Q1 2025 Hello Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the first quarter 'twenty to 'twenty Five Hello Group, Inc Earnings Conference call.
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Again the conference over to your first speaker today Ashley. Thank you. Please go ahead ma'am.
Speaker Change: Thank you operator, good morning, and good evening, everyone. Thank you for joining us today for Hollow group's first quarter 2025 earnings conference call. The company's results were released earlier today and available on the company's IR website on the call today are Mr. Tang Yan for you off the company he's jumped Sichuan fuel will help the company on these pumps.
Speaker Change: Seattle off the company will discuss the company's business operations and highlights as well as the financials and guidance, you'll all be available to answer your questions. During the Q&A session that follows before we begin I would like to remind you that this call may contain forward looking statements made under the safe Harbor provision of the private Security Litigation Reform Act of 1995.
Speaker Change: Such statements are based on management's current expectations and current market operating conditions.
Speaker Change: And relate to events that involve known and unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements.
Speaker Change: Although 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 C O owns.
Speaker Change: Junk food trend is junkie.
Speaker Change: Hello, everyone. Thank you for joining our call.
Speaker Change: Q1 was a solid quarter and great start to 2025.
Speaker Change: Next I will review, our strategic priorities for the years and provide updates institution.
Speaker Change: Before getting into the financials.
Speaker Change: Doctors, who have reviewed our Q1 and you will notice that we have to claw geographical breakdowns on that revenue level.
Speaker Change: Over the past few years with the rapid development of overseas businesses.
Speaker Change: Revenue contribution to the group is getting increasingly prominent.
Speaker Change: In Q1 O. What's your revenue accounted for 16% of children revenue.
Speaker Change: Up from less than 10% in Q1 24.
Speaker Change: We expect this percentage to continue growing rapidly in the coming quarters.
Speaker Change: We believe that they drove profitable revenue breakdown helps investors better help keep track of our progress in our overseas development.
Speaker Change: Now, let's dive into the details of Q1.
Speaker Change: Starting with an overview of financial performance.
Speaker Change: For Q1 'twenty side.
Speaker Change: Total revenue was two point 52 really in R&D.
Speaker Change: Beating the high end of our guidance.
Speaker Change: And it was slightly down one 5% year over year.
Speaker Change: Domestic revenue reached two point 11 billion RMB.
Speaker Change: Nice to think it will be yeah.
Speaker Change: Overseas revenue reached 415 million RMB.
Speaker Change: We celebrate a year over year growth of 72%.
Speaker Change: Adjusted operating income was 358 million RMB down like three.
Speaker Change: 3% from Q1 last year.
Speaker Change: A margin of 14%.
Speaker Change: John six percentage points from Q3 with one year.
Speaker Change: Last earning call I outlined several key priorities for 2025.
Speaker Change: Well Momo, although is to maintain the productivity of these catch her business with the Huskies Shanxi ecosystem.
Speaker Change: Sometimes on Oh go is doing proof is coordinating hearings and do an efficient business model that drives profitable growth.
Speaker Change: As for the new endeavors.
Speaker Change: One is to continue deepening our presence in overseas market.
Speaker Change: In reaching our brand portfolio and building a long term growth engine.
Speaker Change: Since the beginning of the year, we have made strong progress across all three fronts.
Speaker Change: Let me walk you through the detail.
Speaker Change: First our mobile App.
Speaker Change: At the product level, we continue to optimize interactive features that's facilitating uses in making meaningful connection and maintaining interaction.
Speaker Change: Digital of enhancing social experience and stabilizing he used to be.
Speaker Change: As mentioned earlier, we have developed an in house AI algorithm that generate personalized reading for now uses.
Speaker Change: Analyzing our historical test or image posts of female users.
Speaker Change: Data shows that the response rate for AI generated reading is significantly higher than that of user generated at once.
Speaker Change: Since we fully roll out this feature responsory true bleeding Hearts continue to rise.
Speaker Change: On the user acquisition front to ensure stable or activity of the cash coming in.
Speaker Change: In Q1, we shrink.
Speaker Change: So in China without below 80%.
Speaker Change: And gradually terminated its cooperation with or is it performing ones.
Speaker Change: The average user acquisition cost narrow slightly from last quarter. Thanks.
Speaker Change: Thanks to the improved channel efficiency and enhance user onboarding and conversion capability.
Speaker Change: Retention remained stable despite a double digit increase in user acquisition.
Speaker Change: A significant reduction in China, and most of them with a negative all army has resulted in a substantial decline in long tail paying users.
Speaker Change: In Q1, mobile and had $4 2 million paying users.
Speaker Change: We show a decrease of one 5 million.
Speaker Change: It's a long tail paying user offended by channels has relatively low engagement and ending the absence of this group did not have much negative impact on overall use of a G. He and Buffy.
Speaker Change: In fact, it's a process it will in improving overall profit.
Speaker Change: The continuously improving user acquisition all are you in the past two quarters has proved that such a strategy is very effective.
Speaker Change: And we plan to continue with this effort.
Speaker Change: Now on the productivity of normal catch conflict.
Speaker Change: In Q1, almost why do I always thought of as the.
Speaker Change: Previously known as live streaming and Ross.
Speaker Change: Combined as well and just sort of from this quarter.
Speaker Change: Revenue totaled one point 17, 8 billion RMB down less than 10% year over year.
Speaker Change: The declines in level from last year, mainly because we completely our proactive demonetization operational adjustments or the end of 'twenty 'twenty four.
Speaker Change: We believe that the content ecosystem of the platform is now at a relatively satisfactory level.
Speaker Change: The decline was mainly attributed shoes, ending witness a mountain top paying users caused by macro factors.
Speaker Change: We have introduced new operational events and gifting features tailored for Niko, who uses of course, my view audio and video scenarios.
Speaker Change: We are just at the recommendation algorithm.
Speaker Change: True Bachelor of Hawaii, which the chinchilla preferences of Mi cohort users.
Speaker Change: Driving growth in both penetration rates and use the scale of the chat room experience.
Speaker Change: Moreover, we launched new ice breaking paying features to be.
Speaker Change: Pending amount meet cohort.
Speaker Change: Which partially offset the revenue pressure.
Speaker Change: Caused by the decline of top paying users.
Speaker Change: Increasing revenue contribution from children, which has relatively lower revenue sharing ratio.
Speaker Change: I'm sorry to go back of revenue oriented life streaming operation again.
Speaker Change: Together play a positive role in stabilizing gross margin and the revenue pressure.
Speaker Change: I think at one time.
Speaker Change: In recent years, the strategy of cost reduction and efficiency improvement.
Speaker Change: And with product adjustments have put sustained pressure on tons on its user base and revenue.
Speaker Change: To maintain profitability, we Florida, we do sometimes marketing spend in Q1.
Speaker Change: The decrease in China traffic has put some pressure on the overall use of scope.
Speaker Change: However, we are pleased to see that things to gradual improvements in the ecosystem and product experience.
Speaker Change: Organic traffic primarily from returning users has continued to grow.
Speaker Change: Largely offsetting the decrease caused by reduced marketing spend.
Speaker Change: In March turns on in May you was $10 7 million or so.
Speaker Change: Decline of 1% quarter over quarter.
Speaker Change: That's up to endless Q1, sometimes has 800000 paying users.
Speaker Change: A decrease of 60000 from Paris quota.
Speaker Change: This was mainly due to the ongoing product with great.
Speaker Change: Which is improving user experience, but has a short term negative impact on paying promotion.
Speaker Change: Well, we are rolling out testing Fisher's largest pool of users the paying ratio declined slightly from the last quarter.
Speaker Change: Turning to the continent's I mentioned revenue from the onshore business in Q1 was close to 170 million RMB down.
Speaker Change: Down 19% year over year.
Speaker Change: The decrease was due to the decline in the paying user account, whereas our people close by double digits.
Speaker Change: Partially offsetting revenue pressure.
Speaker Change: On the product front in Q1, we wrapped up the product upgrades launched last year with them.
Speaker Change: Focus on enhancing user authenticity through.
Speaker Change: Product testing.
Speaker Change: Which further increase do you use a burger king wherever its location right.
Speaker Change: On the channel front, our goal was to achieve 100% all right.
Speaker Change: Namely we cover all six in basketball.
Speaker Change: Including labor.
Speaker Change: As three amended channels, which right.
Speaker Change: That could not be fully recouped.
Speaker Change: Overall marketing spending decreased further from last quarter and the average user acquisition cost dropped by double digits.
Speaker Change: Combined with minor product driven improvements in our pool and this has led to a significant.
Speaker Change: Sequential increase in user acquisition.
Speaker Change: Currently channel I I have five excuse me, 100%, which is the key to achieving quarterly profit growth despite revenue pressure in Q1.
Speaker Change: On the commercial product front to mitigate revenue pressures caused by the decline in paying users.
Speaker Change: Great. It membership features to boost our people.
Speaker Change: At the same time being moderately increase.
Speaker Change: Ocean efforts to offset the negative impact of product optimization on paying conversion.
Speaker Change: As for the overseas business.
Speaker Change: Q1 overseas revenue reached 415 million RMB.
Speaker Change: With a celebrated year over year growth of 72%.
Speaker Change: Overseas revenues accounted for 16.4% of total group revenue.
Speaker Change: 491, 4% in Q1 24.
Speaker Change: Over the past few years.
Speaker Change: Overseas revenue has mainly come from our white space short hills part up so true in the Mena markets.
Speaker Change: Right. So as you would have maintained rapid growth, we believe stock do choose a fundamental nature of the social entertainment space and the diversified and new end user experiences.
Speaker Change: In order to expand our market share in all regions.
Speaker Change: More effectively and efficiency.
Speaker Change: You need are the brands inhibition to show true.
Speaker Change: As we have accumulated more product and operation experience in neenah.
Speaker Change: Our local team we have lunched more independent brands in recent years to meet different user groups on my social entertainment needs.
Speaker Change: During on so choose so we have that lever.
Speaker Change: Playful, Florida zero to one single element of social and the team.
Speaker Change: Hi, Please hold the conference will recommence shortly.
Speaker Change: Hi, the conference that's recommence.
Speaker Change: Okay.
Speaker Change: Continue.
Speaker Change: Since the beginning of 2025, we have wrapped up a ton of investments for new products.
Speaker Change: Our I O entered China's strategy has driven the revenue of new products to exceed our initial expectations.
Speaker Change: This is the main reason for the accelerated year on year growth of overseas revenue in Q1.
Speaker Change: Currently the overseas revenue increments and largely offset the no domestic revenue decline.
Speaker Change: In Q1 showed schuh, which generated the highest revenue and more.
Speaker Change: Overseas I want in close to 300 million RMB.
Speaker Change: Representing a year on year growth of nearly 40%.
Speaker Change: The growth was mainly driven by localized operation over the past years and improved cross border collaboration between one and Frank and team.
Speaker Change: Evelyn So Joe to achieve satisfactory results in growth expansion into new markets and launch of new features.
Speaker Change: On a quality basis.
Speaker Change: Revenue growth effect face pressure due to political unrest in the middle East at the end of last year, coupled with Rhonda.
Speaker Change: <unk> rich users spending sentiment was depressed.
Speaker Change: However, I'm pleased to see that our team was able to adjust operational strategy promptly to mitigate the negative impact of this uncertainty.
Speaker Change: Which play a positive role in stabilizing revenue.
Speaker Change: Apart from so true our audio based shall show game product, Yeah, Harlan and why base social product AMA has recently entered the amortization phase and have to deliver a stable our students we increased marketing investment.
Speaker Change: At the beginning of this year.
Speaker Change: As a result, we refer to increase marketing spend which drive significant quarterly revenue growth for both products.
Speaker Change: Beyond assuming topline growth our team also focused on optimizing the revenue sharing model and driving high margin features seven huge improve overall gross profit.
Speaker Change: This effort lays a solid foundation for achieving operational breakeven.
Speaker Change: We are confidence that the team to reach this goal by the year end.
Speaker Change: I'll go for the overseas market is not limited to social and entertainment product in the Mena region.
Speaker Change: Hello Group is the operator of Asia largest open social platform, we understand Asians user preferences, and pinpoint and discovering new relationships and building meaningful interactions better than other players in the market.
Speaker Change: Therefore, we are confident that we should be paying a key roles in global data market.
Speaker Change: Germany, we have set up a team in Singapore with deep expertise in overseas dating operation and marketing move.
Speaker Change: Moving forward, we expect to push harder on building, a better dating experience and brand for users that king romantic relationship.
Speaker Change: This concludes my remarks.
Cathy: Now, let me pass the call to Cathy for the financial review.
Cathy: Cathy please.
Speaker Change: [noise] Sig Hello, everyone. Thank you for joining our conference call today.
Speaker Change: Before getting into the financials, let me first outline the adjustments we've made to our disclosure practices starting this quarter.
Speaker Change: We've introduced a geographical breakdown of revenues to more accurately reflect the rapidly growing and increasingly significant overseas business.
Speaker Change: Number two.
Speaker Change: Given that the line between live streaming and value added services is becoming increasingly blurred.
Speaker Change: And these two are really in subsidence all fee based revenues, where we directly charged to users for value added services and in many cases in turn share part of the revenues with content providers.
Speaker Change: Merge the two business lines into one, which we now referred to as value added services.
Speaker Change: Number three given that context revenue accounts for less than 10% of the group's total revenue we've discontinued its segment reporting.
Speaker Change: Now let me take you through the financial review.
Speaker Change: Total revenue for the first quarter of 2025 was 2.52 billion renminbi down 2% year on year, and 4% quarter on quarter exceeding the high end of our revenue guidance.
Speaker Change: non-GAAP net income attributed attributable to the company was $403 8 million renminbi compared to $59 9 million renminbi for the same period last year and 235 million from Q4 of 24.
Speaker Change: And the first and last quarter of 2024, we had some one off tax and impairment related expenses. Excluding these special items net income for Q1, 'twenty 'twenty four and Q4 'twenty four would have been 500, an 8.5 million renminbi and 371.1.
Speaker Change: I mean, a and b respectively.
Speaker Change: Looking into the key revenue.
Speaker Change: Items for Q1.
Speaker Change: Total revenue from value added services to some of the revenues from former live streaming and Vas.
Speaker Change: Our combined as value added services from this quarter was 2.49 billion renminbi down.
Speaker Change: Down, 2% year on year, and 4% quarter on quarter.
Speaker Change: On the user geographic basis vast PRC mainland revenue was 2.08 billion renminbi down 9% year over year and 7% quarter over quarter.
Speaker Change: Year over year decrease was mainly due to the weak consumer sentiment caused by macro factors, which put pressure on our mobile business.
Speaker Change: And to a lesser extent the decrease in <unk> due to the decline in the number of paying users.
Speaker Change: The sequential decrease was due to negative seasonality.
Speaker Change: That's overseas revenue came in at $413 1 million.
Speaker Change: Millions of them and be up 73% year over year, and 16% quarter over quarter the.
Speaker Change: The year over year growth was driven by both the rapid expansion of social and the initial monetization of a few emerging brands.
Speaker Change: Turning to costs and expenses.
Speaker Change: non-GAAP cost of revenue for the first quarter of 2025 was 1.57 billion renminbi compared to 1.50 billion for the same period last year non.
Speaker Change: non-GAAP gross margin for the quarter was 37, 9% down 3.5 percentage points from the year ago period.
Speaker Change: 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 is that oversee business contributed a larger percentage of total revenue, while having a higher payout ratio.
Speaker Change: Especially during the first regional expansion and the initial phase of life streaming service offering.
Speaker Change: And to a lesser degree slightly higher payout from mobile app to incentivize the supply side, considering the downward revenue trend.
Speaker Change: Number two optimization of personnel, which led to an increase in one off severance payments.
Speaker Change: Number three payment channel costs and infrastructure expenses constitute a higher percentage of revenues as a revenue as the revenue mix shifts toward overseas business.
Speaker Change: Where these fees as a percentage of revenues are higher compared to domestic business.
Speaker Change: non-GAAP R&D expenses for the first quarter was $185 9 million and then be compared to $183 4 million in the beef for the same period last year, representing a 1% increase year over year. The increase was attributed to severance payments associated with personnel.
Speaker Change: <unk>.
Speaker Change: non-GAAP non-GAAP R&D expenses remained stable at 7% of revenue consistent with the Seeger from the previous year.
Speaker Change: We ended the quarter with 1336 total employees compared to 1375 from a year ago.
Speaker Change: The R&D personnel as a percentage of total employees for the group was 58% compared with 62% from Q1 last year.
Speaker Change: non-GAAP sales and marketing expenses for the first quarter was 322.1 million, a and then b or 13% of total revenue compared to 287.3.
Speaker Change: 3 million real N V or 11% of total revenue for the for the same period last year.
Speaker Change: The year over year increase was attributable to the increase in channel investment for the overseas apps.
Speaker Change: Whereas marketing spend for the PRC mainland business narrowed due to compounds ongoing cost control strategy.
Speaker Change: Yeah.
Speaker Change: non-GAAP G&A expenses was 104, $114 8 million renminbi for the first quarter compared to $93 5 million renminbi for the same quarter last year, representing a 5% and 4% of total revenue respectively.
Speaker Change: non-GAAP operating income was <unk>.
Speaker Change: 345 points 3 million renminbi with a margin of 13, 7% compared with 515.0 million renminbi with a margin of 21% from the same period last year.
Speaker Change: non-GAAP operating expenses as a percentage of total revenue was 25% an increase from 22% from Q1 'twenty 'twenty four.
Speaker Change: Now briefly on income tax expenses.
Speaker Change: Total income tax expenses was $70 4 million, even before the quarter with an effective tax rate of 16% in Q1. The company accrued withholding income tax of $12 9 million Reminbi, which is 5% of undistributed profit generated by a wealthy.
Speaker Change: Without the way at home without the withholding tax our estimated non-GAAP effective tax rate was around 13% in the first quarter.
Speaker Change: Now turning to balance sheet and cash flow items as of March 31, 2025, Hello group's cash cash equivalents short term deposits long term deposits and restricted cash totaled.
Speaker Change: 12.7.
Speaker Change: Chocolate.
Speaker Change: 12 point 79 billion renminbi compared to $14 73 billion renminbi as of December 31, 2020 for.
Speaker Change: The decrease in cash reserves was largely attributable.
Speaker Change: Two the paint repayment of a 1.74 billion renminbi bank loan, including accrued interest.
Speaker Change: Net cash provided by operating activities in the first quarter of 2025 was $239 7 million U N b.
Speaker Change: Lastly on business outlook, we estimated our second quarter revenue to come in the range from $2 $5 7 billion renminbi to 260.
Speaker Change: 7 billion renminbi, representing a decrease of 4.4, 0.5% to 0.8% year on year. This is based on the assumption that on a year over year basis, PRC mainland business will decrease mid to low teens percentage, while overseas revenue is expected to achieve more than <unk>.
Speaker Change: 80% growth.
Speaker Change: Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to change.
Speaker Change: That concluded our prepared portion of today's discussion with that let me turn the call back to Ashley to start Q&A actually please.
Speaker Change: Just a quick reminder, before we take your questions for those who can speak Chinese. Please ask your questions in Chinese first followed by English translation by yourself. Thank you operator, we're ready for questions.
Speaker Change: 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.
Speaker Change: If you're on a speaker phone please pick up the handset to ask your question.
Speaker Change: Our first question Hudson's Ya Qin Zhang with TICC.
Speaker Change: So if you work with any transitional Akiva uncle <unk> yield the Donaldson, Josh I know what da Vinci Macquarie. So children.
Speaker Change: Such a good idea to push on carnitas on Vishal colossal chill on Austin younger shows the house, the galata zones, you'll shoot up.
Speaker Change: Oh My God It turns off I enjoy it's about equal goldfield towards the appointment uncle novel Dol, but there's such a large pool of volatile showed the equations fleet was Ohio.
Speaker Change: She is so powerful.
Speaker Change: I'll be able to show a Dallas, Chicago, Ginger ales, otherwise wouldn't get hot you feel all of them and.
Speaker Change: I Hope I misheard, you always social and this shows how much on that until you with I E. The gladhill so much neat.
Speaker Change: Thanks management.
Speaker Change: For taking my question and congratulations the envelope from Butler I'm, a remarkable doorstop all grateful.
Michael Szabados: Michael Szabados, social Oh, the first copper earnings call the Muslim commercial that social a true Oh, well strip frontage government golf.
Michael Szabados: Cool, Alright, and management as I mentioned, we're just allow that slope.
Michael Szabados: Oh yeah.
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Speaker Change: But rather more filings for social under what's the comp guidance.
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Speaker Change: Detroit Chinas social to wall, Jack jump in Dubai Union cause actual this is Hudson, Josh slipping one path, especially on US a little question was ended up.
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Speaker Change: You want it shall be gene Ns IV off with our board on food, we all went to handle.
Speaker Change: So you cut that you hope you'll cool yeah, Chris I'll take the question playful.
Speaker Change: Indeed last year. So do you achieved a rabbit revenue grows by strengthening localized operations.
Speaker Change: Bounding into new markets and introducing video features.
Speaker Change: However, since the beginning of this year the revenue growth has slowed down a little bit. These country are these can be attribute not only to a high base effect, but also the political unrest in the middle East at the end of last year, which doesn't come some users' consumption sentiment.
Speaker Change: That continued into Q1 of this year.
Speaker Change: To mitigate the impact of the event driven revenue pressure, we beefed up our efforts to acquire.
Speaker Change: Our paying users through various channels and introduce new features designed to facilitate rate relationship building and improve user engagement.
Speaker Change: Huntsman user experience has positively impacted retention. Additionally, during Ramadan, we organized the several operational events, resulting in more stable user fluctuation compared to previous years. This helped in the rapid recovery of user activities and spending after the Ramadan.
Speaker Change: So your contracts you saw the june's LNG.
Speaker Change: Central London three or.
Speaker Change: So he was happy crunchy.
Speaker Change: So you can feed off incentives <unk> seasonality.
Speaker Change: Alright, so good.
Speaker Change: So as you go to the Nielsen for the same period in junior Nielsen data.
Speaker Change: Chinas celesio to Sogou, J, J sees them and be well.
Speaker Change: Well minimum weight to the champion hydro can goldenson's anjali <unk> won't be all Banco such a moonshot central so temperature type of cool just one on the <unk>.
Speaker Change: Oh, so should hold that she says so in Washington.
Speaker Change: Tell me example, don't function Thats dragging.
Speaker Change: So as for the competition concerns just mentioned, although the middle east to host a rich variety of social entertainment quite off the market remains highly fragmented that's why we haven't experienced a significant.
Speaker Change: Competitive pressure.
Speaker Change: Resilience can also be attributed to our extensive experience in product development and operations with in this sector.
Speaker Change: Last year <unk> revenue was close to 1 billion M. D and we believe is still has greater growth potential.
Speaker Change: However to achieve this goal we need to go beyond <unk> current market penetration and product offering.
Speaker Change: This is precisely why we must continue to expand into new market deepen our presence in existing regions and drive continuous product innovation.
Speaker Change: Even if I'm in corporate G&A, social user policies now Holly you need Shanghai.
Speaker Change: So little golfers Enzo Egypt, Syngenesis also sitting for the July month.
Speaker Change: Liquids rich old you renewed it ends up with a young girl holds a cofounder zelman.
Speaker Change: Zero.
Speaker Change: Hey, Jonathan John have you been in fact hold with our whole cookbook, Josh I'm going to do the phone here so in terms of.
Speaker Change: Profit. So do you have maintained solid earnings and a reason, yes, beehive I'm doing this a phase of rapid revenue growth and ongoing offers two you're hungry market penetration will not prioritize margin expansion inside with well maintained strict control of our channel ally.
Speaker Change: As long as our user acquisition remains profitable, we will reinvest the incremental profit into user acquisition channels and strengthen local lifestyle operations.
Speaker Change: I hope that answer your question.
Speaker Change: So operator, please take the next one.
Yang: Thank you. Your next question comes from <unk> Yang with Deutsche Bank.
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Speaker Change: Thank you.
Speaker Change: Please go ahead.
Speaker Change: Hey, Scott.
Speaker Change: Oh, sorry.
Speaker Change: Hi, there gentlemen.
Speaker Change: Two months.
Speaker Change: Okay.
Speaker Change: Julian.
Speaker Change: Hey, Dan G fast ongoing part.
Speaker Change: So the way huh.
Speaker Change: I mean since May myself. Thank you management for taking my question. My question is also regarding to overseas business.
Speaker Change: Q1, <unk> revenue was celebrate renminbi behind your Marriott and so Chao was close to <unk>.
Speaker Change: 300, <unk> does that mean that the other two that.
Speaker Change: Started to monetize the last year has combined.
Speaker Change: Need a revenue 100 million quarterly revenue.
Speaker Change: Can management share the growth plan of these two products.
Speaker Change: A mention of overseas revenue this year. Thank you.
Speaker Change: Oh sure grandmother, Jetblue Com, Michelle Mackay, where I actually thought you just raised some gondola timing of social.
Speaker Change: I'm wondering whether I'm quite sure I'm joined on the stage IV, that's happening, but Shannon indeed.
Speaker Change: Julian it should on a proportion that Jim thanks.
Speaker Change: So we are also attempting to ultra cold on the Shelby that Houston.
Speaker Change: Why if I'm in a tool.
Speaker Change: No more changes in wages are that ones have been totally Shanghai. That's you think removal with acuity that's useful.
Speaker Change: So shoot a question was enzyme.
Speaker Change: From a revenue goes back to <unk>, who is currently our largest and most successful overseas product or other to social entertainment products targeting the middle East also achieved significant breakthrough in progress at the end of last year and the beginning of this year.
Speaker Change: This was mainly driven by improved user retention on channel marketing efficiency, which lead to a significant improvement in user acquisition and online. We believe that both products are well positioned for rapid scaling and I expect it to maintain strong growth momentum for their fuel from their Q1 levels.
Speaker Change: So does the sunquest, so jugular attempting saar.
Speaker Change: Really the bulk of our content how are you.
Speaker Change: And then.
Speaker Change: This is also joining us is how is the secret to the other people.
Speaker Change: I'm, sorry, 60, though.
Speaker Change: So I think I'll close with Jonathan Shonda Highway MPV in front of it.
Speaker Change: For the local content that later.
Speaker Change: I'm going to you all.
Speaker Change: This is all free tanker company.
Speaker Change: Yeah, Hi, just a follow up on what you're out of order and changing how the group say EMEA youll if he's on total dealership.
Speaker Change: This was on settlement of fact, right we have module, which is a good thing.
Speaker Change: <unk>.
Speaker Change: In addition to these three social entertainment products. Our overseas revenue also includes a townhouse overseas business.
Speaker Change: Tom has always been a mainstream brand among overseas Chinese communities and South East Asian market.
Speaker Change: Mentioned, we established a strong overseas product operation team in Singapore last year tasked with managing international dating products, including patent on we have always been very bullish on the prospects of dating products in overseas market.
Speaker Change: Particularly in the developed regions.
Speaker Change: Low group house unique competitive advantages in this sector and dating market will be a key focus in our international expansion strategy.
Speaker Change: So on that I saw them do you.
Speaker Change: Yeah, Whats ended up kind of as Amit how are you doing.
Speaker Change: Hello, guys I, just wanted to Sogou Hood zombie.
Speaker Change: As you said being some quite some wage it runs into <unk> on the agenda.
Speaker Change: So you did highlight as always she penske.
Speaker Change: Overall speaking we are very satisfied with our performance with the overall performance of our overseas business and ultimately the propulsion of revenue and profit from overseas operations will continue to increase.
Speaker Change: Andy will soon become a true growth engine for the group.
Speaker Change: For our revenue expectations for overseas market. This year, because he can provide more details.
Speaker Change: Hum.
Speaker Change: Let me, let me take the more quantitative question on the overseas revenue outlook.
Speaker Change: This is the first quarter, where we've broken out overseas versus domestic revenue and I think it's an important milestone in understanding our growth global growth trajectory.
Speaker Change: I'm going to I'm going to perhaps.
Speaker Change: The.
Speaker Change: Address this question from several perspectives. Firstly, if you look at where the overseas revenue come from in Q1, 2022 'twenty 'twenty five overseas revenue accounted for 16% of our total revenue within this over within this overseas.
Speaker Change: So chill remains the largest contributor making up approximately.
Speaker Change: From 60% to 70% of our overseas revenue in Q1, the second largest contributor is the overseas piece of content.
Speaker Change: Which is a which is primarily a subscription.
Speaker Change: Subscription based dating product that he's contributed around 10% of the overseas revenue.
Speaker Change: These two we also have several emerging brands are.
Speaker Change: Such as Yahoo, and Amar and others that make up the remaining share together this portfolio approach under the Hello group umbrella has driven robust growth internationally.
Speaker Change: And the second point here is in terms of growth dynamics in different sectors. We see two major forces behind the over 70% year over year oversee revenue growth are first of all the social entertainment market in the Middle East and North Africa.
Speaker Change: Recall Mena area has been a major opportunity.
Speaker Change: Well there are you know somebody step is stopped more established players in the region. The market is large and diverse enough to support multiple platforms, our entry to Mena market through brands, such as social Yahoo Land Tomorrow has been informed by years.
Speaker Change: A product iteration and operational learning over the past few years, we've developed a playbook from launching all the way to scaling that we can replicate across different brands in that region. This matters because meter when you think about Nina its if.
Speaker Change: It isn't a single uniform market it actually spans multiple countries demographics and user behaviors. For example, what works in the Gulf countries May not work in North Africa, So having a modular.
Speaker Change: Portfolio, driven kind of strategy and the operational agility to localize quickly has been a significant advantages advantage for us that playbook is now a real asset.
Speaker Change: Other than the social entertainment opportunities in immuno area, our gross down the path.
Speaker Change: We'll also be increasingly driven by the overseas dating market as well the oversea, stating market, particularly through Tata is starting to turn a corner content performance had been uneven in the past.
Speaker Change: As we tried to play balancing act between dating and more entertaining features such as live streaming chat rooms, such balancing act.
Speaker Change: As some of you may know a lot of times have been pretty uncomfortable for both new users and ourselves what we've learned especially over the last year is that users, particularly in more developed markets one of focus and authentic one to one dating experience.
Speaker Change: As a result.
Speaker Change: We've refined our product strategy to prioritize coordinating functionality a slimmed down are the more peripheral entertainment features we've also made structural changes by regional by relocating.
Speaker Change: Global marketing and operations for dating to Singapore, The Singapore, Singapore team brings deep.
Speaker Change: Experience and expertise in running international data platforms and.
Speaker Change: It's already proven effective combined with China's world class engineering capabilities, especially in product iterations. We now have both the local inside and the engineering horsepower to compete globally. We believe this positions us well to scale, our dating brands are crossing or Nash.
Speaker Change: Market.
Speaker Change: I hoped.
Speaker Change: This elaboration gives you guys a clear backdrop against which you can better understand the reason for the rapid growth of our overseas business now let me give you the numbers to work with your models.
Speaker Change: As as you can see our social grew 38% year over year in Q1, but the rest of the oversea portfolio are including contact here hold on EMR and others grew at a triple digit rate. This drove total overseas revenue growth.
Speaker Change: Over 70% year on year in Q1, and looking ahead into.
Speaker Change: The coming few quarters, we expect overseas grows to see further acceleration even beyond this 70% a level. This growth will increasingly be driven by non social grant. Thanks to the dual engine of our social entertainment.
Speaker Change: Nina and the rebound of our dating business. We believe this combination gave us a strong momentum and diversified exposure across several high growth segments internationally I I hope this dress addresses your question and I'll back to Ashley for my question.
Speaker Change: [noise] outreach at least the next question.
Thomas Chong: Your next question comes from Thomas Chong with Jefferies.
Speaker Change: So it's like one eight times.
Speaker Change: This is one of the mobile, Ohio, Tom Todd died Genie in the heart of what's in the guide.
Speaker Change: And Ah ha.
Speaker Change: Oh somebody BG, you'll hold that much it caught up with me again.
Speaker Change: So we'll go with the Eagle Ford.
Speaker Change: Thanks management for taking my question.
Speaker Change: Our mobile and PON PON undergone a long ball changes in how they kind of fall.
Speaker Change: Should we think about the tonnage on the supply outlook and how should we think about the China revenue for this year. Thank you.
Speaker Change: And one more quick turn times, Alex Henderson, <unk>, well, they all chose us I apologize rune <unk>.
Speaker Change: But frankly more helpful for you.
Speaker Change: Yeah.
Speaker Change: That's all right so you're in a niche so jumping by Charlatans also chip in Pangea procedure for his ongoing leadership.
Speaker Change: <unk> hundred <unk>, Susan Yahoo, Junkie informed me of shallow horizontals.
Speaker Change: Well it comes high $60 long manual Fujitsu, a woman's going to.
Speaker Change: Since you're in New York with a lethal dose.
Speaker Change: Simpson cushioning product I was all wishing sheet.
Speaker Change: So the boundaries.
Speaker Change: But I think you probably know tender Autonation has also faced honestly on the would you say that one Andrew.
Speaker Change: Yeah.
Speaker Change: Since in the later also possible for <unk>.
Speaker Change: <unk> thousand so Cushing so that language.
Speaker Change: Michelle want me, Jim, but I thought your roof, which is all kind of knocking the door you Yuen sorry, yes, we do so then the Nissan vision, which will be helpful and then going into <unk>.
Speaker Change: For mature brands like home 110 times, our goal is to stabilize the user scale and engagement, while ensuring profitability. However for social brands that have been around for over a decade, maintaining fundamental social matrix. These no easy feat, so a part of <unk>.
Speaker Change: Has put considerable effort into using new technologies to enhance users' social experience.
Speaker Change: For example, I mentioned earlier, we provide male users with our self developed AI tools to analyze the historical posts all female users and generate personalized greeting messages.
Speaker Change: This is a very a practical with social too full Asia now who are not very adopt agile initiating conversations.
Speaker Change: If the male users viewed that the content on freezes are generated by AI do not match their personality and the style of expression. They can request the AI to continuously adjust the greeting messages and who they are satisfied.
Speaker Change: We have now replicated this technology in canton, and allowing more users who are eager to fight day spot a lack set of skills to benefit from it.
Speaker Change: Yeah.
Speaker Change: Natural Eli <unk> hopes if it's really with the Taliban you treat all note these really ultra and Sunshine LTM pace.
Speaker Change: <unk> machine with MB Dogger, Fang well most of the job.
Speaker Change: Or you just can't do that.
Speaker Change: Yeah.
Speaker Change: One.
Speaker Change: One be the sensor.
Speaker Change: With regards to your Manhattan Associates, you knew you were bought so you can meet the need of cheese.
Speaker Change: At the beginning of the year in Huntsman in Port operations on matching algorithm has driven year on year and sequential growth in several key matrix of the mobile social ecosystem. This includes retention rates two way chat the number two which has an all female ratio all of which are reflected.
Speaker Change: To increase the user engagement.
Speaker Change: Our stable on highly engaged user base from the cornerstone that allows our cashcall business to sustain our profitability.
Speaker Change: Great well.
Speaker Change: Hans for cases that telephone for linear networks.
Speaker Change: Yeah, Jason I parcel with the jumbo Xinjiang she's want gentle daylight hour at Houston and told him he would shoot.
Speaker Change: Turning to yen Sushi, Italian Transalta Symbolics and Jim.
Speaker Change: What are you what's your name the solar wind he or she will get catch it up again.
Speaker Change: Regarding <unk>, we implemented further cost efficiency measures in both China investment and has now in all our personnel expenses.
Speaker Change: Q1, the OE improvements brought by reduced our marketing spend has five <unk>, our expectations, creating greater operational flexibility for continuous product experience optimization.
Speaker Change: D. C is domestic revenue performance, our leaf a casualty to address those details.
Speaker Change: [noise] okay.
Speaker Change: In Q1 mainland China's revenue declined by high single digit on a year over year basis for Q2, we are guiding to a Y O Y decline in the low teens percentage looking at the full year, we expect the decline rate to remain roughly in line.
Speaker Change: And with.
Speaker Change: The first half, which translates to a 10% plus minus year over year decrease for the full year.
Speaker Change: For the domestic piece this represents a significant narrowing from the high teens year over year decrease that we saw in 2024 versus 2023.
Speaker Change: Shows continuous stabilization of the domestic business.
Speaker Change: Now let me briefly with you the primary factors that drive our domestic business trajectory. So you guys can put our estimation to a perspective and navy form your own view about how things may play out in the second half.
Speaker Change: Our 2025.
Speaker Change: Firstly, a macro sentiment remains a swing factor almost revenue is heavily tied to battery added services, particularly virtual gifting, which depends on discretionary.
Speaker Change: Entertainment spanning of high higher income users spanning sentiment. Among this group is closely linked to their personal financial outlook and that in turn are trucks with macro economic indicators.
Speaker Change: A lot of time, how the equity market is performing.
Speaker Change: In Q1.
Speaker Change: What we saw.
Speaker Change: Was a short term boost around Chinese new year supported by some optimism in the equity markets. However, as we enter into Q2 macro economic and Geo political uncertainties, such as Paris began to resurface.
Speaker Change: But for now sentiment appears stable.
Speaker Change: In our Q2 guidance reflects reflects that that said the outlook for the second half will it depend so depend heavily on broader macro developments.
Speaker Change: And the second a big at a second big factor here is regulatory environment on that front, we've seen meaningful improvement in the regulatory landscape over the past few quarters.
Speaker Change: With that stability, we've shifted from a.
Speaker Change: Defensive risk management posture back to normal product development and operational execution.
Speaker Change: Other than the macro and Ah the regulatory drivers.
Speaker Change: The third factor that happened has an impact on our domestic revenue performance is the new strategy and restructuring of the domestic part of <unk> business as explained by sic in her prepared remarks, starting in March 2025, we made a.
Speaker Change: T J decision to sharply reduce marketing and personnel expenses on the domestic side of content. The goal here was to improve the ROI of our user acquisition and support profitability for a contest domestic business naturally the cut in spend will have a negative impact on top of his top line.
Speaker Change: However, because.
Speaker Change: After the cutting we are seeing significant improvement in our eye of our user acquisition efforts that the client topline caused by cutting our was pretty mild and managing them manageable.
Speaker Change: This came as a.
Speaker Change: Pleasant surprise for us for Qantas domestic business. We also expect a Y O Y decrease to narrow down from what we saw in twice before and we expect the bottom line to come in much better than what we saw last year Lastly, I would like to say a few words.
Speaker Change:
Speaker Change: And beyond the domestic performance are at the at a group level investors should already noticed that our Q1 revenue showed a slight only a slight year over year decrease of a couple of percentage points. In Q2, we are guiding similar level of decrease Y O Y However are with.
Speaker Change: Continuous stabilization.
Speaker Change: Domestic business and the acceleration of growth from overseas business, it's possible that we're going to see groups level topline turned to positive growth in the second half of the year if that happens it would be a major structural turning point for us.
Speaker Change: Yeah.
Speaker Change: Well I hope this addresses your question maybe.
Speaker Change: In time, maybe I forgot to ask our operator do we have any more questions.
Speaker Change: Chewing on the line if we do let's just take one last one before we close the call. Thank you. Yes. Your next question comes from Jenny Wang with UBS.
Speaker Change: Thank you good one ton of UNC wasn't necessarily going to be a.
Speaker Change: <unk> mean that as a yes, no long is why one of the really top got long knock on gone past the issues to deal with when he is not what's going on because really.
Speaker Change: Unless you go Crazy, Washington County alone Oh, he's the Angel and seed.
Speaker Change: You saw that.
Speaker Change: <unk> been on <unk>.
Speaker Change: So let me translate myself also since management for taking my question both of Oregon's block on the strong first quarter at all my questions on the margin side.
Speaker Change: So test the well cost there will be a full year outlook earlier. So could you. Please also give us some color income from our profit outlook for Ocwen.
Speaker Change: And hogs business I expect that you'll be managed on an allocated into the rest of the year. Thank you.
Speaker Change: Sure.
Speaker Change: I guess, that's my job.
Speaker Change: Let.
Speaker Change: Let me take the.
Speaker Change: The margin bottom line question.
Speaker Change: Maybe al.
Speaker Change: Break it down into.
Speaker Change: Into a few key components first of all if you look at gross margin. Our Q1 non-GAAP gross margin came in at approximately 38%, reflecting a three ILUVIEN more than three percentage point decline year over year from Q1, 'twenty 'twenty four.
Speaker Change: The biggest driver towards cash margin decline with the mix shift toward an increasingly bigger oversee revenue overseas revenue contribution gross margins are lower for overseas business.
Speaker Change: Primarily because a payment channel costs are higher and be many overseas applications are still in the early stage of scaling our where efficiency hasn't kicked in yet.
Speaker Change: The overseas business continue to grow as a percentage of a as a percentage of our total revenue we expect to see similar level of YY decline for the whole year of 2025.
Speaker Change: Meaning.
Speaker Change:
Speaker Change: In 2024, we reported a 30.
Speaker Change: 39% non-GAAP gross margin for the full year for 2025, we anticipate a.
Speaker Change: The client of a couple of percentage points, putting us in the range between 36% to 37%.
Speaker Change: Over the longer term, though as overseas applications scale and payout ratios decline, we expect gross margin improvement and leverage gains.
Speaker Change: Turning to operating expenses.
Speaker Change: First of all R&D and G&A expenses with continued personnel optimization, both R&D and G&A expenses are expected to decrease slightly and our absolute dollar terms in 2025 versus 2020 for them with.
Speaker Change: With regards to sales and marketing, we anticipate are around 10% year over year increase in so some marketing spend this increase is driven by our rapid expansion in overseas markets, where we are acquiring new users and growing market share.
Speaker Change: It's important to note that all marketing investments are all ROI driven we only increased that means we only increased our spend when data gave us confidence and cost recovery over time.
Speaker Change: So if you tried it would.
Speaker Change: All of these together and think about adjusted operating margin for the whole year again in 2024, our non-GAAP operating margin was.
Speaker Change: I think somewhere around 16% for 2025, we expect a margin in the low teens percentage likely within the 13% to 14% range as we have swapped in near term gross margin pressure as well as a ramp.
Speaker Change: Up.
Speaker Change: The marketing message Lindsay in overseas market.
Speaker Change: So that's.
Speaker Change: Assessment my answer to the bottom line back to Ashley to wrap up the call. Yeah. I think that's it that's it for they are that's it for today I'm thanking for joining I'll. So I'll see you next quarter.
Speaker Change: That does conclude our conference for today. Thank you for participating you may now disconnect.
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