Q4 2024 Hello Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and fiscal year 'twenty 'twenty Four Hello Group, Inc Earnings Conference call.
If you wish to ask a question you will need to put Starkey followed by the number one on your telephone keypad. Please note that this conference is being recorded today.
Now ill turn the conference over to your first speaker today Ms. Ashley. Thank you. Please go ahead ma'am.
Thank you all brita.
Ashley: Good morning, and good evening, everyone. Thank you for joining us today for Hello group's fourth quarter and fiscal 2024 earnings conference call. The company's results were released earlier today I know available on the company's IR website on the call today I need to.
So you're all off the company.
Speaker Change: Johnson from seal off the company and these probably Seattle off the company they will discuss the company's business operations and highlights as well as the financials and guidance. They will all be available to answer your questions. During the Q&A session that follows before we begin I would like to remind you that this call may contain forward looking statements.
Speaker Change: Made under the Safe Harbor condition of the private Securities Litigation Reform Act of 1995.
Speaker Change: Such statements are based on management's current expectations and current market on the operating conditions and relate to events that involve known or unknown risks uncertainties and other factors.
Speaker Change: 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 these and other risks uncertainties and factors is included in the company's filings with the U S Securities and Exchange Commission the company does.
Speaker Change: Not undertake any obligation to update any forward looking statements.
Speaker Change: No no new information future events or otherwise, except as required under law I will now pass the call over to our CEO, Mr. Tang yen each county.
Speaker Change: Okay.
Speaker Change: Okay. Thank you Archie and Kim the demo.
Speaker Change: Oh absolutely.
Speaker Change: Well.
Speaker Change:
Speaker Change: Oh, good to work with the trade issue.
Speaker Change: Regarding the mind you that's how you create.
Speaker Change: Almost engineer.
Yeah.
Speaker Change: Saia conjecture in Congress.
Speaker Change: So surely in potential.
Speaker Change: How about are you about sort of change it is I'm not sure.
Speaker Change: So time will tell.
Speaker Change: So we're talking about Houston.
Speaker Change: But don't rely on it seems shing touched bottom assumptions. So you can swing things.
Speaker Change: Especially it comes out.
Speaker Change: Should I worry about alcohol gels, you see somehow like torture you didn't go with Jason.
Speaker Change: Hello, everyone. Some people don't even alcohol somebody 24 was yes always challenges and opportunities our team maneuvered wow through external uncertainties and deliver satisfactory financial and operational results well more cashcall business continues to be productive we equals Houston.
Speaker Change: That is healthier than last year.
Speaker Change: Our overseas business maintained its robust growth momentum and make more meaningful contributions to the group's financial standing.
Speaker Change: Empowers us to take all the measures to propel growth and innovation in the international market in the future or.
Now I'll pass the call over to Steve for more detail.
Speaker Change: Yeah.
Steve: Hello, everyone.
Steve: Thank you for joining our call.
Steve: Oh, no updates on our business in Q4 and fiscal 'twenty 'twenty, four and that whole long hours to teach it goes full fiscal 2025.
Steve: Okay.
Steve: Starting with an overview of our financial performance for.
Steve: So Q4 or children's Avenue, with coupons and 64 million RMB.
Steve: Charles and year over year.
Steve: Adjusted operating income for 280 million RMB with a margin of 10, 6%.
Oh Cubo causes included 94 million RMB in few.
Steve: <unk> production the latest.
Steve: Excluding such costs adjusted operating income would have been 317 4 million RMB.
Steve: Margin of 14, 2%.
Steve: Revenue from the mobile App and stand alone.
Steve: 242 billion RMB.
Steve: 11% year over year.
Steve: The decrease was mainly due to the 18% year over year decline in the normal.
Steve: Starting from our proactive sort of adjustments and weak macro economy.
Steve: Meanwhile, Standalone you ask about the new entries.
Steve: Concerns from a year ago.
Steve: Thanks for the rapid growth of our overseas.
Steve: Adjusted operating income from the mobile App and stand alone apps, with Georgia, and 69 million RMB for.
Steve: Margin of 11, 1%.
Steve: Excluding film related costs.
Steve: Adjusted operating income would have been 360 degree mainly in R&D.
Steve: If a margin of 15%.
Steve: And so it turns on Q4 revenue totaled 213 million RMB down 22% year over year due to the decreased kimber of paying users.
Steve: Adjusted operating income was 11 point studies nothing really in R&D.
Steve: Compared to 27.24 million RMB from Hugo.
Steve: So fiscal 'twenty 'twenty four total revenue was $10 6 million RMB.
Steve: Pounded for 12 cylinder arm B last year.
Steve: Adjusted operating income was 117 3 million RMB.
Steve: With a margin of 16, 3%.
Steve: Nothing new from the mobile App and stand alone New apps total was 9.7 billion RMB.
Steve: Year over year.
Steve: Well have another near decreased 16%.
Steve: Mainly due to our active.
Steve: Uh-huh assessments and macro factors.
Steve: Nothing new from stand alone apps grow 40% driven by our overseas expansion.
Steve: Adjusted operating income for the mobile App and stand alone was 165 billion RMB.
Steve: Of 17, 1%.
Steve: A couple of times.
Steve: Total revenue for Cisco to enjoy a fool with 900 million RMB.
Steve: Combined with a one point shoes.
M D.
Steve: Previous year.
Steve: The adjusted operating income was 17, five or 94 million RMB compared with 401 million RMB in the previous year.
Steve: No.
Steve: Now I'll give you an update on our execution.
Steve: The teacher and priorities for each business line and trade very well.
Steve: As the challenges we are facing and how we plan to address them.
Steve: First on the mobile App.
Steve: Our goal is to maintain the productivity of this cash cow business, it's a hungry issue so ecosystem.
Steve: Over the past year.
Steve: Our proactive part of adjustments combined with macro softness.
Steve: A lot of pressure on Saturday.
Steve: However, quality of contracts and a strong ecosystem will lay a solid foundation.
Steve: The stable production.
Steve: Cash cow business next year.
Steve: Right.
Steve: On the product and operational fronts.
Steve: Turning to me for all products you feel good on <unk>.
Steve: Proving the female users and that's my opinion view time shows your use cases to drive infectious interaction.
Steve: We introduced an AI chat.
Cool.
Steve: For now uses in multiple ways.
Steve: Trent experiences such as screening and Ciao ciao.
Steve: Two can generate greeting based on female users.
Steve: And picture they so far any information as far as their historical.
Steve: Try and improve the quality of the King conversation.
Steve: Thereby increasing the response rate for female users and improving the overall interactive experience.
Steve: In addition, we promoted stuff well matching base realtime voice chat feature on the homepage.
Steve: You're driving it or use of interaction and paying conversion.
Steve: That's further strengthening momo's social attributes.
On the used aircraft they shouldn't.
Steve: Over the past few years, you have shifted from a focus on or user growth.
Steve: More dramatic so profit focus.
Steve: Driven both model.
Steve: And we have made good progress in optimizing the efficiency of transition of China, and we do think accuracy.
Steve: Acquisition call.
Steve: The continued improvement now I has allowed us to reduce overall marketing spend while keeping traffic volatility stable.
Steve: Your fingers and second cost optimization achieved over the last few years.
Steve: It's based in Florida reduced costs in traditional channels is limited.
Steve: And therefore with the game to explore new ways to acquire traffic okay.
Steve: By collaborating with short video.
Steve: Classroom such as well.
Steve: In Britain.
Steve: We have increased brand exposure and gradually shifting our budget and high cost transitional channel should carry out of China.
Steve: Which should help with used unit acquisition call.
Steve: In Q4, similar I've had 5.7 million paying users.
Steve: A sequential decrease of 1.2 million.
Steve: Future, our cost reduction and efficiency improvement strategy.
Steve: He refused the acquisition of some extremely low hanging.
Steve: If a negative at all I, which benefits profitability.
Steve: No.
The productivity of catch com of Momo attached to her business. Thank you.
Steve: For mobile live streaming revenue with one point 19 billion and RMB down.
Steve: <unk> 16 has a 10 year over year.
Steve: But you don't read a decline well why does down the pyramid three quarters.
Steve: Mainly due to the reduction in revenue oriented competition events.
Steve: Okay.
Steve: The decrease in incremental revenue from year end competition events compared to previous years.
Steve: In fiscal 'twenty.
Live streaming revenue totaled $4 8 billion RMB down 14% year over year.
Steve: This decrease was mainly due to our proactive operational adjustments to maintain a healthy sugar ecosystem.
Steve: As far as spending softness among top paying users.
Steve: Amidst a weak macro economy.
Steve: To mitigate revenue pressures from declining in top paying users we stepped up our effort to promote like streaming all the homepage to improve channel penetration and paying close right.
Steve: Meanwhile.
We increased our product innovation efforts.
Steve: Targeting a long power users choose stabilize.
Steve: And your scale.
Steve: In early stage of our.
Steve: Operational adjustments.
Steve: That's a reduction in competition bonded with Celgene.
Steve: <unk> profit for supply side partners and.
Steve: Do you have the motivation to work hard on our platform.
Steve: Therefore in the year's second half modestly adjust.
Policy, So daily events, which resulted in a slight increase in the revenue sharing ratio.
Country for compared to country three.
Steve: However, the decree the increase in pounds of live streaming showroom costumes, and PK pumps, which do not require as I've been sharing.
Steve: It is a positive relative in stabilizing the profit level of our cash cows.
Steve: Now moving on to our value added services.
Steve: In Q4 revenue from loss, excluding onetime total at 1.2 billion RMB down 5% year over year.
Speaker Change: What's the revenue from the mobile App.
Speaker Change: 800 million RMB down 15% year over year.
Revenues from the stand alone will add 400 million RMB up 24% year over year.
Speaker Change: Well fiscal 'twenty 'twenty four seven years, our value added services.
Speaker Change: Clothing hometown totaled 417 7 billion RMB down.
Speaker Change: Down 6% year over year.
Speaker Change: So I've been here for the hormone ask was 328 billion RMB down 17% year over year.
Speaker Change: Revenue for the stand alone App.
Speaker Change: 149 billion RMB.
Speaker Change: Oh, 35, Oh boy year over year.
Speaker Change: The incremental revenue from our new endeavors, largely offset the declines in revenue from our legacy business.
Speaker Change: The declines in normal I've watched revenue was mainly due to hours will actually.
Speaker Change: And operation adjustment in audio and video based lots of experiences over the past year to mitigate regulatory risk.
Speaker Change: We significantly reduced the amortization level.
Speaker Change: The agency dominated and heavily more use cases.
Speaker Change: Like livestream.
Chris: So Chris emotion.
Chris: The chat room experience on the homepage.
Speaker Change: I'm confused interactive gifting features for the mid and long tail users.
Speaker Change: And launched new category, such as mini games, and love Fortune, telling shoot you who've traveled in penetration and paying conversion, while driving organic revenue growth.
Speaker Change: I'm going to turn time Hudson's strategic goals for the year was to improve its core dating experience should be around your fishing business model that drives profitable growth.
Speaker Change: And sports eating experiences is pivotal for Asian interest drive organic user growth and retention true quality product.
Speaker Change: We initiated a product upgrade into where you're going for.
Speaker Change: Focusing on user experience.
Speaker Change: To encourage more explanation explorer patients on this product.
Speaker Change: Our management decided not to go straight to team with short term metrics.
Speaker Change: During the pilot phase.
Speaker Change: Allowed small fluctuation in using scouts in revenue.
Speaker Change: Or do you end up in your product just wanted to have played a positive role in improving user experience.
Speaker Change: New user retention and the user growth had not seen significantly improved.
Speaker Change: We use a scanner and revenue continued to show a gradual downward trend.
Speaker Change: And then just turns on excuses trying and financial.
Speaker Change: Also continuous cost reduction and efficiency improvement over the past two years.
Speaker Change: Well, sometimes to break even.
Speaker Change: There has been no rent.
Speaker Change: Food and use of attention drilling by product experience or organic user growth.
Speaker Change: Meanwhile, continuous reduction in China.
Speaker Change: It has put significant pressure on who use a nice.
Speaker Change: The combination of multiple factors led to a 10% sequential decline in content Emmy you choose 10 8 million in September.
Speaker Change: As of the end of Q4, sometimes has 860000 paying users.
Speaker Change: And 80000 sequentially due to the declines in EMEA.
Speaker Change: Turning to content financials Q4, total revenue was 213 million RMB downplaying too for some year over year.
Speaker Change: Mainly due to the decreased number of paying users.
Speaker Change: Go 'twenty 'twenty four.
Speaker Change: Total revenue was 900 million RMB down 25% year over year.
Speaker Change: In terms of business why why seven it was 550 million Aussie.
Speaker Change: Down 18% year over year.
Speaker Change: Due to the decline in number of paying users.
Speaker Change: By dividing members paying futures optimizing the guidance narrative experiences.
Speaker Change: And stepping up.
Speaker Change: <unk> efforts for well, it's Henry hub price paradox, such as S. P.
Speaker Change: My goal and additional I guess you'd go privilege for members.
Speaker Change: Do you manage your drive.
Speaker Change: Again year over year growth in boss RP pool.
Speaker Change: Resulting in lost revenue declining much smaller than they used to the numbers.
Speaker Change: Live streaming revenue was 313 million RMB.
Speaker Change: 38% year over year.
Speaker Change: Mainly due to our strategic decision should be emphasized for live streaming.
Speaker Change: Which has a low correlation with debating it soon.
Speaker Change: If it's go 24 pounds on adjusted operating income was 17, five point 94 million RMB compared with a 101 million RMB in Q4 23.
Speaker Change: Now moving on to our efforts on content and user acquisition.
Speaker Change: First on user acquisition front like Momo has also implemented through our collaborations and our flight integrated campaign enjoy doing well.
Speaker Change: This includes promotion events at bars Music festival and after you've done that.
Speaker Change: Combined with our targeting online campaigns of course, new media channels.
Speaker Change: This approach effectively optimize user acquisition costs, while expanding right into it.
Speaker Change: On the part of friends at the beginning of the year.
Speaker Change: <unk> identified the major issues affecting the user experience through interviews and surveys.
Speaker Change: In the second half hour requirements here.
Speaker Change: In terms of drug to court issues.
Speaker Change: Uncertainty about authenticity.
Speaker Change: Tennessee and lack of response to chance after matching.
Speaker Change: After a year of effort on Cogs, improving Honda is coordinating vytorin has largely been achieved.
Speaker Change: Overall, new user retention have not improved significantly.
Speaker Change: In 2025, and implement more extensive cost reduction and efficiency improvement measures, maintaining a low cost modest profit level, while continuing to explore dating product.
Speaker Change: As for our new endeavor.
Speaker Change: Our goal is doing reached the friends of folio further pushed the boundaries beyond longwall at 10 times and be a long term growth engine.
Speaker Change: And corner for the truth, there's photos back and you're off the new apps was 450 million RMB.
Speaker Change: 37% year over year.
Speaker Change: Cisco talking 'twenty for the total revenue often U S was 157 billion RMB.
Speaker Change: A 40% year over year.
Speaker Change: The rabbit extension of overseas business, especially so true what's the key driver behind this sustained growth.
Speaker Change: Combined with our domestic businesses, which face much Michael and back in Metairie uncertainties.
Speaker Change: Overseas businesses, often clear growth potential and trajectory.
Speaker Change: Our long standing expertise in shows real products and operational gives us confidence that shifting human and financial resources towards overseas business will yield better returns on investment for the revenue and profit.
Speaker Change: Since the beginning of 'twenty 'twenty four we have been committed to localizing, our overseas business and improving the operational efficiency of course, Florida team collaboration.
Speaker Change: On the platform, we introduced virtual gifts designed and interactive features that are aligned with local or use a consensus in the chat room and began exploring expansion from one place to live stream.
Speaker Change: On the operational front of me.
Speaker Change: You find out that this is for high paying users.
Speaker Change: Driven growth in the number of top cohort uses which drives over all our people growth.
Speaker Change: We also improved our supply side collaboration strategy.
Speaker Change: Significantly increasing the number of agencies and broadcasters.
Speaker Change: On the user acquisition front, while maintaining stable I mean moderately increased our marketing efforts to defend our I will preface our presence in existing markets, while expanding into new vision.
Speaker Change: The combined efforts of part out.
Speaker Change: Operations, and China led to increased paying users and our people.
Speaker Change: Mitchell rabbits revenue growth.
Speaker Change: A rabbit Sunshine in Turkish market and live streaming business.
Speaker Change: Is that the temporary consumption is indiana due to the potential risk at the year and equally.
Speaker Change: So it shows to maintain strong growth momentum for he's trying to have three high bay and continuously increasing revenue contribution to the group.
Speaker Change: Over the past two years building on the success of so true.
Speaker Change: We have launched more brands and new products in the Mena region.
Speaker Change: Long term yeah hang on.
Speaker Change: Or do you have a great wide social games and Maher.
Speaker Change: Of course based social part out and hurt the initial marketing and monetization say turning 24, after finalizing product efficiently and monetization models.
Speaker Change: By the end of two years. That's your products have reached a section seven new scout and maintain stable all I, even as we significantly increased marketing investment.
Speaker Change: The initial success of Yahoo, learn and Amar validates our strategy.
Speaker Change: Man, that's Mena markets can accommodate multiple brands and platforms.
Speaker Change: Give us confidence that our overseas business will play an even more important role in our.
Speaker Change: Revenues and profits in the future.
Speaker Change: Enjoy it when you first we will continue to increase our investment in Holland, and Ahmad and strive for continuous improvement in all our.
Speaker Change: And profitability.
Speaker Change: It's a it will to increase the revenue true ups and true our search on scout and a tree profitability, we move replicates the successful experience and model in all of the social entertainment.
Speaker Change: Building, a more diverse product portfolio.
That concludes our business at a view for 2024.
Now, let me outline our priorities for 2025.
Speaker Change: Essentially we will maintain the 'twenty 'twenty four strategies for normal kind of hung in our overseas businesses.
Speaker Change: Just one state on ours.
Speaker Change: Developments and the marketing Diana.
Speaker Change: First for the mobile App. Our goal is to maintain long term stable operation with a health issue. So ecosystem to ensure the continued stable productivity of fish cuts kind of business.
Speaker Change: But sometimes.
Speaker Change: Does the teacher goals for this year is to reduce cost.
Speaker Change: And improve efficiency, while maintaining profitability.
Speaker Change: With a focus on continuing shooting sports amazing experiences suitable for agents and the fishing business models.
Speaker Change: Our new and definitely aim to enrich the brand portfolio and further expand the business.
As normal and Samsung.
Speaker Change: Our long term growth engine.
Speaker Change: We have further increased our overseas efforts and take even voters, that's you drive scale and innovation in international markets.
Speaker Change: Lastly, I'm pleased to announce that our board has approved a special cash dividend in the amount of 0.3 U S. T E. P. S for a total cash payment of approximately 15 million U S D.
Speaker Change: Or about 30% of adjusted net income.
Speaker Change: Attributable to <unk>, Inc. In 2024.
Speaker Change: It's just the seven consecutive years that we have shared this with us.
Speaker Change: With our shareholders through cash dividends.
Speaker Change: Which is a strong testimony to our commitment to creating long term value for our shareholders.
Speaker Change: Now, let me pass the call to Cathy for the financial review.
Cathy: Cathy please.
Speaker Change: [noise]. Thanks, Sig Hello, everyone. Thank you for 20 of our conference call today.
Speaker Change: Now, let me briefly take you through our financial with youth.
Speaker Change: Total revenue for the fourth quarter 'twenty 'twenty, four was 2.64 billion renminbi down 12% year on year, and 1% quarter over quarter non-GAAP net income attributable to the company was 235 million and then be compared to 514 point.
Speaker Change: And indeed from the same period of 'twenty safety and.
Speaker Change: Yeah.
Speaker Change: 493.3 million can be from Q3 24.
Speaker Change: Our Q4 costs included some film production related expenses and <unk>.
Speaker Change: And we also conducted a thorough impairment with you shouldn't assets on our balance sheet, including capitalized film production costs and other long term investments.
Speaker Change: And made provisions in accordance with the principle of Prudence.
Speaker Change: Leading these costs and expenses of 141 million and be adjusted net income for Q4 would have been $371 1 million and it can be.
Speaker Change: Looking into the key revenue items for Q4, Firstly, a lybeck husky total revenue from LIBOR catching business for the fourth quarter of 'twenty 'twenty four it was 1.36 billion in them and be down 17% year on year, and 2% quarter over quarter or year over year decrease was mainly due to a decline.
Speaker Change: Hum in the core mobile live streaming business and to a lesser extent the decrease in Tampa.
Speaker Change: Well my LIBOR, passing revenue totaled 1.19 billion and indeed for the quarter down 16% year over year, and 3% quarter over quarter contest why broadcasting revenue amounted to $75 seven new either downfall cause it now 24% year over year, but up.
Speaker Change: 14% quarter over quarter.
Speaker Change: Revenue from the value added services for the fourth quarter and 24, with one 3 billion and be down 7% from Q4 last year and two per sassy question revenue from value added theory on an X 10 ton basis was $1 2 billion and indeed in the fourth quarter 2024.
Speaker Change: Down 5% from Q4 last year and 2% from the previous quarter.
Speaker Change: Well more apps that are out of service revenue decreased both on a year over year.
And quarter over quarter basis. This was due to a weak standing sentiment as well as airport active product adjustments Olivia like new found a standalone new apps continues to grow nicely, partially offsetting the revenue picture for mobile value added services.
Speaker Change: Gary and his favorite fish revenue amounted to even be 127, 8 million down 20% year over year and 7% sequentially. The decrease was due to a decline in paying users which was in ton due to a reduction in channel investment. However, the continued improvement in our Pea Ridge.
Speaker Change: Noted in revenue declining much less than you could count.
Speaker Change: Now turning to costs and expenses non-GAAP cost of revenue for the fourth quarter of 'twenty 'twenty four with $1 72 billion and then be compared to $1 77 billion for the same period last year non-GAAP gross margin for the quarter was 84, 7% down six five percentage points from the year.
Speaker Change: Our ago period.
Speaker Change: Cost of revenue in Q4 included 94 million even be film production costs as long as the impairment of provided for earlier field production.
Speaker Change: Excluding these costs.
Speaker Change: Gross margin, our gross profit margin would've been 38, 2%.
Speaker Change: Two nine percentage points from Q4 of last year the year over year decrease was due to a number of factors number one higher payout ratio, which in turn was due to two factors. One factor is that overseas business continued.
Speaker Change: Contributed a lot larger as a percentage of total revenue, while having higher payout ratio, especially during the new region expansion and the initial phase of video service offering.
Speaker Change: And to a lesser degree tighter pay out some more cash cow business is stabilized the supply side, considering the downward revenue trends.
Speaker Change: Number two do you leverage where direct personnel and infrastructure costs. It takes up a higher percentage of revenue.
Speaker Change: On the fee payment channel costs represent.
Speaker Change: A slightly higher percentage of total revenue recognition.
Speaker Change: Mix shifts towards overseas business, where channel fees as a percentage of revenue are much higher than those for domestic business.
Speaker Change: non-GAAP R&D expenses for the fourth quarter. It was 212 point for news and then be compared to $218 1 million and indeed for the same period last year with a 3% decrease year over year. The decrease was due to optimization and personnel costs non-GAAP R&D expenses as a percentage.
Speaker Change: Revenue was 8% compared with 50% from the year ago period.
We ended the quarter with 1390 total employees of which 276 are some compounds compared to 1382 total employees of which 301 friend pans out a year ago.
Speaker Change: Andy personnel as a percentage of total employees for the group was 61% compared with 63% Q4 last year.
Speaker Change: non-GAAP sales and marketing expenses for the fourth quarter was 211 point, Southern New England and deal with 12% of total revenue compared to 296.0 millions in India or 10% of total revenue for the same period for the same period period last year.
Speaker Change: Year over year increase was primarily attributable to the increase in channel investments for the overseas up whereas marketing spend for more core business and compound was narrowed to varying degrees.
Speaker Change: non-GAAP G&A expenses was $117 6 million indeed for the fourth quarter of 24 compared to 87 point too many of them would be for the same quarter last year, representing a 4% and 3% of total revenue respectively.
Speaker Change: Year over year increase in G&A expenses was due to a combination of factors, including TV sets on pending legal matters self inspection on tax related matters and due diligence related cost in connection with perpetual investments.
Speaker Change: non-GAAP operating income was $279 9 million and B with a margin of 10, 6% compared with 200, and he $64 2 million and be with emerging of 22, 1% from the same period last year excluding film production.
Speaker Change: <unk> costs as mentioned earlier.
Speaker Change: GAAP operating income.
Speaker Change: Would have been 370.
Speaker Change: $373 9 million, indeed, with a margin of 14, 2%.
Speaker Change: non-GAAP operating expenses as a percentage of total revenue was 24% an increase from 20%.
Speaker Change: For Q4, 2023.
Speaker Change: GAAP operating expenses as a on a year over year basis increased 7% the increase in both absolute and indeed amount and as a percentage of revenue for operating expenses was mainly due to an increase in G&A expenses and to a lesser degree interesting Susan marketing expenses.
Speaker Change: Now I'll give you our income taxes total income tax expense was $89 5 million and then be for the quarter with an effective tax rate of 28%.
Speaker Change: In Q4, the company accrued withholding income tax.
Speaker Change: It was $19 5 million a N D, which is 5%. It is distributed profits generated by our Wuxi in Q4 25, four as a result of our self inspection of tax related matters. We also paid some taxes that will do but unpaid in earlier years without such adjustments any withholding tax.
Speaker Change: Our estimated non-GAAP effective tax rate in Q4 would've been 17% in the fourth quarter.
Speaker Change: Now turning to balance sheet and cash flow items as of December 31st 20 say for whole group's cash cash equivalents short term deposits long term deposits short term investments and restricted cash totaled 14 from 73 billion renminbi compared to $15 48 did even D. As of December 30 <unk>.
Speaker Change: Satisfactory net cash provided by operating activities in the fourth quarter of 44 was 423.6 million indeed.
Speaker Change: Lastly on business outlook, we estimate at our first quarter revenue to come in the range from $2 4 billion in India to $2 5 billion renminbi, representing a decrease of six 3% to two 4% year on year or a decrease of 9% to 5.2% quarter over quarter.
Speaker Change: 70 level for Q1, 'twenty five right.
Speaker Change: Year over year basis, we expect one more segment revenue to decrease.
Speaker Change: I'll need to low single digits due to the continuous macro headwind offset by the rapid growth of overseas business.
Speaker Change: But sometimes side, we expect revenue to decrease around 20% due to bad Daddy's service revenue contraction caused by a decline in user base and to a lesser degree our operational adjustment to deemphasize less data centric live streaming services. Please be mindful that this forecast represents the company's current and preliminary.
Speaker Change: Do you own the market and operational conditions, which are subject to changes.
Speaker Change: That concluded our prepared portion for today's discussion with that let me turn the call back to Ashley to start kidding actually please thank you.
Speaker Change: <unk>.
Speaker Change: So those that's the Chinese please ask your questions in Chinese first followed by English translation by yourself operator, we're ready for questions. Thank you. Thank.
Speaker Change: Yeah, if you wish to ask a question. Please press star one on your telephone. Unlike bear names you know if you wish to cancel your request. Please press star two.
Speaker Change: If you're on a speakerphone please pick up the handset to ask your question.
Speaker Change: Your first question comes from do Kim Zhang with C. I C C.
Yeah, Glenn conditional on Tmall with da Vinci to Guang Ah Mommas agenda, a normal loss, which is two more months of agenda.
Speaker Change: Beefeater in Salt Lake, but also Oh sure yet now you are at least <unk> not all.
Speaker Change: It's just a matter of how to get there. So let me remain silent.
Speaker Change: Awesome.
Speaker Change: She says genius defaulting on fall.
Speaker Change: So a whole lot anytime looking jaquith, yeah, more module quad odd people, who lost hunting their children Sochua a genius Stifel have waiting booting seen shelter I'll tell you something I always come back I'm almost always in Yo Yo Oh, Yeah no sure. So these are under attack.
Speaker Change:
Speaker Change: Since management for taking my question My question I'll come on more in the first part or the number of paying users uncle more much class by 1.2 million Qualcomm Qualcomm, which is significantly larger than our historical average so what's the reason for this what's the impact on the revenue.
Speaker Change: Cockpit Ah shall we see the number of paying users are wrong is yeah.
Speaker Change: Secondly, a hotdog measurement beyond just months two lives Jamie on the bass pro tax over the past a year.
Speaker Change: And your friends that I just mentioned.
Speaker Change: Larceny, how to deal with the revenue and profit after the Kumamoto even touch sense. Thank you.
Speaker Change: I worked our Texas accent, so about the culture of paying users.
Speaker Change: For the last few years, three push hard to get a lot of small tickets paying users because we sponsored a keep improving our earnings.
Speaker Change: And we spend quite a bit on different channels to acquire them, but the costs could not be recouped now given the tough economic and our goal should be more focused on the process. We have decided to cut back on trying to bring and as long as we try and paying users.
And the fourth quarters.
Speaker Change: That's why we saw a big drop in wants how paying users.
Speaker Change: Just more than what we usually experience.
Speaker Change: At the end of this year after year end.
Speaker Change: So in the months of hat, we will she's refusing our effort to acquire this long term small ticket visits.
Speaker Change: This means we expected number of paying users who dropped more than usual, even though even though it is lower our overall count. So you can use them, but this news, they're generally don't engage marshalls spend so a stopping our efforts to bring them in for really.
Speaker Change: That's my fault.
Speaker Change: In fact, the shift should help us boost the profitability of our main business.
Speaker Change: Regarding the adjustments.
Speaker Change: Just months of normal after a year of efforts. We think most content has greatly improved so we are all making any changes to reduce earnings right now.
Speaker Change: Is that what I'm going to focus on adding a fun features and ways to engage users at.
Speaker Change: At the same time, we will keep looking for ways to save costs to make sure. Our main business continued to pour in good profits, even with all our revenue goes down with it.
Speaker Change: Kathy will share more about Momo's financial plans for this year.
[noise] Oh, it's just a very expansive a question so.
Speaker Change: Let me try to break it down into a few key components and take them one by one.
Speaker Change: And first of all.
Speaker Change: Our revenue outlook for the cash cow business.
Speaker Change: Oh, I like to crack it down by considering both internal factors and extra fathers' internally. If we looked at almost fundamentals I would say that the foundation of our business remains very solid and resilient apart mobile continues to be.
Speaker Change: The V go to social platform for users looking to discover a.
Speaker Change: New friends and expand their circles.
Speaker Change: User engagement, such as number of meaningful connections and a.
Speaker Change: The number of interactions remain pretty strong, which give us confidence in the platform's resilience on the paying user Ah metrics, which might've caused some concern this quarter.
Speaker Change: I think investors need to.
Speaker Change: Really worried about it either and here is why it's true that extremely high spending users, which we sometimes called the whales have faced pressure in recent years due to economic challenges many of them, especially our business owners southern networth shrinking doing COVID-19 in subsea.
Speaker Change: Subsequent real estate no doubt.
Speaker Change: Which impacted spending it's also true that as Sig mentioned earlier long tail users.
Speaker Change: Those spending around 10 minutes per month, or even less have been deep prioritize you know use acquisition strategy due to no monetization potential and negative a lot. However, we're happy to see that meet your users are which we sometimes call. It dolphins in comparison with the the whales have been there.
Speaker Change: If our platform. This group of Dolphin has remained remarkably stable.
Speaker Change: Throughout the past few years, perhaps some form of whales have also transition into this category. Looking ahead. We expect this group of dolphin users to continue driving the business and providing a solid revenue base.
Speaker Change: Now turning to two external factors impacting revenue first off on regulatory environment over the past few years are you probably know that policy changes have posted pretty serious challenges for mobile the cashcall business with fun, we proactively adjusted.
Speaker Change: Our monetization strategies to reduce managed to reduce regulatory risk whether it's late 'twenty 'twenty four the environment has stabilized a little bit, allowing us to focus on revenue recovery rather than risk management. So that's the regulatory factor and.
Speaker Change: Oh and macro environment, I would say that consumer sentiment at this point remains a key variable of which there is not much we can do really but to adapt.
Speaker Change: From what we've seen.
Speaker Change: From how users performed so far into Q1, it looks like the very top of the pyramid users or the wells are going to continue to be very cautious in terms of spending the live streaming may continue to see pressure, but that service should be doing relatively well and as the year progresses.
Speaker Change: Is it consumer sentiment continues to recover and government policies for their boost consumer confidence, especially the confidence from the business owners, we could see upside potential as user spending but at this stage, it's still too early to make a very strong call on the macro front.
Speaker Change: So if you're looking for.
Speaker Change: And more quantitative I'll look here is what I can share at this point, it's reflected in our guidance. We expect seasonality in Q1 should see a slight rebound in Q2, where we land kosta rebounds really depends on macro for now I would put in a low.
Speaker Change: <unk> revenue decline in the basketball business for quite some time.
Speaker Change: Alcohol would help us perform better as we had a deeper into the year. That's for the cow, that's where the cash cow and throw in overseas piece and the telecom piece into the pot and look at the growth at group level right. So why do I D.
Speaker Change: Chris will likely narrow pretty substantially to low single digits as the oversea is still gaining pretty strong traction at.
Speaker Change: At this point.
Speaker Change: Of course in absolute dollar terms this will still be a meaningful year over year decrease from 2024. So we are further optimizing head count as well as improving marketing efficiency to absorb part of the topline crusher and reallocated some of the resources.
Speaker Change: As to overseas business as well as a result, while revenue where the well decline profitability impact will be less severe due to cost optimization.
Speaker Change: Oh for the Cashcall however.
Speaker Change: We may invest a big part of the cost savings, especially the marketing savings to grow our overseas business. So I would say that at the group level. The picture is a little bit more complicated for the whole group.
Speaker Change: Meeting combining the cow a compound and the fast expanding overseas business altogether, we are targeting and non-GAAP operating margin range from 12% to 13%. However, you may want to take that range with an understanding that it is a very.
Speaker Change: Soft kind of guidance rather than a firm commitment because.
Speaker Change: As you can understand we are Ah at the beginning of the year and there are still too many moving pieces that could move the bottom line margins one way or another. So this is what I can share at this point of time back to actually to take the next question.
Speaker Change: Operator next question please.
Operator: Your next question comes from Thomas Chong with Jefferies.
Speaker Change: [noise] one.
Speaker Change: You bet.
Operator: Yes.
Operator: Cool.
Operator: Thank you.
Operator: Thank you guys.
Operator: Okay.
Operator: Even better.
Operator: Sure.
Operator: You're welcome.
Operator: Right.
Yes.
Thank you.
Operator: Yeah.
Operator: Hi, good morning.
Operator: Okay.
Operator: He told me that.
Operator: Uh huh.
Operator: Okay.
Operator: Oh.
Operator: Okay.
Operator: Yes.
Operator: Management.
Good question Mike.
Operator: My question is about.
Operator: Okay.
Operator: Can management comment about the market.
Thank you.
Neil.
Okay.
Operator: Okay.
Operator: Good evening.
Operator: Reputation.
Operator: Yes.
Operator: Got you.
Operator: Thank you.
Operator: That's a new spending.
Operator: I'm trying to quantify how should we think about it.
Operator: Neil.
Operator: Okay.
Operator: Okay.
Operator: Thank you.
Speaker Change: Regarding there question if that is so true and and Archer Oh gosh.
Speaker Change: The past few years, social has become the fastest growing product you know good both in revenue and profits.
Speaker Change: Yeah 24 years.
Speaker Change: Fourth is seven new grow 550 for songs from 'twenty, three nearing 1 billion RMB.
Speaker Change: And also surpassing 10 times earnings.
Speaker Change: This growth is mainly due to improving that localization strategies, we started last year.
Speaker Change: Focusing on three main areas, one is reaching two reaching the mature markets to expanding into a new region and also adding features like live streaming.
Speaker Change: We have also strengthened our partnership which has helped boost revenue.
Speaker Change: I'm not sure it's doing well in Turkey, Egypt, and golf countries, showing where strong market demand.
Speaker Change: We also launched two new apps in the Mena regions at Yeah end of 2020 three.
Speaker Change: Oh, the fresh foods, yeah, Heartland, and all of the social game apps and tomorrow.
Speaker Change: Just to show true voice focus.
Speaker Change: [noise] products, but are driven from the starts and has shown promising potential in revenue and user acquisition.
Speaker Change: So in 'twenty five if I remain promising as we plan to increase marketing for both.
Speaker Change: So just some thoughts.
Speaker Change: That's still true and our new product shows that the knowledge gained in our home market works well it affords.
Speaker Change: Especially in the Mena region.
Speaker Change: Which can accommodate multiple social brands.
Speaker Change: So in 2025.
That's more in it for international markets.
Speaker Change: Since our overseas product our focus profits increasing investments are heavily affect the group's net profit. So coffee will provide six each house Avenue and practice broadcast.
Speaker Change: Okay.
Speaker Change: Our overseas growth strategy for 25, five can be Brooklyn broken down into two buckets are the good old in Chile, and the other new niche it for social and.
Speaker Change: Seek mentioned earlier, we're focusing on three main drivers this year.
Speaker Change: For Chinese better localization chicken wise geographic expansion to both countries.
Speaker Change: Where our current penetration is not as deep and if there is driver is new video services.
Speaker Change: And if we make strong.
If we if we make good progress across all those three areas, we could reach the higher end of our growth target is certain areas require more time, we might land in the mid to long range, if all of our target.
Speaker Change: In 2025, we're gonna have a second growth driver for our overseas business. We trial are the two newer applications, yeah, how long and a more both applications are gaining pretty strong traction at this point and we're significantly increasing our marketing efforts.
Speaker Change: To further accelerate revenue growth because the all eyes looking pretty pretty promising despite stepping up.
Speaker Change: The marketing dollars are I remain quite stable, which is a very positive sign if we can maintain strong ROI as we continue to scale by the end of the year. The complaint that the combined quarterly revenue run rate is a new overseas apps could meaning these two smaller asks could reach.
Speaker Change: We are social is today.
Speaker Change: If you annualize that that would mean the overseas revenue contribution for twice what it will become very meaningful.
Speaker Change: However, if marketing efficiency the client as we scale, we made post marketing expenditures to focus on product improvements and operational finance.
Speaker Change: Before wrapping up again in that case revenue growth for those two applications could come in a bit slower. So you know looking at the full overseas portfolio, we expect that the news a summit to growth.
Speaker Change: Around 1 billion renminbi in 'twenty 'twenty four to a range between a it could be between $1 7 billion to 2 billion renminbi in 2025, that's a pretty impressive growth for this year already profitability is not the priority for overseas expansion this year Oh.
Speaker Change: We are focused on scaling our that sad because we grow our overseas business with high level of focus all our Y as we continue to scale our bottom line for overseas business should improve over time.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: We got ready for the next question. Thank you.
Yes, Yang: Your next question comes from Yes, Yang with Deutsche Bank.
Yes, Yang: Yes.
Yes, Yang: So he is Shang from Deutsche Bank. Your line is open.
Speaker Change: Hey, Hello Ashish.
Speaker Change: She shook my knees and just hold that you want with it when he said by the time I'm done.
Speaker Change: Turned on when we talk I found Akshay J D E N J O and kind of cool Oh, Gway Morton joked that he got shot there that's done.
Speaker Change: She Woodbine and juniors.
Speaker Change: Uh huh.
Speaker Change: Yeah, No I'm not sure that you are guy who came back times on the way that those aren't changing you. So I'll leave it at that she and translate myself. Thank you management for taking my question. My question is regarding two ton time up to one year.
Speaker Change: The other adjustment we used the tongue Hans user and revenue scale.
In a declining trend.
Speaker Change: Imagine that ensure the plane for ton time this year in terms of product and operation.
Speaker Change: How should we think of 10 times revenue and profit outlook, a 10 25.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: I'll I'll take the question.
Speaker Change: Maybe let me spend a little bit more time to discuss coupon strategy for 2025.
Speaker Change: And explain why we're taking this approach.
Speaker Change: <unk> has always had two main strategy our strategic objectives.
Speaker Change: One is delivering a good dating experience for users in China, and the broader Asian market.
Speaker Change: This remains our top priority because.
Speaker Change: We.
Speaker Change: No obey all the up and downs in the past, we still see this as a significant underserved demand in China market and we believe we are out of all our all of our peers are still have the best chance of being the best player in this market in the second objective is building up.
Speaker Change: Sustainable profitable business model.
Speaker Change: Given China's highly competitive in cost for user acquisition environment.
Speaker Change: There is only so much we can do to optimize on user acquisition part so in order to build a profitable business.
Speaker Change: Motto.
Speaker Change: Are you referring to the second goal that I mentioned, we in the pasta sauce that boosting monetization was a more feasible.
Speaker Change: That's why in the past, we focus heavily on increasing arb to to improve monetization.
Speaker Change: This approach often conflicted with user experience are forcing us into a pretty awkward balancing act one that we've never executed successfully and sometimes even tumbled and struggle to get back on track. This year, we're taking a different path and instead of prioritizing ARPA growth.
Speaker Change: We're shifting our focus to reducing our user acquisition cost in a pretty dramatic way.
Speaker Change: Now how do we get there typically the more aggressive we acquire users the higher the user acquisition cost would go.
Speaker Change: Which means if we want to maintain current level of user scale.
Speaker Change: It's difficult to further reduce unit acquisition cost on the other hand, if we would use our acquisition volume unit cost would also decrease this year, we will significantly cutback on user acquisition spending all the way to the point, where the all I turned positive which is to say.
Speaker Change: Say that every new user we acquire we aim to fully recover their acquisition costs, including the fixed cost, meaning the personnel and other related expenses are making this adjustment even at all Colin artful levels, we can recover marketing spend and minimize acquisition losses.
Speaker Change: Creating a healthier business cycle. There is of course, a trade off.
Speaker Change: With this strategy.
Speaker Change: We're cutting back on user acquisition caused pretty dramatically, we will likely see a faster decline in active users. However, many of these users were only being maintained at the expense of profitability. So we're willing to let go of some scale and at what time the upside is that there's shifts.
Buys us sufficient time and space to refine user experience and retention strategies as well as experiment with new premium features that could drive sustainable monetization. If we are successful in doing that.
It's gonna lay the foundation for future work.
Speaker Change: We're both user experience a revenue generation can scale together and so that's the overall that that actually marks a pretty pretty big.
Speaker Change: Big but shifting strategies for contact in 'twenty, four and five well see how it plays out as the year progresses. When it comes to content revenue outlook for 2025 are two key factors shaping the quarterly trends one is the product and operational adjustments impacted Rps Lasher, we may.
Speaker Change: Some product and operational changes aimed at improving debating experience. These changes were tested on a smaller group of users last year and now we are fully rolling out these adjustments across the platform in the first half of 2025 and cousins changes will have a negative impact on our P. A full scale rollout.
Speaker Change: Certainly well wait on revenue in the near term.
And the second factor that we should consider is significant reduction in marketing spend as I mentioned in the overall strategy of first time paying twice 95.
Speaker Change: And as I said, starting from Q3 25, we will creep drastically cut marketing expenses to ensure they use acquisition she's a full our oi recovery right. Now we are looking at reducing quarterly marketing spend from around 40 to 50.
Speaker Change: 15 million renminbi quarter to approximately 20 to 30 million for 90 per quarter naturally this will result.
Speaker Change: A decline in active users and top line revenue.
Speaker Change: So given these moving pieces, it's difficult to provide an exact revenue forecast at this point, that's sad I would put a rough estimated range between 20, maybe 20% to 30% revenue decline year over year decline.
Speaker Change: For 2025.
Speaker Change:
Speaker Change: In terms of profitability outlook.
Speaker Change: And despite the.
Speaker Change: Top line decline because of our efforts are focused on achieving better omri profitability will actually see improvement for domestic tanta beyond optimizing marketing spend we will also skilled personnel costs pretty significantly to align with our profitability goals.
Speaker Change:
Speaker Change: And we do expect sometime to remain profitable for the coming couple of years, although at a lower level our platform scale.
Speaker Change: We may need to put in some investment to expand.
Speaker Change: Expand content overseas, but it will be experimental and arise with that as well. So that's four continents financial outlook.
Speaker Change: Actually maybe the last question yeah.
Speaker Change: Operator, let's see if you have any more requests all means alarm if we do let's take one last question before calling Tonight. Thank you.
Jenny Wang: Thank you. Your next question comes from Jenny Wang with UBS.
Speaker Change: Hum.
Speaker Change: And you're finding kind of T O N E.
Speaker Change: What can we eat the client return on tea.
Speaker Change: On this issue and transfer Shaw gives you confidence.
Speaker Change: Special dividend.
Speaker Change: So we've got a whole bunch of photocopies uncle Unfortunately ship.
Speaker Change: As usual mandatory document would be Washington D C.
Speaker Change: Sure.
I'm, sorry, I should know Linda topic with you.
Speaker Change: Unless you have a abbreviation booth.
Speaker Change: All mail, but we're gonna change always wait what does he should.
Speaker Change: So thanks management for taking my question.
Speaker Change: My question is regarding I would have to return.
Speaker Change: None of them as Sean said, she was sentenced conceptually you issue a special dividend.
Speaker Change: So looking ahead.
Speaker Change: We can always look at the mercy.
Speaker Change: Now this has just been pushed out it's not always closing provision use.
Speaker Change: But on the other hand, we extended and Upsized our share buyback program.
Speaker Change: I was just going to take us trying to check progressed, well shut it off till the dividend I mean to some shareholder returns going forward. Thank you.
Speaker Change: Okay.
Speaker Change: Ah Okay I'm hearing several questions here on the question.
Speaker Change: Or whether we are thinking about making the dividend.
Speaker Change: A program of regular one simple answer is no. We don't see a strong reason to make a special dividend plus the regular one and here's why.
Speaker Change: First off for a long term investors, who have been following us it's already well understood that management takes a disciplined approach to capital allocation are when we have excess cash we return it to shareholders in a thoughtful and value enhancing way.
Speaker Change: Because this expectation is already well established we don't see the need for a fixed dividend policy just to formalize it.
Speaker Change: Instead, we would rather keep some flexibility in how we allocate capital if we see compelling opportunity investment opportunities, we would prefer to deploy capital towards close either.
Speaker Change: Organically or through M&A.
Speaker Change: Rather than commit to a rigid dividend schedule.
Speaker Change: And the.
Speaker Change: Second point is perhaps related to it's also related to your other question about how we are how we decide between.
Speaker Change: A cash dividend sources.
Speaker Change: Share buyback.
Speaker Change: No you didn't.
When it comes to returning capital to shareholders, we need the flexibility to decide between dividends versus share buybacks given that our stock is still trading a pretty significantly below cash values buybacks. Currently offers a better return for shareholders compared to our fee.
Speaker Change: Dividend payout. So the conclusion is we could dividend policy would limit our ability to optimize capital allocation instead, we prefer to keep our options open and ensure every daughter is deployed in a way.
Speaker Change: That creates the most value for our shareholders.
Speaker Change: So that's that's that's my answer to the question and maybe with that we'd like to wrap up today's call.
Speaker Change: So thank you all for joining us I will see you next quarter, operator, we're ready to close.
Speaker Change: Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.
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