Hello Group Inc. (MOMO) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2024 Hello Group, Inc. Earnings Conference Call. [Operator Instructions] 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, operator. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's third quarter 2024 earnings conference call. The company's results were released earlier today and are available on the company's IR website. On the call today are Mr. Tang Yan, CEO of the company; Ms. Zhang Sichuan, COO of the company; and Ms. Peng Hui, CFO of the company. They will discuss the company's business operations and highlights as well as the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. I will now pass the call over to our COO, Ms. Zhang Sichuan. Ms. Zhang, please?

Thank you. Hello, everyone. Thank you for joining our call. I would now like to -- I will now give you an update on our business on Q3 2024. Starting with an overview of our financial performance. For Q3 '24, total group revenue was RMB 2.67 billion, close to the high end of our guidance, down 12% from the year ago with a smaller year-over-year decrease than in Q2. Adjusted operating income was RMB 455 million, down 33% year-over-year, representing a margin of 17%, down 5.4 percentage points from a year ago. Looking at the Momo app and standalone new apps, total revenue was RMB 2.46 billion, down 10% year-over-year. The decrease was mainly due to the 17% year-over-year decline in the Momo app, resulting from our proactive product adjustments and the spending softness amid the weak macro economy. The decrease was partially offset by the accelerated 41% year-over-year revenue growth in standalone new apps driven by our overseas business. Adjusted operating income was RMB 440 million, down 33% year-over-year with a margin of 17.8%, down 5.9 percentage points year-over-year, mainly due to the declines in revenue and margin of the mobile app. For Tantan, Q3 total revenue was RMB 212 million, down 28% year-over-year due to the decreased number of paying users. Adjusted operating income was RMB 15.17 million compared with RMB 27.58 million from the year ago, representing a margin of 7.2%, down 2.2 percentage points year-over-year. Now I will give you an update on executing our strategic priorities for each business line. Our main goal for the Momo app this year is to maintain the productivity of this cash cow business with a healthy social ecosystem. Tantan's goal is to continue improving the core dating experience and build an efficient business model that drives profitable growth. As for our new endeavors, our goal is to enrich the brand portfolio further, push the business boundary beyond Momo and Tantan and build a long-term growth engine. I will now walk you through the details of our execution. First, on the Momo app product and operations in Q3. Our product team focused on optimizing the user experience and increasing the volume of effective user interactions. We introduced multiple voice-based one-on-one chat experiences in our legacy text-based chat reading features to facilitate in-depth user interactions. As for female users, we use women's favorite mini social games and [ exciting ] reward mechanism to increase female user engagement and stickiness. We also provide an AI-assisted reading tool to improve the quality of [ icebreaking ] greeting messages for male users, thereby increasing the response rate and interactive experience for female users. On the user acquisition front, we have optimized transitional channels over the past 2 years, bringing down acquisition costs and improving ROI. Therefore, we reduced overall marketing spending, but kept traffic relatively stable. However, as the cost continue to decline, the potential to further optimize transitional channels is getting limited. So we started exploring new ways to drive traffic from KOLs. For example, increasing brand exposure and user favorability by working with short video influencers in new media. In Q3, we increased our investments in KOL channels and the numbers of videos released and played related to the Momo app increased significantly from quarter 2. While deepening our collaboration with KOLs, we've also been refining our channel strategy. Continuous cost optimization has given KOL marketing hub a clear advantage over traditional channels. Therefore, we plan to continue working with KOLs, including enhancing the selection of accumulation of influencers, further innovating ad materials and optimizing onboarding and conversion strategies. This helped us further improve user acquisition ROI and strengthening Momo's branding. To increase the proportion of female users, our user acquisition team continued to refine the ad materials tailored to women and collaborated with our product and operation teams to emphasize features favored by female users. In quarter 3, the Momo app had 6.9 million paying users, a sequential decrease of 300,000. This is mainly due to 2 factors. First, the VAS ecosystem adjustment reduced competition events and operational activities, resulting in a decrease in the number of paying users. Second, to improve profitability and pursue profitable growth, we further reduced the acquisition of small ticket paying users with negative ROI, decreasing long-tail users. Now on the productivity of Momo's cash cow business. Momo's live streaming revenue was RMB 1.22 billion, down 14% year-over-year and flat sequentially. The year-over-year decline was mainly due to our strategy to proactively reduce revenue-oriented large-scale competition events to maintain a healthy social ecosystem and spending softness among top cohort users amid the weak macro economy. To mitigate the revenue pressure, our live streaming team focused on introducing innovative features to improve the product experience for mid and long-tail users. Meanwhile, we stepped up our live streaming promotion efforts in the Nearby People and the Nearby Posts features, which resulted in a steady increase in live streaming penetration and paying ratio. The reduction in high-priced competition events combined with the increase in sales of live streaming showroom, customs and PK props that do not require any revenue sharing, resulting in a slight sequential decrease in the revenue sharing ratio, which played a positive role in stabilizing the profit level of the cash cow business. Revenue from value-added services, excluding Tantan, totaled RMB 1.22 billion, down 6% year-over-year, but up 1% sequentially. VAS revenue from the Momo app was RMB 828 million, down 17% year-over-year and 3% sequentially. Revenue from the standalone app was RMB 391 million, up 32% year-over-year and 10% sequentially. The year-over-year decline in Momo app VAS revenue was mainly due to our proactive product and operational adjustments to mitigate regulatory risk, combined with the impact of spending softness against the weak macro economy. In Q3, our product team promoted chat room in the Nearby feature and Nearby People features, acquired new algorithms to improve penetration. On the operational front, we organized operational activities that tie into holidays and festival to boost consumer sentiment. In addition to transitional audio features, we continued introducing new voice-based gamified play such as billiards and matching puzzle game in chat room. Early data shows that the retention of this new mini game live features is better than the average retention of chat room. We expect the full rollout of these new features will help increase chat rooms user engagement rate. Turning to Tantan. First, on user trends and financial performance. Since the acquisition of Tantan, the number of organic new user has shown a long-term downward trend due to the need for new branding investment and user growth was largely dependent on acquisition channels. Although the ROI-oriented channel investment reduction and cost control strategy over the past 2 years has effectively driven Tantan to achieve profitability, it also have put much pressure on Tantan's user base. The product upgrade we launched in Q2 aimed to explore effective solutions to improve the core dating experience and increase user retention. However, the upgrade is still in early stage and it has not yet significantly impacted our overall user retention. Due to the combination of the above factors, Tantan's user base have not yet stabilized. MAU decreased by 7% sequentially to 12 million in September. As of the end of Q3, Tantan had 940,000 paying users, down 60,000 sequentially, mainly due to the decline in MAU and the short-term impact of the product upgrades on new user paying conversion. Turning to Tantan's financials. Quarter 3 total revenue was RMB 212 million, down 28% year-over-year and 9% sequentially. The year-over-year decrease was due to the decline in payers, whereas overall ARPPU increased slightly. ARPPU of our live streaming business decreased significantly as we continue to deemphasize live streaming. We had some low correlation with the dating experience. Meanwhile, the live streaming drove the sales of SVIP and Black Gold membership by sub-dividing members' paying features and redesigning the guidance never just on paying experience, which drove a slight increase in Tantan's overall ARPPU, partially alleviated revenue pressure. The sequential revenue decrease was mainly due to the decrease in payers and slightly lower ARPPU due to the impact of live streaming business. In terms of business lines, VAS revenue was RMB 137 million, down 19% year-over-year and 2% sequentially, while live streaming revenue was RMB 66.65 million, down 45% year-over-year and 20% sequentially. Now moving to our efforts on Tantan's product and user acquisition and the challenges we faced. First, on the marketing and user acquisition front. To address the continuous decline in organic traffic caused by years of inadequate brand exposure, in quarter 3, our marketing team selected online and offline events that are popular amongst young men and women and organized various marketing activities at a controllable cost to promote Tantan's brand awareness. For example, we set-up interactive groups at music festivals, which we believe is the most effective way to reach young people offline and guide them using Tantan to explore the music plus gaming experience. We combined online community activities and KOL advanced marketing to expand brand influence. At the same time, we continued to accumulate influencer resource and optimize channel investment strategy, resulting in a significant sequential reduction in average KOL user acquisition cost. In terms of channel, we continued to reduce investment based on ROI and further reduce costs from the transitional channels such as feed and app stores. This coupled with increased investments in KOL channels with the most competitive user acquisition costs helped significantly reduce unit acquisition costs quarter-over-quarter. Therefore, we acquired more users with a slight sequential decrease in total channel investment with lower unit acquisition costs and a slightly higher new user ARPU. Although channel ROI has not turned fully positive, we have seen various degrees of improvement year-over-year and quarterly. Next, update on Tantan's product and operations. In quarter 2, based on the results of user surveys, we initiated a product upgrade to address 2 major problems that make users feel their experience are unrealistic. First, uncertainty about the authenticity of the user identity; and 2, lack of response to chat after matching. To address the first issue, such as product picture looking to the true limited information that lack real-life references and if sufficient real person verification, our product team has increased the proportion of high-quality profile on the platform by providing prompts to encourage users to enrich their profile information and guiding users in choosing suitable profile pictures. Meanwhile, we offered rewards such as extra swipe to users who completed their real person verification to increase the overall real person verification rate. Regarding the lack of response to chat after matching, previously, we deliberately increased the exposure of some high-quality active users in the algorithm to improve the experience of some users who don't get matching opportunities easily. While this approach increased the number of matches, it unfortunately resulted in many matches that did not convert to chat. This quarter, we reduced matching concentrations in our algorithm to address the issue of some female users not chatting after matching because they receive too many matches. At the product level, we tested several features aimed at improving the response rate such Qingshu or love letter, which allows users to directly deliver a message to a favorite person every once in a while, improving interactive quality through this unique outreach. We expect this series of product trials to play a positive role in improving the response rate. Product upgrades has enhanced matching quality and encouraged more in-depth conversations. However, the short-term, this has a negative impact on Tantan's original business model, which was built around look at picture, swipe, pay to increase matching up. The decline in new user paying conversion was one of the reasons for the sequential decrease in Tantan's paying users. However, we believe that providing a good product experience to improve user retention and drive organic user growth is the foundation of Tantan to achieve long-term sustainable revenue and profit growth. We need to drive user growth based on profitability to sustain the long-term positive business cycle. Lastly, in terms of new endeavors, in Q3, the total revenue of the new apps reached RMB 418 million with an accelerated growth rate of 41% year-over-year and 17% sequentially, mainly driven by our overseas business. Soulchill's revenue in Q3 achieved its highest sequential growth of the past year, driven by improvements in our operational efficiency. In Q3, our management, key product and tech team from the Beijing headquarter visited several key Soulchill markets. They worked with local teams to analyze user feedback and optimize product and technical solutions. We optimized agency broadcasters payment and compensation system and strengthening our frontline staff decision-making power, boosting their work morale. We also optimized channel strategies for paying users grow paying ratio and the number of paying users. ARPPU increased significantly quarter-over-quarter, driven by various factors such as introducing new virtual gifts, gameplay enhancements and product design improvements. Together, the improvements in paying users and ARPPU drive rapid sequential revenue growth. In Q3, we strengthened our supply side collaboration with new agencies and increased numbers of broadcasters, which also plays a positive role in driving revenue growth. With the gradual expansion of the business, Soulchill's revenue sharing ratio has trended slightly upward since the beginning of the year, mainly because of the relatively low-margin business, including the Turkish market and the newly introduced live streaming business, drove much faster than the overall overseas market. Our team has partially alleviated the pressure on GP margin caused by the increase in revenue sharing ratio by optimizing top-up channel costs, combined with our ROI-oriented user acquisition strategy, enabling us to enjoy operational leverage and fast profit growth despite the increase in channel investments. In Q3, we made good progress in enhancing the localization progress and expanding the voice-based features to live streaming. The growth in users and financial metrics have both reflected our team's recent efforts. We believe that continuously strengthening localized operation and improving user and product experience, we can bring continuous growth to Soulchill and our other overseas products in the MENA region. We will commit more firmly to overseas business in the future. This concludes my remarks. Now let me pass the call to Cathy for the financial review. Cathy, please?

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

Thank you. Just a quick reminder before we take your questions. For those who can speak Chinese, please ask your questions in Chinese first and followed by English translation by yourself. And please, also limit the number of questions to 1 to 2 so we can take more people. Okay. So operator, we're ready for questions. Thank you.

[Operator Instructions] Your first question comes from Raphael Chen from BOCI Research.

[Interpreted] I will translate myself. Congrats on the strong growth momentum of overseas business. Could management share the main contributors driving the overseas business growth in the third quarter? Also, could we have the latest revenue and profit figures for the overseas business and the growth outlook for the fourth quarter and 2025?

[Interpreted] The sequential growth of our overseas business in the first half of the year was slower than we had anticipated at the beginning of 2024, primarily due to the need to address many areas for improvement in local operations, which required more time than we thought. Revenue growth accelerated in the third quarter, thanks to the optimization of cross-border personnel management. As a result, the operational efficiency of the social team got significantly improved. Our strategy of empowering local staff in product operations will help us better address the unique social preferences and needs of users from different culture backgrounds. By leveraging the strength of our local team, we have been able to strengthen cooperation with the local supply side. And with the rapid growth of our overseas business, our operational markets and regions are also becoming more diverse. Therefore, we will continue to optimize cross-border management, establish offices in key markets, recruit more local talent and drive continuous growth in revenue and profit through robust focus on localization. So in the third quarter, total revenue of the new apps reached close to RMB 220 million with Soulchill contributing 60% to 70%. And Soulchill has now surpassed the revenue scale of Tantan. And its revenue in the third quarter was up more than 50% year-on-year. And as we strengthen our localized operation capabilities, we expect Soulchill to continue to grow rapidly next year. Meanwhile, we expect our other 2 Middle Eastern apps to enter rapid -- into a period of rapid revenue growth and possibly breakeven next year. The incremental revenue and profit generated by our overseas business partially offset the decline in revenue and profit from the Momo app. We believe that compared with our domestic business, which faced many uncertainties such as macroeconomic and regulatory issues, the growth potential and trajectory of our overseas business are relatively clear. This is particularly true in the social field where we have distinct product and operational advantages. That's why we have prioritized the allocation of human and financial resources to the operation and expansion of our overseas business in recent years. We believe that our overseas business will play an increasingly significant role in driving the group's revenue and profit in the future, which will be clearly reflected next year. And as for the financial outlook, I will leave that to Cathy, please.

Okay. Over to the outlook. In our Q4 guidance, we are assuming Soulchill to grow probably by 40%-plus year-over-year. That would close out 2024 with a year-over-year growth rate of close to 50%. As the app gets bigger, obviously, the growth rate could slow down a little bit. However, our 2 other social entertainment apps in the Middle East North Africa area have been ramping up rapidly recently. We do expect these 2 apps to start bearing fruits and contributing to the bottom-line -- contributing to both the top-line and bottom-line in a meaningful way in 2025. With these 3 overseas apps, we believe overseas revenues will continue to grow pretty fast and hopefully could accelerate its growth rate next year. The other thing worth mentioning is that if you look at the way we manage our overseas business, we are not pursuing just top-line growth at the expense of bottom-line. We always want what we call profitable growth. That means next year, as overseas apps continue to grow top-line, bottom-line performance for these 3 apps are going to continue to improve as well. Hopefully, that answers your question. I'm handing back to Ashley for next question.

Your next question comes from Jenny Wang from UBS.

[Interpreted] So let me translate myself. Congrats on the good results. My question is regarding the outlook for our cash cow business. So Momo has been undergoing product adjustment for a year since the end of third quarter last year. Could you please share whether these adjustments will continue going forward and when we might see a recovery in growth both quarter-on-quarter and year-over-year? And how should we view the prospect sustainability of the cash cow business going forward?

[Interpreted] Okay. So last year, we implemented operational adjustments to live streaming and audio and video-based VAS experiences with a focus on reducing revenue-oriented competition events. And although this impacted our financial performance, it has played a positive role in reducing revenue concentration and creating a more stable and healthier social ecosystem for our cash cow business. So we remain committed to this operational strategy in the fourth quarter and further deemphasizing high revenue competition events. For the live streaming business, this means that the incremental revenue from the year-end competition event will be very limited compared to the previous years. And in the audio and video-based VAS experiences, we believe there is still room for further optimization of some agency dominant use cases and gamified play. So we will continue to fine-tune our operation in the fourth quarter. As [ Sich ] mentioned earlier, in order to offset the decline in revenue from competition events, we have increased the monetization of mid to long-tail paying users in live streaming and value-added services experiences. So we rolled out more interactive features and content suitable for this kind of cohort of users and increasing the penetration and paying ratio, while driving steady growth in organic revenue. So our primary operational focus in the current macro economy and regulatory environment is to enhance our platform's ability to accommodate mid to long-tail users and expand their revenue scale. After about a year of adjustments, we are quite satisfied with the overall content and ecosystem of the Momo app. I believe this has laid a solid foundation for us to maintain the productivity of the cash cow business next year. As for the specific financial outlook, I will leave that to Cathy, please.

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

Your next question comes from Thomas Chong from Jefferies.

[Interpreted] My question is about Tantan. Just now management mentioned in prepared remarks that there are various updates to our product offerings, but also highlighted the impact is yet to be seen such as on the user retention side. And also, we are seeing user scale and revenue remains soft. My question is about, which product ideas or solutions management gets more positive? How long does it take about the upgrade and the time line? And how should we think about Tantan Q4 and 2025 outlook?

[Interpreted] Okay. Let me give you more details regarding your question. For Tantan's goal is to continue to improve the quality dating experience and build an efficient business model that drives profitable growth. And currently, Tantan needs to address 2 issues. One is product experience and the other is business model. So in terms of product, some users feel the experience is unrealistic and the chat interaction after matching is quite low. And therefore, although users have a real strong demand for dating, but Tantan cannot really meet the needs of many of our users. And the second issue is insufficient branding and low organic traffic, which makes unit acquisition costs too high to form a positive business cycle to achieve profitable growth. So we believe that we must first improve the product experience to a reasonable level and then develop a new sustainable business model. So over the past 2 quarters and for the next quarter or 2, we have focused and will continue to focus on addressing 2 user experience issues. One is users' uncertainty about the authenticity of their matches' identity and the other is the lack of response to chat post matching. Our team encouraged the users to enrich their profile information and guide them in choosing the proper style for their profile pictures. And these efforts significantly increased the proportion of high-quality profiles on our platform. And to effectively increase the overall real person verification rate, we offered rewards such as extra swipes to users who completed the real person verification process. And previously, paying users had a clear advantage over non-paying users in terms of product experience. And moving forward, our goal is to give our verified users a distinct user experience advantage over those non-verified users and to encourage more users to complete the verification process. While we have made significant progress in terms of user identity authenticity, we still need to do more to improve chat interaction rates in the long-term. And fortunately, we feel that the current approach is on the right track. We plan to have all testing underway by the end of the year and wrap-up this round of upgrade in the first half of next year. Since Tantan hasn't entered a positive business cycle yet, we expect the decline in users and revenue to continue for the next 2 quarters. And to drive Tantan's recovery, here are some thoughts. First, by improving Tantan's basic dating experience and especially user identity authenticity, we expect user base to gradually stabilize even without increasing marketing investment. And secondly, after essential product adjustments are made, we will invest more in branding initiatives to drive organic traffic. Third, we will continue to explore and develop innovative product features that improve user experience, while identifying value-added products that increase ARPU. China's dating market is very large with significant unmet needs. We will continue to explore this space to capture growth opportunities. Regarding the bottom-line, we will not pursue profits before Tantan enters a positive business cycle, but we will not let Tantan fall into continuous losses again. As for detailed financials, I will leave back to Cathy.

With regards to financial performance, the simple answer is that the top-line is likely to continue to trend down sequentially due to 2 reasons. The first one is, as Tang Yan mentioned just now, Tantan has not reached a self-sustaining positive business cycle yet. User number is still trending down. The second reason is that although there is still room to pull up the ARPU, the focus at this point is to get the dating experience right. And therefore, we do not want to put too much pressure on the team, so they won't let monetization get in the way when consumer experience is the most crucial priority. With regards to profits, this year, Tantan is on track to achieve I think RMB 50 million plus/minus in terms of segment profits. However, the bottom-line has also been trending down slightly throughout the year due to the top-line pressure. So before we reach -- I would say that before we reach the tipping point on top-line performance, we do need to take some steps to cut down on the cost and expenses front so that Tantan won't slide back to loss. That's one of the key priorities for our financial planning for Tantan 2025. I think on that, I'm going to have more details for you on our next earnings call when we finish planning for 2025. Back to Ashley.

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

Your final question comes from Xueqing Zhang from CICC.

[Interpreted] My question is about shareholder returns. Firstly, regarding dividends, the company has a track record of 6 consecutive years of special dividends. So what's your dividend plan for this year? Additionally, regarding share buyback, the company has bought back nearly USD 150 million year-to-date. So the current buyback program which will expire in the middle of 2026 has less than USD 50 million quarter. And at the current pace of repurchase, we expect that this program will be exhausted by early 2025. So what's your plan for further share buybacks?

Okay. I'll take that question. As you correctly pointed out, during the past 12 months, we've bought back more than I think more than $150 million worth of Momo shares and paid around $100 million in cash dividends. For me, I really look at both approaches, meaning cash dividend and buyback as ways to enhance shareholder value. But sometimes one works better than the other. If you take our Q3 balance sheet number and do a quick math, we are -- you will be looking at somewhere around $8.7 per share in net cash. And that's a growing number as we continue to make profit. And yet our stock is trading at I believe below $7 per share at this point. I would say, in view of such a significant undervaluation, we should give buyback bigger priority in comparison with cash dividends. However, how much we could buy back is limited to a number of factors, the biggest of which is the liquidity out there in the market. If you look at the past couple of quarters, our repurchase has been running at from $30 million per quarter to around $60 million per quarter. With the limited liquidity we have, it's hard to exceed that kind of run rate in terms of how much we buy back. That means we -- it's quite likely that we may continue to have excess cash on top of buyback. If that continue to be the case, we will certainly continue to consider cash dividend as an additional way to return cash to the shareholders, so we can share our prosperity. The other question you have is will be -- at the current run rate, we'll probably use up the repurchase already authorized by the Board of Directors. But I think we're not limited to that cap. If the current program is used up, we'll -- I'm sure that the Board of Directors will continue to make decisions that makes sense in terms of enhancing the shareholder value. So that's what I can say at this point. Maybe back to Ashley to conclude the call.

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

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]