Hello Group Inc.

Ladies and gentlemen, thank you for standing by and welcome to fourth quarter and fiscal year 2024 Hello Group, Inc. earnings conference call. 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 that 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, Albreta. Thank you, Albreta. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's fourth quarter and fiscal 2024 earnings conference call. The company's results were released earlier today and are available on the company's IR website. On the call today are Ms. Tan Yan, CEO of the company, Ms. Jiang 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 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 will now pass the call over to our CEO, Mr. Tang Yan. Mr. Tang, please.

Hello, everyone. Thank you for attending today's call. R&R4 is a year of challenges and opportunities. Our team is very good at applying all kinds of external determinants and achieving the financial and operating results that make us satisfied. MoMo Financial's business is more healthy than last year. Hello everyone, thank you for joining our call.

2024 was a year fraught with challenges and opportunities. Our team maneuvered well through external uncertainties and delivered satisfactory financial and operational results. MoMo Cash Cow business continues to be productive with an ecosystem that is healthier than last year. Our overseas business maintained its robust growth momentum and made more meaningful contributions to the group's financial standing. This impels us to take bolder measures to propel growth and innovation in international markets in the future. I'll now pass the call over to Sig for more details. Sig, please.

Hello, everyone. Thank you for joining our call. Our next update on our business in Q4 and fiscal 2024, and I outline our strategic goals for fiscal 2025. Starting with an overview of our financial performance. For Q4, total gross revenue was 2.64 billion RMB, down 12% year-over-year. Adjusted operating income was 280 million RMB, with a margin of 10.6%. Our Q4 costs included 94 million RMB in fuel production-related expenses, Excluding such costs, adjusted operating income would have been 374 million RMB, with a margin of 14.2%. Revenue from the Momo app and Send Along New app totaled 2.42 billion RMB, down 11% year-over-year. The decrease was mainly due to the 18% year-over-year decline in the Momo app, resulting from our proactive product adjustments and weak medical economy. Meanwhile, standalone new app revenue increased 37% from a year ago. Thanks to the rapid growth of our overseas business, adjusted operating income from the mobile app and standalone new app was 269 million RMB with a margin of 11.1%. Excluding fuel-related costs, adjusted operating income will have been 363 million RMB, with a margin of 15%. As for Tan Tan, Q4 revenue totaled 213 million RMB, down 22% year-over-year due to the decreased number of paying users. Adjusted operating income was 11.37 million RMB compared to 27.04 million RMB from a year ago. For fiscal 2024, total group revenue was 10.6 billion RMB compared with 12 billion RMB last year. Adjusted operating income was 1.73 billion RMB with a margin of 16.3%. Revenue from the Momo app and stand-alone new apps totaled 9.7 billion RMB, down 11% year-over-year. Momo app revenue decreased 16%, mainly due to our active product adjustments and macro factors. Revenue from stand-alone new apps grew 40%. driven by our overseas expansion. Adjusted operating income from the MoMA app and Stand Along New app was 1.65 billion RMB, with a margin of 17.1%. As for 10 times, total revenue for fiscal 2024 was 900 million RMB, compared with the 1.2 billion RMB in the previous year. The adjusted operating income was 75.94 million RMB compared with 101 million RMB the previous year. Now, I will now give you an update on our execution, strategic priorities for each business line in 2024, as well as the challenges we are facing and how we plan to address them. First, on the MOMO Act, Our goal is to maintain the productivity of this cash cow business with a healthy social ecosystem. Over the past year, our proactive product adjustments combined with micro-softness put a lot of pressure on revenue. However, quality of content and a strong ecosystem will lay a solid foundation for the stable productivity of our cash cow business next year. On the product and operational front, in 2024, our product team focused on improving the female user experience and optimizing real-time social use cases to drive effective interaction. We introduced an AI-assisted chat tool for male users in multiple voice and text-based chat experiences, such as greetings and ciao, ciao. The AI tool can generate reading based on female users' text and picture-based profile information, as well as their historical posts, to improve the quality of ice-breaking conversations, thereby increasing the response rate from female users and improving the overall interactive experience. In addition, we promoted several matching bays real-time voice chat features on the homepage that proves effective in driving deeper user interaction and paying conversions. That's further strengthening Momo's social attributes. On the user acquisition front, over the past two years, we have shifted from a focus on overall user growth to a more pragmatic profit focus Our eye-driven growth model, and we have made good progress in optimizing the efficiency of transitional fee channels and reducing user acquisition costs. The continued improvement in our eye has allowed us to reduce overall marketing spend while keeping traffic volatility stable. Given the significant cost optimization achieved over the last few years, The space to further reduce costs in transitional channels is limited. In 2024, we began to explore new ways to acquire traffic through KOLs. By collaborating with short video influencers on platforms such as Douyin and Red Notes, we have increased brand exposure and gradually shifted our budget from high-cost transitional channels to KOL channels. which helped reduce unit acquisition costs. In Q4, the Mono app had 5.7 million paying users, a sequential decrease of 1.2 million. Due to our cost reduction and efficiency improvement strategy, we reduced the acquisition of some extremely low paying users with a negative ROI, which benefits profitability. Now, on the productivity of Momo, the cash cow business, in Q4, Momo's last streaming revenue was 1.19 billion RMB, down 16% year-over-year. The year-over-year decline was wider than the previous three quarters, mainly due to the reduction in revenue-oriented competition events. which resulted in a significant decrease in incremental revenue from year-end competition events compared to previous years. In fiscal 2024, live streaming revenue totalled 4.8 billion RMB, down 14% year-over-year. This decrease was mainly due to our proactive operational adjustments to maintain a healthy social ecosystem. as well as spending softness among top paying users amidst a weak microeconomy. To mitigate the revenue pressure from the decline in top paying users, we stepped up our efforts to promote live streaming on the homepage to improve its channel penetration and paying conversion. Meanwhile, We increased our product innovation efforts targeting meat and long tail users to stabilize the revenue scale of this group. In early stage of our operational adjustment, we found that the reduction in competition bonus resulting in insufficient profits for supply side partners and reduced their motivation to work hard on our platform. Therefore, in the year's second half, we moderately adjust the incentive policy for daily events, which resulted in a slight increase in revenue sharing ratio for 2024 compared to 2023. However, the increase in sales of live streaming, showroom, costume, and PK pops, which do not require revenue sharing, plays a positive role in stabilizing the profit level of our cash cow business. Now, moving on to value-added services. In Q4, revenue from WAF, excluding Tantan, totaled 1.2 billion RMB, down 5% year-over-year. WAF's revenue from the Momo Act was 800 million RMB, down 15% year-over-year. Revenue from the stand-alone app was 400 million RMB, up 24% year-over-year. For fiscal 2024, revenue from value-added services, excluding Tantan, totaled 4.177 billion RMB, down 6% year-over-year. Boss revenue from the normal app was 3.28 billion RMB, down 17% year-over-year. Revenue from the standalone app was 1.49 billion RMB, up 35% year-over-year. The incremental revenue from our new endeavors largely offset declines in revenue from our legacy business. The decline in normal app launch revenue was mainly due to our full-action product, and operation adjustments in audio and video based live experiences over the past year to mitigate regulatory risks where we significantly reduced the monetization level of agency dominated and heavily monetized use cases. Like in Livestream, we set up the promotion of the chat room experience on the homepage introduced interactive gifting features for the mid- and long-tail users, and launched new categories such as mini-games and love fortune talent to improve chatroom penetration and pay-in conversion while driving organic revenue growth. Turning to Tantan. Tantan's strategic goal for the year was to improve its court dating experience to build an efficient business model that drives profitable growth. With four dating experiences suitable for agents and to drive organic user growth and retention through quality products. We initiated a product upgrade in 2024 focusing on user experience to encourage more experimentation on the product Our management decided not to constrain the team with short-term metrics during the pilot phase, but allowed more fluctuation in user skills and revenue. By the end of the year, product adjustments have played a positive role in improving user experience. Still, user retention and organic user growth have not been significantly improved. The user scale and revenue continue to show a gradual downward trend. Turning to Tantan's user trends and financials. Although the continuous cost reduction and efficiency improvement over the past two years have caused Tantan to break even, there has been no breakthrough in user retention driven by product experience or organic user growth. Meanwhile, continuous reduction in channel investment has put significant pressure on the user base. The combination of multiple factors led to a 10% sequential decline in Tantan's MAU to 10.8 million in September. As of the end of Q4, Tantan had 860,000 paying users. down to 80,000 sequentially due to the decline in MAU. Turning to Tantan Financials, Q4 total revenue was 213 million RMB, down 22% year-over-year, mainly due to the decreased number of paying users. For fiscal 2024, total revenue was 900 million RMB, down 25% year-over-year. In terms of business line, vast revenue was 550 million RMB, down 18% year-over-year due to the decline in number of paying users. By subdividing members' paying features, optimizing the guidance narratives on paying experiences, and stepping up promotion efforts for relatively high-priced products such as SVIP, Black Gold, and additional pay-as-you-go privilege for members, we managed to drive a significant year-over-year growth in VAS RP pool, resulting in VAS revenue declining much smaller than the user numbers. Live streaming revenue was 313 million RMB, down 38% year-over-year, mainly due to our strategic decision to emphasize live streaming, which has a low correlation with the dating experience. For fiscal 2024, Hunters adjusted operating income with 75.94 million RMB, compared with 101 million RMB from Q4 23. Now, moving on to our efforts on Tantan's product and user acquisition. First, on user acquisition funds like Momo, Tantan also implemented KOL collaborations and offline integrated campaigns in 2020 as well. This includes promotion events at bars, music festivals, and other youth-centric venues, combined by targeting online campaigns across new media channels. This approach effectively optimized user acquisition costs while expanding brand influence. On the product front, at the beginning of the year, we identified the major issues affecting the user experience through interviews and surveys. In the year second half, our product team makes full attempt to address two core issues. Uncertainty about the authenticity of user identity and lack of response to chats after matching. After a year of effort, our goal to improving Tantan's core dating experience has largely been achieved but overall user retention has not improved significantly. In 2025, we will implement more extensive cost reduction and efficiency improvement measures, maintaining a low-cost, modest profit level while continuing to explore dating products. As for our new endeavors, Our goal is to enrich the brand portfolio further, push the business boundaries beyond normal and 10-10, and build a long-term growth engine. In quarter four, the total revenue of the new apps was 450 million RMB, up 37% year-over-year. For fiscal 2024, the total revenue of the new apps with 1.57 billion RMB, up 40% year-over-year. The rapid expansion of overseas business, especially social, was the key driver behind this sustained growth. Compared with our domestic businesses, which face much medical and regulatory uncertainties, Overseas businesses offer clear growth potential and trajectory. Our long-standing expertise in social products and operational gives us confidence that shifting human and financial resources towards overseas business will yield better returns on investments for the group's revenue and profits. Since the beginning of 2024, we have been committed to localizing our overseas business and improving the operational efficiency, of course, for the team collaboration. On the product front, we introduced virtual gift design and interactive features that aligned with local users' preferences in the chat rooms and began exploring the expansion from WordPress to Livestream. On the operational front, we refined our services for high-paying users, driven growth in the number of top cohort users, which drives overall app people growth. We also improved our supply-side collaboration strategies, significantly increasing the number of new agencies and broadcasters. On the user acquisition front, While maintaining a stable ROI, we mostly increased our marketing efforts to deepen our presence in the existing market while expanding into new regions. The combined efforts of product operations and channels led to increased paying users and app people, which drove revenue growth. Our rapid expansion in Turkish market and live streaming business offset the temporary consumption dips in MENA due to the statistical unrest at the year end, enabling Sochu to maintain strong growth momentum for its 2023 high base and continuously increase its revenue contribution to the group. Over the past two years, building on the success of Sochill, we have launched more brands and new products in the MENA region. Among them, Yahaland, an audio-based voice social game, and Ahmar, a voice-based social product, entered initial marketing and monetization phase in 2024 after finalizing product positioning and monetization models. By the end of the year, those two products have reached a certain revenue scale and maintained stable ROI, even as we significantly increased marketing investments. The initial success of YahaLand and Amar validates our strategy assessment that MENA market can accommodate multiple brands and platforms and give us confidence that our overseas business will play an even more important role in our group's revenues and profits in the future. In 2025, we will continue to increase our investments in the AHA lens and AMAR, and strive for continuous improvements in ROI and profitability. If we are able to increase the revenue of these two apps and to assert and scout and achieve profitability, we will replicate the successful experience and models in other social entertainment apps, building a more diverse product portfolio. That concludes our business review for 2024. I will now briefly outline our priorities for 2025. Essentially, we will maintain the 2024 strategies for normal time in our overseas businesses with adjustments based on our new developments and the market dynamics. First, for the Momo app, our goal is to maintain long-term stable operation with a healthy social ecosystem to ensure the continuous stable productivity of such cash cow business. But sometimes the strategic goal for this year is to reduce costs and improve efficiency while maintaining profitability with a focus on continuing to explore dating experiences suitable for agents and efficient business models. Our new endeavors aim to enrich the brand portfolio further, expand the business beyond normal and time-to-time, and be a long-term growth engine. We'll further increase our overseas efforts and take even bolder steps to drive growth and innovation in international markets. Lastly, I'm pleased to announce that our board has approved a special cash dividend in the amount of 0.3 USD per ADS for a total cash payment of approximately 50 million USD or about 30% of the adjusted net income attributable to Hollywood Inc. in 2024. This is the seventh consecutive year that we have shared the fruits of our business with our shareholders through cash dividends, which is a strong testament to our commitment to creating long-term value for our shareholders. Now, let me pass the call to Kathy for the financial review. Kathy, please.

Thanks, Vic. Hello, everyone. Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total revenue for the fourth quarter of 2024 was 2.64 billion RMB, down 12% a young year and 1% quarter over quarter. Non-GAAP net income attributable to the company was 230.5 million RMB compared to 514.7 million RMB from the same period of 2023 and 493.3 million RMB from Q3 24. Our Q4 costs included some film production related expenses. At year end, we also conducted a thorough impairment review on certain assets on our balance sheet. including capitalized film production costs and other long-term investments and made provisions in accordance with the principle of prudence. Excluding these costs and expenses of 141 million RMB adjusted net income for Q4 2024 would have been 371.1 million RMB. Looking into the key revenue items for Q4, Firstly, on live broadcasting. Total revenue from live broadcasting business for the fourth quarter of 2024 was 1.26 billion RMB, down 17% year-on-year and 2% quarter-over-quarter. The year-over-year decrease was mainly due to a decline in the core Momo live streaming business and to a lesser extent, the decrease in Tantan. Momo live broadcasting revenue totaled 1.19 billion RMB for the quarter. down 16% year-over-year, and 3% quarter-over-quarter. Sometimes live broadcasting revenue amounted to $75.7 million, down 24% year-over-year, but up 14% quarter-over-quarter. Revenue from the value-added services for the fourth quarter of 2024 was $1.33 billion, down 7% from Q4 last year and 2% sequentially. Revenue from value-added service on an ex-time-time basis was 1.2 billion RMB in the fourth quarter of 2024, down 5% from Q4 last year and 2% from the previous quarter. One more app, value-added service revenue decreased both on a year-over-year and quarter-over-quarter basis. This was due to the weak standing sentiment as well as our proactive product adjustments. However, Revenue from the standalone new apps continued to grow nicely, partially offsetting the revenue pressure from mobile added services. Compound value added services revenue amounted to RMB 127.8 million, down 20% year-over-year and 7% sequentially. The decrease was due to other client paying users, which was in turn due to a reduction in channel investment. However, The continued improvement in ARPU resulted in revenue declining much less than user count. Now turning to cost and expenses. Non-GAAP cost of revenue for the fourth quarter of 2024 was 1.72 billion RMB, compared to 1.77 billion for the same period last year. Non-GAAP gross margin for the quarter was 34.7%, down 6.5 percentage points from the year-ago period. Cost of revenue in Q4 included 94 million RMB film production costs, as well as impairment costs provided for earlier film productions. Excluding these costs, gross profit margin would have been 38.2%, down 2.9 percentage points from Q4 last year. The year-over-year decrease was due to a number of factors. Number one, higher payout ratio, which in turn was due to two factors. One factor is that overseas business continued, contributed a larger percentage of total revenue while having higher payout ratio, especially during the new region expansion and initial phase of ZDO service offering. And to a lesser degree, higher payout from more cash cow business to incentivize the supply side considering the downward revenue trend. Number two, deleverage. where direct personnel and infrastructure costs takes up a higher percentage of revenue. Number three, payment channel costs represent a slightly higher percentage of total revenue as revenue makes shifts towards overseas business, where channel fees as a percentage of revenue are much higher than those for domestic business. Non-GAAP R&D expenses for the fourth quarter was 212.4 million RMB compared to 218.1 million RMB for the same period last year, or a 3% decrease year-over-year. The decrease was due to optimization in personnel costs. Non-GAAP R&D expenses as a percentage of revenue was 8% compared with 7% from the year-ago period. We ended the quarter with 1,390 total employees of which 276 are from Tantan compared to 1,382 total employees of which 301 from Tantan a year ago. The R&D personnel as a percentage of total employee for the group was 61% compared with 63% Q4 last year. Sales and marketing expenses for the fourth quarter was 311.7 million renminbi, or 12% of total revenue, compared to 296.0 million renminbi, or 10% of total revenue, for the same period last year. The year-over-year increase was primarily attributable to the increase in channel investment for the overseas app, whereas marketing spend for MoMo core business and TamTam was narrowed to varying degrees. Non-GAAP G&A expenses was 117.6 million RMB for the fourth quarter of 2024 compared to 87.2 million RMB for the same quarter last year, representing a 4% and 3% of total revenue respectively. The year-over-year increase in G&A expenses was due to a combination of factors including provision for some pending legal matters, self-inspection on tax-related matters, and due diligence related costs in connection with potential investments. Non-GAAP operating income was 279.9 million RMB with a margin of 10.6% compared with 264.2 million RMB with a margin of 22.1% from the same period last year. Excluding film production related costs as mentioned earlier, non-GAAP operating income would have been 373.9 million RMB with a margin of 14.2%. Non-GAAP operating expenses as a percentage of total revenue was 24%, an increase from 20% for Q4 2023. Non-GAAP operating expenses on a year-over-year basis increased 7%. The increase in both absolute renminbi amount and as a percentage of revenue for operating expenses was mainly due to an increase in G&A expenses and to a lesser degree, increase in social marketing expenses. Now briefly on income taxes. Total income tax expense was 89.5 million renminbi for the quarter with an effective tax rate of 28%. In Q4, the company accrued withholding income tax is 19.5 million RMB, which is 5% of undistributed profits generated by our woe fee. In Q4 2024, as a result of our self-inspection of tax-related matters, we also paid some taxes that were due but unpaid in earlier years. Without such adjustments and the withholding tax, our estimated non-GAAP effective tax rate in Q4 would have been around 17% in the fourth quarter. Now turning to balance sheet and cash flow items. As of December 31, 2024, whole group's cash, cash equivalents, short-term deposits, long-term deposits, short-term investments, and restricted cash totaled 14.73 billion RMB compared to 13.48 billion RMB as of December 31, 2023. Net cash provided by operating activities in the fourth quarter of 2024 was 423.6 million RMB. Lastly, on business outlook, we estimated our first quarter revenue to come in the range from 2.4 billion RMB to 2.5 billion RMB, representing a decrease of 6.3% to 2.4% year-on-year, or a decrease of 9% to 5.2% quarter-over-quarter. At segment level, for Q1 2025, on a year-over-year basis, we expect MoMA segment revenue to decrease around mid to low single digits due to the continuous macro headwinds offset by the rapid growth of overseas business. On the time-time side, we expect revenue to decrease around 20% due to value-added service revenue contraction caused by a decline in user base, and to a lesser degree, our operational adjustment to de-emphasize less dating-centric live streaming services. 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 for today's discussion. With that, let me turn the call back to Ashley to start Q&A. Ashley, please. Thank you.

For those who prefer to speak Chinese, please ask your questions in Chinese first, followed by English translation by yourself. Operator, we're ready for questions, please. 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 Xu Qingzhang with CICC.

Thank you for accepting my question. My question is about Momo's initiative. 那我们看到四季度默默主战的付费用户环比是减少了120万 这远大于历史的平均水平 那主要的原因是什么 然后这个对收入和利润的影响有多大 付费用户下滑的趋势今年是否能否扭转 然后管理层如何评价过去一年默默这块直播和VAS产品的调整效果 今年是否还会进一步进行调整 In the first quarter, number of paying users on Comomo decreased by 1.2 million quarter-on-quarter, which is significantly larger than the historical average. So what's the main reason for this? What's the impact on revenue and profit? Can we see the number of paying users around this year? And secondly, how does management view the adjustments to live streaming and vast products over the past year? Are there any further adjustments this year? Lastly, how to view the revenue and profit of the Comomo in 2025? Thank you.

I will take this answer. So about the question of paying users, for the last few years we pushed hard to get a lot of small ticket paying users because we thought we could keep improving our earnings. And we spent quite a bit on different channels to acquire them, but the cost could not be Now, given the tough economic and our goals to be more focused on the profits, we have decided to cut back on trying to bring in these low-return paying users in the fourth quarter. That's why we saw a big drop in long-term paying users, which is more than what we usually experience at the end of this year, of the year end. So in the months ahead, we will keep reducing our efforts to acquire this low-return small-ticket users. This means we expected the number of paying users to drop more than usual, even though this will lower our overall count of paying users. But these users generally don't engage much or spend, so stopping our efforts to bring them in won't really the platform. In fact, the shift should help us boost the profitability of our main business. Regarding the product adjustment of Momo, after a year of efforts, we think Momo's content has greatly improved, so we won't make any changes to reduce earnings right now. Instead, we're going to focus on adding fun features and ways to engage users. At the same time, we will keep looking for ways to save costs to make sure our main business continues to pull in good profits, even with our revenue goes down a bit. Kathy will share more about Momo's financial plans for this year.

This is a very expansive question, so let me try to break it down into a few key components and take them one by one. First of all, on revenue outlook for the cash cow business, I like to crack it down by considering both internal factors and external factors. Internally, if we look at almost fundamentals, I would say that the foundation of our business remains very solid and resilient. First of all, Moomoo continues to be the go-to social platform for users looking to discover new friends and expand their circles. Our core user engagement, such as number of meaningful connections and number of interactions remain pretty strong, which give us confidence in the platform's resilience. On paying user metrics, which might have caused some concerns this quarter, I don't think investors need to really worry about it either, and here is why. It's true that extremely high spending users, which we sometimes call the whales, have faced pressure in recent years due to economic challenges, many of them especially business owners saw their net worth shrinking during COVID and subsequent real estate meltdown, which impacted spending. It's also true that, as Sig mentioned earlier, the long-term users, those spending around $10 per month or even less, have been deprioritized in our user acquisition strategy due to normalization potential and negative ROI. However, we're happy to see that mid-tier users which we sometimes call dolphins in comparison with the whales, have been the backbone of our platform. This group of dolphins has remained remarkably stable throughout the past few years. Perhaps some former whales have also transitioned into this category. Looking ahead, we expect this group of dolphin users to continue driving the business and providing a solid revenue base. Now turning to to external factors impacting revenue. First off, on regulatory environment, over the past few years, you probably know that policy changes have posted pretty serious challenges for MoMA, the cash cow business. In response, we proactively adjusted our monetization strategies to reduce management, to reduce regulatory risk. However, since late 2024, the environment has stabilized a little bit. allowing us to focus on revenue recovery rather than risk management. So that's the regulatory factor. And on macro environment, I would say that consumer sentiment at this point remains a key variable on which there is not much we can do really but to adapt. From what we've seen from how users perform so far into Q1, it looks like the very top of the pyramid users or the whales are going to continue to be very cautious in terms of spending. So live streaming may continue to see pressure, but service should be doing relatively well. And as the year progresses, if consumer sentiment continues to recover and government policies further boost consumer confidence, especially the confidence from the business owners, we could see upside potential in user spending. But at this stage, it's still too early to make a very strong call on the macro front. So if you're looking for a more quantitative outlook, here's what I can share at this point. As reflected in our guidance, we expect some seasonality in Q1, but should see a slight rebound in Q2. Where we land post the rebound really depends on macro. For now, I would put in a low P&S revenue decline in the cash cow business for 2025 and see if NACRO would help us perform better as we head deeper into the year. That's for the cash cow. If you throw in the overseas piece and the TATAN piece into the pot and look at the group level rate, the YY decrease will likely narrow pretty substantially to low single digits as the oversea is still gaining pretty strong traction at this point. Of course, in absolute dollar terms, this will still be a meaningful year-over-year decrease from 2024. So we are further optimizing headcount as well as improving marketing efficiency to absorb part of the top-line pressure and reallocate some of the resources to overseas business as well. As a result, while revenue will decline, profitability impact will be less severe due to cost optimization for the cash cow. However, we may invest a big part of the cost savings, especially the marketing savings, to grow our overseas business. So I would say that at the group level, the picture is a little bit more complicated. For the whole group, meaning combining the CAL, TAN-TAN, and the faculty-spanning overseas business altogether, we are targeting a non-GAAP operating margin range from 12% to 13%. However, you may want to take that range with an understanding that it is a very soft kind of guidance rather than a firm commitment because, as you can understand, we are at the beginning of the year and there are still too many moving pieces that could move the bottom line margins one way or another. So this is what I can share at this point of time. Back to Ashley to take the next question.

I'll put the next question, please. Your next question comes from Thomas Chong with Jefferies.

Good evening. Thank you, Manager Chong, for introducing my question. 我的问题是关于我们海外产品的具体的情况。 比如收缺,现在的主力的市场有哪些收入跟利润的规模? 还有就是我们刚刚提到的两个新的APP, 在产品功能还有市场定位上跟收缺, 可以分享一下有什么区别, 还有当前的收入以及投入的规模有多大? 另外再想多问一下,25年, Thanks, management, for taking my question. My question is about our overseas application. Can management comment about the key market for SoChill as well as its revenue and earnings? On the other hand, we also talked about the two new apps. Can management share the positioning of these two applications and how it is different from social. How big are these two apps in terms of revenue and spending? In 2025, how should we think about the overall overseas revenue and earnings expectation, as well as the growth potential in overseas market? Thank you.

Regarding the question about social and other apps, So in the past few years, SHOCHO has become the largest growing product in our group, both in revenue and profit. In 2024, its revenue grew by 50% from 2023, nearing 1 billion RMB and also surpassing Tantan's earnings. So this growth is mainly due to improving localization strategies we started last year and focusing on three main areas. One is reaching the mature markets. Two, expanding into new regions and also adding features like live streaming. We have also strengthened our partnerships which has helped lose revenue. ShowChill is doing well in Turkey, Egypt, and Gulf countries, showing very strong market demand. We also launched two new apps in Amina Visions at the end of 2023. The first one is YahaLand and all the ShowChill game apps, and Amara, similar to ShowChill but voice-focused. Both products was ROI driven from the start and has short promising potential in revenue and user acquisition. So in 2025, if the ROI remains promising, we plan to increase marketing for both. So the surface of Sushu and our new product shows that the knowledge we gain in our home market works well aboard, especially in the MENA region. which can accommodate multiple social brands. So in 2025, we will invest more in exploring international markets since our overseas products are focused on profits. Increasing investments will heavily affect the group's net profits. So Cathy will provide specific details on revenue and profit forecast.

Okay, our overseas growth strategy for 2025 can be broken down into two buckets, the good old Sochiel and the other new initiatives. For Sochiel, as Sig mentioned earlier, we're focusing on three main drivers this year. First one is better localization. Second one is geographic expansion into both countries. where our current penetration is not as deep. And the third driver is new video services. If we make strong, if we make good progress across all those three areas, we could reach the higher end of our growth target. If certain areas require more time, we might land in the mid to lower range of our target. In 2025, We are going to have a second growth driver for our overseas business, which are the two newer applications, Yahalan and Amar. Both applications are gaining pretty strong traction at this point and we're significantly increasing our marketing efforts to accelerate revenue growth because the RI is looking pretty promising. Despite stepping up, the marketing dollars, ROI remains quite stable, which is a very positive sign. If we can maintain strong ROI as we continue to scale, by the end of the year, the combined quarterly revenue run rate as new overseas apps could, meaning these two smaller apps, could reach where Sochio is today. If you annualize that, that would mean the overseas revenue contribution for 2026 will become very meaningful. However, if marketing efficiency declines as we scale, we may pause marketing expansion to focus on product improvements and operational refinance before wrapping up again. In that case, revenue growth for those two applications could come in a bit slower. So, you know, looking at the full overseas portfolio, we expect revenue from it to grow from around 1 billion RMB in 2024 to a range between, could be between 1.7 billion to 2 billion RMB in 2025. That's a pretty impressive growth for this year already. Profitability is not a priority for overseas expansion this year as we are focused on scaling. That said, because we grow our overseas business with high level of focus on ROI as we continue to scale, bottom line for overseas business should improve over time. So that's what I have to share at this point.

I think I'm ready for the next question. Thank you.

Your next question comes from Miao Jiang with Deutsche Bank. Leo Sheng from Deutsche Bank, your line is open.

Hey, hello. Thank you for accepting my question. My question is about Tantan. Tantan, we have seen the reform of Tantan for almost a year now. And then we see that the user and income scale are still in a downward trend. I would like to ask Tantan, what are the plans for the operation of Tantan products this year? Let me translate myself. Thank you, management, for taking my question. My question is regarding to Tantan. After one year of business adjustment, we see Tantan's user and revenue scale is still in a declining trend. Can management share the plan for Tantan this year in terms of product and operations? how should we think of Tantan's revenue and profit outlook in 2025? Thank you.

Okay. I'll take the Tantan question. Maybe let me spend a little bit more time to discuss Tantan's strategy for 2025 and explain why we're taking this approach. Tantan has always had two main strategic objectives. One is delivering good dating experience for users in China and the broader Asian market. This remains our top priority because we, you know, obeyed all the ups and downs in the past. We still see this as a significant underserved demand in China market, and we believe we out of all of our peers still have the best chance of being the best player in this market. And the second objective is building a sustainable, profitable business model. Given China's highly competitive and costly user acquisition environment, there is only so much we can do to optimize on user acquisition costs. So in order to build a profitable business model, referring to the second goal that I mentioned, we in the past thought that boosting monetization was a more feasible path. That's why in the past we focused heavily on increasing R2 to improve monetization. However, this approach often conflicted with user experience, forcing us into a pretty awkward balancing act, one that we've never executed successfully and sometimes even tumbled and struggled to get back on track. This year, we're taking a different path. Instead of prioritizing our pool growth, we're shifting our focus to reducing user acquisition cost in a pretty dramatic way. Now, how do we get there? Typically, the more aggressively we acquire users, the higher the user acquisition cost would go, which means if we want to maintain current level of user scale, it's difficult to further reduce unit acquisition costs. On the other hand, if we reduce our acquisition volume, unit costs would also decrease. This year, we will significantly call back on user acquisition spending, all the way to the point where the ROI turns positive, which is to say that every new user we acquire, we aim to fully recover their acquisition costs, including the fixed costs, meaning the personnel and other related network expenses. By making this adjustment, even at our current ARPU levels, we can recover marketing spend and minimize acquisition losses, creating a healthier business cycle. There is, of course, a trade-off with this strategy. Since we're cutting back on user acquisition costs pretty dramatically, we will likely see a faster decline in active users. However, many of these users were only being maintained at the expense of profitability. So we're willing to let go of some scale in the short term. The upside is that this shift buys us sufficient time and space to refine user experience and retention strategies as well as experiment with new premium features that could drive sustainable monetization. If we are successful in doing that, it's going to made a foundation for future growth where both user experience and revenue generation can scale together. That actually marks a pretty big shift in strategies for Tantan in 2025. We'll see how it plays out as the year progresses. When it comes to Tantan's revenue outlook for 2025, there are two key factors shaping the quarterly trend. the product and operational adjustments impacting ARPU. Last year, we made some product and operational changes in that improving the dating experience. These changes were tested on a smaller group of users last year, and now we are fully rolling out these adjustments across the platform in the first half of 2025. And because these changes will have a negative impact on ARPU, a full-scale rollout certainly will weigh on revenue in the near term. And the second factor that we should consider is significant reduction in marketing spend, as I mentioned, in the overall strategy for Tanta in 2025. As I said, starting from Q2 2025, we will pretty drastically cut marketing expenses to ensure the user acquisition achieves a full ROI recovery. Right now, we are looking at reducing quarterly marketing spend from around $40,000 50 million RMB per quarter to approximately 20 to 30 million RMB per quarter. Naturally, this will result in a decline in active users and top line revenues. So given these moving pieces, it's difficult to provide an exact revenue forecast at this point. That said, I would put a rough estimated range between 20, maybe 20 to 30% revenue decline, year-over-year decline for 2025. In terms of profitability outlook, despite this top-line decline, because our efforts are focused on achieving better ROI, profitability will actually see improvement for domestic contacts. Beyond optimizing marketing spend, we will also scale back personnel costs pretty significantly to align with our profitability goals. And we do expect Tantan to remain profitable for the coming couple of years, although at a lower level of platform scale. We may need to put in some investment to expand Tantan overseas, but it will be experimental and RI-driven as well. So that's for Tantan's financial outlook. Actually, maybe the last question, yeah.

Operator, let's see if we have any more requests on the line. If we do, let's take one last question before calling the night. Thank you.

Thank you. Your next question comes from Jenny Wan with UBS.

Thank you for the opportunity. I want to ask a question about our capital return. So thanks management for taking my question. My question is regarding our capital return. As Michael mentioned, this is the seventh consecutive year of issuing special dividends. So looking ahead, are we planning on a regular dividend policy? Not that this year's dividend payout is not more than previous years, but on the other hand, we extended and upsized our shelter-back program. So does this indicate a strategic preference for shelter-backs over dividends in terms of shelter-back returns going forward? Thank you. Okay, I'm hearing several questions here. On the question of whether we are thinking about making the dividend program a regular one, the simple answer is no. We don't see a strong reason to make our special dividend plan a regular one, and here's why. First off, for long-term investors who have been following us, It's already well understood that management takes a disciplined approach to capital allocation. When we have access to cash, we return it to shareholders in a thoughtful and value-enhancing way. Because this expectation is already well established, we don't see the need for a fixed dividend policy just to formalize it. Instead, we would rather keep some flexibility in how we allocate capital. If we see compelling investment opportunities, we would prefer to deploy capital toward growth, either organically or through M&As, rather than commit to a rigid dividend schedule. And the second point is perhaps related to It's also related to your other question about how we decide between cash dividends versus share buyback. Now, even when it comes to returning capital to shareholders, we need the flexibility to decide between dividends versus share buybacks. Given that our stock is still trading pretty significantly below cash value, buyback currently offers a better return for shareholders compared to a fixed dividend payout. So the conclusion is a rigid dividend policy would limit our ability to optimize capital allocation. Instead, we prefer to keep our options open and ensure every dollar is deployed in a way that creates the most value for our shareholders. So that's my answer to the question. And maybe with that, we'd like to wrap up today's call.

Okay. So thank you all for joining us. I will see you next quarter. Operator, we're ready to close. Thank you.

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