Hello Group Inc. Price & Performance (MOMO)

Morning and good evening, everyone. Thank you for joining us today for Hello Group's fourth quarter and fiscal twenty twenty four earnings conference call. Company's results were released earlier today and are available on the company's IR website. On the call today are Mr. Pan 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 will all be available to answer your questions during the Q and A session that follows. Before we begin, would like to remind you that this call may contain forward looking statements made under the Safe Harbor position of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks uncertainties and other factors. All of which are difficult to predict and many of which are beyond the company's control. Which may cause the company's actual results, performance or achievements to differ materially from those in the forward looking statements. Further information regarding this and other risks uncertainties and factors is included in the company's filings with the U. S. Securities and Exchange Commission.

The company does not undertake any obligation to update update any forward looking statements as a result of new information, future events or otherwise. [indiscernible] except as required under law. I will now pass the call over to our CEO, Mr. Tang Yan.

Ms. Tang, please. 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 spending. 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 Sike for more details. [indiscernible] Hello, everyone. Thank you for joining our call.

I'm update on our business in Q4 and fiscal twenty twenty four and I outline our strategic goals for fiscal twenty twenty five. Starting with an overview of our financial performance. For Q4 twenty nineteen, total group revenue was 2,640,000,000.00 down 12% year over year. Adjusted operating income was RMB280 million with a margin of 10.6%. [indiscernible] Our Q4 costs included RMB94 million in fuel production related [indiscernible] Excluding such costs, adjusted operating income would have been RMB374 million. With a margin of 14.2%. Revenue from the Momo app and Send along new app totaled RMB 2,420,000,000.00.

Down 11% year over year. [indiscernible] The decrease was mainly due to the 18% year over year resulting from our proactive product adjustments and weak macro economy. Meanwhile, standalone new app revenue increased 37% from a year ago. Thanks for the rapid growth of our overseas business Adjusted operating income from the mobile app and stand alone new apps was RMB269 million, with a margin of 11.1%. Excluding film related costs, adjusted operating income would have been RMB365 million.

With a margin of 15% As for Tantan, Q4 revenue totaled RMB213 million, down 22% year over year due to the decreased number of paying users. Adjusted operating income was RMB11.37 million, compared to RMB27.05 million from a year ago. For fiscal twenty twenty four, total group revenue was 10,600,000,000.0, compared with RMB12 billion last year. Adjusted operating income was RMB1.17 3,000,000,000 with a margin of 16.3%. Revenue from the Momo app and standalone new apps totaled RMB9.7 billion, down 11% year over year.

Mobile revenue decreased 16% mainly due to our proactive product adjustments and macro factors Revenue from standalone new apps grew 40%. Driven by our overseas expansion. Adjusted operating income from the mobile app and standalone new app was 1,650,000,000.00. With a margin of 17.1%. [indiscernible] total revenue for fiscal twenty twenty four was RMB900 million, compared with RMB1.2 billion in the previous year. [indiscernible] adjusted operating income was RMB17.5 940,000.00, compared with RMB101 million in 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 app, 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 macro softness [indiscernible] put a lot of pressure on revenue. However, quality of content and strong ecosystem will lay a solid foundation the stable productivity of our cash cow business next year. First, on the product and operational front, 2024, our product team focused on improving the female users and optimizing real time social use cases to drive effective interactions.

We introduced an AI assistant chat tool for male users in multiple voice and tech based chat experiences such as greetings, [indiscernible] The AI tool can generate greetings based on female users' text and picture based profile information as well as their historical post to improve the quality of Ice Booking conversations. Thereby increasing the response rate from female users and improving the overall interactive In addition, we promoted several matching base real time voice chat features on the homepage that proves effect in driving deeper user interaction and paying conversion. [indiscernible] Thus 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 [indiscernible] profit focus, ROI driven growth model. And we have made good progress in optimizing the efficiency of transitional fee channels and reducing usage acquisition costs. The continued improvement in our eye has allowed us to reduce overall marketing spend while keeping traffic volatilities stable. Given the significant cost optimization of 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 Note we have increased brand exposure and gradually shifted our budget from high cost transitional channel to KOL channels. Which helped reduce unit acquisition costs. In Q4, the Momo app had 5,700,000 paying users, a sequential decrease of 1,200,000. Due to our cost reduction and efficiency improvement strategies. We reduced the acquisition of some extremely low paying users with a negative ROI. Which benefits profitability. [indiscernible] Now on the productivity of cash cow of Momo, the cash cow business, In Q4, Momo's live streaming revenue was 1,000,000,000, down 16% year over year. [indiscernible] year over year decline was wider than the period March mainly due to the reduction in revenue oriented competition events which resulted in a significant decrease [indiscernible] in incremental revenue from year end competition events compared to previous years.

In fiscal twenty twenty four, live streaming revenue totaled RMB4.8 billion. Down 14% year over year. [indiscernible] 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 macro economy.

To mitigate the revenue pressure from the decline top paying users. We stepped up our efforts to promote live streaming on the home page to improve its [indiscernible] Penetration and paying conversion. Meanwhile, we increased our product innovation efforts targeting mid- and long tail users to stabilize the revenue scale of this group. In early stage of our operational adjustments, 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 modelly adjust the incentive policy for daily events which resulted in a slight increase in revenue sharing ratio. The current 24 compared to 2023. However, the decrease in sales of live streaming showroom costume and PK parts which do not require revenue sharing. Played a positive role in stabilizing the profit level of our cash cow business.

Now moving on to value added services. In Q4, revenue from VAS excluding Tantan, totaled RMB1.2 billion. Down 5% year over year. [indiscernible] Whilst revenue from the Momo app was RMB800 million, down 15% year over year. Revenue from the spend among apps was RMB400 million, up 24% year over year. [indiscernible] For fiscal twenty twenty four, revenue from value added services excluding Tanheng, totaled 4,177,000,000.000. Down 6% year over year. While revenue from the Lumo app was RMB3.28 billion, down 17% year over year. Revenue from the standalone apps was 1,000,000,000, up 35% year over year.

The incremental revenue from our new endeavors largely offset the decline in revenue from our legacy business. The decline in Momo app watch revenue was mainly due to our full access 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 live stream, we set up the promotion of the chatroom experience on the homepage. Introduced interactive gifting features for the mid- and long tail users and launched new category such as mini games, and Love Fortune Talent to improve chatroom penetration and pain conversion. While driving organic revenue growth. Turning to Changtan, Tantan's strategic growth for the year was to improve its core dating experience to build a efficient business model that drives profitable growth. With board dating experiences suitable for Asians, and to drive organic EBIT growth and retention through quality products. We initiated a product upgrade in 2024 focusing on user [indiscernible] To encourage more explanation experimentation on the product our management decided not to constrict the team with short term metrics During the pilot phase, but allowed more fluctuation in user skeleton revenue.

By the end of the year, product adjustments had played a positive growth in improving user [indiscernible] Still, user retention and organic user growth have not been significantly improved The user scam and revenue downward trend.

Turning to Tantan's user trends and financials.

Although the continuous cost reduction and efficiency improvement over the past two years have brought Tantan to breakeven There has been no breakthrough in use of retention driven by product experience or organic user growth. [indiscernible] Meanwhile, continuous reduction in channel investments has put significant pressure on the user base. The combination of multiple factors led to a 10% sequential decline in Tantan's MAU to RMB10.8 million in September. As of the end of Q4, Tantan had 860,000 paying users, down 80,000 sequentially due to the decline in MAU. Turning to Tantan financials. Q4 total revenue was RMB213 million, down 22% year over year. Mainly due to the decrease number of paying users. Fiscal twenty twenty four, total revenue was RMB900 million. Down 25% year over year. In terms of business lines, RMB550 million, 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, [indiscernible] and additional [indiscernible] for members we managed to drive a significant year over year growth in VAS [indiscernible] Resulting in VAS Latin music declining much smaller than the user numbers. Live streaming revenue was $3.00, down 38% year over year. Mainly due to our strategic [indiscernible] emphasize live streaming. Which has a low correlation with the dating experience For fiscal twenty twenty four, FanDuel's adjusted operating income was 75,000,000. Compared with RMB101 million from Q4 twenty twenty three. Now moving on to our efforts on Tantan's product and user acquisition. First, on user acquisition front, like Momo, Tantan also implemented KOL collaborations and of acquired integrated campaigns in 2020 as well. This includes promotion events as far as music festivals, and other youth centric venues. [indiscernible] combined with biotargeting online campaigns across new media channels. This approach effectively [indiscernible] influence. On the product front, at the beginning of the year, we identified the major issues affecting the user through interviews and surveys. In the year second half, our product team mixed both attempts 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 goals improving Tanwant's core data is experience has largely been achieved but overall user retention has not improved significantly [indiscernible] 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 Momo and Tantan. Build a long term growth engine. In quarter four, the total revenue of the new apps [indiscernible] 450,000,000 up 37% year over year. For fiscal twenty twenty four, the total revenue of the new apps was RMB1.57 billion. Up 40% year over year.

The rapid expansion of overseas business especially Zhong Chu, was the key driver behind this sustained growth. Compared with our domestic businesses, which faced much macro and regulatory uncertainties Overseas businesses offer clear growth potential and trajectory Our long standing expertise in social products and operational confidence that shifting humans and dimensional resources towards overseas business will yield better returns on investments [indiscernible] and profit. Since the beginning of 2024, we have been committed to localizing our overseas business and improving the operational efficiency of course, border 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 expansion from voice based [indiscernible] On the operational front, we refined our services for high paying users driven growth in the number of top cohort users. Which drive overall ARPU 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 more than increased [indiscernible] our marketing efforts to deepen our our presence presence in a stiffening market while it's [indiscernible] into new regions. The combined efforts of product operations and channels led to increased paying users and IPPU.

Which drove rapid revenue growth. Our rapid expansion in Turkish market and live streaming business offset the temporary consumption dips in NINA. Due to the potential unrest. At the year end April showed you 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 Sochil, we have launched more brands and new products in the MENA region. Among them, [indiscernible] and audio based voice social game, and [indiscernible] a voice based social product entered initial marketing and monetization phase in 2024 after finalizing product sufficiently and monetization models. By the end of the year, these two products have reached a subscription revenue scale and maintained stable ROI. Even as we significantly increased marketing investments. The initial success of Hello and Amar validate our strategy assessment that NINA market can accommodate multiple brands and platforms and give us confidence that our overseas business will play an even more important role in our revenues and profits in the future. In 2025, we will continue to increase our investments in the Haohuan and MR. And strive for continuous improvements in ROI and profitability.

If we are able to increase the revenue of these two apps and to a certain scout, and achieve profitability, we will replicate the successful experience and models in other social entertainment apps building a more diverse product for 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, Tantan and our overseas businesses. With adjustments made on our new developments and market dynamics. First, for the Momo app, our goal is to maintain long term stable operation with a healthy social ecosystem to ensure the continued stable productivity of this test car business for Tantan. The strategic goal for this year is to reduce cost 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 Tantan. And build a long term growth engine We will further increase our overseas efforts and take even bolder steps to drive growth and innovation in international market 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 total cash payment of approximately US50 million which or about 30% of the adjusted net income attributable to Hollysgood, Inc.

In 2024. This is the seventh consecutive years as we have shared fruits of our business with our shareholders. Through cash dividends. Is a strong testament to our commitment to creating long term value Now let me pass the call to Cathy. For the financial review. Cathy, please.

Thanks, Zig. 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 twenty twenty four was RMB2.64 billion, down 12% year on year and 1% quarter over quarter. Non GAAP net income attributable to the company was RMB230.5 million compared to RMB514.7 million from the same period of 2023 and [indiscernible] 93,300,000.0 from Q3 twenty twenty four. 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 RMB141 million, adjusted net income for Q4 twenty twenty four would have been RMB371.1 million. Looking into the key revenue items for Q4, Firstly, online broadcasting. Total revenue from live broadcasting business for the fourth quarter of twenty twenty four was RMB 1,260,000,000.00, down 17% year on year and 2% quarter over quarter. The year over year decrease was mainly due to a decline in the in the core Momo live streaming business and to a lesser extent the decrease in Tantan. Momo Live broadcasting revenue totaled 1,000,000,000 for the quarter, down 16% year over year and 3% quarter over quarter. Tantan's live broadcasting revenue amounted to $75,000,000 down 24% year over year but up 14% quarter over quarter. Revenue from the value added services for the fourth quarter of twenty twenty four was RMB1.33 billion, down 7% from Q4 last year and 2% sequentially. Revenue from value added service on an ex onetime basis was RMB1.2 billion in the fourth quarter of twenty twenty four, down 5% from Q4 last year from the previous quarter.

Momo app's value added service revenue decreased both on a year over year and quarter over quarter basis. This was due to a weak standing sentiment as well as our proactive product adjustments. However, revenue from the standalone new apps continue to grow nicely partially offsetting the revenue pressure from Momo Valley added services. Tantan's value added services revenue amounted to RMB127 million down 20% year over year and 7% sequentially. The decrease was due to a decline in 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 costs and expenses. Non GAAP cost of revenue for the fourth quarter of twenty twenty four was RMB1.72 billion compared to RMB1.7 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 RMB94 million 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 the initial phase of video service offering.

And to a lesser degree higher payout from our 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 mix shifts towards overseas business where channel fees as a per percentage of revenue are much higher than those for domestic business. Non GAAP R and D expenses for the fourth quarter was RMB212.4 million compared to RMB208.2 million for the same period last year. Or 3% decrease year over year. The decrease was due to optimization in personnel costs. Non GAAP R and D expenses as a percentage of RMB from the year ago period. We ended the quarter with thirteen ninety total end employees, of which two seventy six are from Tantan.

Compared to thirteen eighty two total employees, of which three zero one from Tantan a year ago. The 61% compared with 63% Q4 last year. Non GAAP sales and marketing expenses for the fourth quarter was RMB211.7 million or 12% of total revenue, compared to $2.96 0 million or 10% of total revenue for the same period of for the same period last year. The year over year increase was primarily attributable to the increase in channel whereas marketing spend for Momo core business and Tantan was narrowed to varying degrees.

Non GAAP G and A expenses was 117,000,000 for the fourth quarter of twenty twenty four compared to RMB87.2 million for the same quarter last year. Representing a 43% of total revenue, respectively. The year over year increase in G and 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 279,000,000 with a margin of 10.6%. Compared with RMB254.2 million 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 $3.70 RMB373.9 million with a margin of 14.2%. Non GAAP operating expenses as a percentage of total revenue was 24%, an increase from 20% for Q4 twenty twenty three. Non GAAP operating expenses as a on a year over year basis increased 7% The increase in both absolute RMB amount and as a percentage of revenue for operating expenses was mainly due to an increase in in G and A expenses and to a lesser degree increase in sales and marketing expenses. Now briefly on income taxes.

Total income tax expense was RMB89.5 million for the quarter, with an effective tax rate of 28%. In Q4, the company accrued withholding income tax as RMB19.5 million which is 5% of the undistributed profits generated by our ROLFE. In Q4 twenty twenty four, 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 12/31/2024, Hello Group's cash, cash equivalents, short term deposits, long term deposits, short term investments and restricted cash totaled 14 point 73 billion compared to RMB13.48 billion as of 12/31/2023. Net cash provided by operating activities in the fourth quarter of twenty twenty four was 423,000,000, The Lastly, on business outlook. We estimated our first quarter revenue to come in the range from RMB2.4 billion to RMB2.5 billion, representing a decrease of % to 2.4% year on year a decrease of 9% to 5.2% quarter over quarter. At segment level for Q1 twenty twenty five, on a year over year basis, we expect Momo segment revenue to decrease around mid to low single digits due to the continuous macro headwind offset by the rapid growth of overseas this On the Tantan side, expect revenue to decrease around 20% due to diabetic service revenue contraction, caused by a decline in user base and to a lesser degree our operational adjustment to eMFSET 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 concludes our prepared portion for today's discussion. With that, let me turn the call back to Ashley to start Q and A. Ashlee, please. For those who 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. Your first question Thanks management for taking my quarter, number of paying users on Comomo decreased by 1,200,000 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 address 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 acquire a bit on different channels to acquire them. But the cost could not be recruit. Now given the tough economic and our goals, should be more focused on the profits. We have decided to cut back on trying to bring in this low VPN users in the fourth quarter And that's why we saw a big drop in long term paying users which is more than what we usually experience at the net end of this year of the year end.

So in the months ahead, we will keep reducing our efforts to acquire this low return smart ticket users. This means we expected number of paying users to drop more than usual. Even though this will lower our overall count of paying users, but this news generally don't engage much or spend. So stopping our efforts to bring them in front really the platform. Instead, the shift should help us boost the profitability of our main business. Regarding the product adjustments of Nogo, After a year of adverse, we think Momo's content has greatly improved So we won't making 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 continue to pull in good [indiscernible] even with our our revenue growth downs of this Kathleen will share more about Momo's financial plans for this year.

This is a very extensive 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'd 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. For of all, Momo 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 network shrinking during COVID and subsequent subsequent real estate meltdown, which impacted spending. It's also true that as Sig mentioned earlier, long tail users, those spending around RMB10 per month or even less have been deprioritized in our JUZ acquisition strategy due to normalization potential and negative ROI.

However, we're happy to see that mid tier users which we sometimes call doffings 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 formal Hello have also transitioned into this category. Looking ahead, we expect this group of DOLFIN users to continue driving the business and providing a solid revenue base.

Now turning 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 Momo, the cash cow business. In response, we proactively adjusted our monetization strategies to reduce regulatory risk However, since late twenty twenty four, 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 performed so far into Q1, it looks like the very top of the pyramid users or the whales going to continue to be very cautious in terms of spending.

So live streaming may continue to see pressure, but better ad 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 up side 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 is what I can share at this point. As reflected in our guidance, we expect some seasonality in Q1, that 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 teens revenue decline in the cash cow business for 2025. And see if macro would help us perform better as we head deeper into the year. That's for the CAL.

That's for the cash CAL. And if you throw in overseas piece and the Tatam piece into the pot and look at the group level, rate the YY decrease will likely narrow pretty substantially to low single digit as the overseas 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 a 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 TAO Tantan and the fast expanding 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 under [indiscernible] 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 Ash Tsi to take the next question. Operator, next question please.

Your next question comes from Thomas Chong with Jefferies.

Thank you management for taking my question.

My question is about our overseas application. Can management comment about the key market for Xochul as well as its revenue and earnings. On this hand, we also talked about the two new apps Can management share the positioning of these two applications and how it is different from Sohu? So 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 Sochi, [indiscernible] So in the past few years, Sho2 has become the fastest growing product in our group, both in revenue and profit. In 2024, its revenue grew by 50% from 2023, nearing RMB1 billion and also surpassing Tantan's earnings. So this growth is mainly due to improving localization strategy we started last year and focusing on three main areas. One is reaching to reaching the mature markets to expanding into new regions and also adding features like live streaming We have also strengthened our partnerships which has helped Ru's revenue. Shochu is doing well in Turkey Egypt and Gulf countries. Showing restaurant market demand. We also launched two new apps in the MENA regions at [indiscernible] end of twenty twenty three. [indiscernible] and Amar. Similar to social but voice focus. Both products was ROI driven from the start and has shown promising potential in revenue. And user acquisition. So in 2025, if ROI remain pharmacist, we plan to increase marketing for both So the success of Sichuan and our new product shows that the wallet we gained in our home market works well abroad, especially in the MENA region. Which can accommodate multiple social brands So in 2025, we will invest more in its exploring international markets since our overseas products are focused on profits.

Increasing investments will heavily affect the group's net profit. So Cathy will provide specific details on revenue and profit forecast.

Our overseas growth strategy for 2025 can be broken broken down into two buckets.

Good old So Hello and the other new initiatives. For SoQiu, as Sig mentioned earlier, we're focusing on three main drivers this year. First one is better localization. Second one is geographic expansion to 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 gross 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, Hello LAN 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 ROI is looking pretty [indiscernible] promising. Despite setting 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 is new overseas apps could meaning these two smaller apps could reach where Socio is today. If you annualize that, that would mean the overseas revenue contribution for 2026 will become very meaningful. However, if marketing efficiency decline as we scale, we may pause marketing expansion to focus on product improvements and operational refinement before ramping up again. In that case, revenue growth for those two applications could come in a bit slower.

So looking at the full overseas portfolio, we expect revenues on it to grow from around RMB1 billion in 2024 to a range between could be between RMB1.7 billion to RMB2 billion. 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, our bottom line for overseas business should improve over time.

So that's for sure at this point. Your next question comes from Neos Yang with Deutsche Bank.

Leo Sheng from Deutsche Bank. Your line is open.

Let me translate myself. Thank you management for taking my question.

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. Could management share the plan for Tantan this year in terms of product and other [indiscernible] 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 obey all the up 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 all of our peers, still have the best chance of being being 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 our unit acquisition cost.

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 ARPU growth, we're shifting our focus to reducing user acquisition costs 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 cost. On the other hand, if we reduce our volume, unit cost 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 loss as creating a healthier business cycle. There is, of course, a trade off with this strategy. Since we're cutting back on user acquisition cost 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 lay the foundation for future growth. Where both user experience and revenue generation can scale together. So that's the overall that actually marks a pre pretty big shift in strategies for Tantai in 2025. We will 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. One is the product and operational adjustments impacting ARPU. Last year, we made some product and operational changes aimed at 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 twenty twenty five.

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 Tantai in 2025. As I said, starting from Q2 twenty twenty five, we will pretty drastically cut marketing expenses to ensure the user acquisition a achieves a full ROI recovery. Right now, we are looking at reducing quarterly marketing spend from around 40 to RMB50 million per quarter to up approximately RMB20 million to RMB30 million 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 to between 20% to 30% revenue decline. Year over year decline for 2025.

In terms of profitability outlook, despite top line decline, because our efforts are focused on achieving better ROI, profitability will actually see improvement for domestic Tantan.

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 Tantao overseas. But it will be experimental and ROI driven as well.

So that's for TaTao's financial outlook.

Actually, maybe the last question. Yes. 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 Huang with UBS.

Special dividend. So thanks management for taking my question. My question is regarding our capital return. As management mentioned, this is seventh consecutive year of issuing special dividend. Looking ahead, are we planning on regular dividend policy? This year, Citibankiao is not always more than previous years. But on the other hand, we extended and upsized our sugarcabag program. So, though this indicates a strategic progress for shelterbacks or the dividends, in terms of shareholder returns going forward. Thank you.

Okay. I'm hearing several questions here. On the question as whether we are thinking about making the dividend program a regular one 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 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 fixed dividend policy just to formalize it.

Instead, we would rather keep some flexibility in how we allocate capital. If we see compelling opportunity investment opportunities, we would prefer to deploy capital toward growth either organically through M and 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 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.

The conclusion is 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 that's that's my answer to the question. And maybe with that, we would like to wrap up today's call. So thank you all for joining us. I will see you next quarter. Operator, we're ready to close. Thank you.