Hello Group Inc.

Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2024 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'll 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 third quarter 2024 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 Security 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 statement. 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 will now pass the call over to our COO, Ms. Zhang Sichun. Ms. Zhang, please.

Thank you. Hello, everyone. Thank you for joining our call. I would now like to give you an update on our business on Q3 2024. Starting with an overview of our financial performance for Q3 2024, Total group revenues was 2.67 billion RMB, close to the high end of our guidance, down 12% from the year ago, with a smaller year-over-year decrease than in Q2. Adjusted operating income was 465 million RMB, down 33% year-over-year, representing a margin of 17%. down 5.4 percentage points from a year ago. Looking at the Momo app and standalone new app, total revenue was 2.46 billion RMB, down 10% year-over-year. The decrease was mainly due to the 17% year-over-year decline in the Momo app, resulting from our proactive product adjustment and the spending softness amidst the weak microeconomy. The decrease was partially offset by the accelerated 41% year-over-year revenue growth in standalone new apps driven by our overseas business. Adjusted operating income was 440 million RMB, down 33% year-over-year, with a margin of 17.8%. down 5.9 percentage points year-over-year, mainly due to the decline in revenue and margin of the mobile app. For TangTang, Q3's total revenue was 212 million RMB, down 28% year-over-year, due to the decreased number of paying users. Adjusted operating income was 15.17 million RMB, compared with 27.58 million RMB from the year ago, representing a margin of 7.2% down 2.2 percentage points year-over-year. Now I will give you an update on executing our strategic priorities for each business night. Our main goal for the Momo app this year is to maintain the productivity of this catch-cow business, with a healthy social ecosystem. TimeTown's goal is to continue improving the core dating experience and build an efficient business model that drives profitable growth. As for our new endeavors, our goal is to enrich the brand portfolio further, push the business boundary beyond normal and TimeTown, and build a long-term growth engine. I will now walk you through the details of our execution. First, on the Momo app product and operations in Q3, our product team focused on optimizing the user experience and increasing the volume of effective user interactions. We introduced multiple VoIP-based one-on-one chat experiences in our legacy tech-based chat greeting features. to facilitate in-depth user interaction. As for female users, we use women's favorite mini-social games and a sign-in reward mechanism to increase female user engagement and stickiness. We also provide an AI-assisted reading tool to improve the quality of eye-catching reading messages for male users. thereby increasing the response rate and interactive experience for female users. On the user acquisition front, we have optimized transitional channels over the past two years, bringing down acquisition costs and improving ROI. Therefore, we reduced overall marketing spending but kept traffic relatively stable. However, as the cost continue to decline, the potential to further optimize transitional channels is getting limited. So we started exploring new ways to drive traffic from KOLs. For example, increasing brand exposure and user favorability by working with short video influencers in new media. In Q3, we increased our investments in KOL channels, and the numbers of videos released and played related to the Momo app increased significantly from Q2. While deepening our collaboration with KOL, we've also been refining our channel strategy. Continuous cost optimization has given KOL marketing calls a clear advantage over transitional channels. Therefore, we plan to continue working with KOLs, including enhancing the selection of accumulation of influences, further innovating ad materials, and optimizing onboarding and conversion strategies. This help us further improve user acquisition ROI and strengthening MoMo's branding. To increase the proportion of female users Our user acquisition team continued to refine the app material tailored to women and collaborated with our product and operation team to emphasize features favored by female users. In quarter three, the Momo app has 6.9 million paying users, a sequential decrease of 300,000. This may be due to two factors. First, the wide ecosystem adjustment reduced competition events and operational activities, resulting in a decrease in the number of paying users. Second, to improve profitability and pursue profitable growth, we further reduced the acquisition of small-ticket paying users with negative ROI, decreasing long-tail users, Now on the productivity of Momo's cash cow business. Momo's live streaming revenue was 1.22 billion RMB, down 14% year-over-year and flat sequentially. The year-over-year decline was mainly due to our strategy to proactively reduce revenue-oriented large-scale competition events to maintain a healthy social ecosystem. and expanding softness among top cohort users amid the weak micro-economy. To mitigate the revenue pressure, our live streaming team focused on introducing innovative features to improve the product experience for meet and long-time users. Meanwhile, we set up our live streaming promotion efforts in the nearby people and the nearby host features which resulted in a steady increase in live streaming penetration and paying ratio. The reduction in high-priced competition events complied with the increase in sales of live streaming showrooms, costumes, and PK props that do not require any revenue sharing, resulting in a slight sequential decrease in the revenue sharing ratio. which play a positive role in stabilizing the profit level of the cash cow business. Revenue from value-added services, excluding time-to-time, totaled 1.22 billion RMB, down 6% year-over-year, up 1% sequentially. Last revenue from the Momo app was 828 million RMB, down 17% year-over-year and 3% sequentially. Revenue from the Send Along app was 391 million RMB, up 32% year-over-year and 10% sequentially. The year-over-year decline in Momo app's vast revenue was mainly due to our proactive setup and operational adjustments to mitigate regulatory risks combined with the impact of spending softness against the weak macroeconomy. In Q3, our product team promoted chat rooms in the nearby features and nearby people features, applied new algorithms to improve penetration. On the operational front, we organized operational activities that tie into holidays and festivals, to boost consumer sentiment. In addition to traditional audio features, we continued introducing new voice-based gamified play, such as brilliant and matching puzzle games in chat rooms. Early data shows that the retention of this new mini-game-alike feature is better than the average retention of chat rooms. We expect the full rollout of these new features will help increase Chatroom's user engagement rate. Turning to TomTom. First on user trends and financial performance. Since the acquisition of TomTom, the number of organic new users has shown a long-term downward trend due to the need for new branding investments. and user growth was largely dependent on acquisition channels. Although the ROI-oriented channel investment reduction and cost control strategy over the past two years has effectively driven TanTan to achieve profitability, it also has put much pressure on TanTan's user base. The product upgrade we launched in Q2 aimed to explore effective solutions to improve the core data experience and increase user retention. However, the upgrade is still in early stage and it has not yet significantly impacted all overall user retention. Due to the combination of the broad factors, 10 times user base have not yet stabilized. MAU decreased by 7% sequentially to 12 million in September. As of the end of Q3, Tantan had 940,000 paying users, down 60,000 sequentially, mainly due to the decline in MAU and the short-term impact of the product upgrades on new user paying conversions. Turning to Tantan Financial, 403 total revenue was 212 million RMB, down 28% year-over-year and 9% sequentially. The year-over-year decrease was due to the declining payers, whereas overall IP pool increased slightly. IP pool of our live streaming business decreased significantly as we continued to de-emphasize live streaming. well have some low correlation with the dating experience. Meanwhile, the last team drove the sales of SVIP and Black Gold membership by subdividing members' paying features and redesigning the guidance narrative on paying experience, which drove a slight increase in Tantan's overall RP pool. partially alleviated revenue pressure. The sequential revenue decrease was mainly due to the decrease in payers and slightly lower AP pool due to the impact of live streaming business. In terms of business life, gross revenue was 137 million RMB, down 19% year-over-year and 2% sequentially. While live streaming revenue was 66.65 million RMB, down 45% year-over-year and 20% vacation. Now, moving to our efforts on time-to-time startup and user acquisition and the challenges we face. First on the marketing and user acquisition front, to address the continuous inflation continuous decline in organic traffic caused by years of inadequate brand exposure. In quarter three, our marketing team selected online and offline events that are popular amongst young men and women and organized various marketing activities at a controllable cost to promote Timetown's brand awareness. For example, we set up interactive booths at music festivals, which we believe is the most effective way to reach young people offline and guide them using content to explore their music plus dating experience. We combine online community activities and KOL events marketing to expand brand influence. At the same time, it continues to accumulate influencer resources and optimize channel investment strategies, resulting in a significant sequential reduction in average KOL user acquisition costs. In terms of channel, we continue to reduce investment based on ROI and further reduce costs from the transitional channel such as feeds and app stores. This coupled with increased investments in KOR channels with the most competitive user acquisition costs helps significantly reduce unit acquisition costs quarter over quarter. Therefore, we acquire more users with a slight sequential decrease in total channel investments with lower unit acquisition costs and a slightly higher new user output. Although channel ROI has not turned fully positive, we have seen varied degrees of improvement year-over-year and quarterly. Next, update on Chan Han's product and operations. In Quarter 2, based on the results of user surveys, we initiate a product upgrade to address two major problems that make users feel that that are unrealistic. First, uncertainty about the authenticity of a user identity, and two, lack of response to chat after matching. To address the first issue, such as product picture looking too good to be true, limited information that lacks real-life references and is sufficient real-person verification. Our product team has increased the proportion of high-quality profile on the platform by providing prompts to encourage users to enrich their profile information and guiding users in choosing suitable profile pictures. Meanwhile, we offered rewards such as extra swipes to users who completed their real-person revocation to increase the overall real-person revocation rate. Regarding the lack of response to chats after matching, previously, we deliberately increased the exposure of some high-quality active users in the algorithm to improve the experience of some users who don't get matching opportunities easily. While this approach increased the number of matches, it unfortunately resulted in many matches that did not convert to chat. This quarter, we reduced matching concentrations in our algorithm to address the issue of some female users not chatting after matching because they received too many matches. At the product level, we tested several features aimed at improving the response rate, such as or , which allow users to directly deliver a message to a favorite person every once in a while, improving interactive quality through this unique outreach. We expect this series of product trials to play a positive role in improving the response rate. Product upgrades have enhanced matching quality and encouraged more in-depth conversations. However, the short term, this has a negative impact on Tantan's original business model, which was built around look at picture, swipe, pay to increase matching up. The decline in new user-paying conversions was one of the reasons for the sequential decrease in Tang Han paying users. However, we believe that providing a good product experience to improve user retention and drive organic user growth is the foundation of Tang Han to achieve long-term sustainable revenue and profit growth. We need to drive user growth based on profitability to sustain a long-term positive business cycle. Lastly, in terms of new endeavors, in Q3, the total revenue of the new apps reached 418 million RMB, with an accelerated growth rate of 41% year-over-year and 17% sequentially, mainly driven by our overseas business. Social's revenue in Q3 achieved its highest sequential growth of the past year, driven by improvements in our operational efficiency. In Q3, our management, key product, and tech team from the Beijing headquarter visited several key social markets. They worked with local teams to analyze user feedback and optimize product and technical solutions. We optimized agency broadcasters' payment and compensation systems and strengthening our frontline staff decision-making power, boosting their work morale. We also optimized channel strategies for paying users, growth, paying ratio, and the number of paying users. Our people increased significantly quarter over quarter, driven by various factors, such as introducing new virtual gifts gameplay enhancement, and product design improvements. Together, the improvements in paying users and app people drive Rabbit's sequential revenue growth. In Q3, we strengthened our supply-side collaboration with new agencies and increased the number of broadcasters, which also plays a positive role in driving revenue growth. With the gradual expansion of the business, Vulture's revenue sharing ratio has shrunk slightly upward since the beginning of the year, mainly because the relatively low margin business, including the Turkish market and the newly introduced live streaming business, grew much faster than the overall overseas market. Our team has particularly alleviated the pressure on GP margin caused by the increase in revenue sharing ratio by optimizing top-up channel costs. Combined with our ROI-oriented user acquisition strategy, enabling us to enjoy operation leverage and fast profit growth despite the increase in channel investments, In Q3, we made good progress in enhancing the localization progress and expanding the voice-based features to live streaming. The growth in users and financial metrics has well reflected our team's recent efforts. We believe that continuously strengthening localized operation and improving user and product experience we can bring continuous growth to social and other overseas products in the MENA region. We will commit more firmly to overseas business in the future. This concludes my remarks. Now, let me pass the call to Cathy for the financial review. Cathy, please.

Hello, everyone. Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total revenue for the third quarter of 2024 was 2.67 billion RMB, down 12% the young year and a slight decrease of 0.6% quarter-on-quarter. Non-GAAP net income attributable to the company was 493.3 million RMB, down 19% year-on-year, but up 10% from the last quarter. Looking into the key revenue items for Q3. Firstly, on live broadcasting. Total revenue from live broadcasting business for the third quarter of 2024 was 1.29 billion RMB. down 16% year-over-year, and 1% quarter-over-quarter. The year-over-year decrease was largely attributable to a decline in the core Momo live streaming business, and to a lesser extent, the decrease in Tantan. The sequential decrease was due to the decline in Tantan live streaming, whereas Momo remained relatively stable. In terms of segments, MoMA live broadcasting revenue totaled 1.22 billion RMB for the quarter, down 14% year-over-year, and flat from last quarter. The year-over-year decrease was due to our proactive product and operational adjustments to scale back from revenue-oriented competition events and the soft spending sentiment amid the weak macroeconomy. Tantan's live broadcasting revenue amounted to 66.6 million RMB, down 45% year-over-year, and 20% quarter-over-quarter. The decrease was due to our strategic decision to de-emphasize the less dating-centric service. Revenue from the value-added services for the third quarter of 2024 was 1.36 billion RMB, down 8% from Q3 last year, but up 1% sequentially. The year-over-year decrease was due to a decline in both Momo and Tantan, however, the growth of the standalone new apps partially offset the downward revenue pressure. The sequential growth of value-added service revenue was driven by the growth of new endeavors. Revenue from VAST on an ex-tantam basis was 1.22 billion RMB in the third quarter of 2024, down 6% from Q3 last year, but up 1% from the previous quarter. Momo app VAST revenue decreased 17% from Q3 last year due to our proactive product adjustments to manage regulatory risks, as well as a weak spending sentiment. And down 3% sequentially due to our continued product adjustments to de-emphasize agency-dominated gamified play. Revenue from the standalone new apps, which is consolidated in more and more segment on P&L, continued to grow both on a year-over-year and quarter-over-quarter basis, driven by the improvement of overseas business. Tantan's vast revenue amounted to RMB 137.2 million, down 19% year-over-year and 2% sequentially. The decrease was due to a decline in paying users, which was in turn due to a decline in user base and the short-term impact of the user interface upgrade on paying conversion. Now turning into cost and expenses. Non-GAAP cost of revenue for the third quarter of 2024 was 1.62 billion RMB compared to 1.77 billion for the same period last year. Non-GAAP gross margin for the quarter was 39.4% down 2% percentage points from the year-ago period. The year-over-year decrease was due to several different factors. Number one, higher payout ratio, which was further due to two factors. Oversee business becoming a bigger percentage of total while bearing a higher payout ratio, and to a lesser degree, higher payout for Momo, the old cash cow business, to better incentivize the agencies in view of a downward pressure trend, of a downward revenue trend. Number two, deleverage. where infrastructure and personnel and other relatively fixed costs take up a higher percentage of revenues. Number three, payment channel costs represent a higher percentage of total revenues as revenue mix shifts towards overseas business, where channel fees as a percentage of revenues are much higher than those from domestic business. Non-GAAP R&D expenses for the third quarter was 185.4 million RMB compared to 186.7 million RMB for the same period last year, or a 1% decrease year-over-year. The decrease was due to continuous optimization in personnel and infrastructure costs. Non-GAAP R&D expenses as a percentage of revenue was 7% compared with 6% from the year-ago period. We ended the quarter with 1,355 total employees, of which 280 are from Tantan, compared to 1,410 total employees, of which 314 from Tantan a year ago. The RMD personnel as a percentage of total employee for the group was 61% compared with 64% Q3 last year. Non-GAAP sales and marketing expenses for the third quarter was 350.1 million RMB or 13% of total revenue compared to 368.1 million RMB or 12% of total revenue for the same period last year. Sales and marketing expenses decreased 5% a young year in absolute RMB amount. Non-GAAP G&A expenses was 85.2 million RMB for the third quarter of 2024 compared to 76.5 million RMB for the same period last year. Both were presenting roughly 3% of total revenue. Non-GAAP operating income was 454.7 million RMB, a decrease of 33% from Q3 2023, down 5% from the previous quarter. Non-GAAP operating margin for the quarter was 17%, down 5.4 percentage points from the same period last year, and 0.3 percentage points from the previous quarter. Non-GAAP OPACs as a percentage of total revenue was 23%, an increase from 21% for Q3 2023, and flat from Q2 this year. Now briefly on income tax expenses. Total income tax expense was 95.3 million RMB for the quarter, with an effective tax rate of 17%. In Q3, the company accrued withholding income tax of 15.2 million RMB, which is 5% of undistributed profit generated by our WOFI. Without the withholding tax, our estimated non-GAAP effective tax rate was around 14% in the third quarter. Now turning to balance sheet and cash flow items. September 30, 2024, Hello Group's cash, cash equivalents, short-term deposits, long-term deposits, short-term investments, and restricted cash totaled 14.78 billion RMB compared to 13.48 billion RMB as of December 31, 2023. Net cash provided by operating activities in the third quarter of 2024 was 341.0 million RMB. Lastly, on business outlook, we estimated our fourth quarter revenue to come in the range from 2.56 billion RMB to 2.66 billion RMB, representing a decrease of 14.7% to 11.4% year-on-year, or a decrease of 4.3% to 0.5% quarter-over-quarter. At segment level, for Q4-24, on a sequential basis, we expect normal revenue to decrease mid to low single digits. On the time-time side, we expect revenue to decrease low single digits. 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 our prepared portion of today's discussion. With that, let me turn the call back to Ashley to start Q&A. Ashley, please. Thank you.

Just a quick reminder before we take any questions. For those who can speak Chinese, please ask your questions in Chinese first and follow English translation by yourself. And please also limit the number of questions to one to two so we can take more people. OK, so operator, we're ready for questions. Thank you.

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 Raphael Chen from Bochi Research. Please go ahead.

Thank you, Manager Chen, for accepting my question. Just now, Manager Chen mentioned in his speech that 3Q is the fastest growing season in overseas business in the past year. 我想具体请问一下推动增长最重要的因素包括哪些,以及能否分享海外业务现在的收入体量和利润的规模和对第四季度和明年的一个增长预期。 I will translate myself. Thanks for taking my question. Congrats on the strong growth momentum of overseas business. Could management share the main contributors driving the overseas business growth in the third quarter? Also, could we have the latest revenue and profit figures for the overseas business and the growth outlook for the fourth quarter and 2025?

Cheers.

Then I think the increase in income in the third quarter is a very important reason because we have optimized a management plan for cross-border employees. This greatly improves the operational efficiency of the search team, and improves the decision-making power of local employees in product operation, which helps us to better satisfy the needs and needs of users with different cultural backgrounds and special social preferences. At the same time, The local employee advantage has also played a significant role in strengthening local co-organization and cooperation. With the rapid development of overseas business, we have involved more and more markets and regions. Therefore, the group level will continue to improve cross-border management, set up offices in the major markets, and prepare local talents to vigorously promote localization, promote the continued growth of income and profits.

Let me translate. The sequential growth of our overseas business in the first half of the year was slower than we had anticipated at the beginning of 2024, primarily due to the need to address many areas for improvement in local operations, which required more time than we thought. Revenue growth accelerated in the third quarter thanks to the optimization of cross-border personnel management. As a result, the operational efficiency of the social team got significantly improved. Our strategy of empowering local staff in product operations will help us better address the unique social preferences and needs of users from different cultural backgrounds. By leveraging the strength of a local team, we have been able to strengthen cooperation with the local supply side. With the rapid growth of our overseas business, our operational markets and regions are also becoming more diverse. Therefore, we will continue to optimize cross-border management, establish offices in key markets, recruit more local talent, and drive continuous growth in revenue and profit through robust focus on localization.

About the revenue of the third quarter, the independent new app is close to 4.2 billion RMB, of which 60-70% comes from social. This overseas product has already exceeded the current income scale. Compared with the same period last year, the income has increased by more than 50%. With the strengthening of our localization operations, we expect that social will continue to grow rapidly next year. At the same time, the other two China's app will also enter the fast-growing period of revenue next year, and it hopes to achieve profit and loss balance. The true income and profits created by overseas businesses must be compensated to a certain extent by the deficit caused by the decline in the main account revenue. In fact, we think that compared with domestic business, which faces a lot of uncertainties such as the macroeconomic economy and policy, the development space and growth path of overseas businesses are relatively clear. Let me translate first.

So in the third quarter, total revenue of the new apps reached close to 220 million RMB, with Socio contributing 60% to 70%. And Socio has now surpassed the revenue scale of Tantan. And its revenue in the third quarter was up more than 50% a year. And as we strengthen our localized operation capabilities, we expect Socio to continue to grow rapidly next year. Meanwhile, we expect our other two Middle Eastern apps to enter a period of rapid revenue growth and possibly break even next year. The incremental revenue and profit generated by our overseas business partially offset the decline in revenue and profit from the Momo app. We believe that compared with our domestic business, which face many uncertainties such as macroeconomic and regulatory issues. The growth potential and trajectory of our overseas business are relatively clear. This is particularly true in the social field where we have distinct product and operational advantages. That's why we have prioritized the allocation of human and financial resources to the operation and expansion of our overseas business in recent years. We believe that our overseas business will play an increasingly significant role in driving the group's revenue and profit in the future, which will be clearly reflected next year. And as for the financial outlook, I will leave that to Cassie, please.

OK, overseas outlook. In our Q4 guidance, we are assuming Socio to grow probably by 40 plus percent year-over-year. That would close out 2024 with a year-over-year growth rate of close to 50%. As the app gets bigger, obviously the growth rate could slow down a little bit. However, our two Other social entertainment apps in the Middle East, North Africa area have been ramping up rapidly recently. We do expect these two apps to start bearing fruits and contributing to the bottom line, contributing to both the top line and bottom line in a meaningful way in 2025. With these three overseas apps, we believe overseas revenues will continue to grow significantly pretty fast and hopefully could accelerate its growth rate next year. The other thing worth mentioning is that if you look at the way we manage our overseas business, we're not pursuing just top line growth at the expense of bottom line. We always want what we call profitable growth. That means next year, as overseas apps continue to grow at top-line, bottom-line performance for these three apps are going to continue to improve as well. Hopefully that answers your question. I'm handing back to Ashley for our next question.

I'll offer you the next question, please.

Thank you. Your next question comes from Jenny Wan from UBS. Please go ahead.

Thank you for the opportunity to ask questions. First of all, I would like to congratulate Guanlin Cun for his excellent performance this time. My question is about the future performance of our cash cow business, MoMo Main Station. We saw that the main station started product adjustment from the end of the third quarter last year, and now it has been almost a whole year. I would also like to ask Guanlin Cun, if you look back, will the product adjustment of MoMo Main Station continue? So let me translate myself. So thank you for taking my question and congrats on the good results. My question is regarding the outlook for our cash cow business. So CoMomo has been undergoing product adjustments for a year since the end of the quarter last year. Could you please share whether these adjustments will continue going forward, and when we might see a recovery in growth both quarter to quarter and year to year, and how should we build a prospect to the sustainability of the cash cow business going forward? So thank you.

Last year, we started to adjust the operation for the live broadcast and WAAS's audio and video scenarios. The main goal is to reduce the number of revenue-driven competition activities. Although it has caused a certain pressure on financial indicators, it has also played an active role in reducing the concentration of revenue and creating a healthier and more stable community environment for cash flow business. In the fourth quarter, we will continue this operation and continue to weaken high-flow competition activities. Okay, so last year, we implemented operational adjustments to our live streaming and audio and video-based VASI experiences.

with a focus on reducing revenue-oriented competition events. And although this impacted our financial performance, it has played a positive role in reducing revenue concentration and creating a more stable and healthier social ecosystem for our cash cow business. So we remain committed to this operational strategy in the fourth quarter and further de-emphasizing high revenue competition events For the live streaming business, this means that the incremental revenue from the year-end competition event will be very limited compared to the previous years. And in the audio and video-based diversity experiences, we believe there's still room for further optimization of some agency-dominant use cases and gamified play. So we will continue to fine-tune our operation in the fourth quarter.

Thank you.

As Sik mentioned earlier, in order to offset the decline in revenue from competition events, we have increased the monetization of meet-to-long-tail paying users in live streaming and value-added services experiences. So we rolled out more interactive features and contents suitable for this kind of cohort of users. and increasing the penetration and paying ratio while driving steady growth in organic revenue. So our primary operational focus in the current macro economy and regulatory environment is to enhance our platform's ability to accommodate mid- to long-tail users and expand their revenue scale. 经过一年的调整,默默平台整体内容及生态都达到了比较让人满意的程度。 After about a year of adjustments, we are quite satisfied with the overall content and ecosystem of the Momo app. I believe this has laid a solid foundation for us to maintain the productivity of the cash cow business next year. As for the specific financial outlook, I will leave that to Cassie, please.

Okay, before I talk about 2025, perhaps let me first quickly review the way we've been managing the productivity of the cash cow business throughout last year, and then point toward the directions we move toward next year. The biggest theme of 2024 for the cash cow was to de-emphasize the promotional slash stimulating agency-driven events in order to improve the healthiness of our ecosystem in view of the current macro environment, both from a regulatory and from an economic point of view. As we took different steps to enable such operational changes, the revenue has been gradually coming down. So in order to maintain the productivity of the cash cow business, we have also been taking measures to control spending more tightly. At the beginning of 2024, the original plan was to put all the adjustments into Q1 and make the revenue impact one-off. However, as we move deeper into the year, it turned out that we did a pretty good job in cost control and thus over-delivered in terms of profits. As a result, the team decided to take this opportunity to continue to put in additional adjustment measures to scale back on bonus-driven promotional events in the second half. And in turn, we saw the top line of the cash cow business continuing to trend downward throughout 2025 from Q2 onwards. With that in mind, looking out to 2025, well, first of all, I won't be able to talk about next year in very quantitative terms before we finalize the financial planning early next year. But as in previous years, there are several points to share to help you think about the performance of the cash cow, at least trend-wise, for the coming few quarters. First of all, as Talian said, after a year of pretty significant operational adjustments at the expense of top line, we feel we now feel pretty good on the ecosystem front. And therefore, currently, we do not see additional adjustments needed for next year. If you think about what that translates into top-line performance next year, how that translates into top-line performance next year, Q1 2025, MoMA is still going to see seasonality, which would cause a sequential decline. And then Q2, there will be a seasonal bounce back. Since we do not expect any deliberate operational efforts to demonetize next year, how significant the bounce back in Q2 2025 will really depend on macroeconomic factor that would play substantially into the consumer spending sentiment on our platform. So if you put all these analysis together, what we can come down to is that because the revenue has been trending downwards in the second half of 2024, next year in terms of year-over-year comparison, it's quite likely that cash cow will continue to see revenue decline on a year-over-year basis. In 2024, if you throw in the midpoint of our Q4 guidance, it looks like that the Momo segment which, by the way, include both the cash cow business and the oversea apps. That whole Momo segment will likely still see a revenue decline in the low teens kind of range. That reflects both volunteer demonetization efforts on regulatory concerns and macro headwinds. For 2025, Because on the regulatory side, it seems that we are now in a pretty safe place, and the oversea, as Tangyan said a little bit earlier, the oversea growth will continue to push the top line up for MOMA segment. Assuming macro status quo continues, the YOY decrease should significantly narrow from what we saw in 2024. But of course, assuming macro status quo is going to continue is kind of a big assumption. We'll see how things play out next year. But of course, even assuming a substantial narrow down in YY decrease ratio in absolute dollar amount, the cash cow may still face a pretty significant top line decrease in 2024. So we are going to have to see what we can do on cost control front to mitigate impact on bottom line. On that specific point, I shall have more color to share as we finish our financial planning at the beginning of 2024 when we have our Q4 earnings call early next year. So that's basically the color that I can give on the productivity of the cash call. Now back to Ashley for next question.

Thank you.

Your next question comes from Thomas Chung from Jefferies. Please go ahead.

Good evening. Thank you, Manager Cheng, for accepting my question. My question is about Tantan. Just now, Manager Cheng also introduced some of the recent product attempts in his speech. However, he also mentioned that the current version of the user flow has not yet had a more practical impact. I also saw that the scale of the user and the decline in income are still being covered. May I ask if there are some products that we are more optimistic about in our many attempts? Good evening. Thanks, management, for taking my question. My question is about Tantan. Just now, management mentioned in prepared remarks that there are various updates to our product offerings, but also highlight the impact is yet to be seen, such as on the user retention side, And also, we are seeing user scale and revenue remain soft. My question is about which product ideas or solutions management gets more positive? How long does it take about the upgrade and the timeline? And how should we think about a time-to-time Q4 and 2025 outlook? Thank you.

I'll try to answer this question in more detail.

The goal of Tantan is to improve the experience of core dating and establish a efficient business model on this basis to achieve profitable growth. Currently, Tantan has two core problems. The first is product-wise. The other is business model-wise. The problem of product experience is that the user's sense of reality is low and the interaction rate of the chat is low. 所以尽管用户有着真实而旺盛的一个约会需求,但探探对于很多用户来说都无法真正满足他们的需求。 第二个是产品弱化,自然量过低的问题,这个导致探探的平均买量成本过高,无法形成商业正循环,从而实现有利润的增长。 我们觉得必须要先要让产品体验达到OK的程度,再来解决商业模型的问题,否则商业模型就无法持续。

Okay, let me give you more details regarding your question. For Tantan's goal is to continue to improve the quality experience and build an efficient business model that drives profitable growth. And currently, Tantan needs to address two issues. One is product experience and the other is business model. So in terms of product, Some users feel the experience is unrealistic and chat interaction after matching is quite low. And therefore, although users have a real strong demand for dating, but Tantan cannot really meet the needs of many of our users. And the second issue is insufficient branding and low organic traffic, which makes unit acquisition costs too high to form a positive business cycle to achieve a profitable growth. So we believe that we must first improve the product experience to a reasonable level and then develop a new sustainable business model.

Then, it leads users to enrich the information of the data industry, enrich the lifestyle, and other prompting functions to increase the comparison of high-quality data, which has played a significant role. In addition, it is more effective to increase the accuracy of the product measures for users who have completed the certification. In the past, in terms of product experience, our paid users have an obvious superiority over non-paid users. So over the past two quarters and for the next quarter or two,

We have focused and will continue to focus on addressing two user experience issues. One is users' uncertainty about the authenticity of their matches' identity, and the other is the lack of a response to chats post-matching. Our team encouraged the users to enrich their profile information and guide them in choosing the proper style for their profile pictures. And these efforts significantly increased the proportion of high-quality profiles on our platform. And to effectively increase the overall real-person verification rate, we offered rewards such as extra swipes to users who completed the real-person verification process. And previously, paying users had a clear advantage over non-paying users in terms of product experience. And moving forward, Our goal is to give verified users a distinct user experience advantage over those non-verified users and to encourage more users to complete the verification process. While we have made significant progress in terms of user identity authenticity, we still need to do more to improve chat interaction rates in the long term. Unfortunately, we feel that the current approach is on the right track.

We plan to have all testing underway by the end of the year and wrap up this round of upgrade in the first half of next year. Since Tantan hasn't entered a positive business cycle yet, we expect the decline in users and revenue to continue for the next two quarters. And to try Tantan's recovery, here are some thoughts.

First, by improving Tantan's basic dating experience, and especially user identity authenticity, we expect user base to gradually stabilize even without increasing marketing investment. And secondly, after essential product adjustments are made, we will invest more in branding initiatives to drive organic traffic. Third, we will continue to explore and develop innovative product features that improve user experience While identifying value-added products that increase our pool, China's dating market is very large with significant unmet needs. We will continue to explore this space to capture growth opportunities.

利润方面,我们在探探达到商业正循环之前不会追求利润, 但我们也不会让探探再次陷入持续的亏损。 更细节的财务问题交给Tessie。

Regarding the bottom line, we will not pursue profits before Tantan enters a positive business cycle, but we will not let Tantan fall into continuous losses again. As for detailed financials, I will leave that.

With regards to financial performance, the simple answer is that the top line is likely to continue to trend down sequentially due to two reasons. The first one is, as Tang Yan mentioned just now, Tan Tan has not reached a self-sustaining positive business cycle yet. User number is still trending down. The second reason is that although there is still room to pull up the ARPU, the focus at this point is to get the dating experience right. And therefore, we do not want to put too much pressure on the team so they won't let monetization get in the way when consumer experience is the most crucial priority. With regards to profits, this year Tantan is on track to achieve, I think, 50 million RMB plus minus in terms of segment profits. However, the bottom line has also been trending down slightly throughout the year due to the top line pressure. So before we reach, I would say that before we reach the tipping point on top line performance, we do need to take some steps to cut down on the cost and expenses front so that Tantan won't slide back to loss. That's one of the key priorities for our financial planning for Tantan 2025. I think on that, I'm going to have more details for you on our next earnings call when we finish planning for 2025. Now back to Ashley.

In the interest of time, let's take one last question before we call it a day. Operator, please.

Thank you. Your final question comes from Xueqing Cheng from CICC. Please go ahead.

Thank you, Manager Chen, for accepting my question. My question is about shareholder feedback. First of all, regarding the dividend, the company has had a six-year special dividend track record in history. So I would like to ask about this year's dividend plan. In addition, regarding the repurchase, the company has repurchased about $1.5 billion in shares since the beginning of the year. The current repurchase plan will expire in 2026, with less than $50 million left. According to the current repurchase speed, we expect this amount to be used up very soon in 2025. Thanks, management, for taking my question, my question about shareholder returns. Firstly, regarding dividends, the company has a track record of six consecutive years of special dividends. So what's your dividend plan for this year? Additionally, regarding share buyback, the company has buyback nearly $150 million year-to-date. So the current buyback program, which will expire in the middle of 2026, has less than $15 million quota. At the current pace of repurchase, we expect that this program will be exhausted by early 2025. So let's apply for further share back. Thank you.

Okay, I'll pick that question. As you correctly pointed out, during the past 12 months, we've bought back more than, I think, more than $150 million worth of Momo shares and paid around $100 million in cash dividends. For me, I really look at both approaches meaning cash dividend and buyback as ways to enhance shareholder value. But sometimes one works better than the other. If you take our Q3 balance sheet number and do a quick math, you will be looking at somewhere around $8.7 per share in net cash. And that's a growing number as we continue to make profit. And yet, our stock is trading at I believe below seven dollars per share at this point I would say in view of such as significant undervaluation we should give buyback bigger priority in comparison with with cash dividends however how much we could buy back is is limited to a number of factors, the biggest of which is the liquidity out there in the market. If you look at the past couple of quarters, our repurchase has been running at from $30 million per quarter to around $60 million per quarter. With the limited liquidity we have, it's hard to exceed that kind of run rate in terms of how much we buy back. it's quite likely that we may continue to have excess cash on top of buyback. If that continues to be the case, we will certainly continue to consider cash dividends as an additional way to return cash to the shareholders so we can share our prosperity. The other question you have is, At the current run rate, we'll probably use up the repurchase already authorized by the Board of Directors, but I think we're not limited to that cap. If the current program is used up, I'm sure that the Board of Directors will continue to make decisions that make sense in terms of enhancing the shareholder value. So that's what I can say at this point. Maybe back to Ashley to conclude the call.

Okay. Well, thank you everyone for participating in the call and I think that's going to be the end of it and we'll see you next year. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.