Q4 2021 Hello Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and fiscal year 2021 Hello Group, Inc. Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you depressed star one on your telephone if you require operator assistance. Please press star zero.
Note that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, It's actually Jim. Please go ahead.
Thank you operator, good morning, and good evening, everyone. Thank you for joining us today for Hello group's fourth quarter and fiscal 2021 earnings conference call. The company's results were released earlier today I know available on the company's IR website.
Call today, Mr. Wang me see off the company Mr. Donaldson, 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.
I would like to remind you that this call may contain forward looking statements made under the Safe Harbor provisions of private Securities Litigation Reform Act of 1995, such statements are based on management's current expectations on current market and operating conditions I relate to your bonds like involve known and 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 take undertake any obligation to update any forward looking statement as a result of new informed.
You can say events or otherwise, except as required under law.
I will now pass the call to Mr. Wang I will translate for him.
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Everyone. Thank you for joining our conference call today Wednesday, 21 was a busy year for us. Despite a variety of external challenges our team was able to methodically execute our strategic priorities set at the beginning of the year and deliver solid results in my remarks today I will begin by reviewing the key operational and business results for the fourth quarter.
Fiscal year 2021 followed by outlining our strategic priorities for FY 2022 and our execution plan.
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I will start with a brief overview of our financial performance for the first quarter of 2021 although revenue at the group level were $3, six 7 billion down 3% year over year and 2% quarter over quarter.
Adjusted operating income for the quarter was 507 million community, representing a 14% margin for Docomo business. Total revenue was three point to 14, a M D up 6% from Q4 last year and flattish from last quarter.
State operating income was 652 million Mindy with a 20% margin.
Total revenue for the quarter came in 437 media, you Mindy and 41% year over year and 14% sequentially. The decrease was due to the money I think the monetization process to improve user experience and retention.
Net loss from compound was 113 million give me for the quarter compared with $8 eight 4 million for the year ago period.
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For fiscal 2021 total revenue at the group level was $14 6 million.
Pad was $15 million.
In 2020, the year over year revenue decrease was due to our strategic decision to lower content monetization level in the second half of the year to improve user experience and retention to drive overall user growth. Excluding one time revenue for the called more more was slightly down 1% from last year with the second half of 2021 .
The year over year gross profit adjusted operating income at the group level was 2.5 might get Andrew Mindy with 818% margin.
Crude and content operating income for the core Momo was $2 92 billion with a 23% margin, but that's not lost what kind of time it was $337 million.
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Now a deeper dive into other aspects of the year I'm going to focus on the call mobile business I'll move onto the Pan out later as for the P. Operating matrix home Walmart had a hungry or $14 1 million monthly active for Q4, 'twenty, one up slightly from a year ago and down slightly from the previous quarter. The sequential decline was due to COVID-19 .
19, resurgence and related control measures in various regions in China. How was the end of the year. This had a clear negative impact on use of social sentiment. In addition, the peak E. Commerce season drove up unit acquisition cost for China marketing as a result, we lowered our channel investments while our considerations.
The number of paying users for the quarter was $8 9 million compared with 9.0, Romania year ago, unless sequential basis paying user accounts decreased 400000. This was mainly due to the decreasing in the us and a couple of facts COVID-19, having a negative impact on pain collusion despite external challenges.
Our product team managed to enhance user engagement and improving the basic social experience on our platform. The number of two way interactions grow meaningfully from the year ago period, and the number of breaches and response rate also increased our continued to trend up.
Amortization together with China strategy refinement like new user retention to hit a record high since the beginning of the pandemic while the overall retention reached ratio reached yeah. Heightened Q4. This shows that the fundamentals of the call more and more as a social platform continued to remain stable.
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Next let me walk you through the progress we made with our strategic priorities for the financial year, 2020 , one there's enormous a lot more of them yet.
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Firstly on call moments user from COVID-19 related control matches surprised the overall open social sentiment throughout 2021, especially in the second half of the year. Meanwhile, trying to win traffic became increasingly concentrated on a few platforms, resulting in a more intensive competition for China resources and driving up unit.
<unk> cost for new users I'll go has been to maximize all wide ICD Super Bowl marketing windows to how about user acquisition efforts, we have been subtly you're adjusting the allocation of marketing spend for new user acquisition and reactivation of dormant users, we offset the overall cost pressure caused by the increase in the unit price of new users.
Shifting resources to reactivate dormant users because the retention ratio and paying conversion I'll sell my users are considerably higher than that of new users and the unit price is meaningfully lower thanks to the continued improvement in China all eye on product efforts, we were able to achieve our strategic goal for call more and more users.
Do you live a moderate increase you know what may use at a slightly lower cost compared to last year. It has proven to be an effective way for us to maintain a stable user base in 2020 to tell me if I'm here almost rubbish.
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On the product side, our call normal product team made good progress optimizing call user experience, while making continuous product innovation throughout 2021, the introduction of the many of US in the first half of the year allows users to share their relationship stories and express their feelings without releasing the profile information. He played a positive.
ROE even counting female users engagement and retention the revamp of the nearby people list in the second half of the year off has also enhance the use of the U S. I D. Centralizing the distributions traffic improving the efficiency of relationship discovery within the college experiences and introducing new features that provide incremental value to previously.
So if the users are key meaningful the product team to improve retention and ultimately drive use of steady user growth.
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Sundar Cri than what you saw in addition to call normal in 2020 . One we continue to execute our strategic priorities of enriching our product portfolio and pushing the boundaries young woman patented well I'll highlight here is so to avoid the social AD targeting the manner area our team leveraged our reach product.
Accumulated in China combined it with a so called localized operational approach with the use of retention on our gradually improving we stepped up our marketing efforts in the second half the year as a result user scale on revenue showed rapid growth.
Although so she always still in the early stages of user and monetization.
As monthly revenue has already caught up to the level of Hudson City combined.
Half of the year, we launched a fairy town of Disney like simulation game, specifically targeting overseas female users.
We stepped up our marketing efforts during the holiday season revenue grow rapidly in Q4, and our continued to improve improve steadily.
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So those are kind of unique in addition to so cheong who's dance lately to audio and video based social apps pocketing domestic market also made impressive progress in 'twenty 'twenty. One for these two relatively mature off our strategy was focused on reducing costs and improving efficiency. During the second half of the year as a result.
Both apps can profit within Q4.
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Firstly with respect to live streaming.
More live streaming business, our revenue totaled $1 95 billion for the first quarter, a 1% younger and flattish sequentially well fiscal 2021 revenue from live streaming totaled 7.4, H M. D I'm, 13% compared with 2020, you mean last year, we continue to focus on the improvement of the.
Content ecosystem by eating up the supply and revenue entered a sequential growth track after Chinese new year low seasonality and its growth momentum was maintained and you meet Q3 and now even days 80 gross revenue came down quite a bit in Q4 compared with some lumpy due to the increasingly challenging macro headwinds starting in <unk>.
Timber in order to overcome spending softness we hosted a series of small scale promotional events to keep various cohort of sandoz and performance while engaged so that we could keep 80 gross revenue at a decent level through relatively mild stimulative measures, although the related costs associated with these additional <unk>.
Put some pressure on gross margin. We believe it was unnecessary expense to help our content ecosystem partners, whether tough economic conditions.
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The macro challenges overall content ecosystem continue to show steady improvement the new incentive program continues to take effect in enabling us to secure the supply of high gross revenue broadcasters and making us more attractive when recruiting new talent the amount of high quality, new talent grew 60% compared to the beginning of the year.
And the retention and share of revenue contribution increased significantly.
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So we didn't see the movie can be summed up by Ministry bluish apps useful, Georgia, Szuba understood, maybe Linda findley, he likes to shop toward W. G would you. So now turning to loss revenue from value added service. Excluding Paragon totaled one 4 billion will be for the fourth quarter of <unk>.
But on a year over year and down 1% sequentially.
The decrease was mainly due to the pandemic induced a suppression of users' social sentiment and propensity to pay resulting in the number of long tail virtual gifting paying users, particularly in the interests with declining significantly the number of memberships subscriptions also showed a slight sequential decrease.
My last revenue was 1.14 billion up 11% from the same period last year revenue from the new bucket all stand alone apps totaled $97, eight 4 million and be up 142% from Q4 last year, making a more meaningful contribution to our topline.
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For fiscal 2020 , one revenue from Pos excluding <unk> totaled $4 eight five feet are going to be up 29% year over year <unk> revenue totaled $4 five 4 billion gonna be up 24% year over year Iraqi rapid growth from a high base was mainly driven by the introduction of forgiveness.
Teachers and operational events into the audio and video social Entertainment experiences for instance in Q2, we brought in the part of my experience in the Cat room, where each grassroot talents are concurrently available and users can send virtual gifts to request.
M. A c's ranging from singing to script rating in Q3, we introduced panic panic someone or Shijiazhuang forgive me if I give to feature in the chatroom. These features while received by users across the board. In addition to argue with your social Entertainment.
<unk> also introduced innovations into the traditional gifting category to illustrate this we made seem seasonal gifts available in the English group at the beginning of the year why wait you're obviously reinvented gift ideas that you've got.
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I'm all lost auto warranty Yeah Taco Jack is a good example of how we keep uses fresh and engaged through accretion of events.
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Now briefly about the new apps for fiscal 2021 revenue from the new bucket totaled 300, and formulate a movie almost tripled that of last year driven by both user on ARPA growth pro forma well collectively driven by socio who's done lately and the performance of each of these apps.
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Now turning to Panther I wish that was used to kind of an overall financials. The Kobe researches had a clear negative impact on people's staging sentiment, which made large scale marketing campaign less effective. We therefore took a moderate approach in terms of marketing investment user scale.
Oh decreased significantly in regions, where COVID-19 containment matches, what's avia internally, we've focused our efforts on quite a adjustments aimed at improving user experience through rapid iterations. The steady product improvement led to an upward trend in user scale in regions that were free of pandemic and the control with more relax.
And that had 27 million monthly active users for the fourth quarter up one.
1% from September and 8% from June are lower than our media expectation kind of paying user count came in at $2 5 million at the end of Q4, 'twenty one down from $2 9 million last quarter 400000 that decrease was mainly attributable to three factors first the demonetization process to improve use a U S.
On retention had a negative impact on pain conversion and RP pool.
The pandemic surprised to use us taking sentiment and inclination to pay.
Our current product efforts, mainly focus on experiences beyond the swipe unmatched in Canada, which diverting traffic away from the existing lapping features.
This is obviously a negative factor to the membership paying conversion and revenues. However, it is a temporary problem, which can be addressed by introducing new features youngest swipe unmatched system.
To help boost that kind of held up here surgical Pentagon. So essentially you didn't have Michelle jump back when necessary, let me check if I missed this one.
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Let me briefly review <unk> financial performance total revenue for the fourth quarter was 437 million and 41% of the youngest and 14% quarter over quarter loss revenue decreased 14% sequentially to 236 million in the sequential decrease was due to the decrease in both paying user count on RP pool for recently.
Earlier, I'm screening revenue decreased 14% sequentially to 201 million movie. The sequential decrease was due to the decline in paying user accounts as we substantially deemphasize live streaming in the September product upgrade.
Our people grow on a sequential basis driven by the promotional event held at the end of 2021 .
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Don't be shy about mission, but fiscal 2021 hotel revenue per ton time was $2 3 billion and be unfortunate, but down year on year. Adjusted net loss was 337 million compared with a net loss of 215. Many arguments in 2020 the decrease in the topline and Bottomline was mainly caused by our initiatives to improve.
<unk> in the U S and retention, including marketing strategy adjustments to increase our female ratio of any of that yet and that the monetization process in the second half. In addition, our COVID-19 resurgence in Q4 also had a further negative impact on revenue.
Our people, we improved partially improvement partially offset the impact of a decrease in paying user count Vas revenue for fiscal 'twenty, one decreased 18% younger two one once a week later than the total revenue from Lifespring thickness decreased 10% to 903 million M D.
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Now I'll quickly recap penthouse execution of our strategic priorities in FY 'twenty one the single most important over time during the year was to deliver a solid user growth by improving marketing efficiency alcohol getting experience several external and internal challenges over the past few years, that's two a decline in content user base.
From its peak in the first half of 2019, the external challenges mainly came from the ongoing COVID-19 pandemic since the beginning of 2020 and other factors that were out of the company's control in retrospect, we could have done much better in important areas, including core product experience panel marketing efficiency and brand building as a.
A result, we haven't been able to take full advantage of the tremendous market opportunities that we were seeing in the past few years.
Our most important move in 2021 was to put content back on track by deploying a viable strategic pocket together with an execution plan as well as assembling a competent team off the group realignment in this process, we encountered unexpected obstacles, but also achieved encouraging results.
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Antonio.
Bill that's helpful. Let me talk about all the aspects that we didn't do well enough during the management transition our assessments about how fast we can push forward the product.
Operational reform was a bit too optimistic this compounded with the COVID-19 resurgence in Q4 have caused us to miss the user growth pocket I sat in mid 2021.
I have assumed up do you want to it's really cheap funding Ashish NIMBY issue and I'm wondering between foundry come with all it so Joe millennium, but do you have a suggestion here I'm going to Michigan and South Dakota.
And without whom lasagna symbion's human wishing me mutually so similar to many of you know long G was that in Q2 showing that the refi although user growth was lower than we originally hoped for we were pleased to see that the entire management and execution team was in place by the end of the year before that we had spent two quarters thoroughly reviewing penthouse.
U S marketing strategy and funding plan.
Our large scale research surveys and in depth studies of user behavior, we identified key problems in these three areas and formulated corresponding solutions.
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On the marketing side. The most important area of progress. We've made was to adjust the increasingly unbalanced use a structure in the past few years in order to control all I am paying conversion to meet quarterly numbers and paying user accounts on revenue and uncompromised quality of new users acquired through channel marketing efforts, what tilted towards male.
With a strong comparison to pay resulting in a gradual deterioration of the tender mix. We believe a balanced agenda ratio is crucial to the overall user experience in the dating community and the long term housing is off the ecosystem percentage all female users acquired through channels increased significantly since we introduced.
The new ads material, specifically targeting women, we managed to keep the propulsion all female users from China's within a reasonable range of 40% to 50%. After several months of adjustments 10 times over our G&A ratio, where it tends to early 2018 level with a stable upward trend.
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On the product side, one of the most important areas of progress made in 2021 was that we can comment that the key to increasing user retention is to improve the U S. All female users and users without forty-five photos. Our survey showed that due to the passive nature of Asian women, 40% female users on content.
In an extremely selective way without in them hobby catching any matches or interactions. In addition for those who failed to provide quantified photos and.
Therefore denied access to the swiping system, 60% of them expressed their genuine desire to use 10 times taking service. Currently this group health depot represents around one third of every stadium new registration the swipe and match product in Canada tends to be less effective in terms of addressing the needs of these two categories of users.
That's why they never retention has always been significantly lower than the average we believe providing reach alternative features can help improve the aging U N and retention ultimately, making a significant incremental contribution to our menus. While the team has yet to make a breakthrough in this as well.
We have seen some encouraging past results, we will continue to explore this with rapid deterioration in 2022.
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Sure Justin.
What are you hoping for.
For our people.
Two questions.
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On the product side. In addition to clarifying that are key to driving user growth is to provide reach alternative taking experience on top off the spiking Mccann is on other important initiatives that we undertook in Q2.
In the Q3 product upgrade was to remove the excessive paywall features and merchandising tactics our cost of customer complaints such IP monetization process had led to decrease in commercial matrix, including paying conversion paying user count and revenue in the short run however in the months following the product upgrade.
The membership renewal rates showed a substantial inquiries and the retention ratio also improved in January and February overall paying conversion retention to a steady improvement track the improvement in partnership and your rate laid a solid foundation for us to islands, using Siemens and further grow revenues.
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But in parallel with our domestic effort our team made impressive progress in overseas expansion since taking over 10 times. The execution, we made a forward back into the Indonesia market in Q2, I, introducing audio and video based a real time interactive features on top off the swiping experience, we were able to really reach live streaming and the non membership.
Monetization model to breakthrough the Aqua seating that is often seen in developing countries. The combination of innovative consumer and monetization products, both steady improvement in channel marketing all why Meanwhile, engagement on the supply side user penetration in transplant continue to trend up as well that he did this.
They from data show that kind of the user and revenue scale, Indonesia was the height of hinder throughout the second half of the year and if the sensor revenue was one four times that of Tinder.
We'll now move you.
Sure Linda.
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Thanks for taking me out.
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Let's see.
The more favorable gender ratio improved a subscription renewal rates and solid progress was made in Indonesia have collectively contributed to the user growth during the latter half of FY 'twenty. One. These positive changes has given us some confidence that small yet solid steps in the right direction can be an effective way towards your user growth.
The journey won't be easy, but will be an extremely rewarding one indiana along that journey commitment matters patients matches cause that ran smack us perhaps the most important of all focused on the long term matters.
We will do more to hire 500 people end up with them.
She comes from an adjournment mobile infrastructure, including it concludes the business update now I'll move onto the most important part of my speech today, the group level strategic priorities for 2022, and how we plan to achieve them and what was left open.
And then we'll be able to ingest the option of enjoying yourself people switching moment.
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20 years from each year Ashish.
Oklahoma our goal continues to be able to maintain a stable user base with a limited marketing budget and try to see user growth on top of.
Our action plan consists of two pillars first we will continue to optimize user acquisition model and increase the propulsion I'll tell my users to balance all the all ally second on the product side will continue to identify and yourself to use those needs and optimize female oriented social experiences to improve retention and leverage new.
<unk> to push forward product innovation to meet the needs of young generation and attract new users.
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Oh, you mean, Amit is that most people don't really must be with us on the other hand, we need to continue to enrich our product portfolio and push the boundaries beyond my own content. In addition to the Atlantis hotel, but I profitability. It has already been proven we plan to replicate this model in other apps, although we still have on that.
Unprofitable apps that can take leading positions in niche market in the next three to five years.
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So all those women with not just with us.
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The muscle the only predictive analytics visuals.
In addition to this vertical apps I'd like to share my views on something data as technology evolves, we can see a clear long term trend of keep whole screen time shifting from mobile devices to other types of smart hardware.
Knowledge breakthrough spring new opportunities for open social experiences in terms of how people can connect and interact with each other we have been paying close attention to the development of technologies, such as three D rendering motion, capturing AI and XR devices, all of which can help enhance social experiences in multiple dimensions.
And we are making.
Explorations on this front as well.
Leading company with over a decade of experience in aiding in the open social space helped more than 100 million users discover new relationships expand their social connections I'm getting meaningful interactions on a monthly basis. This is our core audio business I look forward to helping users to meet the most basic human need through technology called upon.
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Time will tell you you know Georgia.
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Furthermore, my team the third strategic goal for the year is to ensure the cash cow business remained stable for 'twenty to 'twenty two the biggest uncertainty where our rights from the impact of the macro economy and panoramic on consumer sentiment, which brings significant challenges to achieving this cyclical our plan is to enhance commercial product innovation while went.
On the monetization level of new apps to drive overall growth of pass some of that kind of I'm, assuming the government mobile digital support golf's or something.
Yeah.
We're more of a it isn't done with respect to the patent on the strategic go this year remains to deliver solid user growth by improving marketing efficiency and the quality of experience.
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So generally.
On the product side, we will continue to focus on improving the retention ratio all female users and those with a 45 photos. We are currently trying to resolve these two issues through offers mainly in two areas number one in reaching user profile information as well as other content that can reveal personality number two expanding the ways people connect and interact.
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I mean, you cannot use them for this year, while the phone call to talk about even sort of all three of them young people are tending to perform your interesting people depends what the pool in terms of improving marketing efficiency. Three key areas are crucially important for us to achieve all both optimizing unit acquisition costs, you're reaching ads content hunting brand equity.
Our China marketing experience over the past few months made us realize that driving user growth by simply allowing user acquisition costs to go up is costly and inefficient on the country, improving as material and bring considerably more high quality new users. This one will be the key direction for channel marketing.
Sanction this year.
In addition, we are seeing huge potential for content to enhance these brand equity.
Key to creating a virtuous circle in user growth is to increase organic portion of new users as opposed to those coming from paid channels.
These goals can be achieved.
Only through continuous investment into branding, which also needs to go hand in hand with genuine improvement in product experience. This is going to be so much more efficient than simply pouring money into marketing channels. This year, we will further explore opportunities and invest in content spending, but what time the branding efforts with progress answer.
On the product side.
So what you've Sheila maybe why this.
The condition that you bought.
So you can imagine.
You can actually make that Shlomo.
You told us when we would do.
Linda bonuses should be familiar to people who jumped.
<unk> don't yet one of them.
Susan.
Roundup in Telford homes with Dr. Josh Hill going to Trump the singer lastly, I would like to conclude by announcing that our board has declared a cash dividend in the amount of <unk> six four U S dollars per ads, which will amount to a total cash payment of approximately $127 million or 40% of adjusted.
Net income attributable to the Hollow Group Inc. In 2021. This is the fourth consecutive year that we've shut all fruits of our work with our shareholders and demonstrate management's confidence in the fundamentals of the company as well as our commitment to creating and delivering shareholder value for the long term. Thank you for your faith in the Hallo group team.
So don't worry I wish I had other things on their own.
Jonathan.
This is what I'd like to cover today now let me pass the call over to Mr. Jonathan Young for financial review Donkey.
Thanks, 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 2021.
Three 6 billion down, 3% year on year or 2% quarter over quarter.
non-GAAP net income attributable to Hello group was $280 9 million M D.
Compared to.
$836 4 million from the same period.
The 20 or 66% decrease year over year.
During the fourth quarter the company accrued.
207.4.
4 million renminbi withholding tax.
In distributed earnings generated in 2021 by our wholly owned foreign subsidiaries.
Angie enterprise due to our plan.
You too.
Opex rate profit from the Wuxi to support our capital allocation demands.
Clothing, and not limited to returning cash to our shareholders and overseas business investment et cetera.
Excluding this special item.
GAAP net income for the quarter would have been $488 3 million.
So why only has covered revenue analysis.
Great level of details in the interest of time, I will skip it and I've directly into the cost and the expenses items for the quarter.
Our non-GAAP cost of revenue for the fourth quarter of 2021 was 4.19 billion Airbnb compare it to two.
2.02 billion.
For the same period last year.
non-GAAP cost of revenue as a percentage of total revenue.
Was 59, 6%.
<unk> from 53, 2%.
From the Q4 2020.
non-GAAP gross profit margin for the quarter was found.
Six three percentage points from the from a year ago.
The decrease was attributed to the following factors number one which is the biggest.
Alright.
Higher paying payout ratios.
From core more live broadcasting business on a year over year basis, due to our adjustments to the broadcaster and agencies.
And number two content accounted for a smaller.
Percentage of the group's total revenue.
Gross margin is higher.
For mobile.
Number three 6%.
Nature cost items, such as head counts and IDC CDN expenses represented a higher percentage of revenue as total revenue declined, particularly on <unk> side.
Due to the year.
Your monetization plan.
On a sequential basis, the non-GAAP gross profit margin for the quarter was down by two 2%.
From Q3.
Cost of revenue in Q3, 2021 included $49 million production costs.
Excluding this quarterly specific item, we would have seen a three 4% sequential decrease.
non-GAAP gross margin for the quarter, which was primarily attributable to the higher payout ratio in connection with the year and the color.
And more promotional events to help the agencies and broadcasters whether through the macro headwind.
We currently expected non-GAAP gross margin to see a rebound.
Percentage point from Q1 hours due to less competition events related.
Related costs.
It's positive revenue mix change as we expect Vas.
Revenue to represent a high increasingly higher percentage of total revenue.
non-GAAP R&D expenses for the fourth quarter.
$479 7 million or renminbi compared to $486 5 million.
For the same period last year, representing seven 6% and seven 5% of total revenue respectively.
The decrease was mainly due to decrease in.
Employee salaries and social welfare.
<unk> from a reduction in head count.
We ended the quarter with 2051 portal employees of which 552 are from Panther.
R&D personnel as a percentage of total employees for the group was 62% compared to 57% Q4 last year.
non-GAAP sales and marketing expenses for the fourth quarter was $648 $6 million.
Or 17, 7% of the total revenue compared to $654 1 million or 17, 2% of total revenue for the same period last year.
The year over year decrease in sales and marketing expense.
RMB amount was mainly due to a lower.
User acquisition investment for content.
You mentioned earlier.
The decrease was also partially offset by our stepped up marketing efforts to promote a recent launched.
Simulation game.
Tom in the <unk>.
Overseas market.
non-GAAP G&A expenses was $89 4 million.
<unk> for the fourth quarter on the 'twenty, one compared to 134.
Only $5 million for the same period last year.
Presenting two 4% and three 5% of total net revenue respectively.
It's worth mentioning here due to the fact that the group.
Fair market value as indicated its market cap.
Has been significantly below its net book value of equity for competitive <unk>.
Conservative perspective.
We recorded.
A 4.3 97 billion renminbi.
As the impairment loss during the quarter, which represented a total value of all goodwill and intangible assets.
The exception of the group's operational licenses and permits on the consolidated statements of operations for the year ended December 31 2021.
This impairment.
Resulted.
In a 4.02 billion renminbi.
GAAP operating loss for the Q4, 2020 one.
Now briefly on income tax expenses.
As I mentioned at the beginning in.
In Q4, we accrued.
Withholding income tax of.
207, 4 million M D.
And distributed earnings generated in the year of <unk> 21, our roofing.
This amount was reported as income tax expenses for the company.
In the past, we recorded withholding income taxes in connection with the repatriation of office profit whenever it's actually happened.
As we intended permanently reinvest.
Our undistributed earnings from our office in China.
Starting from Q4, 2021 all undistributed profit generated by <unk> will be subject to 10% withholding tax.
Tax accrual.
It sounds like companies.
Repatriation history.
And expected ongoing demand for U S dollar funding needs, including but not limited to returning cash to our shareholders as well as offshore business development.
Therefore going forward on a quarterly basis, we will approach 10% of net income for award fees for the quarter and report as income tax expenses.
Now turning to our balance sheet and cash flow items as of December 31, 2021, Hello groups cash cash equivalents short term deposits long term deposits restricted cash and long term restricted cash totaled 15 points to seven one.
1 billion compare.
Compared to 16.48 billion renminbi as of December 31st 2020.
Net cash provided by operating activities in the fourth quarter 2021 was $665 5 billion renminbi.
Lastly on the business outlook, we estimated our first quarter of 2022 revenue to come in the range from three one to $3 2 billion in E&P.
Presenting a decrease of 10, 7% to seven 8% year on year or a decrease of $15 six.
Sent to 12, 9% quarter over quarter.
The Q1 2022 for Q1 2022 we expect total revenue for core mobile to decrease it.
Mid single digits from Q1 last year due to macro weakness and dynamic control negatively impact users spending sentiment.
I'll put aside we expect our revenue to be in their trough.
In Q1, mainly due to the combination of factors, including <unk>.
Resurgence in Covid.
<unk> Vas revenue impact from the <unk> monetization process last year as well as restructuring of our content live streaming business, which could translate into a similar level of year over year decrease right.
<unk> seen in Q4, 2021 .
However, we do expect contents revenue to improve from Q1's level.
The year progresses.
Please be mindful that this forecast represents the company's current and preliminary view on the market condition and operational conditions, which are subject to changes.
That concluded our prepared portion of today's discussion with that let me turn the call back to actually to start the Q&A. Thanks, Thanks, John I'm.
Just a quick reminder, defined before we'd take in the questions for those pesky Chinese. Please ask your questions in Chinese first followed by English translation and also please limit the number of questions to maximum two thank you operator, we're ready for questions.
Ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the pound key our first question comes from Thomas Chong with Jefferies.
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The tenant you need to.
User growth expectations.
And that's a new trend for boss and live streaming to get over the full year profitability profile and the second question is about.
Can management comment about the user trends our revenue as well as earnings.
Thank you.
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Okay. That's helpful.
So to answer your question on the call normal part of our user growth target for the call more and more in 2022 remains the same as last year, which is to remain a stable user base with a flattish marketing budget and try to seek user growth on top of that and as far as the current channel marketing environment is concerned.
To achieve this goal we need to continue to optimize our strategy for reactivating doorman users and expanding marketing channels. However.
In Q1, they experienced a decline due to the impact of the pandemic and the negative seasonality in terms of revenue outlook.
A few factors that need to be taken into consideration that first of all is the macro economy are all coupons guidance reflect the severe challenges to our live streaming business from the macro headwinds and besides changes in the external environment have had quite an impact on the engagement of agencies. So.
If the macro and other external conditions ease in the second half the life streaming business may vary wildly improve otherwise the downward pressure will continue to address this we will try to make more efforts on the product and operational sites to enhance user experience and ensure stable content supply.
And in terms of a value added service the macro environment and pandemic have had a negative impact on the calm on more value added service.
Pat with live streaming business model is a lot more resilient to the economic cycles. So in particular.
As the new market I'll stand alone apps is taking off so we will moderate to be ramp up monetization effort. This year to drive overall user growth of loss, we expect value added service to grow as a whole in the double digits in 2022 as for the revenue structure.
Revenue contribution from value added service will continue to increase while the propulsion of live streaming will further decrease.
Group level, we expect live streaming revenue contribution to drop from 60.
And at the end of last year to around 50% at the end of this year.
Even the net income in Q1 will be quite low due to negative seasonality in revenue here I would like to provide a bit more color about profitability. This year.
There is also a currency pressure on revenue from macro uncertainty.
Management has a strong focus on optimizing our operating expenses, we expect opex to reduce significantly this year. Although there are some uncertainties on the revenue front, we expect profits to rebound after Q1 and excluding content. The annual profit margins for the core Momo is expected to remain.
Above 70%, which is about the same as last year.
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Well I think sometimes.
Sometimes the user growth in the upcoming year will depend on both external and internal factors.
Sterno factors include when the pandemic and the related control matches will ease in Q1, but probably 19 resurgence has been quite serious and related control measures well very strict as a result active user base decreased significantly in areas like probably resurgence was severe however, the study program.
And marketing improvements led to an upward trend in user scale in regions, where COVID-19 containment measures will have relatively relaxed on the whole we need to wait until the pandemic situation becomes clear out before we can make a more realistic estimate of the user growth.
The internal factors I'm come from progress on the product side and the pace of our marketing efforts.
Last year, the target, we set at which Ah how fast are we should push forward the product and operational plans was a little bit too aggressive yet user growth has bottomed out and we tend to a growth track.
As for now we are making steady progress in various product iterations and channel marketing optimization, we expect to see a steady upward trend.
When the pandemic subsides.
<unk> is to deliver a steady pick up growth of 20% for and they use over the next three years.
One of them in the fall when we.
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On the revenue front, we expect revenue to be in the trough in Q1, mainly due to the pandemic impact and revenue deferral.
POS revenue should gradually pick up after Q1, mainly due to the following factors.
First one is the steady recovery of and they use after the pandemic Aesop second factor is that we should benefit from a stable paying conversion, we're done with Audi monetization initiatives and paying conversion is back on a steady growth track in Q1, Yeah I wish I have some reason developments to give you more insight on the situation.
Although COVID-19 resurgence led to a sequential decrease yeah and they use in the first couple of months after yes, and thanks to the improvement in pain and conversion the number of paying users in February remained pretty much stable compared to last December .
And the third driving factor for revenue growth is the contribution of new value added service products. For example, flash chat chat room and some other new membership base paying features are very much likely to bring in incremental revenue and steady growth in overseas market will also make incremental contribution to the topline.
Although we expect revenue to be on a sequential upward trend after the trough in Q1, our total vas revenue for the year 2022 will still be lower than last year.
Due to our substantial demonetization strategy in the second half of 'twenty one.
The live streaming since he's not 10 times. The current business focus we expect this revenue to further decline significantly in Q1, we will shift our strategic focus to multi play in light with video, which fits better with the overall social atmosphere on Canada.
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In terms of cost and expenses according to our annual budget well make matches to optimize.
We will take measures to optimize cost controls across various areas, including labor costs and expenses for I D. C. N C. D. N. However, since we will start to invest in content spending.
Building as planned this year marketing expenses will go up depending on the effectiveness of the campaigns.
We'll control the annual net loss to be somewhere around 500 million. Indeed, our revenue in the first half the year will be relatively low so net loss widened from Q4 level. However, we expect the net loss to narrow as revenue growth in the second half.
So I think I hope we answer your question Thomas.
I think in the year's off time, we're getting quite close to market open. So maybe we're just going to wrap up here for today's call and thank you all for participating to our Q4 earnings conference call and we will see you next quarter.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
[music].