Hello Group Inc.

Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and fiscal year 2023 Hello Group Inc earnings conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. Please note this 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, operator. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's fourth quarter and fiscal 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, Ms. Zhang Sichuan, 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 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 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, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties, and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. I will now pass the call over to our COO, Ms. Jiang Sichun. Ms. Jiang, please.

Thank you. Hello, everyone. Thank you for joining our call. 2023 was a busy year. Despite many changes and challenges in the internal environment, our team makes steady progress in implementing our strategic priorities and achieve solid financial results. I will walk you through the details of our work across business line in the fourth quarter and fiscal year 2023, and then outline the strategic goals for fiscal 2024. I will start with a brief overview of our financial performance. For the fourth quarter of 2023, Total group revenue was 3 billion RMB, down 7% year-over-year and 1% sequentially, which is at the high end of our guidance. Adjusted operating income was 664 million RMB, up significantly by 33% year-over-year. The profit margin was 22.1%, a significant improvement of 6.6 percentage point year-over-year. Total revenue from the Momo Act and the San Antonio Act was 2.73 billion RMB, down 5% year-over-year, and adjusted operating income was 637 million RMB, up 24% year-over-year. with a margin of 23.3%, up 5.4 percentage points year-over-year. The year-over-year improvement in profit margin was primarily due to our team's excellent cost management and improved efficiency in resource utilization over the past year. Total revenue from Tantan came in at 272 million RMB, down 21% year-over-year. Adjusted operating income was 27.04 million RMB, with a margin of 9.9%. Compared with an operating loss of 5.17 million RMB in the same period of previous year. For fiscal 2023, total group revenue was 12 billion RMB, compared with a 12.7 billion RMB in 2022. Adjusted operating income was 2.57 billion RMB, up significantly by 27 year-over-year, with a margin of 21.4%, up significantly by 5.4 percentage points. The strong improvement in growth, profit, and margin despite lower revenue was mainly driven by our effective cost optimization and efficiency improvement initiatives across our businesses over the past year. We've supported the stable productivity of the Momo Cash Cow business and make TamTam profitable. Total revenue from the Momo app and standalone new app was 10.8 billion RMB, down 5% from 2022, mainly due to the decline in revenue from the Momo app resulting from spending softness amid the weak microeconomy and our proactive product and operational adjustments to maintain a healthy economy ecosystem. Their new app maintains rapid growth momentum driven by our overseas business. Adjusted operating income was 2.5 billion RMB, up 5% year-over-year, with a margin of 23.2%, up 2 percentage points from a year ago. At TanTan, we continue implementing costs optimization and efficiency improvement initiatives in the past year. We continue to reduce investment in low ROI channels and reallocated access to human resources. In addition, we continue to optimize the paying experience to improve our pool. As a result, with 10 times revenue declined due to significantly reduced marketing spending caused decreased more than revenue. Accordingly, we improved our cash use efficiency, delivering four consecutive quarter of profitability. For fiscal 2023, TANTA's total revenue was 1.2 billion RMB, down 30% year over year, and adjusted operating income was 101 billion RMB. compared with a loss of 330 million RMB in 2022. While we're very pleased with the team's execution in cost optimization and efficiency improvement, we must admit that we make a mistake in equal system management, which led to an outbreak of spamming activity in the first part of the year and negatively affect Tantan's user experience and retention. While the problem has been fully solved through our efforts in the second half, it has also caused our various product and operational work to lag significantly behind expectations. As a result, we were unable to make any meaningful breakthroughs in the new dating features. We remain committed to working hard towards this goal this year. which I will discuss and explain in more detail later. Now, I wrote you through the progress we make against our strategic priorities for Momo, Chantang, and the new vendors, as well as the challenges we are facing and our plans to deal with them respectively. For the Momo app, this is the main goal for 2023 to keep the user and revenue scale stable, continue to optimize core structures, and remain the productivity of this cash cow business. In the past year, despite the pressure from the macroeconomy and changes in regulatory policies, our team mitigated the external revenue pressures by continuously optimizing product operations and introducing new monetization features. Meanwhile, by improving cash humanization and staff efficiency, we increase operating profits and margins despite revenue pressures. On the channel marketing front, we have focused on improving channel ROI to pursue profitable user growth. rather than blindly pursuing unprofitable user acquisition. In fiscal year 2023, our unit acquisition cost decreased 25% year-over-year, and we acquired 20% more users while reducing channel investments by 10% year-over-year. The number of paying users remained stable in the first nine months of 2023. thanks to our product and channel efforts. However, at the end of the year, the number of active users fell temporary due to the impact of external COVID and regulatory-driven product adjustments and community ecosystem optimization, which resulted in a short-term pressure on the number of long-term paying users In the fourth quarter, the number of paying users of Momo app was 7.4 million, a decrease of 400,000 compared with the previous quarter. Now, let's go through the productivity of our Momo Cash Cow business. In the fourth quarter, Momo's live streaming revenue was 1.42 billion RMB. down 9% year-over-year. For fiscal year 2023, Momo's live streaming revenue totaled 5.57 billion RMB, down 7% year-over-year. With the pandemic over in early 2023, Momo's live streaming delivered positive year-over-year revenue growth in quarter two. a quarter earlier than we expected, thanks to the economy recovery and our product and operational efforts. However, as we enter the year's second half, the economy recovery becomes weaker than expected. At the same time, to better manage regulatory risk, our operational team proactively reduced revenue-oriented competition events resulting in a decline in revenue in the second half of the year compared with the same periods of 2022. The combination of spending softness and decreased revenue from the competition events is the main reason for the decline in Momo's live streaming revenue in 2023. On the product front, our team continues to enrich interactive game-as-I features to improve pay-in conversion and API pool of users in different cohorts. Against the backdrop of spending softness, introducing new game-as-I features not only help stabilize the engagement of live streaming users in the mid- and long-term cohort, but also plays a positive role on the supply side of live streaming. Regarding last revenue from value added services, excluding time down, total 1.26 billion RMB for the fourth quarter, flat year over year. Last revenue from the Momo app totaled 940 million RMB, down 10% year over year. Revenue from the standalone app was 320 million RMB, up 44% year-over-year. For fiscal year 2023, vast revenue, excluding content, totaled 5.09 billion RMB, down 2% year-over-year. Vast revenue from the normal app was 3.98 billion RMB, down 10% year-over-year. RAS revenue from the standalone app was 1.11 billion RMB, up 50% year-over-year. The incremental revenue contributed by standalone apps largely offset the revenue decrease from the Momo app. The rate of decline in RAS revenue from the Momo app was higher than we expected at the beginning of the year, mainly for two reasons. First, the economic recovery was weaker than expected. The user spending remained soft. Second, the product adjustments to maintain a healthy community ecosystem in the year's second half resulted in a decline in paying users. On the product front, integrating audio and video-based live experience with the non-paying features on the homepage, possibly improve the efficiency of WAP monetization. On the operational front, we focus on user-oriented operational efforts to drive organic revenue growth, resulting in 30 IP pool improvements. Now, moving to Tantan. Our strategic goal for Tantan was to achieve overall break-even for the year and develop product and monetization models that are suitable for Asian dating culture to pursue sustainable growth on the back of the positive business cycle. Driven by our efforts on both product and channel fronts, Tan Tan hit the first milestone of its strategic goals at the beginning of this year. achieving operating break-even and maintain a small profit throughout the year despite the pressure on revenue. The success of our cost optimization and efficiency improvement initiative was primarily due to our continued improvement in channel efficiency and personnel cost optimization. However, As I mentioned at the beginning, due to some missteps in execution and efficiency in narration, Tantan has yet to make breakthroughs in achieving its strategic goal of sustainable growth. As the pandemic subsided at the beginning of 2023, our user base and engagement level quickly recovered from the trough around Chinese New Year holidays. However, due to the overly aggressive adjustments to our user screening standards, our platform experienced significant spammer attacks starting at the spring. And three, impacting our user experience and leading to a decline in user retention that threatened the health of our dating ecosystem. To improve the user experience and ensure the stability of our ecosystem, our team launched Verger's six-month anti-spam campaign. However, the missteps I just mentioned, combined with our reduced investments in channels, had a significantly negative impact on our user experience and retention. putting significant pressure on our user base. With further reduction in channel spending and the impact of the COVID, our MAU in December was down 30% from December to 30.7 million. As of the end of the fourth quarter, Tantan had a 1.2 million paying users a next decrease of 200,000 sequentially. Turning to 10 times financials, total revenue for the fourth quarter was 272 million RMB, down 21% year-over-year and 8% sequentially. The decrease was solely attributed to a reduced number of paying users. For fiscal year 2023, Total revenue was 1.2 billion RMB, down 30% year-over-year. The decrease was due to the declines in paying users that resulted from reduced channel investments, the anti-spam campaign, and adjustment to subscription renewables. In terms of business line, WAC revenue was 667 million RMB, down 90% year-over-year, while live streaming revenue was 505 million RMB, down 7% year-over-year. Contents adjusted operating income for fiscal year 2023 was 101 million RMB, compared to an adjusted operating loss of 330 million RMB in 2022. Turned profitable despite the pressure on revenue. This was primarily driven by significant reduction in unproductive channel investments as part of our cost optimization strategy and staff allocation optimization. Meanwhile, the continued improvement in Apple resulted in revenue declining much less than the user count. Now I would like to walk you through the details of Timeline's progress on the channel and product front. First, on the channel front, our user acquisition team continued to reduce marketing expenses that couldn't generate positive ROI, and total channel investment declined by over 60% compared to 2022. We avoided seasonal costs caused by external competition by seasonally allocating budget ratio to different channels and effectively adjusted marketing windows. By fiscal year 2023, our unit acquisition cost was significantly reduced by 45% compared to 2022. Although cost cutting puts pressure on the user base, reducing investments in China with negative ROI is essential for Tantan to remain profitable. On the product and operational side, in 2023, Our user product team mainly focused on product adjustments and strategy upgrades to fight against the spamming activities that broke out during the spring. Our commercial product team launched a variety of premium membership products and pay-as-you-go privileges on top of the basic membership services, which combined with appropriate guidance on paying experience led to a significant sequential increase in WhatsApp people in every single quarter of 2023. To mitigate the impact of reduced user base and the Ministry of Industry and Information Technology regulations on server renewal, we improved the product experience for paying users which plays a positive role in the contingency and study increase in paying ratios and accrues throughout the year. By the end of 2023, spending activities were under control and the dating ecosystem had also recovered. Beyond the dating-centric value-added service, Since live streaming and chatroom services are not the focus on the dating cloud, we began to emphasize live streaming in the second half of the year, and we allocated access to human resources to innovative projects. Over time, the chief overall break-even In 2023, thanks to our effective cost optimization and efficiency improvement initiative, as well as the continuous improvement in Apple, we failed to achieve the strategic goals of sustainable growth on the back of the positive business cycle due to our misstep in ecosystem management and the lack of breakthrough in product innovation. Therefore, the biggest priority for Tantan in 2024 is to continue focusing on product innovation and improving the monetization experience to ultimately achieve profitable growth. Lastly, in terms of new endeavors, our goal is to enrich our product portfolio, expand beyond Momo and Tantan. and develop long-term growth engines. In the first quarter, the total revenue of the new app, including social and game products, was 328 million RMB, up 43% year-over-year. For fiscal year 2023, revenue from the Sentinel app was 1.12 billion RMB, up 42% year-over-year. Driven by rapid growth of our overseas business, standalone apps remain rapid growth momentum from a high base in 2022. As for the domestic apps, given their relatively mature life cycle, our team's operational focus on 2023 was to control costs and expenses while continuing to tap monetization potential. As a result, the profit growth rate of the domestic app was higher than the revenues due to the improved operating profit margin. Compared with domestic products, our overseas product is at the relatively early stage of its life cycle with a border market size. and the team has accumulated more experience for previous endeavors. Even though the overseas business was affected by negative factors such as the earthquakes in Turkey and the devaluations of currencies in several countries in 2023, its revenues still maintain rapid growth with the combined effort of our product and channel team. On the product front, we continue to enrich localized experience and operation for users and different cohorts. On the channel front, our team focuses on acquiring paying users, strictly adjusted channel investments according to change the revenue and ROI. As a result, our product efforts, coupled with an increase in channel investment has supported the continued improvement in IP pool and the number of paying users. Upraising profit margins significantly improved year over year thanks to operating leverage. Our overseas business profit increased significantly from a few million RMB in 2022 to close to 100 million RMB in 2023. In addition to revenue and profit-oriented products, we have also made remarkable progress in exploring new opportunities in social sectors by leveraging technological product development. In 2023, we developed InSpace, a brand new social app for Apple Vision Pro. As one of the 600 native apps, it was launched simultaneously with Appalachian Pros in February this year. The product is still in very early stage, and we will continue to enrich its use cases and gain place for social interactions and emotional connections. Let's talk about our business review. As this is the first call with our investors in 2024, I'd like to spend some time talking about management priorities for this year. First of all, our goal for the Momo app is to maintain the productivity of this cash cow business with a healthy social ecosystem. In order to maintain an excellent social ecosystem, and limit the radical monetization approaches adopted by broadcasters and agencies in order to obtain competition event-related bonuses. We plan to further reduce revenue-oriented large-scale competition events. Instead, we will leverage more social contributions to increase non-event-driven revenue through new gaming-side features and user-oriented operational activities. We will use part of the event's bonus savings to increase daily revenue sharing. As the declines in competition, event-related revenue will put some pressure on live streaming and live streaming. We will continue to look for ways to optimize our cost efficiency to mitigate the impact of lower revenue on our profits. For Tantan, our strategic goal for Tantan this year is to improve the core dating experience and on top of that, build an efficient business model that drives profitable growth. Regarding our new endeavors, We plan to continue enriching the brand's portfolio, pushing the business boundary beyond Momo and Tantan, and build a long-term growth engine. Based on our experience in the MENA region over the past three years, we believe that the social and entertainment industry still has a great room for growth in the overseas market. Hello Group has unique advantage in social space and monetization built on the social ecosystem. We know how to help users find new friends and interact effectively with each other. And we know how to build well-added services on top of that to create value for the company and our shareholders. We leverage and replicate our successful experience to explore new products. not limited to Xochitl and new markets beyond the MENA market. We believe that if we are doing a good job in localization, we can succeed in a border market with a more diversified product. In 2024, we plan to invest more resources and take a strike to explore this area. Lastly, I would like to conclude by announcing that our board has declared a special cash dividend in the amount of 0.54 US dollars per ADS, which will amount to a total cash payment of approximately 103 million USD, or one-third of adjusted net income contributable to Hello Group Inc. in 2023. This is the sixth consecutive year that the company has paid a cash dividend, and together with the device with purchase program, it demonstrates the management's confidence in the fundamentals of the business and our commitment to creating long-term value for shareholders. Thank you for your confidence and trust in us. And now I will pass the call over to Kathy for the financial review. Kathy, please.