the COVID outbreak in early 2020. By May the pandemic in China got under control, and we subsequently saw decent use recovery from May to early August. Since mid August, the user acquisition cost has started to rise dramatically due to the aggressive marketing investments for medication and online gaming companies, and in Q4 joined by eCommerce players as well. For ROI considerations, we scaled back our spending in the paid marketing channels in Q4, which puts some pressure on the user trend. During Q4, our team fully focused on improving the marketing efficiency and lowering the unit acquisition cost. The team conducted a thorough walkthrough of the system to identify potential areas of improvement and optimization. We realized that marketing and top of the funnel conversion is indeed an area where we need to make increased investment -- improvements in order to get more efficient in driving user growth. There's actually a great deal of essential we can cultivate here. In Q4 and January 2021, we quickly put two things in place for Chinese New Year's campaign. Number one, building up the backend infrastructure to enhance our data tracking capability, so that we can provide more effective feedback to our channel partners. Number two, beefing up ad materials to make it more appealing to our target users. We stepped up our marketing efforts when the competition became milder towards mid-February. We were able to see some initial positive results on the cost side. The new ad materials and channel strategy are also bringing in significantly higher percentage of women in the new…

Thank you. Hello, everyone. Thank you for joining our conference call today. Let me briefly take you through the financial review. Total revenue for the fourth quarter 2020 was RMB3.8 billion, down 19% year-on-year, up 1% quarter-on-quarter, exceeding the high end of our revenue guidance, primarily due to the better-than-expected outcome from the year-end competition event in live streaming business. Non-GAAP net income attributable to Momo was RMB836.4 million compared to RMB1.25 billion for the same period of 2019 or a 33% decrease year-over-year. Total revenue for fiscal year 2020 was RMB15.02 billion compared to RMB17.02 billion for 2019, down 12% year-on-year. Non-GAAP net income attributable to Momo for 2020 was RMB2.9 billion compared to RMB4.49 billion for 2019, a decrease of 36% year-on-year. The year-over-year decrease in top line and bottom line was due to the impact from the pandemic during the first half of the year and the structural reform in the second half in 2020, partially offset by Tantan's rapid growth in revenue and narrowing loss. Looking to the key revenue line items for the quarter. Firstly, on live broadcasting. The total revenue for live broadcasting in business for the fourth quarter of 2020 was RMB4.33 billion, down 31% from the same period last year, and 2% from last quarter. Core Momo's live broadcasting revenue totaled RMB1.92 billion for the fourth quarter, down 43% from the same period last year, and 3% from last quarter, while Tantan's live broadcasting revenue amounted RMB404 million, 2% up from previous quarter. Moving on to VAS revenue. From the -- revenue from the value added services reached RMB1.4 billion, up 18% year-on-year, 5% quarter-over-quarter. Revenue from VAS, excluding RMB336 million from Tantan reached RMB1.07 billion for the fourth quarter of 2020, a 30% increase year-over-year, 7% increase sequentially. The solid performance…

Actually just a quick reminder for people who are in the queue to ask the question in Chinese first, and perhaps follow with English translation by yourself. And also if you could limit the number of questions to one to two, that will give more time for other people to ask questions. Operator, ready for questions. Thank you.

Thanks management for taking my questions. I have two questions. The first one is about the user and the revenue trend during and after Chinese New Year for core Momo and Tantan. And also, can management comment about the full year outlook, if possible. And my second question is about the spending. Can you comment about the marketing spending for this year as well as the overall margin outlook? Thank you.

Let me translate first. It has been around 5 weeks after the lunar year holiday. During that period of time, it's fair to say that the Momo core has been seeing pretty encouraging recovery trends, both in terms of traffic and in terms of grossing. I would attribute that positive trajectory to three major factors. One is the progress that we made in improving the basic social experience last year on the core. And the second factor is the fruits coming out of the structural reform in the second half of the year. And the third factor is the right approaches that we adopted on the channel marketing side both during and after Chinese New Year for the core Momo. More specifically on the user front, the average DAU so far into March on the core has already exceeded last December's level in a pretty meaningful way. On the grossing front, we did see a pretty mean -- pretty significant decline in both live streaming and VAS during the 3 weeks around Chinese New Year. But up until now, live streaming -- for live streaming, it has already entered into a period of steady improvement and VAS has truly been an outperformer here. Its grossing has far exceeded -- already far exceeded the pre-Chinese New Year level. It looks like that in Q1 we are going to see a pretty meaningful sequential growth from last Q4, and even on a wide basis we're going to see very notable acceleration which is very impressive to me. For the whole year, although now it's still a little bit too early to get very prescriptive, but here are some big trends that I'm ready to share. For live streaming, I think this year will still be -- still about improving the content ecosystem…

Okay. So firstly, let me elaborate a bit on the [indiscernible] trends. In January and early February, we pretty much focused on building our user acquisition materials, and fixing other technical stuff in order to make the Chinese New Year campaigns more effective. So the December week user trends continued in January and early February. They -- usually they started ticking up from late February. As said, we're on track to deliver a better March DAU than last December, while further lowering the total marketing costs from Q4. Revenue wise we had pretty strong seasonality this year due to the streaming services. Because we have the big majority of our live streaming revenue coming from long tail broadcasters are difficult to manage. The broadcasting time and the number of channels saw a very significant decline during the winter period, winter holiday period, [indiscernible] the revenue to see a deep dive and also a slow recovery. Now the supply has come back and we expect the revenue to gradually ramp up from Q2 onwards. Now some thoughts about the whole year. User growth is the single most important priority for Tantan this year. We had some initial success in sorting out the user acquisition approach in the post-Chinese New Year campaign. It definitely shows that we are heading towards the right direction. In the coming few months, we've lined up a few other new product updates, most of which aim at further improving the retention ratio on the platform. We're confident that with these products and marketing efforts, we're going to see solid user growth this year. Revenue is not one of the top priorities for the company this year, neither is profit. We certainly care about top and bottom line, and long-term wise, they should be the outcome of user…

Thomas, this is Jon. Let me address your second question. On the marketing strategy for core Momo, actually we are looking to keep the same level of channel investment for the payment -- for the marketing channels, same dollar amount, similar dollar amount for -- from last year. However, as Wang Yu said, this year some of our new apps are getting tractions. And with that we do like to keep the flexibility to invest more to grow the users and revenues for those new initiatives. But, however, we are focusing on the revenue growth on those new apps. So I guess we are probably looking to increase the marketing resources available for those new initiatives. We're looking at probably around 1 to 2 percentage of total revenue for core Momo. So -- but, however, we're only to make adjustments on this level where the spending plan on as we go basis, because a lot of it really depending on the performance of ROI. So that's the moving piece. For Tantan, as Wang Yu just mentioned, Tantan's team is the top priority on user growth. So we're going to spend -- how much they're going to spend? We're going to really -- it will really depend on the pace and magnitude of the improvement of its marketing efficiencies and product rollout. So if we move faster, we will spend more. But however, the VAS revenue will grow up more. And if we need more time, we'll spend less and the VAS revenue will ramp up a bit slower. So, instead of managing the line by line target, we are more focusing on targeting a range of bottom line. At this stage, we are looking at further narrowing down the adjusted net loss for 2021 down by RMB150 million to RMB200 million from last year's level. So, that's on the Tantan side. In terms of margin trends, on top of the additional potentials ending from core Momo, on the gross margin side, as I mentioned during the prepared remarks, due to the newly launched incentive program for new broadcasters, we do expect [technical difficulty] margin impact on the gross profit -- gross margin side. And that's for starting from Q1. You can apply that throughout the year. And, however, there are other factors probably will impact the margin on a quarterly basis such as the revenue mix might have some impact. But, however, we don't expect a [technical difficulty] will be significant. So, overall, the gross margin will see a 2% to 3% downtick for the year and also the potential -- higher selling marketing expenses from core Momo. Thank you.

Got it. Thank you.

Operator -- yes, operator, we're ready for next and maybe for the interest -- in the interest of time, this will be the last one we take -- we take in.

Thank you. Yes. Our next question is from the line of Tian Hou of TH Capital. Please go ahead.

Yes. Good morning, management. Just a question on the VAS. Look at the financial results VAS was growing pretty rapidly and also Mr. Wang expressed enough confidence for 2021. So can Mr. Wang elaborate a little bit further the drivers for VAS continue to grow in 2021? That's my question.

With regards to the future outlook for VAS, we are actually seeing plenty of growth opportunities in VAS both in terms of product innovations as well as revenue growth. As I said, over 80% of the time spend on Momo is in a variety of social experiences that are not related to live streaming at all. There is actually a lot of potential that we can cultivate in this big pool of users and traffic. In addition other than Momo and Tantan, this year some of our newer applications are also becoming more meaningful revenue contributors and that could push the VAS opportunities beyond the core Momo. More specifically, I think in the year 2021, we are mainly looking at several key drivers. Number one is we're going to continue to bring in new product innovations into the chat room experience. Things like the new interactive gifting experience, the new game plays into the karaoke experience, all of these have proven to be effective levers that we can pull to drive continuous growth in the chat room. And the second area of growth is the opportunity -- the revenue opportunities around the new applications and the new paying experiences that we're testing. Things like Hertz and the video matchmaking experience both within our core website which is [indiscernible] and as a separate application, which is [indiscernible]. Other than these we also had a few -- a couple of other [technical difficulty]. These new opportunities are increasingly coming into fruition on the revenue side. And -- so they can be more of a longer term driver for the VAS line. And the third driver this year is going to be the innovations within the older experiences. For example, the interest group is a old experience that has been around for many years [technical difficulty] after have been around since the year 2012. But after the introduction of new gifting experience, it started growing very impressively in the last year making it actually one of the most important drivers for the VAS line. This year we also have plans to continue to introduce new stuff into the one-to-one [ph] chatting and also the group chatting in order to activate people's willingness to pay for VAS. Now about Tantan, content VAS is actually at a very early stage of development in terms of user growth, ARPPU and the overextension of paying experiences. I think, obviously, the biggest, biggest priority for Tantan this year is on user growth instead of pulling other revenue levers. But actually in the coming 3 to 5 years, Tantan should actually have bigger potential -- bigger revenue potential in the form of VAS than Momo has today. I think we're approaching the markets open. So that will be the last question that we take today. And that also wrap up -- wraps up the conference call for today. Thank you for joining us. We'll see you next quarter. Operator, we're ready to close.

Thank you.

Thank you.

Thank you. Ladies and gentlemen, that concludes today’s [technical difficulty]. Thank you for participating. You may now all disconnect.