Q4 2023 Hello Group Inc Earnings Call
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 to market and operating conditions.
And relate to events that involve known unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements.
Further information regarding this and other risks uncertainties and factors is included in the company's filings with the U S Securities and Exchange Commission.
The company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise except as required under law.
I will now pass the call over to our CEO East Johnson from Jefferies.
Thank you.
Hello, everyone. Thank you for joining our call.
Mm three what's the bogey here, despite many changes and challenges in the internal environment.
To make steady progress in implementing our strategic priorities and achieved solid financial results.
Well I won't go through the details of our work across business lines.
Fourth quarter and fiscal year, 2023, and now all license and future growth for fiscal 2024.
I will start with a brief overview of our financial performance.
For the fourth quarter of 2023 total group revenue was 3 billion RMB down 7%.
Over a year and 1% sequentially.
Which is at the high end of our guidance.
Adjusted operating income was 644 64.
Sorry, 664 million RMB up significantly by 33% year over year.
The profit margin was 22, 1%.
Significantly improvement.
Six six percentage point year over year.
Children revenue from the mobile App and the sand and our new App was $2 73 billion R&D down.
Down 5% year over year, and adjusted operating income was 637 million RMB.
Up 24% year over year with a margin of 23, 3%.
Five four percentage points year over year.
Over year improvement in profit and margin was primarily due to our team's excellent cost management.
And improve efficiency.
In resource unit transition over the past year.
Total revenue from time to time and came in at $272 million RMB down 21% year over year.
Adjusted operating income was 27 104 million R&D with a margin of nine 9%.
Comparison.
Operating loss of life.
17 million RMB in the same period of period yet.
For fiscal 2023.
Total group revenue was 12 billion RMB compared with a 12 7 billion R&D in 2022.
Adjusted operating income was $2 57 billion RMB up significantly by 27 year over year.
With a margin of 21, 4% up significantly by <unk>.
Five four percentage points.
The strong improvement in gross profit and margins despite lower revenue with.
It was mainly driven by our effective cost optimization and efficiency improvement initiatives.
All of this is that over the past year.
We are supportive of stable report activities of some normal cash cow business.
And make <unk> profitable.
Total revenue from the mobile App and then our new App was $10 8 billion RMB.
<unk>, 5% from 2022.
Due to the declines in revenues from the mobile App, we're starting from spending softness amid the weak macro economy, and our proactive product and operational investments to maintain a healthy economy ecosystem.
Several of our new App maintained rapid growth momentum driven by our overseas business.
Adjusted operating income was 215 billion RMB up 5% year over year with a margin of 23, 2%.
Two percentage points from a year ago.
At <unk>, we continue implementing cost optimization and efficiency improvement initiatives in the past year.
We continue to reduce investment in low hour I channels.
And reallocated axis human resources.
In addition, we continue to optimizing the paying experience to improve aqua.
As a result with Tennant's revenue declined due to significantly reduced marketing spending.
Cogs.
Decreased more than revenue.
Accordingly, we improved our cash used efficiencies.
Delivering four consecutive quarter of profitability.
For fiscal 2023, 10% of total revenue was $1 2 billion RMB down.
Down 30% year over year, and adjusted operating income was 101 billion RMB.
Compared with a loss of 330 million RMB in 2020 two.
While we're very pleased with the team's execution in cost optimization and efficiency improvements.
You must have missed that we make a mistake in ecosystem management.
Which led to an outbreak of spending activity in the first part of the year.
And negatively affect <unk> user experience and retention.
While the problem has been fully resolved.
Through our efforts in the second half. It has also caused our various product and operational work to lax and the second meet the high expectations.
As a result, we were unable to make any meaningful breakthroughs in.
New <unk> features.
We remain committed to working hard to reverse this goes this year.
Richard will discuss and explain in more detail later.
Now I'll walk you through the progress we've made against our strategic priorities for our mobile content and a new vendors.
As well as the challenges we are facing and our plans to do with them with back to Lee.
Or the mobile App business. The main goal for 2023 was to keep the user and revenue scale and stable.
Continue to optimize cost structure and remains the productivity of the cash cow business.
In the past year, despite the pressure from the macro economy and changes in regulatory policy.
Our team navigated the China.
No.
Revenue pressure by continuously optimizing product operation.
And introducing new monetization features.
Meanwhile, by improving cash Humanization and staff efficiency.
We increased operating profits and margins.
Revenue pressures.
On the channel marketing fronts, we have focused on improving channel our eyes to pursue profitable user groups, rather than Brian as pursuing unprofitable user acquisition.
In fiscal year 2023.
Our unit acquisition costs decrease.
25% year over year.
And we acquire 20% more users.
While reducing channel investments by 10% year over year.
The number of paying users remained stable in the first nine months of 2023.
Thanks to our product and channel efforts.
However, at the end of the year the number of active users are.
Temporary due to the impact of extraordinary coli and revolutionary driven product adjustments and community Eagle system optimization.
Which resulted in a short term pressure on the number of longtime paying users.
In the fourth quarter, the number of paying users of mobile apps was $7 4 million of.
A decrease of 400000 compared with the previous quarter.
Now, let's go through the productivity of our normal cash cow business.
In the fourth quarter.
Most labs remain revenue was 1.42 billion RMB.
9% year over year.
For fiscal year 2023.
Live streaming revenue totaled $5 57, Dalian RFP.
Down 7% year over year.
With the pandemic over in early 2023 mobile live streaming to deliver positive year over year revenue growth in.
Quarter two.
A quarter earlier than we expected.
Thanks, Judah at colony recovery, and our product and operational efforts.
However.
As we enter the year's second half.
They call me recovery become weaker than expected.
At the same time.
Sure bedroom Manish regulatory risk.
Our operational team proactively reduce.
Revenue oriented competition events, resulting in a decline in revenue in the second half of where compare with the same periods of 2000 and trying to.
The combination of spending softness and decreased revenue from the competition events.
Is the main reason for the declines in mobile live streaming revenue in 2023.
On the product front, our team continuing to enrich interactive gaming features to improve paying conversion and RP pool of users in different cohorts.
Against the backdrop of spending softness.
Introducing new game features not only help stabilize the engagement of flats remain uses in the meat and long child cohort, but also play a positive role on the supply side of life's journey.
Regarding loss revenue from value added.
<unk> services.
Excluding time hand.
Total one corn.
26 billion RMB.
For the fourth quarter flat year over year.
Lastly revenue from the mobile App totaled 948 million RMB down.
Down 10% year over year.
Revenue from the Standalone apps was 328 million RMB.
44% year over year.
For fiscal year 2023, fast revenue, excluding content totaled 5.09 billion RMB down <unk> 10 year over year.
<unk> revenue from the <unk> App was 3.9 billion RMB down 10% year over year.
While revenue from the Central App was 111 billion RMB.
Up 50% year over year.
The incremental revenue contributed by central apps, largely offset the revenue decrease from the mobile app.
The rate of declines in loss revenue from the normal apps was higher than we expected at the beginning of the year mainly for two reasons.
For first.
The economic recovery it was weaker than expected.
He uses spending remained soft.
Second.
The product adjustments to maintain a healthy community ecosystem.
The year's second half resulted in a decline in paying users.
On the product further integrating audio and video based loss experience, which the nonpaying feature on the homepage Hawk will certainly improve the efficiency of what monetization.
On the operational front, we focus on user oriented operational efforts to drive organic revenue growth.
With Celgene in 30, RP pool improvement.
Now moving to <unk>.
Our surgical <unk> sports content was to achieve overall breakeven for the year and developed product and monetization models that integral for Asian dating culture to pursue sustainable growth on the back of the positive business cycle.
Driven by our efforts on both product and channel funds.
Compound hit the first milestone.
So to get goes at the beginning of this year.
Achieving operating breakeven.
<unk> maintained a small profit throughout the year, despite the pressure on revenue.
The success of our call.
Cost optimization and efficiency improvement initiatives.
It was primarily due to our continued improvement in channel efficiency and personnel cost optimization.
Ever as I mentioned at the beginning future some missteps in execution and efficiency in relation.
Content has yet to make breakthroughs in achieving its strategic goal of sustainable growth.
As the pandemic subsided at the beginning of China train three.
Our user base.
Engagement level quickly recover from their trough around Chinese new year holiday.
However, due to the overlay overly aggressive adjustments to our users screening vendors.
Our platform experienced significant sandler attack starting at the spring.
So in <unk> impacting our user experience and leading to a decline in user retention.
That threaten the health of our dating ecosystem.
To improve user experience and ensure that it's a stable of our ecosystem our <unk> launch.
Very good.
Six months anti spam campaigns. However.
The missteps I, just mentioned combined with our reduced investments in channels how does significantly.
Negative impact on our user experience and retention.
Gaining significant pressure on our user base.
With further reduction in channel spending and the impact of the coli.
Sure <unk>.
December was down 30% from December.
Choose.
$37 million.
As of the end of the fourth quarter <unk> had a $1 2 million paying users.
Our net decrease of 200000 sequentially.
Turning to <unk> financials total revenue for the fourth quarter was 272 million RMB down 21% year over year and 8% sequentially.
The decrease was solely.
Attributed to a reduced number of paying users for.
For fiscal year 2023 <unk>.
Total revenue was $1 2 billion on data.
Down 30% year over year.
The decrease was due to the declines in paying users that resulted from that.
Is channel investments.
The <unk> campaign, and the adjustment to subscription with new rules.
In terms of business lines was.
<unk> revenue was 667 million RMB.
19% year over year.
While <unk> revenue was 505 million RMB down.
Down 7% year over year.
Sometimes adjusted operating income for fiscal year, 2023 was 101, Lillian RMB compared to an adjusted operating loss.
330 million RMB in 2022.
I'll now turn profitable despite the pressure on revenue.
This was primarily driven by significant reduction in unproductive channels in lessons.
As part of our cost optimization strategy and SAP will allocation optimization.
Meanwhile, the continued improvement in Apple researches in revenue declined much less 70 user accounts.
Now I would like to walk you through the details of townhouse progress.
On the channel and product lines.
First on the channel front.
Our user acquisition teams continued to reduce marketing expenses that couldn't generate positive ROI.
And total channel investment declined by over 60% compared to 2022.
We have avoided the seasonal cost site caused.
Caused by external competition by seasonably allocating.
<unk> ratio to different channels and festival week adjusted marketing Windows.
By fiscal year 2023.
Acquisition costs was significantly reduced by 45% compared to 2022.
Although cost cutting was.
<unk> put pressure on Hulu space we.
Reducing investments in channel with negative all eyes.
Essential for <unk> to remain profitable.
On the product and operational side.
In 2023.
Our use of the product team, mainly focused on product adjustments and strategy upgrades to fight against this family activity that broke out isn't this spring.
Our commercial product launch of varieties of premium membership product and pay as you go privileges on top of the basic membership services.
Combined with appropriate guidance on paying experience.
Not sure.
Michigan.
<unk> increased in Whatsapp people in every single quarter of 'twenty three.
To mitigate the impact of a.
We do use a bank.
The ministry of industry and information technology regulations.
The new rule.
We improve the product experience for paying users.
<unk> plays a positive role in the continuously.
And 30, increasing paying ratio and <unk> throughout the year.
By the end of 2023 spending activities well under control.
And it's aging English is selling had also recover.
Beyond the dating centric rather than at the start of it.
Live streaming and chat room services are not the focus on debating cloud.
We began to de emphasizing lapsed.
<unk> in the second half of the year and reallocated access human resources to innovation projects.
Oh, and then achieve overall breakeven in 2023, thanks to our effective cost optimization and efficiency improvement initiatives as well as the continued improvements in apples.
Without achieved does that she should go so.
Stable growth on the back of the part of the business cycle here.
Your childhood zapped in ecosystem management and lack of breakthrough in product innovation.
Therefore, as the biggest priority for content in 2024 is to continue focusing on product innovation and improving our monetization experience.
Funny achieve profitable growth.
Lastly in terms of new.
Endeavors.
Also is enriching our product portfolio.
<unk> beyond normal and Townhomes.
And develop long term growth engine.
In the fourth quarter, the total revenues of some new apps, including social games partner.
328 million RMB.
Up 43% year over year.
For fiscal year turn age minus three.
Revenue from the cinema App was 112 billion RMB up.
42% year over year.
Driven by rapid growth of our overseas business.
Some of them actively made rapid growth momentum from a high base in 2022.
As Florida domestic.
Given their relatively mature lifecycle, our team's operational focus on China trying three let's control costs and expenses.
Continuing to tap a monetization potential.
As a result, the profit growth rate of the domestic <unk> was higher than that.
The revenues they are choosing crews operating profit margin.
Comparison may stabilize.
<unk>.
Our overseas product is at the regulatory early stage of its lifecycle with the border market size.
And the team has accumulated more experience for a period of vendors.
Endeavors, even though the overseas business was affected by a negative factors such as earthquakes in Turkey.
The revaluation of currencies in several countries in 2023.
If revenues do.
We will maintain rapid growth bluish a combined effort of our product and channel team.
On the part of our firms with continuous and enrich local localized.
Clearance and operation for use it in different cohorts.
On the channel firms, our keen focus on with crane paying users strictly adjusted channel investments. According to change the revenue NRI.
As a result.
Our product efforts coverage, we have been increased.
In China investment.
Has supported the continued improvement in active pool and the number of paying users.
Operating profit margins significantly improved year over year, thanks to operational leverage.
Our overseas business profit increased significantly from a few million RMB in 2022 to close to 100 million RMB in train three.
In addition to revenue and profit oriented products. We have also made.
Remarkable progress in exploring new opportunities and ensure those sectors by leveraging technology.
<unk> development.
Development.
In 2023.
Read that level of insight.
A brand new social App for Apple vision pool.
That's one of the 600 native apps.
Similar painlessly with ex acquisition growth in February this year.
The product is still in very early stage and we will continue to enrich is used cases and in place for social interactions and emotional connection.
The thought about our business with you.
As this is the first cost with all investors.
In 2020 four.
I'd like to spend some time talking about our management priorities for this year.
First of all.
I'll go for the mobile App.
To maintain the productivity of this cash cow business with a healthy Shoshone ecosystem.
In order to maintain an excellent social ecosystems and limited to radical monetization approaches adopted by broadcasters and agencies in order to obtain.
Competition events.
Chip warheads.
With plans for further which is.
Revenue OEM chips large scale competition events.
Instead, we will leverage <unk> show show country route to increase non event driven.
Our revenues through new game features and user oriented operational activity.
We reduced harvest events forehead savings to increase daily revenue sharing.
As the declines in competition is and that led to revenue will put some pressure on <unk> and <unk>.
We will continue to look for ways to optimize our cost efficiency to mitigate the impact of lower revenue on our profit targets.
Or 10 times.
Our strategic growth for.
10000, this year is to improve the cost savings experience.
And on top of that.
<unk> business model that drives profitable growth.
Regarding our new and lenders.
And endeavors, we plan to continue enriching the friends portfolio pushing that business foundry beyond normal and turn time and do a long term growth engine.
Based on our experience in the Mena region over the past three years.
We released that the social.
<unk> entertainment industry.
<unk> has a great room for growth.
In the overseas market.
Hello Group has unique advantage.
<unk> space and monetization search on the social ecosystem.
We know how to help users find new friends and interact.
Effectively with charter and we know how to view, while the added services on top of that to create value for the company and our shareholders.
We leverage and reputation our successful experiences to explore new products not related to show true.
New markets beyond the Mena markets.
We believe that if we are doing good job in localization, Kansas, Susan our border markets with a more diversified products.
In 2020 four we plan to invest more resources and takes vigorous rate Keurig sports this area.
Lastly, I would like to conclude by announcing that our board has declared a special cash dividend in the amount of.
0.45.
He will 0.54 U S dollar per avs.
Which will amount to a total cash payment of approximately 102 million USD or one first.
Adjusted net.
Net income contribute <unk>, Hello Group, Inc. In 2028 suites.
This is the sixth consecutive year that the company has paid a cash dividend.
Together with the revised with purchase program.
It demonstrated the management's confidence in fundamental of the business and our commitment to creating long term value for shareholders.
And thank you for your confidence and catching up.
And now I'll pass the call over to Kathy for the financials with you.
Heavy plate.
[noise] Charles.
Thanks, Sig Hello, everyone. Thank you for joining our conference call today.
Now let me briefly take you through the financial review.
Total revenue for the fourth quarter, 2023 was 3.0 billion renminbi down 7% in younger and 1% quarter on quarter.
non-GAAP net income attributable to the company was $514 7 million reminbi up 5% year on year, but down 15% from the previous quarter.
Net income continued to grow on a year over year basis. Despite lower revenue. This was mainly attributable to our effective cost optimization and efficiency improvement initiatives.
Which supported the stable.
The activity of the mobile cash cow business and turn profitable.
Now, let me walk you through the details.
Looking into the key revenue line items for the quarter Firstly on the live broadcasting.
Total revenue from LIBOR casting business for the fourth quarter of 2023 was 152 billion renminbi down, 12%, 12% year over year, but flat quarter over quarter.
The year over year decrease was mainly due to three factors number one soft consumer sentiment in the current macro environment and we're to our proactive operational adjustments to reduce competition events related revenue in order to better manage regulatory risk.
And the three kind of pivoting away from the less savings centric live streaming service.
More and more application library testing revenue totaled $1, four 2 billion renminbi for the quarter down 9% year over year, but up 1% quarter over quarter.
Sometimes LIBOR cutting revenue amounted to 100.2 million renminbi down, 39% year over year, and 17% quarter over quarter.
Revenue from the value added service for the fourth quarter of 2023 was 142 billion renminbi down 4% from Q4 last year and 3% sequentially revenue from value added service on an extra income basis was $1. Two 6 billion renminbi in the fourth quarter of 2023 CMS.
Q4 last year, but down 3% from the previous quarter.
Mobile application value added service revenue decreased both on a year over year basis in a quarter over quarter basis. This was due to a weak spanning sentiment as well as our proactive product adjustments.
On the other hand revenue from the Standalone, New apps continued to show strong growth momentum.
Partially offsetting the revenue pressure from mobile value added service.
Uh huh.
Fast revenue amounted to women do $165 million down 13% year over year at 5% sequentially. The decrease was due to a decline in paying users, which was in turn due to a reduction in channel investments the anti spam campaigns and the adjustments to <unk>.
<unk> subscription revenue subscription renewal. However, the continued improvement in <unk> resulted in revenue declining much less than user accounts.
Now turning to costs and expenses.
non-GAAP cost of revenue for the fourth quarter of 2023 was $1 77 billion renminbi compared to $1 91 billion for the same period last year non.
non-GAAP gross margin for the quarter was 41, 1% up 0.7.
Seven percentage points from the year ago period, but down <unk> seven percentage point from the from the last quarter. The year over year increase was due to an improvement in contract margin that resulted from a shift in its revenue mix the.
Quarter over quarter decline was mainly due to incremental expenses in connection with various year and events and live streaming.
However, as you can notice the sequential decrease in GP margin and this Q4 was much less than in previous years as we deemphasize revenue oriented competition events to better manage regulatory risks.
non-GAAP R&D expenses for the fourth quarter was $218 1 million renminbi compared to $255 million or maybe for the same period last year or a 13% decrease year over year.
The decrease was due to the continuous optimization and personnel costs.
non-GAAP R&D expenses as a percentage of revenue was 7% compared with 8% from the year ago period.
We ended the quarter with 1382 total employees of which 301 are from Kantar.
1700, and 705 total employees of which 459.
From a year ago.
R&D personnel as a percentage of total employees for the group remained stable at 63% from Q4 last year.
non-GAAP sales and marketing expenses for the fourth quarter was $296 million in India, or 10% of total revenue compared to $398 6 million renminbi with 12% of total revenue for the same period last year the.
The significant year over year decrease both in terms of absolute renminbi amount and as a percentage of revenue was primarily attributable to more strategy to lower the cut lower efficiency channel marketing spend and to a lesser degree compound continuing to control costs and focus on channel ROI.
Yeah.
non-GAAP G&A expenses was 87.2 million remains a need for the fourth quarter of 2023 compared to $84 9 million and indeed for the same quarter last year, both representing 3% of their respective total revenues.
non-GAAP operating income was $664 2 million Reminbi, an increase of 33% from Q4, 2022, but down 2% from the previous quarter non-GAAP operating margin for the quarter was 22, 1% up six six percentage points from the same period last year.
Slightly down <unk> three percentage points from the previous quarter non.
non-GAAP operating expenses as a percentage of total revenue was 20% a decrease from 23% from Q4 to a 21% from last quarter non-GAAP operating expenses as we are on a year on year basis decreased 18% the decrease in both absolute renminbi amounts and.
As a percentage of revenue of OPEC was mainly due to a reduction in sales and marketing expenses and to a lesser degree optimization in personnel costs.
non-GAAP operating expenses decreased 5% sequentially.
<unk> attributable to the decrease in marketing expenses, which offset the increase in expenses such as yearend bonus.
Now briefly on income tax expenses total income tax expenses was $183 8 million renminbi for the quarter with an effective tax rate of 25%.
In Q4, the company accrued withholding income tax of $53 5 million, a and B, which is 10%.
Distributed profit generated by our Wuxi without a withholding tax our estimated non-GAAP effective tax rate was around 18% in the fourth quarter.
Now turning to balance sheet and cash flow items as of December 31, 2023, Hello group's cash cash equivalents short term deposits long term deposits short term investments and restricted cash totaled $13 four 8 billion renminbi compared to $13 four zero billing and then Andy as of December.
31 2022 now.
Noncash provide net cash provided by operating activities in the fourth quarter 2023 was $415 9 million indeed.
Lastly on business outlook.
We estimated our first quarter revenue to come in the range from $2 45 billion renminbi to true <unk> five 5 billion renminbi, representing a decrease of 13, 1% nine 5% year on year or a decrease of 18, 4% for 15, 1% quarter over quarter.
At segment level for Q1, 2024 on a year over year basis, we expect normal revenue to decrease around 10% due to our operational plan for further reduce revenue oriented competition events in order to better manage regulatory risks and to a lesser degree the continuous macro headwinds.
On the content side, we expect revenue to decrease mid 20th due to our operational adjustments to deemphasize less data centric live streaming service and to a lesser degree Vas revenue decrease caused by decline in your user base.
Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions operational conditions, which are subject to changes.
That concluded our prepared of today's discussion with that let me turn the call back to actually to start your question. Please.
Good morning.
Just a quick reminder, before we take questions for those kind of speak Chinese. Please ask your questions in Chinese first followed by English translation and also please.
The number of questions to maximum two.
So operator, we're ready for questions.
Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star two if you're on a speaker find please pick up the handset to ask your question.
Question comes from changing client Jang from CIC. Please go ahead.
Can you take R&D penitential level with Lincoln Square.
On the accounting guys that go through <unk>.
How are you Julien.
Kenya shingles, even then.
Thanks management for taking my question and my question about let's say spinning equipment.
Could management share with us your OLED strategy.
Any financial guidance for the next two closer yes.
Okay.
Yeah.
Oh, yes.
The more general <unk> <unk> and you also.
Hey, Joe.
So Joel.
This assumes a full volume.
On our call ahead of time.
All of those have construction Cassandra buckled Ya <unk>, it's all about what the Sanger for me, that's all that Mr. Friese on shareholders.
Joe So Joe just so you guys thats it from me in the second.
If I'm gonna needs to highlight for you on the call Randy.
I think our team main competitive advantage in the in the overseas market lies in the social space and our value added services based on social and patent entertainment products.
Our domestic team has a very comprehensive capabilities.
Social product innovation, our monetization on profitability. So <unk> is a good example of how these capabilities can be replicated overseas.
So George Washington, Youll, Sean.
So as I was talking about should we then Josh.
Did you towards <unk> some of them yes.
Ohio agenda and hold your.
So much on the Tricia icon June took on time here. So how do you in terms of them here.
Gotcha.
<unk> you start to go from here.
Sure <unk>.
Robert.
So that could.
<unk>.
Hi, Roger.
And good morning on the call how Giambi Todd.
Todd.
Once you have all been deliberately walk from your <unk>. So the Opex, yes.
In New York.
Sure.
Sure. So Joe go along within Zone Trimble.
So Joel the moment that switching was off I mean can we open Jonathan so could you share how our subsidiary.
From a generic <unk>.
So Joan John going through physical job did you talk about your other programs such as work from home with Shanghai, which required.
Publishing excuse me you probably I'm sure you have virtual <unk>.
Youre watching this job I know it sounds just drive that whole order book.
I present so.
<unk> still has a reasonable room for improvement in three aspects.
Number one pop deeper into the monetization potential in its existing market.
Number two at video based social experiences and number three expand into new market.
Just on the current trend, we believe <unk> will continue to deliver decent revenue and profit growth this year in.
The Roes will come from several directions.
First considering we're not doing a very good job in terms of our localization, especially.
Especially compared to our peers, who have been in the overseas patent entertainment industry for many years, we're still far from good.
Currently we are accelerating our localization process, which is crucial for use of <unk> and continued growth.
Second with limited staff and other resources <unk> in higher growth in the past came from audio based on social experiences.
However, <unk> has strong capabilities in building video based interactive features that can be replicated in overseas products. Our will you buy some low resources in this area this year.
And so while we expand our services to the GCC countries in the middle East and other countries.
And in addition to <unk>. We also launched several new products in the past year, one of which is doing quite well, we will try to ramp up its investments in the second half of this year.
Meanwhile, well, Missouri, So R&D <unk>.
<unk> you.
That's all it is.
Most of our <unk> hybrid with Socgen.
Results show up at <unk> <unk>.
I mean would you Julie.
Sure.
Absolutely absolutely true.
So if there is also the ultra chaotic when yogurt subject.
Almost all indulgent, Sean on the tissue.
So time will mean guy.
Sure sure. So she watches how does injunction.
Julian.
From here on we'll be able to talk about <unk>.
<unk> you Havent seen TSS telco.
In addition, we believe that dating services all have a lot of room for growth in Asia and overseas Chinese communities in the past where have been trying to explore effective ways to drive growth.
Encountered many beautiful.
We like the sustained and effective results.
Government and most importantly, we didn't do much in terms of localization.
Nevertheless, <unk> of our remaining stream unimportant dating product in Asia, especially in the Chinese all communities are more.
And we'll also has established a solid foundation among overseas Chinese.
We should back to make use of these assets to <unk> growth potential.
This year, we will start off our step up our efforts in the dating space to house overseas user experience and increase our overseas market shocks.
Zero convey from here for you.
<unk> <unk>.
However, our tissue Joseph with publishers.
<unk> <unk>.
Jumbo wing Youll show to some degree.
Well, thank you <unk>.
<unk>.
Yes sure.
Sure Jonathan.
Yes.
So <unk> was on the culture shock like that you'd have to true pushing something too.
Schedule y <unk>.
Well, Doug you're catching up with us.
Regarding our results of allocation for 2024, we plan to greatly to your overseas in terms of our human resources on capital allocation, so asked to accelerate to localization.
Around the end of last year, we have adjusted staff in each business line and transferred some top product operations and technical talent to new endeavors.
To strengthen those are part of our overseas team.
And the budget allocation was also tilted towards the overseas businesses.
This approach will enable us to back room in the middle East the market, while accelerating our efforts to explore new regions and new products.
As for the revenue and profit guidance our EBIT.
Kathy.
Okay.
New and profit expectations.
Try to look at this both from a near term perspective, and a longer term perspective.
For if you look at the near term for 2024 as Tang Yan said so.
So chill.
Still going to be the primary driver our overseas revenue and profit growth.
If we do a decent job in those three areas that Tom you mentioned, namely.
Beefing up local operations expanding to Ddos service and diversifying into other regions.
We should be able to maintain similar growth rate as we saw in 2023 in terms of top line.
Property wise.
I think we're.
Still going to be growing pretty meaningfully however.
Because social is still at early stages development and we are currently seeing a lot of growth opportunities.
It's Roy makes sense, we're going to be very flexible in terms of how much of the incremental revenue, we would invest back to pursue higher growth in other words.
I think we're.
Sure.
We're going to.
Continued to see steady growth at Bottomline by in terms of magnitude of profit growth in 2024.
Is secondary to.
Secondary to topline and user growth.
Now for <unk>.
A more longer term.
A point of view.
If we pick up three years perspective.
We have an internal goal that we will like overseas revenue to take up a very sizable portion.
Hello groups top line, obviously to get their social needs to be able to continue to grow.
Needless to say in addition to Tokyo and we have to achieve this level of success in building other products and in other parts of the world.
<unk> already laid out a few areas.
We're going to be pushing.
Pushing very hard to grow organically I would like to stress that.
Over the past few years, we have also built up a very strong balance sheet. If we see good opportunities out there we can certainly leverage our cash position to supplement the growth that we can achieve organically.
So hopefully that addresses your question.
With that back to actually before next question Operator next question. Please.
Thank you. The next question is from Henri <unk> from J P. Morgan. Please go ahead.
Just a question to ensure that we're the one key issue.
Charge off rate bulk inventory at all of course virtual Lorenzo Jonathan Chang with <unk> 48 on shoring up our <unk> session.
What is on local social touch upon the <unk> relationship. We will call. This you should do it yourself with your boss to hold one is on those locations are where local chocolate golar.
Thanks management for taking my question. The question was about shareholder value.
We noticed that the dividend payout of insurance because fiscal concern last year sort of 30%. This year. Despite the solid Pos growth so promotional should shed some light on the rationale behind the dividend payout reduction.
On a consideration for our records it would imply in the future unless les could management share your perspective on that.
Execution plan moving forward once the law.
Okay, I guess I'll ask a question.
I will take that question.
So.
First on the payout ratio.
Question.
When we think about how much profit ROE going to payout, we compare our offshore cash reserve and the potential offshore capital demand.
Tanya as <expletive> mentioned earlier, the biggest investment area for the coming couple of years.
Is overseas expansion.
Whether we invest organically or through M&A.
In my consume more offshore cashed in the past.
Past few years.
With the foreign exchange controls.
It makes more sense to.
To try to be more conservative in terms of returning cash to shareholders through dividend payments. So that's the first reason.
Other factors that are.
Led to the decision to lower the payout ratio a little bit this year is that.
We consider our stock is significantly undervalued at this point.
With the stock trading below the net cash value I believe it's more efficient to buyback versus cash dividend.
So that's.
That's my response to.
To payout ratio.
Is your question about why not 10 11 Dominion Wow.
The regular dividend.
Okay. So.
Well why not a regular dividend plan.
We've been paying cash dividend.
Against the past six.
Six or seven years in a row.
And we've said many times that if we continue to generate more active kashagan.
What we can effectively deploy we will continue to return to the shareholders either through dividend or share repurchase so whether or not we have a more regular allowing us we've already get the expectation right.
At the same time, we are still seeing like.
Like we said before we are still seeing any growth opportunities and investment areas and we doubt 100% flexibility in foreign exchange. It may not be too wide to be pinned down by a regular dividend payout ratio every year I think I heard.
<unk> on.
How we plan to manage the repurchase program I think from today's earnings release, you can see that we announced.
The extension of the share repurchase plan that especially on the cloud would allow us to purchase up to $200 million for two years period from now onwards. So.
Like I said, we consider our stock at this point significantly under value trading that net cash value.
We're going to.
Utilize that passion take the opportunity to.
Create more shareholder value that's for sure.
Hopefully that answers your question.
Fashion.
Next question please.
Thank you. The next question is from Leo Chiang from Deutsche Bank. Please go ahead.
So as you got into and just all of the key will power their one piece require more module jamba gunshot ghansham Sunshine shot, earning our senior more modules.
Hi, Bob.
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Drill hole rule her come back towards the window would be.
Thank you management for taking my question My question is about mobile.
Can management share the business outlook of core more onboard March forecast.
<unk> and <unk>.
How the current core environment.
The spending for core users and lastly, how to build the process by Bill.
Core more in 2012, but thank you.
Oh sure.
<unk> had a probably a little feudal.
It was engineered and the Windows Agency <unk> So Joseph.
Engineered wood in the essential.
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So Joe you want to share with you a few minutes with Volvo.
Gulf BBW Usher syndrome <unk>.
Strategic there is only a partial book dreams.
Which Andrew Johnson Greenwood.
Is it possible for washingtonians old lingo bulk <unk> usages in the bathroom that's horrible.
Jonathan.
It's also important as I said I'm glad that it was a tissue Andrea Balzarini cohorts Rudolph will be helpful.
Yes.
So don't you think GTO Julien.
From you.
While <unk> <unk> mobile suggested which is that I was talking about.
It's Andrew.
<unk>.
So youll hopefully youll Chihuahua.
You said <unk>.
<unk>.
I saw I think you mentioned earlier.
<unk> for the mobile App is to maintain the productivity of the Cashcall business always in a healthy social ecosystem.
Given the uncertainties in the current market environment and consumer spending sentiment.
Also to ensure use us a social experience and prevent broadcasters and agencies from adopting a radical monetization approach to obtain competition you've unrelated bonuses.
We plan to reduce the scale of bonuses to deemphasize, our large scale competition events and live streaming on our value added services that may lead to periodic revenue search.
Im arrangement will undoubtedly caused a decline in competition related revenue.
We believe it will play a positive role in <unk>.
Growing the social experience engagement and retention are paying users, especially off those are high paying users.
Although product and operation fronts, we will better leverage our monetization opportunities brought by more and more social attributes and value reach Gamify features an interactive tools for the top and medical how to use us to drive organic revenue growth.
Most of you agree with Sean So the essential tremor program the timing.
<unk> hundred <unk>. So it does have a construction loan.
So at any moment, Jack what's your generic Linda.
Let me from utilization sort of industrial sort of infusion.
Sure Moshe.
<unk> done a ginger film Junkie. So you all can do.
And as I said just for example, going to you should you James sorry.
<unk> one was the last question is with the Genco with Munis engineering, which is all without the qiagen portfolio.
So thats useful.
Let me say <unk> posted up regardless.
<unk>.
Normally so much whole brand with a 12 year history, but our product team has always been passionate about product innovation as a result over the past few years more and more has demonstrated outstanding stability in terms of user traffic and profitability.
Although the challenges in the current external environment of <unk>, we believe that as long as we stabilize our basic our social fundamentals and continue to make efforts to progress with time normal will continue to be a healthy and stable cash cow for the foreseeable future, providing a solid foundation for the group.
Future expansion as for the specific all financial related guidance fall 'twenty fall Kathy Waller.
Okay I guess in her.
Prepared remarks seek have already spelled out the priority.
<unk> management agenda for 2024.
Let me try to translate them into the impact on financials.
When we say.
No not segment.
That segment actually includes the cash cow business.
The old model and also the revenue generated by the new applications, mainly so chill.
For the cash cow business one of the key theme as is.
This year is to significantly de emphasize on the promotional events and the competition for regulatory reasons and that would involve changing the operational strategies and bonus structure.
For both live streaming and value added service business and that could significantly significantly lower or the events.
SaaS competition, driven tipping revenue however, the non event and more organic part of the revenue will increase.
In the near term, though it's difficult for the organic part to make up for the event driven revenue that we're going to lose so I guess the.
Top line for the cash call business will continue to see some pressure on a Y O y basis for the coming two quarters because of that operational.
That strategy changing operational policies.
With regards to Tokyo and other new applications, we continue to see pretty strong.
Momentum, which is going to partially offset the decline of the cashcall business.
Yeah.
So.
If you.
If you put these different pieces together and try to.
<unk>.
Try to get a more quantitative outlook. This is probably what I can say at this point.
We've already given our Q1 guidance efficacy at any point, we're seeing a somewhere around 10% year over year decrease.
For mobile segment in it I guess, the cash college declining mid teens percentage offset by a 40 something percent Y O y growth from the new applications.
I don't have enough visibility to pin down the rest of the year with very reliable numbers, but I guess, we can use Q1 as a good basis for the projection into.
The last few quarters of the year and how do we move from Q1 will heavily hindered upon several factors.
Can lead the macro and regulatory environment, and how well we execute our overseas strategy.
So I guess, that's what I can say at this point I will keep you updated.
As the year progresses.
Back to Ashley for questions operator, just in the interest of time, let's just take one last person for today's call.
Thank you go ahead and just final thing.
The final question is from Rafael Chen from <unk> Research. Please go ahead.
You said what are you trying to show with a QR code to your chance to ask your question.
Paul Sankey Macquarie Conference, you're always talking about Jesus you guys did not want Ashish.
Awesome.
Auditory to industrial and what are your thoughts.
If you are going to require you filed your Undrawn Chicago GE provision called the Shin <unk> no.
And Glenn you talked much outgoing board of champions.
A whole call without going through something like that actually you will lead to a woman contact you guys you talked about your issue.
I will translate myself I have two questions first one is regarding contract could management share the latest user trends marketing at a monetization strategy in Tucson, Anthony for any guidance or its Robert you had a profit this year.
Secondly, could management mentioned.
ICU management mentioned, the new products related to applebee ship quicker box.
Could you could we have more insights on the product details also considering company plans to ramp up exploring new business opportunities how do we evaluate the margin trends into account going forward. Thank you.
Hey, guys.
<unk> hold off on that Jim.
Sure Jade gentle <unk>.
Joshua for men's reinsure.
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<unk> will hold a series of web reinsure Vishal Sir.
<unk>.
<unk>, yes.
Yes.
So we just wanted short.
From a generic depends on the Ultrashape.
You're saying you hope with Australia, which neutrons argues achieve the grocery strong emotions.
So your view of the zone.
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Sure.
Pushing you a bit challenging James having Chongqing.
Turning to cultural sundry potential sorry, Yahoo <unk>.
The jewelry Hu <unk>.
Are you viewing the tundra.
So most of the Chongqing.
In the future.
Over the short term.
With our focus on both of them yet.
Changes from June.
You have with LNG.
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I'm wondering which conjecture home where you acquired.
If you can go Jonathan for your assumption Shlomo.
So if you go to zero.
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Gina Bill Scheffel, Chiyoda Goldberg with the sugar than me.
So that's from just simple gentle, we'll put you away from it.
Sure Vishal.
John Walsh I apologies.
Yes.
Sure.
If you look this year.
Sure.
Yeah for the Ultra and your question was on <unk>.
Julian go suggestions in this organization and from which other trigger.
I appreciate you've given it ends up.
The merge Chicago, sorry would be Chris good wishes.
At the beginning of this year, our user base continued to be under pressure from factors such as the cold waves.
The reduction in China investments and the Chinese new year holiday after the holiday as external negative factors subsided penthouse, new user engagement on new user paying ratio started to bottom out and stabilize.
<unk> had this year is to improve the call dating experience and on top of that viewed unaffected.
And efficient business model that drive some profitable growth.
In order to improve the quality of the CRM, we need to constantly innovate use cases and explore dating scenarios around the <unk> theme.
More tailor made services for users in different market.
And maintain a healthy stable ecosystem.
Achieving profitable growth depends on business model innovation, and China OE improvement.
Last year, we achieved good results in reducing unit acquisition costs.
This year, we will continue to improve our monetization capability based on the quality and experience.
For example around the Chinese new year holiday, we launched a pilot campaign for our membership membership product that is a higher than the blackout membership I received very positive feedback from the first batch of high paying users.
Through this new premium membership, we hope to first unleashed the spending power of the existing high end member.
And second capture the data needs of the top cohort paying users from live streaming mainly.
Meanwhile, we will also leverage.
All reason to improve the basic member experience and drive paying ratio growth.
Ive through these offers.
<unk> can continue to improve without compromising user experience on retention, we will truly realize a positive piece of news cycle and achieve profitable growth by increasing marketing investment.
For other financial related questions.
We'll answer them.
Sure.
So.
She can come you mentioned.
The focus of compound this year can be broken down into two priorities one is ah.
To continue to improve the coordinating experience.
In the past couple of years, we tried to diversify into live streaming.
More community driven entertain make sure any such as chairwoman experience now we can conclude that although these efforts did contribute meaningfully to <unk>.
They are not.
Very compatible to dating experience at this point.
And therefore, we will increasingly pivot away from the more entertainment oriented experiences and the other focus for <unk>. This year is of course.
To continue to improve paying user experience. So we can drive a higher <unk>, if <unk> and user retention continued to improve to the point, where <unk> is positive we will definitely ramp up marketing to drive user and top line growth.
When we are going to see what we call a profitable growth cycle. However, before we hit that tipping point.
It's possible that we will continue to see topline training either flat or.
Slightly under a bit of a pressure as we continue to scale back from live streaming and the chat room experience. However, if we are successful in reaching that tipping point and enter into a positive business cycle. As we described we can see growth in both topline and bottom line at this point I would say.
Investors proud.
We don't need to have more patients as we work our way to get there.
Uh huh.
Hi, Thiago issue weekly doses.
Let me see.
Jim.
Welcome to Sunoco <unk> Java, though.
So Greg so I'll shoot it.
During the program by Paulo.
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<unk>. This is Jody <unk> also got I would assume that you know me.
<unk>, which is a huge finishing jojo cushion welcome Jim <unk>.
<unk>, which improved core lodging room pardon me Gordon Johnson with <unk>.
But what we regard as of Friday Goldman Goldman.
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<unk> hundred <unk>.
Going forward under yoga pure harder.
And Sean the AUM.
She is also launching more toward transformed the suggestion here.
So you almost a year with a total <unk> hundred <unk> introduces.
Hi, Sheila.
Yes.
With the continuous iteration of I saw hardware more and more new users of joining the <unk> space.
The development of hardware has a broken through the limitations of social models in the mobile Internet era and has also brought a new opportunity to us.
Dedicated to the social space for the docs for the past decade.
In space users can create their own <unk> and personalized space and in light Appalachian Pro users around the world to have parties play each has and have fun together.
And is based beauty now real time translation function allows users of 12 major languages to communicate without a barrier.
Checking all the social Ordina party games makes getting together more thoughtful ocwen disease, who have thousands of miles apart and it also helps I'll break the ice with strangers in the open social space.
We plan to roll out to more use cases and getting your five features based on la <unk>.
Localize the user's preferences in different regions and to make better use of technology technological innovation to breakthrough the traditional social experience.
The investment budget for new and diverse and our overall margin trend our lead.
To Cassie.
Yes.
Investment budget for new endeavors.
Internally, we do have a budget for new endeavors, but at this point, we hesitate we.
We will probably defer until later to answer that question with a more definite number because we want to be.
Keep the budget flexible at this point in time, if we see really good opportunities, we will invest a little bit more is that alright.
As you know.
Trends good.
We will probably in less dilutive.
So it's really a quite flexible number that we're trying to put in there at the beginning of the year on the on the margin question I guess.
If this is a question about <unk>.
Our whole group level I think for gross margin. It has remained relatively.
Relatively stable throughout 2023.
With the largest cost driver, which is the payout ratio being stable.
I'm currently not seeing any factor that could potentially change that trend one way or another.
A very meaningful way, but there.
There is there is the one thing that I would like.
I'd like to call out here, which might cause the margin to fluctuate a little bit and that is that as revenue decreases.
There could be some negative leverage on.
The infrastructure costs and also the personnel cost charging to the cost of sales line.
<unk> got a pressure.
Gross margin a little bit, but we do not expect that to be very significant.
So thats.
That's what we're seeing on the gross margin line operating expenses wise, although we plan to substantially increase our investment in the new business.
Part of the increase will come at the expense of the old business, which won't be consuming as much resources.
Now if we try to think about the operating margin on a <unk> basis last year.
I believe we delivered close to 23% adjusted operating margin in Q1, the <unk> part is going to see a.
<unk>.
9% to 10% year over year decrease at top line and that level of topline decrease has obviously been a pressured the operating margin a little bit, but I would say.
My team from 19% to 20% is still a quite achievable range of adjusted operating margin for the X 10, some part of the business.
I do not really have a margin number for the whole year.
Because of that flexibility that we talk about that we'd like to maintain especially for the new business, but.
In terms of how the operating margin, it's going to trend from Q1 onwards, I would say.
I would say there are several factors to consider here one is the overall top line improvement from Q1 onwards.
Of course that that is heavily dependent on the overall macro and rubber for environment. The second factor is how aggressive we are to cut down on costs at each point I do see some headroom to continue to cut on the old business Park.
We do want to like I said and maintain the flexibility to move the spending to new business. If we see good ROI.
So basically that that's my current thoughts on how the margin knee.
Play out for the whole year.
I think with that hanging back I think from a healthy I think that's it for today.
<unk>, we're ready to close.
Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.
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