Q3 2021 Hello Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2021 how low group incorporated 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.
Ms. Ashley Jing. Thank you. Please go ahead ma'am.
Thank you operator.
Good evening, everyone. Thank you for joining us today for Hello groups third quarter 2021 earnings conference call. The company's results were released earlier today I know available on the company's IR website on the call. Today are you still want me C O off the company and Mr. Jonathan Zhang CFO of the company.
It 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 unknown risks uncertainties.
These 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.
Uncertainties and factors is included in the company's finding with the U S Securities and Exchange Commission. The company does not undertake any obligation to update any forward looking statement as a result of new information future events or otherwise except as required under law.
I'll now pass the call to Mr will translate for him he's a lumpy.
Oh gosh.
Great.
Some people don't.
Volume that's supposed to be presumed donor.
Sure.
Gosh, I wish them well.
You got it.
Traditionally well.
Good morning, and good evening, everyone. Thank you for joining our conference call. Today Q3 was a good quarter and in fact, we delivered solid financial results, while continuing to push forward with all of our strategic priorities now let me walk you through that need house.
I will go here.
San Diego than usual, so that you don't really get it maybe can be tricky when people don't know about all told them.
You can send to you maybe.
This achieved.
Well, we're glad to join you.
Got it.
When we think about going to cheat consulting turned off when we do have a breach in party life. So.
So here he was old computer rooms on one.
Let me come home with Robin's hold them back when it's done children.
She didn't.
See the only vendor.
Well there are two things you always want to you know book well yeah.
I told her whole career.
She was a one time deal.
So I'm attending school you almost.
There's only one way to get all dependent upon to do doing so it wont be juggling back when essentially Julian.
That'd be shutdown viability.
People dependent children inclusive.
From Chile, what you don't do it.
At your R&D.
From your usual jugal also send you a lot. So I don't suppose should we model I E.
First of all a brief overview of the financial performance for the third quarter 'twenty 'twenty. One total revenue at the group level was three 760 million, maybe flattish year over year and up 2% quarter over quarter.
Adjusted operating income for the quarter was 637 million M D, representing a 17% profit margin.
Call business total revenue was 3.25 D up 7% from Q3 last year I'm glad to see that for the first time. After the pandemic struck the call was able to turn year over year positive on top line.
Sequential basis.
Revenue from the core business was up 3% adjusted.
Adjusted operating income for the core Momo was 750 million in D. R.
3% profit margin.
I sat at previous conference calls after contact management changes in May the new.
New team strategically shifted the focus from driving thing collection to lowering the monetization level in order to improve user experience and retention.
As a result and has total revenue for the quarter opinion, 511 million movie and 30% year over year and 1% sequentially.
Adjusted net loss for <unk> was 120 of malaria in India for the quarter compared to $66 eight 7 million indeed for the year ago period.
The revenue mix of the group remains stable and healthy with Haas, representing 71% of the size of live streaming.
Got it.
Well, we didnt see if someone was Huawei doesn't call.
Yeah.
So here's a cushing Fuji normal drops and you got menu.
You bet you were here you can go by but I'll be.
Can be tricky and beautiful people, who talk about central lab Champs and Hubert you Abella.
Yeah.
So you just chose a suite you hope I'm sure you'll hear shingle doesn't give you okay.
What you should know about human reaching one two or three months.
Attendees you talk people connected.
Tricia to you soon.
Any chance you shouldn't be dealt with but you also don't get involved so that's our wholesale team.
Hopefully you won't have a ball mill. So you shouldn't bother you that you've come up with you soon.
Some people mean, almost laughable he forgot how to keep them here because I don't know.
Now a deeper dive into the quarter I'm going to focus on a comb on my first and move onto the kind of later.
On key operating metrics.
<unk> had $115 5 million monthly active for the third quarter 'twenty or 'twenty one.
2% younger than flattish on a sequential basis.
Paying users for the quarter was $9 3 million compared to 9.0 million a year ago.
On a sequential basis paying user count remained flattish, which is in correlation with the trend of any use.
September is seasonally low in terms of how far off the phone activities. Our students go back to school after the summer holiday.
The flattish quantity user trend was a reflection of that.
He's like we could pop off the phone auditions our product efforts continue to drive that's a in the final activities during the quarter.
Greetings and the number of messages stayed at a high level compared to the year ago period.
The number of impressions off nearby people I need my post has grown steadily since the beginning of the pandemic.
These improvements show that the fundamentals of called Walmart as a social platform continue to be healthy and stable.
It doesn't mean it doesn't only.
So the teams are doing.
Yeah, the same notion.
You can show me that she can pull that don't do that.
It shouldn't be Chinook and a whole lot.
Sure couldn't deal with what's been done with all the fat tissue.
Okay.
Yoga, India.
So what do you think about doing them somewhat.
So some good Pos if she or he just told them EG Cushing.
We moved it seems longer.
I just was hoping you do it but that's it for me.
I think that did you mean.
So you can get a doctor next let me walk you through the progress we made in the strategic priorities I laid out at the beginning of the year.
Come on my side, the three goals for the year, our number one further grow the core user base with limited marketing budget and improve our both as last year.
To bring the business back onto a growth track and number three continue to enrich our product portfolio and push the boundaries beyond Walmart and content.
On the content side. The most important goal for the year is to deliver solid user growth by substantially improving the marketing efficiency and the quote eating experience.
Now, let me walk you through the progress that we've made as well as the challenges that will continue to face on each of these frontline's.
Freedom almost why people don't go fishing history chart doesn't you don't want to do when you're in for Ya and I don't think they will not renew.
The whole motion along with always showing them your Penguin when people go to them, but what we want with them.
The only 10 billion infusion.
For me the Holywell shipped to how you can cook.
Yeah.
Sure. So she had junior so you don't even go to someone else.
Well go to know kind of on which have to go to eight inch so you.
Don't confuse that with some of his opinions on time and you don't get shouldn't yesterday himself with Linda.
So you're already on any of your jumbo towards me.
Firstly, she can use of growth for the core Momo platform.
To adapt to the challenging environment one of our key efforts since the beginning of the year was to optimize our use of rest of Orexin model to make the calling back half with more efficient.
Unit price of around the rest of it uses is meaningfully lower than that of the new users, while the retention ratio and paying conversion are considerably higher.
That's all I from the reactivation is one of the teaming to achieve our first strategic goal for the year I'm glad to see that such strategy has paid off pretty well so far into the year based on the Protectory that we're seeing I believe we'll be able to end this year with a slight increase in the overall I mean, you against last year.
Importantly, our overall flattish marketing spend in comparison with the year 2020.
When we you can see one of those familiar with the chart looking back. He told me she likes to shop with Us I mean.
I don't think it's all public school publicly about Hulu.
Within the treatment pushing.
It was a moment in time and go through all the hoopla shove it doesn't seem to be more mobile just enrollment to teach them about the sky bet sure.
I bet, they put any chance you're going to come out at Boddington, Jim jumping a little boy who completed.
Sure.
What do you see that issue that you bump it litigation surety Chimbonda. She would do wait for sort of what you said.
I know some of your social digital shouldn't pull them down.
Ooh Ooh Ooh.
Would you rather Suzhou Wuxi I'm asking about the timber fortinet since you're talking to you within the cost could you go to Beaumont.
My stomach troll brand that has been around for more than 10 years.
They use a resurrection start any work at all we need to move fast and product innovation.
Because you said it would only come back stay longer at all when we have something new and something better to offer.
We made a bold effort should change the user interface of our thinking to a nearby people list. The new interface keeps the recommendation engine recalibrates to allocate high exposure to a wider range I'll say now users, especially those who put me easily ignored in the previous version.
A number of responses from female users grew meaningfully driving a significant increase in the number of Tweens, Kuwait interactions, which in telling you how is the retention and engagement level, we intend to gradually roll out the new version of nearby people to the entire mobile community in Q4, so that he can contribute positively to overall user.
Growth in the long run.
Do I believe that without food can add you don't talk on mobile because that's where the European industry. He's doing his own yourself is that she likes what she does seem to the Orange Belgium.
That's just how they view sugar so true unfortunately, because people do.
Yes.
How many folks you clean sheeting shop, so shortly when he was talking about.
But.
So some people want without them going forward.
We will see some meaningful price within that probably we should have them, yet who doesn't know about when people.
People thought but wasn't really fulfill the need now to talk to you all mentioned that he was when he was thinking.
I've got a pretty sharp shooting yourself.
Don't have so many of them also don't have to tell the truth.
So prices went up.
Well they don't.
In total from Asia.
In addition to the call normal we continue to advance our strategic priority of enriching our product portfolio and pushing the boundaries young one one time time amongst the ally oriented projects. So chill a voice based of social apps pocketing overseas market has been an outperformer in the recent couple of quarters.
Driving by ongoing product innovation and operational efforts.
So what you'll continue to show steady improvement in retention and monetization potential.
Q3, we stepped up our marketing efforts targeting high value users as a result, some fuel generated robust revenue growth driven by both user base on our people expansion.
Number of paying users increased 50% compared to at the beginning of the year and our people more than doubled over the thank you were at all time, we believe Tokyo has a strong competitive advantage in the Mena area.
Our plan is to continue to invest in its marketing channels as long as he remains on target for ally.
Though is to form a self sustaining commercial cycle, so that the product kind of cheap rapid growth in both users and revenues at the same time not hurt the bottom line of the company.
So something to those people to move up.
He is actually better usually are trying to do.
Who shut in Chicago, So it can go down even further.
Oh no.
No kidding.
Tell me what your media with the larger producers are starting to Chicago.
You should hold pretty don't do that's why even though you don't think so.
So Hollywood.
In addition to this early success in overseas development.
A voice based social App, primarily serving the agenda and play a video I'm actually making up the patient targeting lower tier markets continue to progress well call with our target.
Currently we're still seeing lots of potential in video matchmaking category, especially in the lower tier cities.
And therefore, we're going to continue to invest in these new apps to drive growth both in terms of users and in terms of revenue and profit.
She said that she knows element that freedom shouldn't you.
Some of them with all that you've done as soon as countries at the same time.
Next let me review the progress that was made against our priority of bringing the cash cow business back onto the gross crap.
We'll send you to almost half a trillion with food.
Let me get him back burner, a bunch of you don't know about it.
Bobby the jingles, you've Gotta go talk to the point the shop off with you John.
I'm not sure I'll start with water.
So those are the only offering or switching who when they went through all the things that you want them to be mean, but then she shopping to Europe.
Sometimes a little slow.
The finding someone who wasn't that the use of the milk histology with a peer pressure.
To show that he has he got here.
Firstly on life Broadcasting Oh My God.
Live broadcasting revenue totaled $1 93 billion and indeed for the third quarter Cooper starting from the same period last year, but up 3% from last quarter. The year over year decrease caused by the structural reform in August last year was largely narrowed from 22% in Q2, we have seen some weakness in non event they stated growth.
And since the since September, which we believe was due to the macro headwind and consumption softness.
I have a promotional event that we held in September turned out to be quite successful and well why are we received by the performance as well as the users the incremental revenue contribution from the events helped us to overcome the September weakness and ended up putting a pretty strong quarter.
Professor who shall be pure empires, <unk> puzzles zynga, usually they shoot one more thing the only kind of wireless that's actually a frenzy that yourself Monaco will publish a senior homeless housing well figure out his home base, you're waiting for me to somewhat.
So what am I going to ponder, what's young children being born you can call the screen dumped into level one.
We will send you do you want to set our centers.
So we must listen if you don't want to put sometimes you don't put the same division.
One of them will go our remarkable I'm wondering why you shouldn't be volatile with Oh with shop in shops.
He called off I'm wondering what you're thinking what do you what are some people talk to you about and see if we would sort of professional puzzle.
You don't walk away.
Well most of them already.
You don't have it in pieces the Lutheran bulk so that you don't know how to shipping.
When you talk on the level of body shop each of charter.
Thank you.
Your baby's G could you go cello her because she didn't bother to telefonica.
So people besides what do we need all the things like the mall.
Q2, you'll have probably wouldnt shopping oh, okay sure.
Wonderful.
Softness off spending doing 91 days continued into October and November and we are not currently seeing signs for macro headwind to pay it out in the near term given that most of our high paying users are private business owners, whose financial conditions and discretionary spending are closely tied to macro factors, we adjust it up.
Additional plans to adapt to the current environment.
Instead of utilizing having stimulation matches during the quarterly tournament in Q3, we broke down the one big event into different levels of smaller ones. So that we can keep various cohort offenders at our engaged without pushing too hard to turn them away.
Leif macro factor and they continue to be a headwind for the top spending in the near term in the face of macro uncertainty. We plan to continue hosting a number of smaller events in Q4, which may involve additional investments from us in setting our bonus plans for performers and agencies.
Throw in one to two percentage point of gross margin back into the system. We can keep the data growing at a decent level and help our agencies and perform a stay in a good economic condition when macro is tough.
It's worth mentioning that contrary to the permanent rise to a payout ratio of structured structural changes to the incentive programs such as the ones. We undertook a few quarters ago The party.
We set aside for Q4 events is highly elastic with moderate gross margin impact we can easily scale it back when sentiment et cetera.
And I tell them, who you tried to the left school started maybe only gonna go back with US a little let me go back and listen to you don't want to I'm, telling you I'm asking so when people don't know about menarche wishing Aberdonian shortfall example, I want to hear about basketball.
Now turning to lost revenue from value added services on X 10 ton basis totaled $1 6 billion in India for the third quarter up 26% year on year, and 4% quarter over quarter mobile Vas.
Revenue was up 21% from the same period last year revenue from the new bucket of Standalone apps grew 188% from Q3 last year.
And with any luck syndrome.
So you use it you don't have you won't breach with the 20.
Hum.
What does she have will be laughing sogou Jabil machine control do you have a chance to answer the Sunday well either.
If somebody were to move out so thats only shipping.
Two I believe you win more with lutetium to garner approval.
Well done.
I don't recall, you minions Asia shows which comes with Opex, you got something to watch a movie.
Would you like it went up from as you'll see from the people who shop without meaningfully because you guys, who went out of things yet.
Well they'll call mom application the growth was mainly driven by the introduction of unified features and operational events in the audio and video social entertainment experiences at the same time revenues from the new bucket make more meaningful contribution to the vast topline Q3 collectively revenues almost tripled from the year ago period.
The growth was mainly driven by user and engagement growth because we are still keeping the monetization at low levels.
With the gradual improvement in ally and steady ramp up in users. We may consider writing monetization level next year for some of them all mature app. We expect the revenue contribution from the new bucket to continue to grow meaningfully driven by both user and optimal improvement next year.
So here's what you would choose to go down to Toby schilke.
Charles Machine vehicle, Tricia Gotcha, Kimberley, who tell me more changing thought back when it was.
You can also call it from here.
So within the mobile percentage of do those positions, which I was hoping for.
The codell.
So the bulk of the political it she bought some docs that have shown on shelf.
John do you assume that this for yourself.
Go ahead Sir.
We also show some signs of.
<unk> is a Yahoo, Japan yourself Huawei with Deloitte.
Now turning to Titan, firstly on user trends and overall financials.
Structure continued to improve in Q3 with females now accounting for 50% of the newly acquired users.
However, within a bit behind our own pockets in optimizing the marketing Formula and lost unit acquisition cost eight at a relatively high level throughout Q3. Therefore, we have been maintaining moderate approach in terms of marketing spend.
To take out of ally.
User growth in July and August turned out to be quite strong with I mean, you're growing more than 10% from June in September, which as I said is seasonally low due to the students going back to school the user trajectory came down a bit from August and ended up with an 8% increase from the month of June.
Send you to a more kind of a weird.
How about your provider does home depot to somebody who said if I heard you also shot deal let me just I'll everybody.
Suddenly uses which is used to shoot them you'd be tissue.
It depends on the future shop, Machinable becomes a fruitful way that you need with the United team.
Paul we would yield which was only a washroom due to children.
With me on the Sofa inbox shortly.
It's a valuable IP portion.
We are publishing model when hyperlocal, hopefully, we see some of which <unk> was talking about before COVID-19.
Shimbun.
Possible because having children.
People will touch on them each of whom Asia.
Jim do you deliver your children.
Okay. So you would you are you should people casado plus almost whenever you're in July.
As usual she may come up with it.
Hollywood has come from Asia.
Hum.
How do you select Bushnell why don't <unk>.
You just don't come through political numbers here, because he saw what mythology.
Good house of Hoops, you talked about pushing Hawkeye G to dry dock will show them when did your short reach on the bus.
Okay.
As you know tell me due to shop.
So to go out and do that they can put up all.
Yes sure.
Uhm.
Sure.
Anytime you do a fine so don't share with US you know two years ago.
G.
Oh boy.
The vast checking this woman.
That was actually in the vessel.
Sure well with the Chinese Boy I Hope I'm Gonna movie, who can help with events.
So from Asia.
And on the paying user accounts came in $2 9 million of end of Q3, 2021 and from $3 1 million from last quarter to have the 200000 net decrease was mainly attributable to three factors.
The first one is the improvement in the female percentage in the newly acquired users as women are much less likely to pay in comparison with men with Titan has current product in Canada.
Factor pertains to the monetization process to protect you say, yes for.
For example, we removed some misleading narratives from membership subscription pages in July resulting in a considerable decrease in both membership conversion ratio and RP pool.
In addition in the new product upgrades released in September we took on quite a number of paywall and merchandising tactics that may not be helpful in improving user experience.
The new version also emphasized live streaming in a pretty significantly.
These product changes had a planned active impact on pain conversion on RP pool, we believe they are necessary at this point so help us pantone after the right track in terms of user experience.
Other than these two reasons I can also see a third factor that in the near term could be negative to the paying conversion.
As I said multiple times in the past one of the key directions on the product front is to reach out alternative experiences on top off the cost wipe I'm actually kind of them.
As a matter of fact, many of our product experiments today focuses on lungs Viking related features.
However over 95% of us.
Currently built upon the post Whiting system.
They find any into other experiences outside of the system certainly won't be positive for pushing the users into law.
I believe the long term solution here is to in that value added service into the new experiences, which I shouldn't say with confidence in our team's long standing strength.
Somewhere in between the diversity diversification from swiping and a catch up of new <unk> features the paying conversion could be under a bit of pressure.
Can you help me with that.
And that's how we're going to.
So he can present.
You may be only talking about one thing I'm, just talking about very well. So I mean, I don't think she gerardo should even be blunt.
So people should have yeah.
Sure.
I'm thinking about with the bar chart it somewhere.
I can put a T shirt.
And he has shown you before.
Oh, the market is in a city to influence.
Hollywood to the shut in reality, the surgical John you want to shoot.
Thank you Bill.
Now let me briefly review <unk> financial performance total revenue for the third quarter was 511 million movie and 30% of young yet and 1% quarter on quarter.
<unk> revenue decreased 7% sequentially to 276 million in D C.
The sequential decrease was due to the decrease in both paying user count on our people reading off which already explained earlier lite.
Streaming revenue increased 8% sequentially to $275 million and be driven by occupancy improvement.
We expect the bulk of the revenue impact from the pending a product upgrade to fall into the fourth quarter. Therefore, the downward pressure on paying conversion and lost revenue should continue into Q4.
We enter into next year, both numbers should gradually pick up.
Sundar formulary position Paul this is Daniel.
People have done where mobile trends it will be fun.
So you're going to pick on the older people.
It will close at the fucking for simple, but it was also good at wholesale so they don't think it's all of them will be off with Linda <unk>.
She has shown a bunch in the window.
Now moving onto the execution Beadhouse off the single most important Gulf of content. This year user growth Q3 was indeed, a good quarter at <unk>, where we saw both unexpected challenges as well as encouraging observations and progresses.
Here are a number of things I'd like to share with investors to help you understand what was down and what remains to be done in order to reach our goals.
So some of you don't.
We are kind of one of them told them well Melissa.
During the trial, a little Penguin Lindahl kind of the same people you know with one of them.
Well, you're going to meet you soon on that Q&A Party events. When you go buy somebody not Oh, yeah, well machine in similar conditions.
So this is all last year.
So as you know one is what's the impact with another hugel, if a pool than somebody who can be films or something to put 2000 students at assembly row, nobody wound up due to Jimmy Choo whooping cough, a few pockets of defense you do bump up against any photos.
Oh, God I forgot who you play doh.
Hmm.
One transaction so he would give us any soda, who don't have Australia with a meaningful level.
So that so yeah, you're right.
You too.
So nobody's, which ill touch on a few million so totally within our system. So we can be.
Some of them are homeowners don't post COVID-19.
Do people come in yet.
I will start with the problems first one of my key priorities. After management changes in that time was to put together a strong team to lead the product and user growth I thought.
I originally expected to have a fully functioning leadership team by July.
Fortunately I have underestimated the difficulties you're feeling in some of the key positions.
It turned out that it was not until October 14th Tangos, New management and execution team at Manhattan. As a result, some of the key projects on the product and marketing Frank got pushed from Q3 into Q4 and 8% user growth in Q3 came in lower than our early expectations.
Our original plan was to release the bulk of the product adjustment in Q3, and subsequently step up marketing spend after double 11 to drive faster user growth in Q4. However, now it looks like most of the new product adjustments aimed at substantially improve.
User experience are going to be released only in December and early next year.
In addition, the Covid research in southern part of China. Since October also had a clear negative impact on the dating sentiment, which in turn would make that a.
Our marketing campaigns less effective due to these reasons, we decided to push more aggressive marketing campaigns from Q4 into next year.
Hundreds of deform and quality you Chico's honest with you.
But I presume Chinese doctors.
Dr. Linda what did you do you want without trending from here going out because of the potential ownership would you the tiger woods and the whole business.
What are you doing any <unk>.
The original just you do without.
Oh sure because some of them are good.
Okay.
Thank you Lisa.
Okay.
You're guiding for digital power.
We believe this facility shifting out before due to COVID-19.
Do you need to have a childhood central related issue.
Sure.
Sure.
Cool.
Do you hold you to the whole akhil, you'll hear the term you seem to do well.
Jim will touch wood I found in Appalachia.
Yeah.
Sorry, I forgot.
I told them a few times you see it here.
It's helpful for them.
Yes.
There will be a really good look sometimes it's absolutely I would guess, it's yes, they're moving towards them, we are going to be a man what would you go to shop.
It wasn't a window here should be taboo confusing presentation, you should don't kill combatants, you from showing Pennsylvania Young cognizant.
So really the two tank in children.
People, who shop with us.
Sure.
Our soldiers.
Michelle.
<unk>, who will begin to ship the tool.
It's really we cannot keep up.
With you soon.
Zhou for issue to measure digital.
Yes.
Sundar.
Hum.
Sure.
Hugo.
Moving to the Keystone continued to hover Susan.
Although it took us longer to put together a fully functioning team they haven't been able to make some solid progress in driving the product plans, we laid out earlier one of the most important moves we made on the product front in the past few months was to remove from the system some of the aggressive paying conversion majors.
User experience over.
Over the past couple of years due to excessive pursue off part of the operating and financial matrix Hana had been overly aggressive in setting a paywall and merchandising tactics.
One of the key complaints that we have received from our user survey was that increasingly seems so that it was impossible to use Titan without pain that is a perception that we have to change and so we did take some importance that starts in Q3 for example in July we took down some slight misleading.
<unk> membership subscription page, which we're extremely effective in driving new user paying collusion ive had led to a large number of customer complaints and unsubscribing as well I use a chance at later stages.
In the September product upgrade we further removed from excessive paywall features such as S. Vit's Reed with CPM and Flash Chad Keetch.
We also adjusted a few merchandising tactics that have proven to be not user friendly. In addition, we've replaced our live streaming app on the lobby bar with a new entertainment page, which features the chatroom experiences.
After several months of pilot operations.
Realize that Pat room fits better into kind of stating ecosystem.
Screaming.
So generate higher level of synergy and loss has the potential to reach higher via your penetration on contact the left a livestream.
Those adjustments in the September version.
Put it in a considerable decrease in both paying conversion and RP pool, which in turn that to a decrease in paying user count and revenues. However, we believe they are absolutely the right thing to do for Titan tend to get onto the right track in terms of user experience.
As a matter of fact, we started to see substantial increase in membership renewal rate over the subsequent months alongside with meaningful improvement in next day and seven days to retention.
These are solid evidence that we have been found the right path.
In addition, the increase in the Sop renewal rate will benefit paying user accounts in the long run and we will further translate into lost revenue growth on the path.
Tim what do you mean.
It all depends on how much you need to kind of our system will be able to check it out and tell me I'm doing in children.
To fulfill that need to come on this whole thing to me is a consultation.
Sure.
But you know once you put the new companion animal shoot with them.
We are comfortable with the model for that so we're talking about when people do either.
So people who don't improve.
Although we kind of women's I think a function at all of these inputs and assumptions.
Fight, a temporary pullback or view on kind of the monetization potential stays unchanged.
Young people today are much more willing to pay for AG services in comparison with the priority on the ratios.
And the purchasing power is also rapidly rising.
To fully unleash that monetization potential we need to go beyond the currently dominant membership subscription model and gradually at pay per use model.
We also need to evolve our value added services as the consumer features continuing to diversify the youngest swipe and nationally Canada.
You are going to see us testing different possibilities how was those directions next year.
But then he could tell you, which year you would target somewhat unusual to go how the months when you issue affecting with official yeah don't machine. So we can talk about how you back when this was a machine.
Okay.
Moshe.
Turning to the shops.
So it's kind of unusual also means yet.
I'm wondering if I can push it initiatives.
But of course, there's a lot of year over to you.
Why don't you push for going forward.
Talk with a little bit cheaper caputo fake news recently, Walmart so lumpy when we looked at Hudson City.
We're bullish on kind of Joseph would've dosage, Vishal, which assume no <unk> effect.
Are you guys, assuming the 700 <unk>.
Well number two would you agree with us.
<unk> published an official pulling too hard on the auto dealer.
The only kind of Mou Cushing connect with yet.
Another important aspect on the product side that has a long term impact on user experience is better addressing female user and user demand.
Asian women generally tend to be quite passive when it comes to dating around 40% are female users and kind of how hot is hardly swipe, hi, Paul resulting in them getting no matches. Our interactions. This explains why female users retention on canton is significantly lower than that of men.
They can use the only other hand refers to those will be reluctant to provide quantified profile photos and therefore denied for access to the swiping system.
Users retention extremely low due to their inability to get matches and interact.
Our survey showed that the majority of these two kinds of users have genuine desire to use 10 times they can service.
Now, 50% of new users being female and flip users representing around one third of average data new registrations.
If we can maintain these two groups of underserved users by offering more effective social experiences that I can address that demand.
Can make very significant incremental contribution to Titan has any view.
Got you.
Some of them will know timing funded to do it even being sure that you bought.
Pulling out the Etame sphere that you don't think I know you don't want to lose them if I'm interested in Asia.
So when would you want somebody that's really quite who did other functions under shooting with tourists attempting total yoshida now in Chicago.
During the past couple of months our product team has made it has developed a clear roadmap to address the above mentioned issues and also undertook a few important product experiment. Some of them have shown encouraging results in terms of improving the retention of those two groups of users that are underserved.
One is to push these tested product adjustments into the system and historically through rapid iteration in the coming few months.
Additionally, myself who's a quota.
I know you with you at one point you had a final Dupont automobile agenda mill.
Don't you did central yes, what you don't do too many of them Jonathan we're looking forward to the Ebola Oh I'm going to be that you don't bill So what kind of that one should not do it.
Yes, Tanya, we essentially buena immune acetone.
The thing running in parallel at 10 times the overseas expansion, we have resumed our pursuit of opportunities beyond China market. Since we took over 10 has execution I'll always simple unclear to become an indispensable part of People's didn't like in Asia and for the global <unk> community. Our first step is to solidify <unk>.
<unk> has leadership position.
The Chinese communities and use that as a base camp to penetrate into southeast Asia and in a market what did you do it.
You should have a wall.
100, and you're doing it so you should do but we also have reed switches.
Well you can do that.
Pardon.
On the tissue business.
600, <unk> don't be unnecessary Puma wisely.
You'll notice if you take a fortune won't be the format.
Don't you Funky Buddha, which.
It's obviously a different what are you trying to more.
We can do I think we have asked most likely is our people.
When we think of unit volume.
You don't know, what our sustainable boomed up Chile.
You can see on the show that we can do more you told me peanuts.
Shown in Blue.
The increase that you saw.
Jim what are you thinking for the year with a good excuse me.
So it's only been couponing done with them you don't even know.
Past few months, our team made a pretty successful repackaging to Indonesia, which was one of the major market as long as the Ot make their footprints on back in 2019, one major issue wellness team encountered in developing countries, such as Indonesia, and India was that it was difficult to scale profit due to the low per capita GDP in that.
Market.
New teams answer to that issue is to leverage life streaming and eventually non membership box to take advantage of the extreme disparity in personal income and spending.
So far we've already launched live streaming in Indonesia, and ally for channel marketing has been improving steadily and Tampa has surpassed tinder, Indonesia in terms of <unk>.
Onload and active user base since July.
We will increase marketing spend according to our performance. So we can drive user growth, while keeping my eye on profitability level.
We'll progress as we progress further.
Overseas market will become an increasingly important part of the company's growth strategy.
So what's up with that coming down anyway.
Without this opportunity I wish them well.
These are the things I'd like to cover on this call now let me pass the call over to Mr. Jonathan Jonquil financial reviews donkeys.
Thanks.
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 $3 76 billion renminbi flattish year on year up 2% quarter over quarter and exceeded the high end of our guidance.
Non-GAAP net income attributable to Momo.
571, 6 million RMB compared to 600.
53 8 million RMB.
The same period.
2020, or a 13% increase year over year.
In the interest of time, I will jump directly to costs and expenses.
Okay.
Our revenue line items.
Covered so wildly.
Pretty comprehensively.
Yeah.
Our non-GAAP cost of revenue for the third quarter of 2021.
<unk>, one 6 billion renminbi compared to 2.00 billion.
The same period last year.
Non-GAAP cost of revenue as a percentage of total revenue was 57, 4%.
An increase from 53%.
Third quarter 2020.
Non-GAAP gross profit margin for the quarter was down.
By four 4% point percentage point.
From a year ago.
Kris was attributed to the following factors number one higher payout ratio.
<unk> Lite broadcasting business on a year over year basis.
Number two our wholly owned subsidiaries.
Cool media and more pictures produced a variety show and film respectively. During Q3.
The vast majority of the cost.
We're recognized in Q3, which had over 1% percent drag to the GP margin.
Number three panta accounted for a smaller percentage of the group's total revenue gross margin is around 10 percentage points higher.
And the core mobile.
Non-GAAP R&D expenses for the third quarter was.
431, 8 million and maybe compare it to.
$452 $3 million for the same period last year.
Presenting six 2% and six 7% of total revenues respectively.
Decrease was mainly due to the decrease in employee salary and social while welfare.
Resulting from a reduction in head count.
We ended the quarter with 2015 total employees.
<unk>.
548.
Panther.
The R&D personnel as a percentage of total employees.
For the group was 59% compared to 58% Q3 last year.
Non-GAAP sales and marketing expenses for the third quarter.
637 1 million.
Or 19 point.
16, 9%.
Total revenue comp.
<unk> $696 million.
I mean, the or 18 five.
5% total revenue for the same period last year the.
The year over year decrease in sales and marketing expenses both in terms of.
RMB amount and in terms of as a percentage of revenue.
Was primarily due to lower user acquisition investment for 10 times, a reflection of our conservative marketing approach at this stage.
We believe this is a wise choice before we make further progress in improving user retention and the marketing efficiency.
Non-GAAP G&A expenses was.
$114 8 million M D.
For the third quarter of 2021 compare to.
$105 8 million and maybe for the same quarter last year, representing three 1% and.
Two 8% of total revenue respectively.
Non-GAAP operating income was $637 $2 million.
A decrease of 14.
14% from Q3 on a 'twenty, representing 17% non-GAAP operating margin for the quarter.
2.6%.
From the same period last year.
Non-GAAP Opex as a percentage of total revenue was.
26, 2%.
A decrease from 28% from Q3 last year.
The decrease mainly due to the decrease in selling marketing expenses as a percentage of total revenue.
Now turning to the balance sheet and cash flow items.
As of September 32021, Hello groups cash cash equivalents short term deposits.
Long term deposits restricted cash and long term restricted cash totaled.
15, $1 7 billion renminbi compared to 16.48 billion renminbi.
Of December 31, 2020 in Q3, we repurchased and.
An equivalent of 557 million.
The company's shares from the open market.
The net cash.
Generated by operating activities for the in the third quarter 2021 was 559 9 million.
Lastly, on our business outlook, we estimated our fourth quarter revenue in the range from $3 6 billion in Q.
Two or three points.
Seven 5 billion, representing a decrease of five 1% to one 2% year on year or a decrease of four 2% two 0.2% quarter over quarter.
The fourth quarter for the fourth quarter 2021.
We expect the total revenue for core more to maintain a similar level of year over year growth momentum.
As in Q3.
Sequential wise the revenue.
Ex contact versus.
<unk> remained flattish or show a slight uptick versus previous quarter due to the macro weakness impact on spending from users.
<unk>.
On patent side.
<unk> mentioned earlier, we expect a big part of the negative revenue impact from September product adjustments.
Into Q4 that would translate into a sequential decrease in content topline in the mid teens percentage.
Please be mindful that.
This forecast represents the company's current and preliminary view on the market and operational conditions.
We are subject to which subject to changes.
That concluded our prepared portion of today's discussion with that let me turn the call back to Ashley to start Q&A actually please.
Just a quick reminder to follow we take the questions for those who passed the Chinese. Please ask your questions in Chinese first followed by English translation by yourself and also please limit the number of questions to a maximum two so we could take more people to ask questions. Operator, we're ready for questions. Thank you.
Certainly as a reminder, if you wish to ask a question you will need to press star one on your telephone to withdraw your question press the pound or have ski once again, its star and the number one on your telephone keypad.
Your first question comes from the line of Thomas Chong of Jefferies. Please ask your question.
Was that all seems like Omnichannel and say, it's all awarded to you and.
Oh gosh, one you can find the tender.
Trunk or even something besides all should woman.
Hi, Joe should I mean, and a lot of that cycling, who sogou Hao Zhou do you couldn't find them in that they do cheat.
Oh Boy I hope Nobody goes Mueller.
You guys have all kinds of other whole food are traditionally higher doses are most of your home.
Cotton Valley, you've got bottom out, but you got to say Wow.
No matter, what the Oracle wins yesterday, one of your mobile although you've been awesome cutting your thoughts also told them that Paul's beds outdoor lifestyle. It seems that the team teaching one oh.
Sounds about woman lifestream eligible, Ohio, those should be a S. R.
The project manager.
Many of you may not be taking my questions I have two questions. The first question is on the content.
And many Truman.
Comments about Q4 as well as our 2022 outlook.
The doors are wrapping Neal and Paul but.
That patients and the range, 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 our core mobile Okay miniature my comments about how the met coal.
It should affect the live streaming.
The V a S business trend. Thank you.
Akshay.
Im going to utilities.
On the hotel front do you want to get into our mature impact, but honestly something Bill No question, who do have a few for me not really true tusa wonderfully peanuts.
What also called luthier sounds equal each in Asia.
Our country has showed you two.
<unk> century.
And let me translate here.
So due to the delay in product and marketing plans, our previous users grow target off by over 20% seems to be a bit too aggressive and in Q4 with a similar level of marketing spend as Q3, considering the impact of E Commerce peak season, and the pandemic research.
Now looks like I may you in December could be flattish versus Q3.
In those patients out of the room.
The woman that <unk> will be done.
Changing the heretofore people show the CTO Mooching Goodyear Hollywood from Formula One team.
Well Moshe I know your agent single price with the other cases.
<unk>.
Sure, we'll actually means mainly in the Eagle Ottawa.
You should not rely on a woman ammonia.
As shown in the Sudan co dependency champion Petros.
I mean could we could you just attempting promotional duties munching pump for.
<unk> shown in the automobile.
Even though user growth come in lower than our early expectation I'm quite pleased with our product roadmap and the lab results off the product elements.
Confident that these measures can effectively address our current user expectations.
And our retention issues, we have already started moving forward with our plans to make various product adjustments through rapid iterations on <unk>.
Marketing plan for next year, it will be based on the results of these efforts.
In addition to channel marketing, we'll also invest more into branding next year to enhance 10 times. The 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.
Grupo Fomento, when we divest of some of the.
<unk>.
We pushed out from the blood.
Sure.
Starting from here.
We don't know.
For the Hawk sonoco locations.
My name is Shannon Alcolock, especially on the beach offshore partners.
They still dealing with some challenges.
I mean, you did them accounting and no one knows what the components how should that you can go from here.
For the tundra.
Sun has assumed elastic it's neutral.
Spotify, even with him.
Yeah.
In EMEA conoco team pushing for.
With regards to revenue I'm paying users, we expect that the monetization impact on loss to bottom out in Q4, both numbers should pick up next year here are some driving practice that we are looking at firstly, it's the overall user growth and secondly is the growth in flash had anti roaming experiences.
We believe that cat room, and flash chat piece while into content ecosystem.
Generate high level of synergy with social interaction. So we expect both speeches to show decent growth next year in terms of the of your penetration in revenue there.
Third after that is going to be beneficial to paying user and revenue is the introduction of new Baas VITAS.
And in terms of live streaming since it is not the current product all operational focus so it makes shrink further next year.
Great Tiago and sheet triple when J&J commissions due to fringe year to strategic components noted neither do convenience department.
And welcome to <unk>, So that you don't want.
<unk> will be important.
Sure.
<unk> will materially was good for one familiar you can bundle the Penguin.
Do you want to go to the collection of tubular into it.
So Julien, Virginia, they're going into the Eagle Ford and Tor <unk> lessen that.
Hum.
Legal was up into the tumor mass of film Cuda to broker harshly accounting <unk> shoot it.
It seems you're holding knew who the sailboat, but could could've pool.
Bob are you junior moved more towards a slowdown to the Permian ambitious she's only promote autonomy auditing intricate palmolive issue. So that is what's the hold up well.
Listen John Baugh with full legal co op, you put us without counting the stimulus funds.
Live streaming revenue is closely tied to the macro economy, especially the financial conditions of a private business owners. Therefore, a market environment. In this regard is indeed, an important factor in determining the company's revenue next year. However, we don't think investors need to worry too much about this.
Some key points.
Firstly, we have gone through multiple rounds of macro level fluctuations since the year 2018, our team has plenty of experience and while we establish mccann is them to navigate through the challenging external environment second the supply side of my live streaming ecosystem has been very stable.
Since we made the adjustments to the payout ratio at the beginning of the year.
Third the fundamentals of Paul Momo as a social platform are very solid.
Theres, a strong synergy and complementary arity between live streaming and other social use cases on normal life streaming plays a unique and indispensable role in helping high paying users accumulate social capital. It is true that we have some consumption levels.
Turning business back in 2018 and 19, we believe that after we took the initiative to squeeze out the bubbles in 2020, the remaining part of the business will continue to be solid and develops Saturday as a social use case with high RP pool.
Many of you know for your portfolio beyond so she's done a stupid, but royalty go to Youtube.
So should those hunting function for Ya Li minus 30, the 10 day somebody machine, though treasuries are sundar.
<unk> assumed a conscious way.
Okay Gotcha.
I don't have the service should have a pretty good opportunity for continued growth next year and the growth will be coming from the following areas.
First is the continuous product innovation and optimization on the call more and the second area of growth will be the rapid growth from the new bucket off and along have especially the overseas part, which now seems to have strong growth momentum.
So I guess, that's the question for Thomas.
Let's take another question.
Keith.
Your next question comes from the line of Dan.
Daniel Chen of Jpmorgan. Please ask your question.
Oh great.
There's this whole weather wasn't what it was.
She is by enrollment and his team there this year, but there's a whole bunch of it.
So, let's think about what type of day right there with them.
Because I know it.
It sounds so chose.
So we've got this year Chinas Titan team that you said you work with them I would think that it's on.
Your father.
Jenkins.
Yeah.
So my question is on our non mobile and the types of labs. So it talks about one times now we also have.
Several new apps like hoods, and also greatly so Chile et cetera.
Sure.
Color on fees.
User growth outlook and the monetization outlook for these two apps. Thank you.
Now shifting to the Lindsay.
Digital Orange on the shoe show no one Peter.
They include.
Kombucha She asked the company will be more movement.
We turned up avenues oil Australian alumina into shall be termed up acquisitions loyal.
That's definitely helpful.
Hum Mayo to Institute.
For the Allied reacted new apps will mainly focus on a scale of paying users.
Actively you asked paying user foundries around 5% off the call more months number and.
The paying user count was up 40% niche in October compared with at the beginning of that yet but have not included new apps paying user in the company's reported quarterly paying user number yet.
Alright.
If you consider the hotel this year.
But one.
One of the mill.
Could you. Please repeat your you mean libre unit ups, when we reach anemia with pre two she'd have to Kentucky.
We also have a lesser known memorial Citicorp, and we talk to them all the shippers that takes all of you know who you are they might be with us.
We expect how are rounded apps such as P.
Hey, Jay and social to make meaningful incremental contribution to last next year and in addition to the apt we've already launched they have proven to be profitable. We have several other apps in the pipeline we plan to roll out next year, although in the coming three to five years is to have 10, or so apps that are not only.
And the profit both but also and dominant in specific niche market in the social space.
Operator, let's maybe take one more question.
Your last question.
Comes from the line of John Hall of Th capital. Please ask your question.
Oh goodness.
Like in house.
I think the more.
Hey, Jim.
And Kevin I'm not sure.
So that's the kind of quiet.
Uh huh.
Well.
Oh, sorry, yes.
Yeah.
Walk through or not.
Sure thing.
Okay.
Yeah.
Yeah, Oh, Yeah go go go nuts.
Hundreds into tissue.
Yeah.
No. Thanks, Uh Huh huh, so well Marc has already been in the market and more than 10 years and yet.
Sure.
Go it has already become older so how kind of more.
Continuing to evolve itself and to keep pace with the younger generation to provide services that says hey, Mr. Byrd New reward me.
<unk>.
The country and you are not.
Given that your market leadership.
That's my question. Thank you.
Susan.
Oh, well maturity, but you do enough with our Leesville and she is now.
No more tons into motion and soldiers home with a tissue producer.
Corruption pushed without counting the shampoo bar Amar a panel.
He started a rebound in June.
Enrollment of where she thinks you don't get the question of dilution isn't what I'm homes, almost always disciplined releases you can see most useful and entry into the.
I'm showing there are beautiful.
Sydney, Australia with ambient digital do that Williams Anja.
My question was she said Timna.
Hi, Julien.
With your milk handle for water transfer to the point to a point in time.
So you don't particularly view this.
So we'll see that return to honestly, it's just that I showed you that you can add.
Let me translate here. So we we also similar kind of question. So a few quarters ago and homeland contact have a clear advantage in the open social territory more and more mainly focused on online companionship.
A variety of social use cases, well handhelds call value compensation lite in connecting young people for romantic purpose and converting online relationship to offline. We believe aging is a fundamental human need throughout human history, so compared with the previous.
Generations, such as a normal user from a decade ago. The younger generation is increasingly receptive to online dating products. So as far as Pat has core value proposition is concerned which is connecting people for romantic purposes and offline relationship collection, we don't see any comparable products in China.
Market at all.
Worthy of our attention.
One is clearly the biggest and the most committed as well as the most effective platform.
<unk> space.
So yeah.
Yeah, and I think that's.
Answer to your question that's good that's very clear thank you yeah.
Yeah.
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 Vishal ready to close thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.
Okay.
[music].
[music].
[music].
[music].