Hello Group Inc.

Ladies and gentlemen, thank you for standing by and welcome to Hello Group's first quarter 2026 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 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, Arpreetha. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's first quarter 2026 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. 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 filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under law. I will now pass the call over to our COO, Ms. Jiang Zituan. Ms. Jiang, please.

Thank you, Ashley. Hello, everyone. Thank you for joining today's call. The group maintains steady business momentum in Q1. Guided by the strategic priorities set last year, our domestic business stayed healthy through focused product innovation and refined operations despite external pressures. Leveraging the synergy of a diversified product portfolio Our overseas business has remained a positive trend. Looking ahead, we are fully confident in each business line to continue to advance along the strategic roadmap in 2026. Now I'll walk you through the key updates. Starting with the financials, for Q1 26, total group revenue was 2.39 billion RMB, down 5% year-over-year. Domestic revenue reached 1.79 billion RMB, down 15% year over year. Overseas revenue was 597 million RMB, up 44% year over year. Overseas revenue accounted for 25% compared to 16% in the same period last year. Adjusted operating income was 349 million RMB, up 1% year-over-year, with a margin of 14.6%. Building on the strategic direction from 2025, our 26 priorities continue along three main tracks. For Momo, the goal is to ensure stable, sustained productivity of our cash cow business. for Tantan to continue exploring a dating experience and efficient business model tailored for Asian users, and for our new businesses to deepen overseas presence, enrich our brand portfolio, and build a long-term growth engine. Let me walk you through each, starting with Momo. On the product side, our key focus in recent years has been to optimize user experience and stabilize our user base. This year, we have continued to refine the chat experience. Our not-lock feature improves connection accuracy by analyzing users' historical chat patterns to optimize matching algorithms. Driving sustained growth in two-way and in-depth chats In real-time chat scenarios, building on a study run up of voice features, we have also introduced video features to enrich our portfolio of instant interactions. The combined upgrades in algorithm recommendation and product experience have lowered the barrier for users to find chat partners. This is the main driver behind the study improvement in retention among existing users. In 2005, we undertook a number of meaningful inspirations in leveraging AI to improve users' social efficiency with encouraging initial results. For example, our AI greetings and AI chat assist features improved the female users' experience. This drove higher reach vibrates from male users and more in-depth conversation overall. In Q1, The product team explore AI-driven innovations such as voice-driven models, guiding users to complete voice profiles, auto-generating voice content, and releasing it onto the platform in a message in a model format to spark users' desire to connect. For user acquisition, Channel ROI has been made fully profitable since the beginning of the year. Ongoing audio room, gameplay updates, and better channel conversions lifted payment intent among meat and small spending users. This drove study LTV growth and channel ROI improved more than the quarter over quarter. Overall, acquisition spend continued the refined discipline approach, narrowing slightly from last quarter. This is worth noting that Q1 was affected by the Chinese New Year as some users shifted their social time to offline gathering and close friends and family. This temporary pullback platform activity and paying skills with most paying users decreasing by 200,000 quarter over quarter to 3.7 million. That said, thanks to a year of product refinement focused on chat experience, organic traffic grew compared to last year, and retention among existing users improved slightly. During the Chinese New Year, the team ran targeted operational events at a low point of the cycle, narrowing the decline in user activity compared to past holidays. As a result, the post-holiday recovery was meaningfully better than in the same period last year. This set a solid foundation for stabilizing our user base over the full year. Turning to Momo's commercial performance. In Q1, Momo's last revenue was 1.52 billion RMB, down 15% year-over-year and 9% quarter over quarter. The year-over-year decline mainly reflects the ongoing impact of the new tax regulation and stricter local enforcement that came into effect in the second half of 25. The motivation of some high-grossing agencies and broadcasters is still recovery. The sequential decline was largely seasonal, during by the Chinese New Year, alongside persistently soft consumer spending sentiment. In response to this external shift, the teams continue to direct gameplay innovation and operational resources towards mid-tier and long-tail users, keeping revenue from audio scenarios and social games, such as parking walls, relatively resilient. This helps partially absorb the external pressure on overall revenue. On the product and operations side, our live streaming business organized a series of user-oriented events during the Chinese New Year, effectively cushioning the delusion of online behavior from the long holiday. As a result, the post-holiday recovery in key operational metrics, including user engagement, paying conversion rate, and streamer return rate, was meaningfully stronger than in the same period last year. At the same time, we continue to introduce and selectively support high-quality talent streamers, lifting organic revenue through content quality improvements, In audio scenarios, we roll out the new PK gameplay to further motivate users to give one another. With some mid-tier and long-term broadcasters and agencies on our platform facing ongoing profit pressure during the test compliance process, we have rolled out a new incentive-based revenue sharing policy. This is decided to enable the quality performance to deliver greater value to the platform while ensuring they make stable income in turn. Now, let's turn to Tantan. As of the end of Q1, Tantan has 0.6 million paying users, a modest decrease of 30,000 quarter over quarter. This decline was driven by two factors. First, the carryover from ongoing MAU decline, and second, Alipay's changes to its auto-renewal billing rules, which placed short-term pressure on membership conversions. Under the continued effect of our strategic marketing cuts, Tencent's user base remained on a downward trajectory though the magnitude of decline has narrowed meaningfully. Through algorithm integration and refined operations, engagement and retention among younger users showed slight improvements, contributing positive to user base stability. On the product side, the team optimized recommendation strategies in our court swipe-based scenario. For example, we introduced HHEAR's restrictions on female users' matches, allowing only horizontal or upward matching, a benefit for female users' rural social expectations. This drove a near three percentage point increase in average swipe per female user, slightly improving the retention. On new scenario inspiration, we piloted Mac-based social and AI chat assist features. On user acquisition, although the year-over-year reduction in channel investment led to a lower required volume, the meaningful narrowing the unit acquisition cost partially offset the impact. Additionally, because organic traffic outperform channel traffic on both user engagement and retention, the overall decline in our user base has far smaller than the channel-driven decline implied by our strategic cuts. Sequentially, both spend and user acquisition cost, narrowed by various degrees, so the channel volume decline was relatively limited. While early-phase renewal policy created new near-term output pressure, channel ROI was sustained well above 100% throughout the quarter. On the financial side, in Q1, 10 times domestic business generated 125 million RMB in revenue, down 25% year-over-year and 8% quarter-over-quarter. The primary driver remains MAU construction, leading the fewer paying users, compounded by the short-term impact of Alipay's policy adjustments on vast payments. On monetization, the team unbundled membership features into a lock-card offering while enriching fresh chat game plans and stepping up in app promotion to ease top-line pressure. On profitability, thanks to ongoing cuts in channel investment and personal costs, net profits grew significantly year over year. Lastly, our new businesses. Our 2036 goal carries forward from 25 to deepen our overseas presence, enrich our brand portfolio, and build a long-term growth engine. In Q1, overseas revenue totaled 597 million RMB, up 44% year-over-year, with a slight 2% sequential decline. Overseas now accounted for 25% of group revenue, compared to 16% in the same period last year. The sequential softness was mainly due to some external challenges SoChill faced during the quarter, which weighted on our overseas business overall. Excluding SoChill, the rest of our overseas businesses continue to deliver healthy growth this quarter, Further validating the value of diversified product portfolio in dispensing risk from single product volatility. Our two newer product in MENA, Yahalan and Amar, continue their rapid growth trajectory with both delivering triple digit revenue growth year over year in Q1. Driven by continuously improving localized operations, a more precise graph of local user preferences, and sustained game plan innovation, both products saw concurrent improvement in revenue and profit. This quarter, Yahoo! Land is approaching net income break-even, and Amarth achieved positive for marginal contribution for the first time. This is a significant milestone making our shift in MENA from a social-dominated model to a multi-product portfolio. Beyond our audio and video social products in MENA region, our daily business focus on developed markets is another important pillar of our overseas footprint. Also deliver satisfying progress this quarter. Panda International, met by our Singapore team, completed a full upgrade of product positioning and branding over the past year. And in the second half of 2025, began migrating from a shared domestic international app build to a standalone overseas app. The migration was completed in Q1, with 99% of paying users successfully transferred, minimizing the revenue impact of the version speed. Starting in Q2, the team's focus will return to further optimizing product experience and improving monetization efficiency. Separately, Happn, which joined the group last year, has continued to study healthy growth trajectory since the beginning of this year. Happn's user base has remained relatively stable over the past year. and both sequential and year-over-year revenue growth came mainly from improvements in paid conversion rates and app people, reflecting greater efficiencies in operating the existing user base. In Q1, we began testing Happen's entry into new markets, laying the foundation for the brand's mid- to long-term growth. As a relatively newer segment for our overseas front, we remain confident in the dating businesses' continued release of growth potential in 2026. This concludes my remark. 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 take you through the financial review. Total revenue for the first quarter of 2026 was 2.39 million RMB, down 5% the young year and 7% quarter over quarter. Non-GAAP net income attributable to the shareholders of the company was 328.8 million RMB, compared to 403.8 million RMB in the same period of 2025 and 281.3 million RMB in the previous quarter. Looking into the key revenue items for Q1, total revenue for value-added services for the first quarter of 2026 was 2.35 billion RMB, down 6% year-on-year and 7% quarter-on-quarter. On a geographic basis, PRC mainland value-added service revenue was 1.76 billion renminbi, down 15% year-over-year and 9% quarter-over-quarter. The decrease was primarily due to heightened tax scrutiny on the agencies for homeless entertainment business, combined with softened consumer sentiment amid broader macro pressure, and to a lesser degree, a decline in paying users on Tantan. VAS overseas revenue reached 593.7 million RMB, up 44% year-over-year, driven by the rapid expansion of our diversified product portfolio. Overseas VAS revenue decreased slightly by 2% sequentially due to seasonal factor, namely Ramadan, as well as some external challenges in MENA area during the quarter. Turning to costs and expenses, Non-GAAP cost of revenue for the first quarter of 2026 was 1.46 billion RMB compared to 1.57 billion RMB for the same period last year. Non-GAAP gross margin for the quarter was 38.8% compared to 37.9% from year-ago period. Gross profit margin, or GPM, in Q1 26 rose by around 1 percentage point worldwide. The increase was primarily driven by improved margins in MENA products after lowering the revenue sharing ratio to promote quality growth, together with a greater revenue mix from higher margin overseas saving products. This was partially offset by the decline in MOMOS GPM resulted from increased payout ratio to agencies in order to cushion the impact from the tax scrutiny. Non-GAAP R&D expenses for the first quarter was 165.2 million RMB compared to 185.9 million RMB for the same period last year, representing an 11% decrease while wide. The decrease was due to overall labor cost savings from the optimization of our personnel structure. Non-GAAP R&D expenses as a percentage of revenue was 7%, same as Q1 last year. We ended the quarter with 1,396 total employees compared to 1,336 from a year ago. The R&D personnel as a percentage of total employee for the group was 56% compared with 58% from Q1 last year. Non-GAAP sales and marketing expenses for the first quarter was 335.4 million RMB, compared to 322.1 million RMB for the same period last year, representing a 14% and a 13% of total revenue, respectively. The year-over-year increase in sales and marketing expenses was mainly driven by increased marketing investments in our new overseas apps. This was partially offset by continued cost control in our PRC mainland operations, as both Momo and Tantan reduced marketing spend. while Sochi also temporarily scaled back channel investments amid external challenges. Non-GAAP GNA expenses was 89.4 million RMB for the first quarter compared to 114.8 million RMB for the same period last year, representing a 4% and 5% of total revenue, respectively. The decrease in GNA expenses was primarily attributable to a high base effect in Q125, resulting from a self-inspection related to tax matters. Non-GAAP operating income was 349.2 million RMB, representing a margin of 14.6%, compared with 345.3 million RMB and a margin of 13.7% from Q125. The increase was driven by improvement in GPM. Non-GAAP OPACs as a percentage of total revenues stood at 25%, unchanged from the year-ago period. Now briefly on income tax expenses. Total non-GAAP income tax expenses was 81.5 million RMB for the quarter, with an effective tax rate of 20%. In Q1, the company accrued withholding income tax of 21.2%. million renminbi, which is 10% of undistributed profit generated by our wealth fee. Without a withholding tax, our estimated non-GAAP effective tax rate was around 15% in the first quarter. Now turning to balance sheet and cash flow items. As of March 31st, 2046, Holo Group's cash-cash equivalents, short-term deposits, long-term deposits, short-term investments, and restricted cash totaled 8.56 billion renminbi compared to 8.68 billion RMB as of December 31st, 2025. Net cash provided by operating activities in the first quarter of 2026 was 158.9 million RMB. The difference between operating net cash and non-GAAP net income was mainly due to a significant increase in accounts receivable caused by temporary payment collection delays on one of our apps, as well as higher other current liabilities from the accrual of year-end bonuses and the 13-month payroll. Lastly, on business outlook, we estimated our second quarter revenue to come in the range from 2.45 billion RMB to 2.55 billion RMB, representing a decrease of 6.5% to 2.7% year-on-year. This is based on the assumption that at midpoint, on a year-over-year basis, revenue from our mainland China business would decline by high teens percentage-wise, while overseas revenue is expected to grow by high fifties percentage-wise. Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to change. 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.

Just a quick reminder for those who can speak Chinese, please ask your questions in Chinese first and follow by English translation by yourself. And please also limit the number of questions to maximum two. 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 today comes from Suqing Zhang with CICC. Please go ahead. Okay.

Thank you for accepting my question. My question is about overseas business. Regarding MENA business, SIG mentioned in its speech that SOCHO will face external challenges in a quarter. Can you please explain the specific situation? Thank you for taking my question. And my question about the OVNC's business Regarding the MENA business, SIG mentioned in her prepared remarks the social face some challenges from external factors in the first quarter. Co-management provided more details on what happened, and will this have any impact on the three-year revenue outlook for the overseas business? In addition, SIG also mentioned that the two new products continue to see revenue growth while the losses kept narrowing. So can management share when this new business is expected to turn profitable? Going forward, will the company continue to increase marketing investment to scale these products? Or will you focus more on narrowing losses and moving toward profitability? Thank you.

我先从说出陈家的具体原因说起来吧。 一季度流水环比下滑主要有三个原因。 The first is that the Turkish government has strengthened the supervision of products in social media and live broadcasts, and has temporarily conducted a unified price-to-price process on products related to the entire industry. This is the stage pressure caused by the acquisition of new users in our Turkish market. The second is the seasonal factor. During the month of March, the consumer sentiment in the Middle East and North Africa was generally weak. As a large body weight and relatively mature products in the period of life, the impact of seasonal factors is relatively obvious. Let me start with what was dragging social down in Q1.

So the sequential revenue decline came down to three main things. Number one is the Turkish government tightened regulation on social and streaming apps, which temporarily resulted in a blanket removal of all related products across the industry. That created a headwind for us in terms of new use appreciation in Turkey. And number two is seasonality. Consumer sentiment in the MENA region during Ramadan was relatively softer. As a large and rather mature product, Socio was more noticeably impacted by this seasonal kind of headwind. And number three is the ongoing conflicts in the Middle East. that has also had some drag on Socio's revenue in the Gulf region.

We believe that Socio is fully in line with Turkey's policy on social media products. Currently, the Socio team is communicating with Turkey's relevant departments, hoping to get on the shelves as soon as possible. At the same time, we will also speed up the localization of other regions to make up for Turkey's lack. Currently, Socio's business

We are confident that SOCHIL fully complies with all applicable Turkish laws and regulations governing social platforms. Our team is actively working with relevant authorities to bring the app back to the app store as soon as possible. In the meantime, We are accelerating localization efforts in other markets to offset the temporary impact from Turkey. Sochi's business has already began to see a steady recovery from the Q1 low, and we do not believe investors need to be overly concerned about it.

中东北非地区的另外两款新产品, 一季度收入保持快速增长, 亏损也在迅速缩窄。 给大家一些数字概念。 The same income is a three-digit increase. As the business continues to scale up, the team can gradually adjust the share ratio. The net profit has continued to significantly increase in the past year. Under the premise of the recovery of the ROI, we have gradually increased the investment scale and actively tested the new potential market. At the same time, the loss-loss scale is gradually shrinking. Overall, we have a very clear development path for the two new products in the Middle East market. So the other two new MENA products had a strong Q1, triple-digit year-over-year revenue growth with losses narrowing rapidly.

As the business has scaled, the team has been able to gradually adjust the revenue sharing structure, driving meaningful and sustained growth margin improvement over the past year. We have selectively increasing marketing spans where ROI targets are being met and are actively testing new markets while keeping the loss trajectory moving in the right direction each quarter. Our path for these two MANA products is pretty clear. Build scale first, optimize the growth margin structure, keep marketing ROI driven, and let net profitability flow naturally. Ya'alan should keep net profitability within a quarter. Ama is about half a year behind on that trajectory. And for the full year overseas revenue outlook, I will hand it over to Cassie.

Okay. Let me first break the overseas outlook into three separate pieces. First is our flagship overseas app, Sochil. As Tangso mentioned earlier, Sochil was under some pressure in Q1, mainly due to regulatory changes in Turkey, as well as the prolonged geopolitical tensions in parts of the Middle East. That said, I think the team has adapted reasonably well to the changing environment. While revenue in Turkey remains somewhat pressured, performance in other Middle Eastern markets has actually been quite solid. Overall, I would say that social, particularly in the first half of the year, is likely to come in a bit below our original expectations, but the business itself remains fundamentally healthy. If you look at the second piece, for the two newer social entertainment apps we've been scaling in the MENA region, their trends are actually developing very much in line with our plans. And third, for the dating and membership-oriented business outside of the MENA region, that part of the portfolio has remained very much on track. And honestly, that's one of the things that makes dating and membership business model pretty attractive. Compared with entertainment-driven platforms, the revenue visibility and performance forecasting clarity are generally much higher. So putting these three pieces together, if you recall what we said on the last earnings call, we mentioned that overseas revenue for 2025 was I think somewhere around 2 billion renminbi. This year, for 2026, we are likely to hit 3 billion renminbi milestone. At this point, our overall view really hasn't changed materially. Depending on how market expansion progresses across different regions, there could still be somewhere around 100 million renminbi of variation, either to the upside or to the downside of that 3 billion renminbi number. But based on what we see today, we remain pretty comfortable with that original range. So hopefully that answers your question. Back to Ashley for her question. Hi. Thank you.

I'll present the next question, please.

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

晚上好。 谢谢管理层接受我的提问。 我们看到Q1的话, 国内的业务的收入同比下降大概是15%。 我们什么时候可以完全的消化? 这个第一,第二的话呢, 刚刚也是提到在支付宝, Thank you. Hi, good evening. Thanks, management, for taking my question. In Q1, we saw domestic revenue declined by 15% year-on-year, and the year-on-year decline widened versus 2025. Management comments this is related to the new tax rules which affect Momo. May I understand when should we expect these external factors to be fully digested? On the other hand, Management comments Alipay automatic renewal has some changes which need to short-term impact to time-to-time paying conversion. Can management comment about the scope for this adjustment and how long will it last? And should we expect this will affect Momo and other subscription products as well? Lastly, how should we think about the full-year outlook for the domestic revenue? Thank you.

Let me first talk about the impact of taxes on MoMo. In the second half of 2015, the new tax regulations and the strengthening of the local government have had a more obvious impact on the public associations related to Liao Tian Shi. In order to ease the pressure of the Communist Party, in the second half of 2015, we tried to adjust the division of the core public associations, which had an active effect on the public associations that were affected last year. But in the beginning of this year, the Tax Bureau made a new round of policy tightening to the public associations, which caused a relatively large impact on the public associations in March and April. Therefore, in mid-May, we selected some high-quality unions to help them achieve tax reform. For the additional tax reform to bring profit pressure to these unions, we launched a new union organization policy. To these high-quality unions, we have given further support. From the current flow of water from mid-May to the current flow of water, the work efficiency and flow of water of these unions are recovering quickly. We hope that the three seasons can return to a normal level.

So, let me first address the impact of tax policies on Huomua. New tax regulations introduced in the second half of 2025, combined with the stricter local tax collection and enforcement, affected agencies operating chatroom scenario. To elevate the pressure on the supply side, we moderately adjusted the revenue sharing ratios for key agencies in the latter half of last year. which yield positive results for those impacted. However, tax authorities further tightened their policies targeting agencies in early 2026, resulting a decline in agency-related revenue during March and April. In response, we selected a group of high-quality agencies in May and began assisting them with tax compliance. To help offset the profit pressure caused by additional compliance costs, we introduced a new incentive program and provided further financial support to these selected agencies. And since late May, both operational enthusiasm and revenue among these agencies have rebounded actually rapidly. We expect their performance to return to normal level by Q3.

As for when MomoVax will return to year-over-year growth, beyond the tax issue, it also depends on when broader consumer sentiment peaks back up.

What we can control is making sure the product fundamentals are rock solid and operating efficiency is maximized. We are very confident in Momo's modernization capabilities.

关于支付宝代扣规则调整的问题, 确实对探探一技术的会员收入造成了一定影响, 主要体现在续费转化率阶段性的沉压, 导致一小部分的存量会员流失。 团队应对很迅速, The commercialization has adopted a strategy of disbanding and selling, and has tied the original in the membership package. For example, super likes to recommend priority. This type of high-end privilege is disbanded and sold separately. At the same time, we have upgraded the free chat, which is a method of paying in numbers. Therefore, the membership fee is reduced. Currently, we are enriching the payment channel to guide users to use the payment method that is less affected and to buy long-term membership products.

So on the Alipay auto renewal policy changes, yes, this did impact Tantan's membership business in Q1, primarily manifesting as a temporary decline in renewal rates and resulting in some subscriber churn. The team actually responded swiftly. On the monetization side, we launched an unbundling strategy separating high-frequency perks that were previously bundled into membership packages, such as superlikes and boosts, and offering them as stand-alone purchases. We have also enhanced our a la carte pay-as-you-go features, like flash chats, to help offset the headwinds in membership renewals. In addition, we are diversifying payment channels, encouraging users to shift towards less-affected options and promoting longer-term membership plans.

至于影响范围, 支付宝代扣调整主要影响的是订阅类的会员制产品。 默默的主要付费模式是消耗型的虚拟礼物, 不依赖自动续费代扣,所以影响很小。 海外业务用的是这个App Store和Google Play的 这个支付通道也不受影响, 所以这是一个相对局部的影响, 主要集中在探探的国内会员业务上。 In terms of scope, the Alipay policy changes primarily affected subscription or membership products.

Momo's core payment model is based on consumable virtual gifts, which do not rely on auto-renewal, so the impact is actually quite minimal. Our overseas business uses App Store or Google Play payments channels, which remain unaffected. Overall, this is a relatively contained issue, primarily impacting only 10 times the domestic membership business. On timing, we expect the impact to be concentrated in the first half of the year, with the situation gradually improving in the second half as we diversify payment channels. and membership structures. So for the full year domestic revenue outlook, I will hand it over to Cassie.

Okay. Time for an update on how we are thinking about the revenue outlook for the rest of 2026. I will, as in previous quarters, use the same framework which is set upon three key elements, the macro environment, the regulatory environment, and our own platform fundamentals. Along those lines, starting with the macro side, honestly, consumer sentiment looks largely unchanged from what we saw at IBM last year and through Q1. It remains relatively soft, but importantly, we are not seeing any meaningful deterioration either. On the regulatory front, this is really where most of the incremental pressure came from in Q1 and Q2. You are right that the year-over-year decline in Q1 widened versus last year. And if you look at our Q2 guidance, the domestic revenue decline is expected to widen further from Q1's level. The main reason is tighter tax scrutiny on some of the small and medium-sized agencies in our ecosystem, which hit March, April, and early May particularly hard. In response, we rolled out new agency incentive policies to encourage tax compliance. The goal here is very straightforward. We want to maintain the long-term health and stability of the constant ecosystem and continue supporting the agencies that create the most value on the platform. Since rolling out these measures in late May, we've already started seeing encouraging feedback and some improvement in operating trends. And we do expect June performance to benefit from these adjustments. That said, April and May were clearly impacted by the tightened regulatory environment, and that pressure is reflected in our Q2 guidance. Some of the impact could still carry into Q3, but at this stage, we believe the most difficult period is likely behind us already. Now turning to platform fundamentals, as Sig mentioned in the prepared remarks, the core business itself remains very solid, So outside of the regulatory pressure, there really hasn't been any material change in the underlying business fundamentals compared with what we saw in Q1. Looking into the second half of the year, we still expect the year-over-year decline rate to narrow meaningfully. Part of this is because the regulatory impact should gradually normalize as the year progresses. And part of it is simply because the comparison base becomes significantly easier in the second half of 2025. So for the second half, we still expect the domestic business decline rate to improve to somewhere below 15% year-over-year. That said, given the additional disruption that we saw in the first half from tax tightening, we are modestly adjusting our four-year outlook four-year outlook. Previously, we were guiding to a low teens decline for the domestic business. Based on what we see so far happen in the first half, we now expect the four-year decline to be closer to somewhere around mid-teens year-over-year. So that's how we are currently thinking about the domestic revenue outlook. Back to Ashley, maybe for one more question.

Yeah, so in the interest of time, let's just take one last question before we close the line, and we're ready. Thank you, operator.

Thank you. Your next question comes from Jenny Yuan with UBS. Please go ahead. Go ahead.

Good evening, Mr. Guan. Thank you for the opportunity to ask a question. My question is about the innovation of our AI and the potential of our users. In the past year, we have mentioned AI-related product innovation many times. From last year's talk on AI, to this year's talk on AI, we would like to know more about the deployment of AI products. How does AI innovation play a role in long-term performance? So let me translate myself. So management has highlighted AI-driven product innovation in several companies released over the past year, ranging from AI-powered ice-breaking features AI assistant chat features to a newly launched AI voice message with photos at the quarter. So could you please share more details on the group's AI product roadmap going forward? And more broadly, how do you view the contribution of AI innovation to our longer-term learning skills? And should we expect any meaningful impact on near-term profitability from AI investment? And given the external challenges faced by both domestic and overseas businesses at the end of the year, how do we assess the group's four-year prospects? I will can march into a chapter report for you. Thank you.

AI, for a company that uses social products as its core business, has a very direct meaning. Our product play and recommendation logic is essentially to reduce the threshold of building connections between users, AI is particularly meaningful for a company like ours where social products are the core.

The essence of our product features and recommendation logic is to lower the barriers for users to form connections and enable long-term and effective interactions and deliver emotional value. AI is a tool that can genuinely transform the user experience in this space.

我们目前的实践看,AI在产品侧具备两种不同的发展方向。 第一,用户之间辅助破冰降低社交门槛,比如我们的AI助聊的功能,以及正在测试的AI语音漂流屏,通过AI引导用户以语音的形式完善基本的个人信息。 AI is based on real-time information, real-time voice is automatically generated, more vivid and interesting self-introduction and care content, and is published on the platform in a floating screen. This type of AI support tool is very valuable for users who have a need for communication but lack social skills. Second, the form of new products. For example, TianLianQuan is a cloud social product driven by all AI. It is currently trying to launch commercialization in China. Foreign AI role-playing love products Minamind has also obtained good early data in the Japanese market. It is currently expanding to other Asian markets. This product represents the direction we use AI to explore the next generation of social product models.

Based on what we have built so far, AI is advancing in two distinct directions on the product side. First, enhancing connections between users by breaking the ice and lowering social barriers. Examples include our AI-assisted chat features and the AI voice drift bottle, which we are currently testing. The concept is that AI guides users to provide basic profile information through voice input and then automatically generates more vivid and engaging self-introduction and greetings using the user's actual voice. And this is then published on the platform as a drift bottle. So these AI tools are particularly valuable for users who have dating needs, but relatively weaker social skills. And second, enabling new products formats. For example, like Donut is fully AI-powered voice social product that has already begun monetization in China. And on the overseas side, our AI role play dating app, Milai Mind, has shown solid early attractions in Japan and is now expanding to other Asian markets. These products represent our exploration of what next generation social experience can look like.

关于投入对利润的影响, 我们的判断是AI投入是高回报。 它能够直接提升用户体验, 进而提升用户的付费意愿。 执行层面, AI在我们产品中的渗透还在快速的扩展阶段。 In the past year, we have focused on AI call and support chat, and then we will use this technology system to apply it to more scenarios, including the AI manager function, based on the stream image to generate AI short films, and to explore the smart matching and distribution, as well as the support chat function. The use of this technology asset in a horizontal way helps to maximize the return of AI technology investment.

Regarding the impact of AI investment on profitability, our view is that AI spending is high return in nature. It directly improves user experience and drives higher propensity to pay. From an execution standpoint, AI penetration across our products is still in a rapid expansion phase. Over the past year, We focused on refining the AI greeting and AI-assisted chat algorithm on the Momo platform. Going forward, we will be replicating that tech stack across more use cases, including AI agents for Momo live streaming, AI short dramas generation based on broadcasters' images, as well as the smarter matching and content distribution content and AI-assisted chatting features. This kind of horizontal reuse of the Tax Act helps maximize the return on AI investment. For the Group 3 profitability outlook, I'll pass it over to Cassie.

Okay, on profitability outlook, I'll just go back to the framework that we laid out at the beginning of the year on our March earnings call. Starting from the top line, if you combine our updated view on the domestic business with what I just discussed on the overseas side, we now expect group revenue for 2026 to see a slight year-over-year decline versus 2025, probably down by a couple of percentage points at the top level. At the beginning of the year, we also said that we were targeting adjusted operating margin in the low teens. And based on what we see today, that target still looks quite achievable. That said, because the domestic business faced additional pressure from the tax-related disruption in Q1 and the early part of Q2, Our full-year revenue outlook in absolute dollar terms is now somewhat lower than where we started the year. Naturally, that creates more pressure in terms of absolute profit amounts. So internally, we are looking at additional opportunities to optimize spending wherever appropriate and necessary. whether on personnel side, marketing efficiency, or other operating areas where we believe we can improve productivity without affecting long-term growth initiatives. So overall, I would say that we remain broadly on track to achieve the profitability targets that we laid out at the beginning of the year. So I think that wraps up the call. Now I'm handing back to Ashley for closing remarks.

Well, so thank you for participating today, and that's going to be the end of the call, and we'll see you next quarter. Thank you. Bye.

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