Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2021 Hello Group Inc. earnings conference call. Please note this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms. Ashley Jing. Thank you. Please go ahead, ma'am.

Thank you operator. Good morning and good evening everyone. Thank you for joining us today for Hello Group's third quarter 2021 earnings conference call. The company's results were released earlier today and are available on the company's IR website. On the call today are Mr. Wang Li, CEO of the company 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. They will both 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 provision 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 this, other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information due to events or otherwise, except as required under law. I will now pass the call to Mr. Wang. I will translate for him. Mr. Wang, please.

[FOREIGN LANGUAGE] Good morning and good evening everyone. Thank you for joining our conference call today. Q3 was a good quarter. I am glad we delivered solid financial results while continuing to push forward with all of our strategic priorities. Now let me walk you through the details. [FOREIGN LANGUAGE] First of all, a brief overview of the financial performance. For the third quarter 2021, total revenue at the group level was RMB3.76 billion, flattish year-over-year and up 2% quarter-over-quarter. Adjusted operating income for the quarter was RMB637 million, representing a 17% profit margin. For the core business, total revenue was RMB3.25 billion, up 7% from Q3 last year. I am glad to see that for the first time after the pandemic struck the core was able to turn year-over-year positive on topline. On a sequential basis, revenue from the core business was up 3%, adjusted operating income for the core Momo was RMB750 million or 103% profit margin. [FOREIGN LANGUAGE] As I have said at previous conference calls, after Tantan's management changes in May, the new team's strategically shifted the focus from driving paying conversion to lowering the monetization level in order to improve user experience and retention. As a result, Tantan's total revenue for the quarter came in at 4RMB511 million, down 30% year-over-year and 1% sequentially. Adjusting net loss for Tantan was RMB120 million for the quarter compared to RMB66.87 million for the year ago period. The revenue mix of the group remained stable and healthy with March representing 71% the size of live streaming. [FOREIGN LANGUAGE] Now a deeper dive into the quarter. I am going to focus on the core Momo first and move on to Tantan later. First, on key operating metrics, core Momo had 115.5 million monthly actives for the third quarter 2021,…

Thanks. Hello everyone. Thank you for joining our conference call today. Let me briefly take you through the financial review. Total revenue for the third quarter 2021 was RMB3.76 billion, flattish year-on-year, up 2% quarter-over-quarter and exceeded the high-end of our guidance. Non-GAAP net income attributable to Momo was RMB571.6 million compared to RMB653.8 million for the same period of 2020 or a 13% decrease year-over-year. In the interest of time, I will jump directly to cost and expenses as the revenue line items was just covered by Mr. Wang Li pretty comprehensively. Our non-GAAP cost of revenue for the third quarter of 2021 was RMB2.16 billion compared to RMB2.00 billion for the same period last year. Non-GAAP cost of revenue as a percentage of total revenue was 57.4%, an increase from 53% from the third quarter 2020. Non-GAAP gross profit margin for the quarter was down by 4.4 percentage point from a year ago. The decrease was attributed to the following factors. Number one, higher payout ratio for core Momo's live broadcasting business on a year-over-year basis. Number two, our wholly-owned subsidiaries, QOOL Media and Momo Pictures produced a variety show and a film, respectively, during Q3. The vast majority of the costs were recognized in Q3, which had over 1% drag to the GP margin. Number three, Tantan accounted for a smaller percentage of the group's total revenue as its gross margin is around 10 percentage points higher than the core Momo. Non-GAAP R&D expenses for the third quarter was RMB231.8 million compared to RMB252.3 million for the same period last year, representing 6.2% and 6.7% of total revenues, respectively. The decrease was mainly due to the decrease in employee salary and social welfare resulting from a reduction in headcount. We ended the quarter with 2,050 total employees,…

Just a quick reminder before we take the questions. For those who can speak Chinese, please ask your questions in Chinese first followed by English translation by yourself and also please limit the number of questions to maximum two so we could take more people to ask questions. Operator, ready for questions. Thank you.

[Operator Instructions]. Your first question comes from the line of Thomas Chong of Jefferies. Please ask your question.

[FOREIGN LANGUAGE] Thanks, management, for taking my questions. I have two questions. The first question is on Tantan. Can management comment about Q4 as well as 2022 outlook from the user, revenue and profit expectations? And how should we think about the paying users trend and when we should expect the paying users to bottom out? And my second question is on core Momo. Can management comment about how the macro should affect the live streaming and VAS business trend? Thank you.

[FOREIGN LANGUAGE] Let me translate here. So due to the delay in product and marketing plans, our previous users growth target of over 20% seems to be a bit too aggressive. In Q4, we have audited similar level of marketing spend as Q3. And considering the impact of our e-commerce peak season and the pandemic resurge, it now looks like MAU in December could be flattish versus Q3. [FOREIGN LANGUAGE] Even though user growth came in lower than our early expectation, I am quite pleased with our product roadmap and the lab results of the product experiments. I am confident that these measures can effectively address our current user experience and retention issues. We have already started moving forward with our plans to make various product adjustments through rapid iterations. Our marketing plan for next year will be based on the results of these efforts. In addition to channel marketing, we will also invest more into branding next year to enhance Tantan's brand equity. We will provide user growth target for the year 2022 in Q1 next year based on progress in improving product and marketing efficiency. [FOREIGN LANGUAGE] With regards to revenue and paying users, we expect that the monetization impact on VAS to bottom out in Q4 and both numbers should pick up next year. Here are some driving factors that we are looking at. Firstly, is the overall user growth. And secondly is the growth in Flash Chat and chat room experiences. We believe that chat room and Flash Chat fits well into Tantan's dating ecosystem and generates high level of synergy with social interactions. So we expect both features to show decent growth next year in terms of DAU penetration and revenue. And the third factor that is going to be beneficial to paying user and…

So I guess that's the question for Thomas. Operator, let's take another question. Thank you.

Your next question comes from the line of Daniel Chen of JPMorgan. Please ask your question.

[FOREIGN LANGUAGE] So my question is on our non-Momo and Tantan apps. So besides Momo and Tantan, we also have several new apps like Hertz and also TuiTui, Sochio, et cetera. Could management share some color on the user growth outlook and the modernization outlook for these new apps?

[FOREIGN LANGUAGE] So for the ROI oriented new apps, we mainly focused on the scale of paying users. Collectively, new app paying users count is around 5% of the core Momo's number. And the paying user count was up 40%-ish in October compared with at the beginning of the year. We have not included new apps paying user in the company's reported quarterly paying user number yet. [FOREIGN LANGUAGE] We expect ROI oriented apps such as Hudl, [indiscernible], Sochio to make meaningful incremental contribution to VAS next year. And in addition to the app we have already launched that have proven to be profitable, we have several other apps in the pipeline that we plan to roll out next year. Our goal in the coming three to five years is to have 10 or so apps that are not only can be profitable, but also can be dominant in specific niche markets in the social space.

Operator, let's maybe take one more question.

Your last question comes from the line of Tian Hou of TH Capital. Please ask your question.

[FOREIGN LANGUAGE] So Momo has already been in the market more than 10 years and the customer 10 years ago has already become older. So how can Momo continue to evolve itself and to keep pace with the younger generation to provide services that fits to the newer need, the demand to continue your market leadership position? That's my question. thank you.

[FOREIGN LANGUAGE] Let me translate here. So we answered a similar kind of questions a few quarters ago. And Momo and Tantan have a clear advantage in the open social territory. Momo mainly focus on the online companionship via a variety of social use cases while Tantan's core value proposition lies in connecting young people for romantic purpose and converting online relationship to offline. We believe dating is the fundamental human needs throughout the human history. To compare with the previous generations, such as a Momo user from a decade ago, the younger generation is increasingly receptive to online dating products. So as far as Tantan's core value proposition is concerned, which is connecting people for romantic purposes and offline relationship conversion, we don't see any comparable products in the China market that are worthy of our attention. Tantan is clearly the biggest and the most committed as well as the most effective platform in the dating space. So Tian, I think that's the answer to your question.

That's good. That was very clear. Thank you. Yes.

So maybe in the interest of time, this will be the end of the call today. And thank you very much for your interest in Hello Group and look forward to talk to you guys next quarter. Rachel, we are ready to close. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.