Hello Group Inc.

Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2023 Hello Group, Inc. earnings conference call. Please note the conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms. Ashley Jing. Thank you. Please go ahead, ma'am.

Thank you, Alpreetha. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's first quarter 2023 earnings conference call. The company's results were released earlier today and are available on the company's IR website. On the call today are Mr. Tang Yan, CEO of the company, and Ms. Peng Hui, CFO of the company. They will discuss the company's business operations and highlights, as well as the financials and guidance. They will both be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that This call may contain forward-looking statements made under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks and certainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties, and factors is included in the company's findings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under law. I'll now have to call over to our CEO, Mr. Tang Yan.

Hello, everyone. Thank you for attending today's call. Hello, everyone. Thank you for joining our call. We delivered solid results in the first quarter, laying a good foundation for our business development in the post-pandemic era. Now, I will review the progress that was made in each business line since the beginning of the year

and our future development plan.

with a 4% increase in the share price and a 3% increase in the interest rate. The interest rate is still growing at the same rate under the downward pressure of income. It mainly comes from the loss of carbon dioxide, which reduces the pressure on group profits, as well as the cost-effectiveness strategy of cash flow business. Not considering carbon dioxide, MoMo's main account and independent new apps have a total revenue of 25.1 billion RMB, with a 10% decrease in the share price and a 12% decrease in the rate of return. After adjustment, the operating profit is 5.03 billion RMB, which is 19% lower than before, and 2% lower than before. The corresponding operating profit rate is 20%. Pantan's revenue is 3.09 billion RMB, which is 12% lower than before, and 11% lower than before. In order to deal with the pandemic and the economic situation, it is much more uncertain. In the second half of last year, Pantan used the goal of reducing losses to start the strategy of cutting capital and controlling capital. This quarter, Pantan has achieved its goal I will start with a brief overview of our financial performance for the first quarter of 2023.

Total revenue was 2.82 billion RMB, down 10% from the same period last year, and 12% sequentially. Topline performance came in better than our expectations, as the year-on-year decline in revenue narrowed compared to the previous quarter. Adjusted operating income was 518 million RMB, up 12% from Q1 last year, and 4% sequentially, with a margin of 18%, up 4% point year-on-year, and 3% quarter-over-quarter. Profitability improved despite the downward pressure on top line, mainly due to Tantan's breakeven, which relieved pressure on the group's profit level, as well as the solid cost control on the cash cow business round. Total revenue from the MoMo app and standalone new apps was 2.51 billion RMB, down 10% year-over-year and 12% quarter-over-quarter. The adjusted operating income was 503 million RMB, down 19% year-over-year, or a slight decrease of 2% from the previous quarter, with a margin of 20%. Total revenue from Tantan came in at 309 million RMB, down 12% year-over-year and 11% quarter-over-quarter. In response to the many uncertainties surrounding the pandemic and its impact on the economy, we initiated a cost control strategy in the second half of last year to reduce low-efficiency channel marketing spend in order to narrow Tantan's net loss. As a result, In Q1, Tantan delivered its first quarterly profit at the operating level since its inception, with an adjusted operating income of 14.48 million RMB, representing a margin of 5%, compared with an adjusted operating loss of 158 million RMB in the same period of last year. I'm very pleased with Tantan's team's ability to execute and improve cost efficiency over the past few quarters.

At the end of last year, we completed the overall organizational structure adjustment. We will quietly explore and innovate products into three relatively independent business models. This operation management method using product life cycle as a unit helps us to set clearer goals at the strategic and executive levels. It is also beneficial for the product team to focus more on user experience and commercial integration and balance, in order to better release long-term products and commercial values. In March, I introduced to you the strategic focus of each business line in the Group in 2023. For the mature products of Yu MoMo Group, our requirement is to scale up, reduce costs, maintain cash flow business, and continue stable output. Tantan's strategic goal is to achieve balance of profit and loss, run in the business model suitable for Asian market dating culture, and pursue sustainable growth on the basis of the business cycle. Regarding new products, we plan to

At the end of last year, we completed the alignment of our overall organizational structure and divided Momo, Tantan, and the new endeavors into three relatively independent business segments. This lifecycle-based management approach makes it easier for us to devise and execute different strategic priorities for products at different stage of their respective lifecycle, allowing our product teams to focus effectively on the integration and balance of user experience and monetization to better unleash the long-term product and commercial value of each app. On the March earnings call, I outlined our strategic priorities for 2023 across our businesses. For the mature Momo app, our goal is to keep the user and revenue scale stable, continue to optimize cost structure, and maintain the productivity of the cash cow business. For Tantan, our goal is to achieve overall break-even for the year and develop products and modernization models that are suitable for the Asian dating culture in order to pursue sustainable growth on the back of a positive business cycle. With respect to new products, we will enrich our product portfolio, push the boundaries beyond Momo and Tantan, and develop long-term growth engines. Now, I'll walk you through the details.

First of all, as a mature brand, we need to fulfill two key factors to achieve the continuous production of cash flow business. First, to continue to optimize product operation and expand the new revenue play method. Second, to increase the efficiency of funds and personnel use. In the first quarter, MoMo surpassed the expected financial performance, which is a good proof of the team's success in the implementation of strategic focus. Although in the first quarter, MoMo's main battle faces multiple external pressure, For the mature Momo app, in order to ensure that the cash cow business remains stable,

We must optimize product operation and introduce new monetization features, as well as improve cash utilization and personnel efficiency. MoMo's better-than-expected financial performance in the first quarter is a good demonstration of our team's execution capabilities on those strategic priorities. Although revenue from the MoMo app declined year-on-year due to multiple external pressures, new standalone apps continued their rapid growth momentum, partially offsetting the pressure on MoMo app. the incremental revenue contributed by the new stand-alone app to MoMo's value-added service line resulted in an increase in the revenue ratio of VAS and live streaming from an average of 87% last year to 93% in the first quarter, which further optimized our revenue structure.

In this quarter, MoMo's live streaming revenue was 12.9 billion RMB, with a decrease of 13% in the same period, and a decrease of 17% in the same period. With a decrease of mainly from the pandemic and the product adjustment in the second quarter of last year, and from the outbreak of the pandemic at the end of last year, which caused a serious impact on the supply chain. In addition, the spring festival and the traditional egg season caused a lot of pressure on the flow of water. This quarter, the live financial performance is better than expected. The flow of water is less than the same level as in the previous year. It is mainly due to the positive flow of water brought by operating activities and the upgrade of products that lead to natural flow of water recovery. In the first quarter, Walmart's live streaming revenue was 1.29 billion RMB, down 13% year-over-year and 17% sequentially.

The year-over-year decrease was mainly due to the pandemic and product adjustments to comply with regulatory requirements in the second quarter last year. The quarter-over-quarter decline was due to the severe impact of COVID infection surge on the supply side at the end of last year, coupled with negative Chinese New Year seasonality. The financial performance of the live streaming business in Q1 turned out to be better than expected, with a lower sequential revenue decline than in the same period last year. mainly due to incremental revenue from operational events and a rebound in organic revenue brought about by product upgrades. In order to stimulate supply side recovery, we offered incentives to broadcasters to resume the live shows. The related incremental costs were offset by the reduction in competition event costs. The revenue sharing ratio in the first quarter was relatively stable compared to the previous quarter. By March, the supply side had almost recovered to its before the COVID infection spike at the end of last year.

低气度不包含碳碳,WAS营收11.9亿人民币, 同比下降5%,环比下降6%, 其中默默主战WAS营收9.69亿人民币, 同比下降14%,环比下降7%, 独立新UPS营收2.25亿人民币, 同比增长66%,环比持平。 The downfall of the flow of water mainly came from the outbreak of the epidemic, plus the spring festival factors, which caused a serious impact on the large-scale traffic and the number of resettled people. In order to alleviate the negative impact of external factors on the number of resettled people and RPP, the traditional gift of the social line around the festival 10 o'clock launched a theme activity to try to keep the flow of water in the low-level stable. Because of the video scene, the supply side optimized the flow of water to return to the growth trend soon after the low point of the spring festival. At the end of March, Liao Tian Shi launched a multi-person interactive playroom. The initial data shows that it has a greater effect on improving RTP.

In the third quarter, vast revenues including can-can totaled 1.19 billion RMB, down 5% year-over-year and 6% sequentially. Vast revenue from the MoMo app totaled 969 million RMB, down 14% year-over-year and 7% quarter-over-quarter. While revenue from the standalone app was 225 million RMB, up 66% year-over-year and slacked sequentially. The decline in mobile VAS was mainly due to the severe impact of COVID on traffic and users' propensity to pay for VAS. Combined with negative signality, in order to mitigate the negative impact of external factors on the paying user account and RP pool, we launched a theme event around the Chinese New Year holiday in our traditional virtual gifting social use cases. and try to maintain a stable revenue scale in the off-season. In audio- and video-based social entertainment experiences, we optimized the supply side to bring revenue back to a growth track soon after the Chinese New Year. In late March, we introduced a new multiplayer interactive feature in the chatroom, and the initial data shows that it has a notable effect on improving our people.

From the perspective of users and operating data, In December last year, after the opening of the epidemic policy, the large-scale outbreak of infection caused the MAU to experience a very serious blow in the short term. In January, after the outbreak of the epidemic hit the peak, the size of the local users continued to rise, but the recovery trend was interrupted by the impact of the spring festival of egg-based factors. During the spring festival holiday period, active users reached the same historical low point, but after the spring festival, the size of the users and the activity rate quickly rose. The flow rate and duration are better than the short-term warm-up trend in the past year and before the Spring Festival. In March, MAU increased by 13% to $1.065 billion, which is close to the level of September last year. In terms of channels, we have benefited from the continuous optimization of strategic optimization. The unit price dropped by 10% in the same period last year, allowing us to invest in channels at a relatively stable user size at a lower cost. The increase in the efficiency of capital use has been of great help to promote MoMo's overall profit level. In the first quarter, MoMo主占付费用户780万,返比持平。疫情爆发及春节长假对WAS常委用户消费需求造成尤其严重的负面影响。假期后,人们生活回归正常化,用户消费情绪也进入恢复趋势,但由于一季度上旬,付费用户水平过低,拉低了 In terms of our user base and operating matrix, after the removal of the zero COVID policy in December last year,

MAU was severely hit by the large-scale infection surge over a short period of time. After COVID cases peaked in January, MAUs in various regions gradually picked up, but the recovery was negatively impacted by Chinese New Year. During the holiday, MAUs fell to an all-time low for the same period. However, MAUs and user engagement rebounded rapidly after the holiday, and the extent and duration of the recovery were better than previous years, and the short recovery period before the holiday. In March, MAUs increased 13% sequentially to $106.5 million, close to the level in September last year. Channel marketing unit acquisition costs decreased by nearly 10% from a year ago, thanks to our continuous efforts to optimize user acquisition strategy to enhance efficiency, which enabled us to obtain a relatively stable user scale with lower investment in channels. the improvement in capital utilization efficiency has played a positive role in holding up Momo's overall profit level. In Q1, Momo had 7.8 million paying users, flat sequentially. The COVID spike and the Chinese New Year holiday had a severe negative impact, particularly on the demand from long-tail VAS users. After the holiday, people's lives returned to normal, and users' consumption sentiment also began to recover. However, the relatively large decrease in the number of paying users in the first half of the quarter dragged down the average for the entire quarter. In terms of various users' engagement matrix, the trending users' engagement and retention at the beginning of the year is consistent with that of MAUs. After entering the rebound period, use cases with strong LBS attributes, which were hit hard by the pandemic, recovered particularly well.

MoMo is a mature brand with more than 11 years of history. It has been through a period of rapid growth of users. Currently, the strategic focus is on control and stability. This year, our overall strategy for this cash flow business is to focus on assessment, ROI, optimization, and LTV. We want to promote profitable growth in a channel that does not have a bad effect, and avoid blind pursuit of users who cannot bring profits. In this case, compared with the number of paid users, As a metropolis with more than a decade of history,

MoMo earlier has experienced a period of rapid user growth. However, our current strategic priority is to control cost and maintain stability of the user scale. Our overall strategy for this cash cow in 2023 is to focus on ROI, reducing investments in low LTV channels to drive profitable growth rather than blindly chasing unprofitable user growth. Consequently, in comparison with paying user accounts, MAU will no longer be the most meaningful operational matrix for investors, and thus does not need to be tracked on a quarterly basis. Therefore, we have decided to stop disclosing MAU data on a quarterly basis from Q2 onwards, unless there are significant changes in our user base. We suggest that investors focus on the trend in paying users when looking at Moomoo's user matrix.

Next, let me introduce Tantan. The first is the trend of users and the overall financial performance. In the beginning of the year, the size of users was significantly suppressed by the impact of the epidemic, the Spring Festival, and the continuous channel reduction and other internal and external factors. The flow gradually recovered after the low point of the Spring Festival. In March, the MAU reached 1,950,000, compared to a growth of 6%. The growth mainly came from the continuous recovery of the natural quantity after the relief of external pressure. On the other hand, since the Spring Festival, due to the rapid recovery of users after the epidemic, The platform was attacked by a larger-scale spam attack, which is dangerous to the health of the exchange ecosystem. So we carried out a more strict anti-spam cleaning to make the users regret it. But overall, we judge that the MNU, which was introduced in the past three years due to the epidemic and the short-term control strategy, has gradually come to an end. At present, there is no small-scale up-and-down fluctuation. But under the current market investment level, the overall MAU will maintain a balance of 18 million. The next step is to continue to improve channel efficiency, control customer costs, and at the same time, through product innovation, improve RPU and flow, so that ROI can continue to increase significantly, and promote Tantan to a stable business order. And in this basis, realize user growth. Since the end of the first quarter, Tantan has paid 1.6 million users, which is less than 100,000 people. Now, let's review Tencent's performance.

At the beginning of the year, our user base was severely affected by internal and external factors, such as the pandemic, Chinese New Year, and the continued reduction in China investment. Traffic started to recover gradually after the Chinese New Year. In March, MAUs increased 6% sequentially to 19.5 million. The growth was mainly due to the continued recovery in organic traffic after the external pressures eased off. Entering spring, as users' dating sentiment came back rapidly, we've been seeing an outbreak in spamming activities on Tantan, threatening the health of the dating ecosystem. Therefore, we've launched a heavy-fisted anti-spam campaign, which has caused the users' count to go down from the March level. However, overall speaking, We believe that the past more than three years downward trend in MAU caused by the pandemic and scale back in marketing has gradually bottomed out. We may see some small fluctuations from the current level, but overall speaking, if marketing spend stays at the Q1 level, our user base should remain stable around 18 million. Our next step plan is to further improve channel efficiency while increasing our pool and retention through product innovation in order to sustainably improve ROI and drive Tantan into a stable positive business cycle and pursue user growth from there. As of the end of Q1, Tantan's paying user count was 1.6 million, a decrease of 100,000 from the previous quarter, mainly due to the pandemic and Chinese New Year, which led to soft consumer demand in the first half of the quarter.

接下来回顾一下Tantan的财务表现。 一期度,Tantan总营收3.09亿人民币, fell by 12% and fell by 11%. Although the COVID-19 pandemic and the cut-off of capital and the size of MAUs and paid users fell by 24% and 33% respectively, the growth of products and paid experience has led to an uptick in the number of RPPs. This greatly mitigates the impact of the decrease in the number of paid users caused by the flow of water. In contrast, the decline in the number of people in the first quarter caused by the COVID-19 pandemic and the Spring Festival, which suppressed the needs of users, The number of people paid and the number of RPPs dropped in the fourth quarter last year. In terms of business lines, WAX income is 1.68 billion RMB, down 9% in return. Live income is 1.4 billion RMB, down 14% in return. But what makes us happy is that our cut-off, control and improvement of ROI efforts are also showing results. In terms of personnel and promotion, the efficiency of funding use has increased significantly. The cost of unit purchase has continued to decrease significantly. Now, I'll briefly review Tantan's financial performance. Total revenue for the first quarter was 309 million RMB, down 12% over the year and 11% sequentially.

Although the pandemic and reduction in channel investment cost a significant deal with your decline in MAU and paying users by 24% and 33% respectively. The increase in RP pool brought about by product and paying experience upgrades have partially offset the impact of the decline in the paying user count on revenue. The sequential decline in revenue was due to the suppressed user demand cost by the COVID infection surge at the beginning of the year. and Chinese New Year. Both the number of paying users and RP pool declined compared with Q4 last year. Vast revenue was 168 million RMB, down 9% sequentially. Live streaming revenue was 140 million RMB, down 14% quarter-over-quarter. However, it's good to see that our efforts to reduce cost and increase ROI are paying off. The efficiency of capital utilization in terms of personnel and marketing was substantially improved, and unit acquisition costs continued to decrease significantly. With the improvement in capital utilization efficiency and further optimization in channel investments, even though revenue fell temporarily due to external factors, Tantan achieved its first-ever quarterly profit at the operating level, a good start to achieving its strategic goal for the year.

This year, Tantan's strategic goal For Tantan, our strategic goal is to achieve break-even for the year and develop product and monetization models that are suitable for the Asian dating culture.

in order to pursue sustainable growth on the back of a positive business cycle. To achieve this, we will be pursuing hard on both marketing and product fronts. Now, let me brief you on the specific work our team has done in these areas and our execution plan going forward.

First of all, channels. Reducing low ROI channels and increasing the efficiency of channels is one of the key tasks to consider in the second half of last year. It is also a key factor in the success of Tantan in this quarter. Due to the multiple external factors in the beginning of the year, it seriously suppressed users' use of new and paid services for dating products. We have further reduced Tantan's channel budget and will focus on, for example, adjusting channel plans, improving the efficiency of high-quality users, and optimizing the landing experience to reduce new users from entering the threshold. The data shows that these new measures have played a certain role in increasing the DAU. In the first quarter, the cost of unit customers has been significantly reduced compared to the previous year. The channel ROI has significantly improved after the low in December and has formed a self-sufficient positive cycle. The MAU has also started to stabilize. That is to say, Tantan has become a business that can continue to profit under the condition of maintaining the current user volume.

Firstly, on the channel front, one of our strategic priorities in the second half of last year was to cut down investments in low ROI marketing channels and improve user acquisition efficiency. This was the key factor for Tantan to achieve operating profit this quarter. Given the multiple external challenges at the beginning of the year, which had a significant impact on the user's dating sentiment and willingness to pay, we further reduced Tantan's channel marketing spend and focused our efforts on refining our operations, such as adjusting channel strategies to reach high-quality users more efficiently, and optimizing our onboarding experience to lower entry-level barrier for new users. Our data shows that these new initiatives have contributed to the improvement in DAU. In the first quarter, unit acquisition costs decreased significantly, both year-on-year and sequentially. China ROI improved significantly after the low point in December last year and formed a self-sustaining cycle. MAU also stabilized after a period of decline. In other words, Tantan has become a sustainably profitable business based on its current user base.

然而,我们对Tantan的期待远不止于此。 尽管去年为应对外部环境进行了战略调整, 但Tantan的长期目标并没有改变。 Because what Tantan is facing is a group of users who have real needs but have never been able to get good satisfaction. In the peak period, Tantan's user size was close to half. But in the past few years, due to the epidemic and our too conservative development strategy at the product level, Tantan users have shown a large-scale feedback. The purpose of adjusting strategic goals is to make Tantan's users and income grow again in an unfavorable situation. However, our expectations for MoMo goes far beyond this. Despite the strategic adjustments we have made over the past year,

Tantan's long-term goal remains unchanged, as it faces a big market that consists of hundreds of millions of users with genuine dating demands that are currently underserved. At its peak, Tantan's user base was almost half the size of Mormo's. However, in recent years, due to the impact of COVID and our overly conservative product development strategy, Tantan's user base declined substantially. The whole point of adjusting our strategic goal is to resume time as user and revenue growth without incurring losses. In the first quarter, we achieved the first step of our strategic goal, which is to achieve break-even. The next step for us is to address the under-deserved user needs through product innovations and leverage new product experience to improve our pool and drive user and revenue growth. This is what we mean by driving sustainable growth on the back of a positive business cycle.

ZHUOFANG MIAN. From a commercial perspective, we believe that the current ARPU still has a lot of room for improvement, but ARPU growth should not come from what we did in the previous years, like building a heavy backup wall or live broadcast. The new route we followed in the past year is to introduce new products that are more helpful in improving the experience of dating. In January, we promoted the high-end black gold members we introduced at the end of last year, and did a special upgrade and re-price. Later, we attracted a group of We have to clarify two important directions on this front.

First, for user products, we need to create social experiences beyond the swipe and match features. Second, for commercial products, we need to introduce new vast paying models with more flexibility to improve our people. In the first quarter, we try to prioritize diverting users who are reluctant to swipe to content-based use cases, such as the post. This helps those who are not very good at talking to strangers out of nowhere to get more timely interactive opportunities by commenting on posts, thereby increasing the positive social feedback. In terms of monetization, we believe there's a lot of room for ARPU improvement. But we don't think our food growth should come from building excessive paywalls for memberships or live streaming, as we did a couple of years ago. Since last year, we have taken a new approach to monetization that can enhance dating experience. In January, we upgraded and repriced our high-end Black Gold membership service, which we launched at the end of last year. Since then, we've attracted a group of high-paying users that we couldn't reach before. The adjustment of the Black Gold membership service drove our ARPU to a record high during the Chinese New Year holiday period, which normally is a low season for our business, and supported our daily revenue against the seasonality with its incremental revenue. In terms of non-membership VAS features, we continued to increase the penetration ratio of our chai room experience through continued product refinement. If the Black Gold membership service Chartroom and other new vast products can deliver significant output growth and effectively improve China ROI. Then, we will invest our profit in user acquisition to drive further user growth and revenue.

最后,聊下创新业务团队在持续丰富品牌矩阵打造长期增长引擎这一战略重点方面取得的进展。 对于ROI项

The goal of DoliApps this year is to continue to expand the scale of profits and contribute as much as possible to the group. In the first quarter, the overall revenue of DoliApps, which aims to pursue profits in innovative business, is 2.28 billion RMB, which is 42% of the total growth, compared to food. The main reason for the slow growth is that relatively mature domestic social products in the period of life are affected by the epidemic and spring festival factors. Taiwan. Lastly, our review of the progress was made against our strategic priorities of enriching product portfolio and developing long-term growth engines.

Our plan for ROI-oriented standalone apps is to continue to scale our profit and to contribute additional incremental revenue and profit to the group. In the first quarter, total revenue of the profit-oriented standalone apps was 228 million RMB, up 42% year-over-year and flat sequentially. The deceleration in growth was mainly due to a slight quarter-over-quarter decline in revenue of the relatively mature domestic apps. which were negatively impacted by the pandemic and Chinese New Year. Overseas social apps with the largest revenue scale and at the stage of rapid growth experienced a temporary revenue growth slowdown due to multiple short-term negative factors such as the reduction of social entertainment activities during Ramadan, the earthquake in Turkey, and the devaluation of Egyptian currency. Our team responded quickly by adjusting marketing plans to reduce operating expenses in order to protect profitability. We've also shifted market focus to countries that are less affected by the above-mentioned factors. The proportion of revenue from these markets increased steadily, while China ROI trended upward, laying a good foundation for rapid revenue and profit growth this year. With continuous product iteration and cost optimization, We expect both domestic and overseas apps to contribute more incremental profit to the group this year.

以上是本次电话会我想和大家分享的内容。 接下来请Cassie为大家具体介绍一下财务情况。 This concludes my remarks. Now, let me pass the call over to Cassie for financial review. Cassie. Thanks, Tang Zhong and Ashley. Hello, everyone.

Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total revenue for the first quarter of 2023 came in better than our previous expectation at 2.82 billion RMB, down 10% year-on-year and 12% quarter-on-quarter. Non-GAAP net income attributable to the company was 471.9 million RMB, up 18% from the year-ago period despite the top line decrease. were down 3% from the previous quarter. The better-than-expected bottom line performance was attributable to our continuous cost control efforts, which led to Tan Tan's break-even and improvement in MoMA's profitability. Looking into the key revenue line items for the quarter, firstly, on the live broadcasting. Total revenue from live broadcasting business for the first quarter of 2023 was 1.43 billion RMB, down 11% year-over-year, and 17% quarter-over-quarter. One more app live broadcasting revenue totaled 1.29 billion RMB for the quarter, down 13% year-over-year, and 17% quarter-over-quarter. The year-over-year decrease was due to the pressure caused by the COVID infection surge and regulatory factors. The sequential decrease was mainly due to COVID coupled with negative seasonality. Contents live broadcasting revenue amounted to 139.6 million RMB, up 12% from Q1 last year, but down 14% from the previous quarter. The year-over-year growth was mainly due to a low base in Q1 2022 when we adopted a demonization strategy to focus on user experience and retention. The sequential decrease was due to the pandemic and negative seasonality. Revenue from value-added service for the first quarter of 2023 was 1.36 billion RMB, down 8% from Q1 last year and 6% sequentially. Revenue from value-added service on an ex-tantan basis was 1.19 billion RMB in the first quarter of 2023, a 5% decrease year-on-year and down 6% sequentially. The decrease was due to pressure on the mobile application caused by the pandemic and Chinese New Year negative seasonality, which put pressure on both traffic and users' propensity to pay for that added service. The year-over-year decrease was largely offset by incremental revenue contributed by the standalone new applications. Time-times value-added service revenue amounted to RMB 167.9 million, down 25% from Q1 last year and 9% from previous quarter. The decrease was mainly due to the COVID-related factors as well as the reduction on marketing spend. Non-GAAP cost of revenue for the first quarter of 2023 was RMB 1.66 billion compared to RMB 1.82 billion for the same period last year. Non-GAAP gross margin for the quarter was 40.0%, down 1.2% from the year-ago period, but up 0.6% from last quarter. The year-on-year decrease was mainly due to the one-off incentives that we provided to live streaming broadcasters to stimulate supply-side recovery after the pandemic surge. The sequential increase in non-GAAP growth margin was attributable to the reduction in the costs related to the year-end competition event in the previous quarter. Non-GAAP R&D expenses for the first quarter was 214.4 million RMB compared to 229.2 million RMB for the same period last year, or a 6% decrease year-over-year The decrease was due to the continuous optimization in personnel costs. Non-GAAP R&D expenses as a percentage of revenue remained relatively stable at below 8%. We ended the quarter with 1,533 total employees, of which 374 are from Tonton, compared to 1,936 total employees, of which 563 from Tonton a year ago. The RMB personnel as a percentage of total employee for the group was 63%, compared with 61% last year. Non-GAAP sales and marketing expenses for the first quarter was 372.0 million RMB, or 17% of total revenue, compared to 578.0 million RMB, or 18% of total revenue for the same period last year. The significant year-over-year decrease, both in terms of absolute RMB amount and as a percentage of revenue, was primarily attributable to Tan Tan's shift in marketing strategy to control costs and focus on channel ROI. Mobile sales and marketing expenses remained stable from the year-ago period, however, With MoMA's marketing spend, our team trimmed low-efficiency channel marketing spend and used the savings for MoMA live streaming year-end gala, which did not happen last year due to COVID control measures. Non-GAAP GNA expenses was 88.4 million RMB for the first quarter of 2023, compared to 85.9 million RMB for the same period last year. GNA expenses as a percentage of total revenue remained stable at 3% from the year-ago period. Non-GAAP operating income was $517.8 million RMB, an increase of 12% from Q1 2022 and up 4% from the previous quarter. Non-GAAP operating margin for the quarter was 18.4%, up 4 percentage points from the same period last year and 3 percentage points from the previous quarter. Non-GAAP operating expenses as a percentage of total revenue was 24%, a decrease from 28% in Q1 2022, but slightly up from 23% in Q4 last year, largely due to the sequential decrease at top line level due to seasonality. Non-GAAP operating expenses on a young year basis decreased 24%. The decrease in absolute RMB amount was primarily due to reduction in social marketing expenses and to a lesser degree, optimization in personnel costs. Now briefly on income tax expenses. Total income tax expenses was 122.6 million RMB for the quarter, with an effective tax rate of 20%. In Q1, the company accrued withholding income tax of 34.5 million RMB, which is 10% of undistributed profit generated by our world fee. Without the withholding tax, our estimated non-GAAP effective tax rate was around 15% in the first quarter. Now turning to balance sheet and cash flow items. As of March 31st, 2023, HoloGroup's cash, cash equivalents, short-term deposits, long-term deposits, short-term investments, and restricted cash totaled 13.35 billion RMB compared to 13.40 billion RMB as of December 31st, 2022. Net cash provided by operating activities in the first quarter of 2023 was 451 million RMB, which was in line with net profit. Lastly, on business outlook, we estimated our second quarter revenue to come in the range from 3.0 billion RMB to 3.1 billion RMB, representing a decrease of 3.5% to 0.3% year-over-year, or an increase of 6.4% to 10% quarter-on-quarter. At segment level, for Q1 2023, on a sequential basis, we expect normal revenue to grow high single digit and time-time revenue to grow low single digit. Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to changes. That concluded the prepared portion of today's discussion. With that, let me turn the call back to Ashley to start Q&A. Ashley, please.

Hi, operator. We're ready to take questions. And just a quick reminder for those who are taking questions, please ask your questions in Chinese and followed by English translation by yourself. Thanks.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Zhujing Zhang with CICC. Please go ahead.

谢谢管理层接受我的提问。 想问一下关于探探的问题。 有看到探探MAU一季度开始环比回升, 想请管理层分享一下用户的近期展望, 以及VAS会员和聊天室产品的进展。 Thanks, management, for taking my question. My question is about Tantan. We noticed that the MAU and Tantan have recovered in the first quarter. Can management share about the latest user trends and also what's the progress on last uncharted room? In terms of financials, Tantan delivers the first quarterly profit at the operating level. What's your outlook for 2023 revenue and profitability?

Thank you. 年初以来, Tantan 取得的最大成绩是实现了 历史上首次运营层面的盈亏平衡。 渠道 ROI 已经打正, 同时用户规模也已经触底。 在此基础上要获得有效的用户增长,

The biggest achievement since the beginning of the year is that it delivered its first-ever quarterly profit at the operating level.

Channel ROI turned positive, and user scale has bottomed out. We need to further improve the marginal contribution rate of the new users in order to achieve effective user growth from the current level onwards. Therefore, our next step is to increase ARPU through new BaaS features, and at the same time, further reduce unit acquisition costs through technical means to drive ROI growth through both product and channel efforts.

In terms of our goal to increase ARPU,

we have actually made some pretty good progress, except for the low seasonality in the first quarter. TenTen's R pool has actually been trending up sequentially since the beginning of 2022. The drivers behind this include improvements in the basic paying experience and the launch of new paying features such as the Black Gold membership service and the chat room and so on.

Regarding the chat room,

We have also made some pretty good progress on the product front since the beginning of the year. We do not want to get too aggressive on the monetization for the time being because the product is not quite yet where we want it to be. And we're not limiting ourselves to this specific paying experience. In addition to the chat room, we are also testing other new product features to drive our growth that will be launched in the second half of the year.

Yeah, so for contents revenue, I guess, contents revenue will be driven by both user growth and ARPU growth. As Tang Yan mentioned just now, we expect ARPU, contents ARPU to keep improving as we roll out more value added service experience in the second half of the year. And if we can get to a satisfactory level in terms of marketing ROI, we are going to push the marketing button a bit harder. Then we're going to see user growth kicking in as another leg of the growth engine. But before we actually see that second leg kicking in, I would lean on the conservative end and assume mid-to-high single-digit quarter-over-quarter growth, top-line growth for Tantan from Q2 onwards. So that's revenue. I guess the question covers the profitability outlook as we move deeper into the year as well. On that front, I guess I would say the bottom line will stay relatively stable around Q1's level as well. Like I said, if marketing ROI improves in a significant way, top line and gross profit obviously would be higher. But instead of letting it flow straight to the bottom line, we would likely invest a good portion of that into marketing to build future driver and expand market share. So I hope that answers your question.

Yeah, that's it. Operator, next question, please. Thank you. Your next question comes from Rafael Chen with BOCI. Please go ahead.

I will translate myself. Thanks, management, for taking my questions. Congrats on the strong quarter. Firstly, could management share some latest updates on the development of time-tied overseas business? Secondly, could management share some insights on the latest updates of our new initiatives, including ROI-oriented apps and DAO-oriented apps? Thank you.

We are currently in overseas.

The strongest product of certainty is Socio. Since 2021, the social direction has been clarified and the Middle East market has been locked down. Socio has always been in a trend of rapid growth of users' income and profits in three lines. So, despite the accident of the Turkish earthquake in the first quarter and the collapse of the Egyptian currency, Socio is still Our most promising overseas product currently is Sotio.

Since we decided on the product direction, which is to focus on social, and targeted the Middle East market in 2021, Socio has been experiencing rapid growth in terms of users, revenue, and profit. And despite encountered some unexpected events in the first quarter, such as the Turkish earthquake and the Egyptian currency devaluation, Socio has actually shown good resilience, and continued growth. Revenue in the Turkish market has actually started to recover. And as we temporarily shifted marketing dollars away from the above-mentioned affected markets, we saw good potentials for growth in emerging markets, such as North Africa and also in the Middle East, which is Socio's traditional stronghold. Therefore, we will focus our resources on marketing Socio overseas and hope that it can achieve better revenue performance in the second half of this year.

As for exploring overseas, we have made some attempts in Indonesia and other Southeast Asian countries in the past year or so. But perhaps due to the lack of localization, we have not yet found a way to make money on a scale. In this regard, we need more time to explore. But we will stick to the current strategy As for Tantan's overseas development, we have been making some experiments in Indonesia and some other Southeast Asian countries for over a year.

And maybe because our localized operation is not quite good enough yet, we haven't found a way to scale up profit. And we need more time to figure this out. However, we will stick to our current strategy of pursuing profitable growth. In other words, we will not rush to increase marketing investments without a significant positive ROI. And instead, we'll continue to explore ways to scale up profit while maintaining break even.

In the new business, the most developed and the most wide-ranging is the overseas social product, which is Sochell. In the past few years, there have been a lot of products launched by Chinese Internet companies. Sochell has successfully shown that our social products actually have considerable advantages in the overseas market. As a social enterprise, our team has gained a lot of experience in product and commercialization. Through social attributes, we attract users, and then use the real-time service to convert, This is a very profitable model. Currently, the Middle East and North Africa regions, as well as some other Asian countries, have some potential, but we have not yet set foot in this market. So, in a short period of two years, we are going to be able to make a very substantial income and profit for the group. We plan to duplicate the social model in these potential areas in the above numbers, to expand and cover the user group, and at the same time, we can also get a richer profit.

The most promising app amongst our new endeavors is actually our overseas social product, Socio. And the reason is many Chinese internet companies have launched products overseas. And the success of Socio has actually shown that social apps has quite considerable advantage in the overseas market. As a company that started with social products, our team has actually accumulated very intensive experiences in terms of user products and monetization. Attracting users through social attributes and monetizing the traffic through value-added service is actually a very profitable business model. Currently, there are many other potential markets in the MENA regions and also in some Asian countries that we haven't got a chance to enter yet. And given that Sochio has contributed significant revenue and profit to our group in just two years' period of time, we plan to replicate the Sochio model in this potential market to expand our users' coverage and generate more substantial profits. We have recently been actually experimenting with several new products and we'll update you in the due course.

Since the end of last year, we tightened our channel budget for TTA and focused on campus marketing. And this is because we found that this product is particularly suitable to enhance

intimacy and fun interactions amongst young people in universities. Our current thinking is that if we can find a new model that can attract new users group and expand the overall user base, we will continue to invest in marketing. Otherwise, we will prepare to start monetizing TTA. We have several other DAU-oriented products in our pipeline, but they're still at a quite early stage. And we will update you when we have more data. I think that answers your questions, Ralph. Maybe let's move to the next question.

Operator. Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Good evening. Thank you, Manager Cheng, for accepting my question. My question is about Momo's main app. Manager Cheng, can you share about the current number of users and contract trend since the second quarter? In addition, I would like to ask more about Momo's year-on-year income forecast and an outlook on the benefits at the group level. Thanks, management, for taking my questions. I have two questions. My first question is about Momo APP. How should we think about the user scale since Q2 and also the engagement? And on the other hand, talking about the outlook, can management talk about the full year revenue trend as well as from a group level perspective, how should we think about the profitability? Thank you.

I'll answer the previous question, and then if there are any income-related questions, I'll start to answer them. The decline in the overall activity of the DAO and the overall activity of the DAO have quickly rebounded after the spring holiday period. The growth trend is stronger than the previous year. In May, the growth rate will slow down, but it is still in a low state. We are very satisfied with MoMo's old product being able to make its way out of the market with the help of natural resources.

MoMo DAU and user engagement rebounded rapidly after the Chinese New Year holiday, and the growth momentum was stronger than in previous years. Although the growth rate slowed down in May, but it still is showing a slight upward trend, and we are very pleased to see that MoMo as a mature brand can achieve this current users' trend, driven by the recovery of the organic users, and despite the reduction in channel investment.

The reason behind this, I think, on the one hand, is the performance of social feedback after the pandemic. On the other hand, our product team has also made many positive innovations today, such as providing users with more timely interaction experiences, such as sharing content such as dynamic and small universe, I think the reason behind this is that,

Moomoo is benefiting from the recovery in social sentiment after the pandemic. And on the other hand, our product team has made many innovations this year, such as providing users with more timely interactive experiences. The penetration ratio of our content and emotional sharing use cases, such as the post and the miniverse, has actually increased significantly. I must say that The user engagement and financial performance of the Momo app has positively surprised me in 2023. This proves the strong vitality of Momo's brand influence and product form and social ecosystem, which also gives our team more confidence to maintain the steady productivity of this cash cow business.

Okay, this is Kathy. I guess I'll take the financial part of the question. I believe the first part of the question is our revenue outlook for the cash cow for the ex-tenten part and then the profitability outlook for the whole group. For Momo's top line outlook or more broadly the ex-tenten part, As you can see from our Q2 guidance, the second quarter top line is showing a pretty nice and healthy quarter over quarter growth. The driving forces here came mainly from two directions. One is the overall post-COVID recovery, both in terms of social sentiment and in terms of the consumer spending. The other driving factor is, of course, the growth momentum from the new applications. with the oversea market being particularly strong and resilient. So that's Q2. Looking beyond that into the rest of the year, I believe top-line performance will continue to be dependent on these two driving forces. Currently, we are still gaining pretty strong traction in the MENA area, and there are a number of other markets that we are eyeing on and may try expanding into as the year progresses. So that part should continue to drive the overall top line. The other factor, which is China's MAC role, I guess we're seeing more of a mixed picture here. A lot of it will depend on consumer confidence, especially you know, the financial condition of the wealthier private business owners, you know, how they may perceive their future economic, how they may perceive the future economic trends. Now it looks like that Chinese government is pretty determined to make things work on that front. So we remain cautiously optimistic on the macro side as well. And the other factor that we should consider as far as modeling is concerned is that as we head into the second half of this year, the con is going to become much easier. So if you consider all those factors, we have a good level of optimism that, you know, we should exit the year with a mid to high single-digit year-over-year growth for the ex-tentum part. and that should lay a pretty good foundation for the year 2024. So that's the top line outlook for the X-Ten-Ten part. Bottom line wise, I would, I think this is a question for the whole group, we don't really have a very prescriptive outlook for, or guideline for bottom line, but I would generally break down that question between our view on the gross profit margins and the OPEX. At the gross margin level, our view remains the same as what I said at the beginning of the year, which is that revenue share with the broadcasters and agencies should remain relatively stable in the foreseeable future. And with payout being the biggest cost driver, if that's going to remain stable, it means gross margin a gross profit margin will also stay relatively stable. So I guess what investors can do is to use Q1's gross profit margin to model out the rest of the year. Revenue mix may move. The change in revenue mix quarter over quarter may move the margin within a narrow range, but I would say that roughly speaking, Q1 is a good reference point to use. With respect to operating expenses, Q1, we did a pretty good job. As you can see, we did a pretty good job in cost control. We expect operating expenses to further decrease in the second quarter as some of our optimization efforts continue to bear fruit. As the year progresses into the back half, we would like to keep some flexibility there so that if we see good spending opportunities, we can spend a little bit more. So it's possible that you're going to see a slight trend up in both R&D and marketing expenses. But again, if that does happen as the year progresses, it should come with good ROI and that's bigger profit as well. And maybe, you know, just a bit more color on the operating margin. I think on a non-GAAP basis, we were at 18-something percent in Q1 on non-GAAP basis. Q2 onwards, with revenue ramping up and cost control on the right track, we would start seeing operating leverage, probably for the first time in the recent couple of years, as I can remember. It looks like that we can get back. There's a good chance that we can get back to the 20-something percent range in the second half in terms of non-GAAP operating margin at a group level. I think that's a healthy bottom line margin range for the business profile that we currently have. So that's the thing that I can share at this point based on the visibility that we have. And I'll get back to Ashley for more questions if we still have time.

I think that's all the time we have for today's session. Maybe let's just call it a day. And thank you, everyone, for participating. And we will see you next quarter. Thank you.

Operator, ready to close? Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.