Ladies and gentlemen, thank you for standing by. And welcome to Fourth Quarter and Fiscal Year 2024 Hello Group Inc. Earnings Conference Call. [Operator Instructions] Please note that 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 fourth quarter and fiscal 2024 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. Tang Yan, CEO of the company; Ms. Sichuan Zhang, COO of the company and Ms. Peng Hui, CFO of the company. They will discuss the company's business operations and highlights as well as the financials and guidance. 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 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 and 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, future events, or otherwise, except as required under law. I will now pass the call over to our CEO, Mr. Tang Yan. Mr. Yan, please?

[Foreign Language] [Interpreted] Hello, everyone. Thank you for joining our call. 2024 was the year fraught with challenges and opportunities. Our team maneuvered well through external uncertainties and delivered satisfactory financial and operational results. Momo Cash cow business continues to be productive with an ecosystem that is healthier than last year. Our overseas business maintained its robust growth momentum and made more meaningful contributions to the group's financial standing. This impels us to take bolder measures to propel growth and innovation in international markets in the future. I will now pass the call over to Sichuan for more details. Sichuan, please?

Hello, everyone. Thank you for joining our call. I'll now update on our business in Q4 and fiscal 2024 and I outline our strategic goals for fiscal 2025. Starting with an overview of our financial performance. For Q4 '24, total group revenue was RMB2.64 billion, down 12% year-over-year. Adjusted operating income was RMB280 million, with a margin of 10.6%. Our Q4 costs included RMB94 million in film production related expenses. Excluding such costs, adjusted operating income would have been RMB374 million, with a margin of 14.2%. Revenue from the Momo app and standalone new app totaled RMB2.42 billion, down 11% year-over-year. The decrease was mainly due to the 18% year-over-year decline in the Momo app resulting from our proactive product adjustments and weak macroeconomy. Meanwhile, standalone new app revenue increased 37% from a year ago. Thanks to the rapid growth of our overseas business, adjusted operating income from the Momo app and standalone new apps was RMB269 million, with a margin of 11.1%. Excluding film related costs, adjusted operating income would have been RMB363 million, with a margin of 15%. As for Tantan, Q4 revenue totaled RMB213 million, down 22% year-over-year due to the decreased number of paying users. Adjusted operating income was RMB11.37 million, compared to RMB27.04 million from a year ago. For fiscal 2024, total group revenue was RMB10.6 billion, compared with RMB12 billion last year. Adjusted operating income was RMB1.173 billion with a margin of 16.3%. Revenue from the Momo app and standalone new apps totaled RMB9.7 billion, down 11% year-over-year. Momo app revenue decreased 16%, mainly due to our proactive product adjustments and macro factors. Revenue from standalone new apps grew 40%, driven by our overseas expansion. Adjusted operating income from the Momo app and standalone new app was RMB1.65 billion, with a margin of 17.1%.…

Thanks, Sichuan. (ph) Hello, everyone. Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total revenue for the fourth quarter 2024 was RMB2.64 billion, down 12% year-on-year and 1% quarter-over-quarter. Non-GAAP net income attributable to the company was RMB230.5 million, compared to RMB514.7 million from the same period of 2023 and RMB493.3 million from Q3 '24. Our Q4 costs included some film production related expenses. At year end, we also conducted a thorough impairment review on certain assets on our balance sheet, including capitalized film production costs and other long-term investments, and made provisions in accordance with the principle of prudence. Excluding these costs and expenses of RMB141 million, adjusted net income for Q4 2024 would have been RMB371.1 million. Looking into the key revenue items for Q4. Firstly, our live broadcasting, total revenue from live broadcasting business for the fourth quarter of 2024 was RMB1.26 billion, down 17% year-on-year and 2% quarter-over-quarter. The year-over-year decrease was mainly due to a decline in the core mobile live streaming business and to a lesser extent, the decrease in Tantan. Momo live broadcasting revenue totaled RMB1.19 billion for the quarter, down 16% year-over-year and 3% quarter-over-quarter. Tantan's live broadcasting revenue amounted to RMB75.7 million, down 12% -- down 24% year-over-year, but up 14% quarter-over-quarter. Revenue from the value-added services for the fourth quarter of 2024 was RMB1.33 billion, down 7% from Q4 last year and 2% sequentially. Revenue from value-added service on an ex-Tantan basis was RMB1.2 billion in the fourth quarter of 2024, down 5% from Q4 last year and 2% from the previous quarter. Momo app value-added service revenue decreased both on a year-over-year and quarter-over-quarter basis. This was due to a weak standing sentiment, as well as our proactive product…

Thank you. For those who speak Chinese, please ask your questions in Chinese first, followed by English translation by yourself. Operator, we're ready for questions, please. Thank you.

Thank you. [Operator Instructions] Your first question comes from Xueqing Zhang with CICC.

[Foreign Language] [Interpreted] Thanks management for taking my question. My question is about core Momo. In the first quarter number of paying users on core Momo crashed by 1.2 million quarter-on-quarter, which is significantly larger than the historical average. So what's the main reason for this? What's the impact on revenue and profit? Can we see the number of paying users around this year? And secondly, how does management view the adjustments to live streaming and VAS products over the past year? Are there any further adjustments this year? Lastly, how to view the revenue and profit of the core Momo in 2025? Thank you.

I will take this answer. So about the question of paying users, for the last few years, we pushed hard to get a lot of small ticket paying users because we thought we could keep improving our earnings and we spent quite a bit on different channels to acquire them, but the cost could not be recouped. Now given the tough economic and our growth to be more focused on the profit, we have decided to cut back on trying to bring in this low return paying users in the fourth quarter. And that's why we saw a big drop in long-term paying users, which is more than what we usually experience at the end -- at the end of this year -- of the year-end. So in the months ahead, we will keep reducing our efforts to acquire this low return small-ticket user. This means, we expected a number of paying users to drop more than usual even though this will lower our overall count of paying users. The users generally don't engage much or spend. So stopping our efforts to bring them in for (ph) release the platform. In fact, the shift should help us boost the profitability of our main business. Regarding the product adjustments of Momo. After a year of efforts, we think Momo's content has greatly improved. So we won't make any changes to reduce earnings right now. Instead, we're going to focus on adding fun features and ways to engage users. At the same time, we will keep looking for ways to save costs to make sure our main business continue to pull in good profits even with our revenue goes down a bit. Cathy, will share more about Momo's financial plans for this year.

Hey. This is a very extensive question, so let me try to break it down into a few key components and take them one-by-one. First of all, on revenue outlook for the cash cow business, I'd like to crack it down by considering both internal factors and external factors. Internally, if we look at Momo's fundamentals, I would say that the foundation of our business remains very solid and resilient. First of all, Momo continues to be -- the go to social platform for users looking to discover new friends and expand their circles. Our core user engagement such as number of meaningful connections and a number of interactions remain pretty strong, which give us confidence in the platform's resilience. On paying user metrics, which might have caused some concerns this quarter, I don't think investors need to really worry about it either, and here is why. It's true that extremely high spending users, which we sometimes call the whales have faced pressure in recent years due to economic challenges. Many of them, especially business owners saw their net worth shrinking during COVID and subsequent real-estate meltdown, which impacted spending. It's also true that as Sichuan (ph), mentioned earlier, the long-time users, those spending around RMB10 per month or even less have been deprioritized in our user acquisition strategy due to normalization potential and negative ROI. However, we're happy to see that mid-tier (ph) users, which we sometimes call dolphins in comparison with the whales have been the backbone of our platform. This group of dolphins has remained remarkably stable throughout the past few years. Perhaps some former whales have also transitioned into this category. Looking ahead, we expect this group of dolphin users to continue driving the business and providing a solid revenue base. Now turning to two external…

Operator, next question, please?

Your next question comes from Thomas Chong with Jefferies.

[Foreign Language] [Interpreted] Thanks management for taking my question. My question is about our overseas application. Can management comment about the key market for Soulchill as well as its revenue and earnings? On the other hand, we also talk about the two new apps, can management share the positioning of these two application and how is it different from Soulchill? How big are these two apps in terms of revenue and spending? In 2025, how should we think about the overall overseas revenue and earnings expectation, as well as the growth potential in overseas market? Thank you.

Regarding the question about Soulchill and other apps. So in the past few years, Soulchill has become the fastest growing product in our group, both in revenue and profit. In 2024, its revenue grew by 50% from 2023, nearing RMB1 billion and also surpassing Tantan's earnings. So this growth is mainly due to improving localization strategies we started last year and focusing on three main areas. One is reaching to -- reaching the mature markets; two, expanding into new regions and also adding features like live streaming. We have also strengthened our partnerships, which has helped [indiscernible] revenue. Soulchill is doing well in Turkey, Egypt, and Gulf countries showing very strong market demand. We also launched two new apps in the MENA regions at the end of 2023. So the first one is Yaahlan and [indiscernible] game app and AMER. Similar to Soulchill, but voice focused, both products was ROI-driven from the start and has shown promising potential in revenue and user acquisitions. So in 2025, if the ROI remains promising, we plan to increase marketing for both. So the surface of Soulchill and our new products shows that the knowledge we gain in our home market works well support, especially in the MENA region, which can accommodate multiple Soulchill brands. So in 2025, we will invest more in exploring international markets since our overseas products are focused on profits, increasing investments will heavily affect the group's net profit. So Cathy will provide specific details on revenue and profit forecast.

Okay. Our overseas growth strategy for 2025 can be broken – broken down into two buckets, the good old Soulchill and the other new initiatives. For Soulchill as Sichuan mentioned earlier, we're focusing on three main drivers this year. First one is better localization; second one is geographic expansion into developed countries, where our current penetration is not as deep; and the third driver is new media services. If we make strong -- if we make good progress across all those three areas, we could reach the higher end of our growth target, if certain areas require more time, we might land in the mid to lower range of our target. In 2025, we are going to have a second growth driver for our overseas business, which are the two newer applications, Yaahlan and AMER. Both applications are gaining pretty strong traction at this point and we are significantly increasing our marketing efforts to accelerate revenue growth because the ROI is looking pretty promising. Despite stepping up the marketing dollars, ROI remains quite stable, which is a very positive sign. If we can maintain strong ROI as we continue to scale by the end of the year, the combined quarterly revenue run rate is the new overseas apps could -- meaning these two smarter apps could reach where Soulchill is today. If you annualize that, that would mean the overseas revenue contribution for 2026 will become very meaningful. However, if marketing efficiency decline as we scale, we may pause marketing expansion to focus on product improvements and operational refinance, before ramping up again. In that case, revenue growth for those two applications could come in a bit slower. So looking at the full overseas portfolio, we expect revenue from it to grow from around RMB1 billion in 2024 to a range between -- could be between RMB1.7 billion to RMB2billion in 2025, that's a pretty impressive growth for this year already. Profitability is not a priority for overseas expansion this year, as we are focused on scaling. That said, because we grow our overseas business with high level of focus on ROI, as we continue to scale bottom line for overseas business should improve over time. So that's what we have to share at this point. [Technical Difficulty]

Operator, we're ready for the next question. Thank you.

Your next question comes from Leo Chiang with Deutsche Bank. Leo Chiang from Deutsche Bank, your line is open.

[Foreign Language] [Interpreted] Let me translate myself. Thank you management for taking my question. My question is regarding to Tantan. After one year of business adjustment, we see Tantan user and revenue scale is still in a declining trend. Can management share the plan for Tantan this year in terms of product and operation? How should we think of Tantan's revenue and profit outlook in 2025? Thank you.

Okay. I'll take the Tantan question. Maybe let me spend a little bit more time to discuss Tantan's strategy for 2025 and explain why we're taking this approach. Tantan has always had two main strategies -- strategic objectives. One is, delivering a good dating experience for users in China and the broader Asia market. This remains our top priority because we obey all the up and downs in the past. We still see this as a significant underserved demand in China market and we believe we -- out of all of our peers still have the best chance of being the best player in this market. And the second objective is building a sustainable, profitable business model. So given China's highly competitive and costly user acquisition environment, there is only so much we can do to optimize on user acquisition cost. So in order to build a profitable business model, referring to the second goal that I mentioned, we in the past thought that boosting monetization was a more feasible path, that's why in the past, we focused heavily on increasing ARPPU to improve monetization. However, this approach often conflicted with user experience, forcing us into a pretty awkward balancing act, one that we've never executed successfully and sometimes even tumbled and struggled to get back on track. This year, we're taking a different path. Instead of prioritizing ARPPU growth, we're shifting our focus to reducing user acquisition cost in a pretty dramatic way. Now, how do we get there? Typically, the more aggressively we acquire users, the higher the user acquisition costs will go, which means if we want to maintain current level of user scale, it's difficult to further reduce unit acquisition cost. On the other hand, if we reduce our acquisition volume, unit costs would also decrease.…

Operator, let's see if we have any more requests on the line. If we do, let's take one last question before calling the night. Thank you.

Thank you. Your next question comes from Jenny Wang with UBS.

[Foreign Language] [Interpreted] So thanks management for taking my question. My question is regarding our capital return. As management mentioned, this is the seventh consecutive year of issuing special dividends. So looking ahead, are we planning our regular dividend policy, we note that this year's dividend point is not really small than previous years. But on the other hand, we extended and upsized our share buyback program. So does this indicate a strategic progress for share buybacks over dividends or in terms of shareholder returns going forward? Thank you.

Okay. I'm hearing several questions here. On the question as whether we are thinking about making the dividend program a regular one, simple answer is no. We don't see a strong reason to make our special dividend plan a regular one and here's why? First off, for long-term investors who have been following us, it's already well understood that management takes a disciplined approach to capital allocation. When we have excess cash, we return it to shareholders in a thoughtful and value enhancing way. Because this expectation is already while established, we don't see the need for fixed dividend policy just to formalize it. Instead, we would rather keep some flexibility in how we allocate capital. If we see compelling opportunity -- investment opportunities, we would prefer to deploy capital towards growth, either organically or through M&A, rather than commit to a rigid dividend schedule. And the second point is perhaps related to -- it's also related to your other question about how we decide between a cash dividend versus share buyback. Now even when it comes to returning capital to shareholders, we need the flexibility to decide between dividends versus share buybacks. Given that our stock is still trading a pretty significantly below cash value, buybacks currently offers a better return for shareholders compared to a fixed dividend payout. So the conclusion is a rigid dividend policy would limit our ability to optimize capital allocation, instead we prefer to keep our options open and ensure every dollar is deployed in a way that creates the most value for our shareholders. And so that's my answer to the question. And maybe with that, we would like to wrap up today's conference.

So thank you all for joining us. I will see you next quarter. Operator, we're ready to close. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.