Hello Group Inc. (NASDAQ:MOMO) Q2 2023 Earnings Call Transcript

Hello Group Inc. (NASDAQ:MOMO) Q2 2023 Earnings Call Transcript August 31, 2023

Hello Group Inc. beats earnings expectations. Reported EPS is $3.14, expectations were $0.38.

Operator: Ladies and gentlemen, thank you for standing by and welcome to Second Quarter 2023 Hello Group Inc. Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [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. Please go ahead, ma’am.

Ashley Jing: Good morning, and good evening, everyone. Thank you for joining us today for Hello Group’s second quarter 2023 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. Peng Hui, CFO 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 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.

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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 event, or otherwise, except as required under law.

I’ll now pass the call over to our CEO, Mr. Tang Yan. Mr. Tang, please.

Tang Yan: [Foreign Language] [Interpreted] Hello, everyone. Thank you for joining our conference call. We delivered solid results in the second quarter with strong financial performance and good progress on execution of various strategic priorities. Before we go into details, I would like to introduce our COO, Ms. Zhang Sichuan, who rejoined the company last year. She will be the one who review our quarterly performance today. With that, I’ll turn the call over to her.

Zhang Sichuan: Hello, everyone. It is my pleasure to join today’s conference call. We celebrated Momo’s 12 anniversary in early August. As a founding team member it is a great pleasure to see how Momo over the past 10-plus years has grown from a single function app to a multi-brand listed company with a presence in several countries and regions. It is a great honor to return to the Hello Group family, and welcome to the next decade of the social era with old and new colleagues. Next, I will walk you through the details of the second quarter. So I will start with a brief overview of our financial performance. For the second quarter of 2023, total group revenue was RMB3.14 billion, up 1% year-over-year and 11% sequentially, exceeding our earlier guidance.

In Q2, we delivered the first year-on-year growth since the beginning of the pandemic three years ago, mainly due to the stabilization and recovery of Momo’s cash cow business. Adjusted operating income was RMB709 million, a substantial increase of 53% from Q2 last year and up 37% quarter-over-quarter with a margin of 22.6%, up 8 percentage points year-over-year and 4 percentage points quarter-over-quarter. The significant year-on-year improvement in profitability was mainly due to Tantan working even. The sustainable performance of Momo cash cow business and our effective cost control initiatives and sequential improvement in profitability was mainly contributable to the increase in Momo’s profit. Total revenues from the Momo app and standalone new apps was RMB2.82 billion, up 1% year-over-year and 12% sequentially, and adjusted operating income was RMB777 million, up 60% year-over-year and a significant increase of 34% quarter-over-quarter with a margin of 24%, up 3 percentage points year-over-year and 4 percentage quarter-over-quarter.

We are very pleased to see that normal as our cash cow business has maintained stable and strong productivity after over the decade of operation. Total revenue from Tantan came in at RMB321 million, down 3% year-over-year, up 4% quarter-over-quarter. Tantan delivered its first operating profit at the beginning of this year and managed to improve its profitability in the second quarter. Adjusted operating income for Tantan for the quarter was RMB31.89 million, representing a margin of 10%, compared with adjusted operating loss of RMB119 million in Q2 last year and an adjusted operating income of [RMB14.48] (ph) million in the previous quarter. Now I will discuss our progress and our strategic priorities in this three business lines, Momo, Tantan and the new endeavors.

Starting with the Momo app, which is at a relatively mature stage. Our goal for Momo this year is to keep the user a very low scale stable, continue to optimize cost structure and maintain the productivity of cash cow business since the beginning of the year. Our team has made good progress in optimizing product operations, introducing new monetization features and improved cash unitization and staff efficiency, better-than-expected financial performance and studies recovery in [Indiscernible] scale average of [Indiscernible] results. Now I’ll walk you through the details. Firstly, on the product and operational funds since the beginning of the year, our focus on product operation has been stabilized, the users face and improve monetization efficiency.

The core of our efforts is both around providing more timely social interactions and enriching content supply. On the channel front, we have strategically focused on assessing channel ROI, as well as our user lifetime value or LTV, driven by the joint efforts of product and operations. The recovery trend of user and retention after the Chinese New Year continues in the second Quarter. Momo’s next-day retention rate has returned to its pre-pandemic level, which is the main reason for the continued [Indiscernible] in user pace. The number of Momo’s paying users increased by 100,000 to 7.9 million from the previous quarter. The steady growth in paying users has proven that the core value of normal as the SoulChill product remains strong with our focus on user acquisition tilted towards high-quality users.

Our overall user quality has been gradually improving, which lays solid foundation for the cash cow business to maintain its productivity. As Tang Yan mentioned last quarter, since Momo is a firm with a history of more than a decade our current strategic priority is to stabilize user scale, optimize costs and ensure is commercial productivity. We expect such priority at the KPI level, our focus has shifted from driving the growth of mobile user sales to pursuing profitable user growth. MAU, therefore, is no longer the most meaningful operational metric for investors. Therefore, we have decided to no longer disclose MAU data on a quarterly basis unless there is a significant change in our user base. We believe that investors should rather focus on the number of paying users when evaluating Momo’s overall scale and operation — operating performance.

Now let’s go through the productivity of our Momo’s cash cow business. In the Second Quarter, Momo’s live streaming revenue was RMB1.44 billion, up 3% year-over-year and 12% sequentially. The revenue growth was mainly due to the significant increase in the number of top promo users, driven by new operational events and gamified features and the increase in high paying users growth overall are people growth. In the second quarter, the revenue sharing ratio of live streaming was lower than the previous quarter, mainly because in Q1, we offer a one-off incentive to broadcasted to resume live shows after the Chinese New Year. As the supply side remains stable, we believe the current revenue sharing policy is effective enough to incentivize forecasted.

There is no significant structure adjustment is needed. In the second quarter VAS revenue, excluding Tantan, totaled RMB1.33 billion, up 1% year-over-year and 11% sequentially. VAS revenue from the Momo app totaled RMB1.07 billion, up 6% year-over-year and up 10% quarter-over-quarter. While revenue from the standalone app was RMB262 million, up 44% year-over-year and 60% sequentially. The main reason toward the year-on-year declines in Momo revenue is that the number of paying users had yet to recover to the level in the same period of last year. Meanwhile, ARPPU improved significantly from a year ago, partially offset the revenue pressure from the decline in paying users. The sequential improvement in normal VAS revenue was driven by the increase in both ARPPU and paying user count.

Since the beginning of the year, our team has in integrating user products with commercial products to improve monetization efficiency. For example, we added access to the chat room experience in several features such as nearby people and post. This can not only improve our user experience also increase the penetration of paying features and similarly uses expanding behavior. The expansion of new entry points combined with optimizing the recommendation algorithm drove studies, sequential growth of audio and video-based social entertainment experience, which enjoy higher ARPPU. So let’s review Tantan’s performance. Our strategic goal for Tantan is to achieve overall breakeven for the year and develop product and monetization models that are suitable for the Asian dating culture.

In order to pursue suitable sustainable growth on the back of the positive business cycle. At the beginning of the year, we achieved the first step of our strategic goal, which is to breakeven. However, in terms of user growth we still need to make further breakthrough on both user and commercial product funds. As mentioned last quarter, Tantan user base gradually recovered after the Chinese New Year trough. However, entering spring user activity after the pandemic as well as the adjustment of user registration process. Tantan was attacked by large-scale scamming activities, which can the main issues that play us in the second quarter. In order to maintain a healthy and stable dating ecosystem we launched a stringent anti-spam campaign, which resulted in an 11% decrease in MAUs to 17.3 million in June, compared to March.

As of the end of Q2, Tantan had 1.1 million paying users, a net decrease of 200,000 from the previous quarter. The decrease was due to the decline in user base, whereas paying conversion remained stable sequentially. So now moving on to Tantan’s financials. Total revenue for the second quarter was RMB321 million down 3% year-over-year, but up 4% sequentially. During the last 18-months ago, although Tantan’s user base a number of paying users declined on a large scale, due to the factors such as the pandemic marketing spend reduction and NP spend initiatives, the platform has experienced a limited decrease in revenue due to the team’s efforts to improve ARPU. The second quarter — in the second quarter loss revenue was RMB170 million, up 1% sequentially.

Live streaming revenue was RMB145 million, up 4% quarter-over-quarter. At the same time, we continue to optimize costs and expenses related to staff and infrastructure, resulting in a sequential growth of operating income to RMB31.89 million. Now I would like to share our progress against Tantan’s strategic priorities during the quarter. So since the beginning of the year, our team has delivered good results with respect to our strategic priority of achieving breakeven. So this is primarily due to our efforts in both marketing and monetization. So firstly, on the marketing front, in the second quarter, channel competition intensified due to the impact of the e-commerce shopping festival in June, resulting in a quarter-on-quarter increase in unit acquisition costs.

Our team tried to limit the increase in unit acquisition cost by adjusting the channel structure and awarding channel competition during peak times, thanks to our optimization of our channel strategy and the data feedback system. Our new ARPU increased significantly from the previous quarter. The channel ROI remained stable despite the sequential increase in unit acquisition costs. On a year-over-year basis in Q2 2023, unit user acquisition costs increased by almost 50% and new users ARPPU increased by almost 60%. In the second half of the year, we will continue to focus on improving user acquisition efficiency. The plan is to continue to closely monitor channel ROI and adjust channel investments accordingly. In addition, we will further improve resource unitization by carefully selecting the KOLs we work with and optimizing advertising materials.

On the monetization front, our commercial product team has delivered good results over the past year and optimizing the existing paying experience and launching new paying features continuously driving ARPU growth. The Black Gold membership service launched at the end of last year and play a positive role in driving ARPU growth. In the second quarter, our product team increased the exposure of the Black Gold privilege service and added a premium privileged package effectively drove further ARPU growth. In the past year Tantan’s ARPPU has continued to increase significantly as we provided more new paying features that can effectively improve matching [efficiently] (ph) and enhance user dating experience. Moving forward, we will follow the path by adding new use cases while increasing the exposure of commercial products.

For example, introducing exclusive privilege for female members, providing female users with high-quality matched and non-interference auction. Meanwhile, we will optimize the matching algorithm for members based on user feedback and improve the process experience for members to drive renewal rates. Overall, in the first-half of the year, our team has made good progress in improving user acquisitions, efficiency and driving our people growth. We are happy to see that the decrease in cost and increasing ARPU able Tantan to achieve breakeven. However, we have to admit that we haven’t made any substantial breakthrough in terms of user growth or any significant innovation in commercial products, such breakthrough on product innovation is the key for Tantan to drive a positive business cycle and achieve sustainable growth.

During the second quarter, the outbreak of stemming activities on Tantan created a serious negative impact on the ecosystem. So our product team has to focus its main efforts on the anti-spam campaign. In quarter two, we started testing product experience to improve female users, engagement and retention. However, based on our preliminary data feedback, this product do need further iterations. In the second-half of the year, our product operation team will continue to optimize the core life and match mechanisms and explore other social experience to improve user [transcend] (ph) and female user retention. Lastly, in terms of our new endeavors, the goal here is to enrich our product portfolio, push the boundaries beyond Momo and Tantan and deliver long-term growth engine for the group.

In the second quarter, the total revenue for us the profit oriented stand-alone app, including domestic and overseas social and games product was RMB264 million, up 33% year-over-year and 60% sequentially. Revenue of domestic product was backed on sequential growth track after the Chinese New Year [Indiscernible]. Revenue growth in overseas social product, temporary slower at the beginning of the year, due to the earthquake impact in Turkey and the evaluation of Egyptian currency. In the second quarter, consumer sentiment in Turkey recover, our team shift is market focus from Egypt to several affluent middle eastern markets. With the compliance efforts of product and channel teams, the number of paying users of overseas social products increased rapidly, which led to our significant sequential increase in revenue.

In addition, our team optimized the overall revenue sharing ratio and revised cost and expense items by fine-turning operations. Thanks to operating leverage, the net margin improved sequentially. As a result, the net income grew much faster than revenue. As we dive deeper into the overseas market, we realize that the Middle East and emerging North Africa markets still have much room for growth. Therefore, in second quarter, while we increased our investments in assisted products to drive rapid revenues and profit growth. We also tested several new ROI OEM test product in the MENA area. We’ll try to replicate our success so far in our overseas expansion to both our user base further. With our expertise in attracting users through social attributes and monetizing through value-added service.

We are hopeful that this new product will contribute sizable revenue and profit to the group in a foreseeable future. This concludes my remarks. Now I will pass the call over to Cathy for the financial review. Cathy, please.

Hui Peng: Thank you, Sic. Hello, everyone. Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total revenue for the second quarter 2023 came in better than our previous expectation at RMB3.14 billion, up 1% year-on-year and 11% quarter-over-quarter. Non-GAAP net income attributable to the company was RMB632.1 million, up 36% year-on-year and 34% from the previous quarter. Better-than-expected bottom line performance was attributable to the outperformance of the top line, as well as our continuous cost control efforts, which led to improvement in both Momo and Tantan’s profitability. We are proud that after three years of pandemic, we emerged on the other side with a very healthy and solid cash cow business and at the same time, stronger capability of managing new business endeavors to drive future growth, while delivering decent profits to the shareholders.

Now let me walk you through the details. Looking into the key revenue line items for the quarter. Firstly, on live broadcasting, total revenue from live broadcasting business for the second quarter of 2023 was RMB1.59 billion, up 5% year-over-year and 11% quarter-over-quarter. Momo app live broadcasting revenue totaled RMB1.44 billion for the quarter, up 3% year-over-year and 12% quarter-over-quarter. The increase was driven by an increase in the number of high paying users, which in turn drove overall ARPPU growth. Compound live broadcasting revenue amounted to of RMB145.2 million, up 25% from Q2 last year and 4% from the previous quarter. Revenue from valued added service for the second quarter 2023 was RMB1.50 billion, down 2% from Q2 last year, but up 10% sequentially.

Revenue from VAS on an ex-compound basis was RMB1.33 billion in the second quarter of 2023, up 1% year-on-year and 11% sequentially. Momo app VAS revenue decreased from the year ago, due to a decrease of paying user count. However, the downward pressure was completely offset by the growth of standalone new applications, which led to a slight year-over-year increase in value-added service revenue on an ex-compound basis. The sequential growth was primarily attributable to the seasonal recovery of Momo app value-added service business, as well as the continuous growth of the new application. Tantan’s value-added service revenue amounted to RMB170.2 million, down 21% from Q2 last year, but up 1% from the previous quarter. The year-on-year decrease was due to the decline in paying users.

However, the downward pressure on value-added service revenue was partially offset by the growth in ARPPU driven by commercial product efforts. Now turning to costs and expenses. Non-GAAP cost of revenue for the second quarter of 2023 was RMB1.82 billion, compared to RMB1.79 billion for the same period last year. Non-GAAP gross margin for the quarter was 42.1%, down slightly by 0.4% from the year ago period, but up 1.1% from the last quarter. The sequential increase was due to the discontinuation of one-off incentives in Q1 provided to live streamers after the Chinese New Year to speed up supply side recovery. Non-GAAP R&D expenses for the second quarter was RMB200.8 million, compared to RMB214.3 million for the same period last year, or a 6% decrease year-over-year.

The decrease was due to the continuous optimization in personnel costs. Non-GAAP R&D expenses as a percentage of revenue was 6.4%, compared with 6.9% Q2 last year. We ended the quarter with 1,470 total employees of which 339 are from Tantan, compared to 1,825 total employees, of which 516 from Tantan a year ago. The R&D personnel as a percentage of total employees for the group was 63%, compared with 61% Q2 last year. Non-GAAP sales and marketing expenses for the second quarter was RMB349.7 million or 11.1% of total revenue, compared to RMB601 million or 19.3% of total revenue for the same period last year. The significant year-over-year decrease both in terms of absolute renminbi amount and as a percentage of revenue was primarily attributable to Tantan’s shift in marketing strategy to control costs and focus on channel ROI and to a lesser degree, Momo strategy to trim low-efficiency channel marketing spend.

Non-GAAP G&A expenses was RMB83.2 million for the second quarter of 2023, compared to RMB82.6 million for the same quarter last year. G&A expenses as a percentage of total revenue remained stable at 2.7% from the year ago period. Non-GAAP operating income was RMB708.8 million, a significant increase of 53% from Q2 2022, and up 37% from the previous quarter. Non-GAAP operating margin for the quarter was 22.6%, up 7.7 percentage points from the same period last year and 4.2 percentage points from the previous quarter. Non-GAAP operating expenses as a percentage of total revenue was 20.2%, a decrease from 28.8% in Q2 2022 and down from 23.9% in Q1 this year. Non-GAAP expenses in absolute renminbi amount decreased 29.3% year-on-year. This was mainly due to a reduction in sales and marketing expenses and to a lesser degree, optimization in personnel and infrastructure costs.

Now briefly on income tax expenses. Total income tax expense was RMB166.0 million for the quarter with an effective tax rate of 20%. In Q2, the company accrued withholding income tax of RMB48.1 million, which is 10% of undistributed profit generated by our ROFE. Without withholding tax, our estimated non-GAAP effective tax rate was around 14% in the second quarter. Now turning to balance sheet and cash flow items. As of June 30, 2023, Hello Group’s cash, cash equivalents, short-term deposits, long-term deposits, short-term investments and restricted cash totaled RMB11.27 billion, compared to RMB17.40 billion as of December 31, 2022. In Q2, we paid an equivalent of RMB937 million cash dividend to our shareholders. And in late June, we prepaid an equivalent of RMB2.26 billion cash to repurchase our convertible senior notes, which was settled in early July.

Net cash provided by operating activities in the second quarter of 2023 was RMB828 million. Lastly on business outlook. Before we give out the numbers, let me spend a few minutes talking about a few things that are expected to have impact on our top line performance in the near-term. For the second quarter of 2023, revenues from Momo segments or on a ex-compound basis totaled RMB2.82 billion, up 1.3% year-over-year. This was the first positive quarter for Momo on a Y-o-Y basis since the beginning of COVID in early 2020. On the one hand, we are happy to see that the cash cow business showed remarkable resilience on the back of strong platform fundamentals. On the other hand, we remain cautious about the operating environment we are in. As you guys can probably feel macro rebound is now turning out as promising as we had hoped at the beginning of the year, especially as we entered into Q3, we’ve got a clear sense that the spending sentiment is softening.

In addition, starting mid-Q3, we have also been making product adjustments to make sure that our ecosystem stays healthy. Some of the adjustments have negative impact on the top line performance of Momo’s value-added service in the short run. All of these factors are expected to cause revenues for Momo segment for Q3 to decrease on a sequential basis. For Tantan, in June, we made some product adjustments to comply with the new policy rolled out by MIIT in Q2, which posted a negative impact on the renewal rate of the membership service. This will likely cause Tantan’s revenue to see a sequential decrease from Q2 as well. To be more specific, we estimated the group’s third quarter revenue to come in the range from RMB2.9 billion to RMB3.0 billion, representing a decrease of 10.3% to 7.2% year-on-year or a decrease of 7.6% to 4.4% quarter-over-quarter.

At segment level, for Q3 2023 on a sequential basis, we expect Momo revenue to decrease around mid-single digit, and Tantan revenue to decrease in PM. 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 the prepared portion of today’s discussion. With that, let me turn the call back to Ashley to start Q&A. Ashley, please.

Ashley Jing: Just a quick reminder before we take questions. For those who can speak Chinese, please ask your questions in Chinese first, followed by English translation by yourself. Operator, we’re ready for questions, please.

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Q&A Session

Operator: Thank you. [Operator Instructions] The first question today comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong: [Foreign Language] Thanks management for taking my question. My question is on core Momo, the first part is about the user recovery trend, as well as the outlook. And the second is regarding the macro, how it is going to impact live streaming and PAS? And the third part is about our second-half core Momo revenue expectation. Thank you.

Zhang Sichuan: [Foreign Language] [Interpreted] As I mentioned in my prepared remarks, the strategic priority for the Momo app this year is to keep the user base stable and increase the productivity of the cash cow business. The team’s mandate is to devise and execute product and channel strategies with idea to accomplish this goal. On the product front, we integrated user products with commercial products to continue to introduce new features that facilitate timely social interactions and improve relationship building. In addition, users can further enhance the social experience by paying for value-added services. On the back end, we continue to optimize the content recommendation algorithm, so we can create a better community atmosphere and deliver more value for female users and those who are seeking for emotional companionship, an enhancement in product experience has played a positive role in improving user retention.

And therefore, even with reduction in channel investment versus a year ago, the user base continue to grow steadily after the Chinese New Year trough. Although Momo’s user growth and engagement level performed pretty well so far this year. We will remain our operational focus on keeping the number of paying users at a healthy and stable level rather than the excessive pursuit of MAUs because paying users on a fundamental basis will maintain the high productivity of the cash cow business. In terms of consumer sentiment, we felt that the user social and consumption demand started to pick up after the Chinese New Year for our better-than-expected user metrics and financial performance in the first-half of the year a solid evidence of this. However, since during Q3, Momo’s core revenue started to soften, compared with the second quarter.

And there are two reasons for this: One, is the weakening of consumer sentiment caused by the overall macro environment. And the other is that we took the initiative to make a round of relatively large round of large production adjustments in late August to further ensure a healthy ecosystem. And for the questions related to revenues, Cathy will take that.

Hui Peng: Hey, now briefly on the revenue outlook for Momo. As you guys can see, we had a pretty good first-half of the year due to the post-COVID recovery, as well as the fact that the team has been doing a good job on the product and operational side. However, as Sic mentioned, moving — as we move deeper into the year by monitoring the daily grossing and also from some of the anecdotal conversations with our VIPs, we can feel that the consumer sentiment is obviously weakening, possibly due to the macro, not turning out to be as promising people had hoped earlier in the year. And the other factor that we have to take into consideration is that we’ve been making some product adjustments on the value-added service side to make sure that Momo’s social ecosystem stays healthy.

And such adjustments involve temporary suspension of some of the products and services we previously offered on the Momo platform. And such suspension is expected to have partial impact on Q3 and full impact from Q4 onwards, because the adjustments and suspension took place toward late August time frame. And due to those two factors, one at the macro level and the other one on the product front, our previous view that I remember saying on our last earnings call that the second-half of the year is likely to see continuous improvement from the first-half. That view at this point of time, obviously seemed a little bit too optimistic. As you guys can see from our guidance, we are seeing Q3 to show a sequential decline by mid-single-digits. Q4 is at this point of time, still a little bit far out to see, because a lot of it will depend on how micro eventually is going to weigh out.

But if the macro stays the way it is, I think it is possible that we can see a flattish quarter from in Q4 from Q3. Q4 is usually a very strong season due to the year-end competition event by the full quarter impact product adjustments that I just mentioned on the mass side could in some of the incremental revenue from the year-end competitions. Also we think it’s possible that October long holiday this year could have a bigger negative impact on us because more people could be traveling due to the reopening instead of hanging out online using the social entertainment services that we offer. So again, at this point of time, I do not really have enough visibility to be very prescriptive about Q4. But if you ask our view at this point of time, we’d rather stay on the conservative side for the whole second half of the year.

I hope that helps.

Ashley Jing: Yes. Operator, next questions, please.

Operator: The next question comes from Raphael Chen with BOCI Research. Please go ahead.

Raphael Chen: [Foreign Language] Thanks management for taking my question. My question is regarding our new apps. Firstly, could the management share some latest update especially [Indiscernible]? Also, could we have some insight on whether if the company had other new apps or products this year? Lastly, do we have any revenue guidance of new apps in the second-half of this year or 2024? Thank you.

Zhang Sichuan: [Foreign Language] [Interpreted] In terms of new endeavors, our domestic apps, which launched relatively early, have now entered a rather mature stage in terms of product and product format and user scale. And for these apps, our team’s current focus is on continuously exploring monetization opportunities and optimizing the cost structure and promoting the steady growth of profit scale. And as for the overseas business with the greatest and most promising potential, as I mentioned earlier, although user and revenue growth are temporarily slowed down at the beginning of the year due to some external factors. The overseas business operational and financial metrics actually resumed a satisfactory growth trend thanks to the timely adjustment our team made in shifting market focus.

While digging deeper into mature markets and exploring opportunities for revenue expansion in new markets, we also optimized the revenue sharing policy in favor of our GP margin as we build on our brand power and industry influence. And that is why if you look at social profit growth rate and went much faster than it’s a revenue or growth rate level. We have recently set up an overseas business unit and has launched several new products overseas. Our goal here is to further develop existing products, while more effectively replicating our successful overseas experience in new vertical markets, but we’ll start making channel investments once user matrix reach a satisfactory level. In fact, we have started trial marketing in selected regions.

But our focus this year will be on optimizing products from product form according to user feedback rather than engaging in large-scale user acquisition and monetization. However, given that all of new products in the Middle East ROI-oriented app, so we have strict requirements for the financial return on financial performance of the product iteration and operations. Hopefully, these apps can make some real contribution to our top line next year. As for other new products, after Tang Yan returned to the management team, our investment in research and development of new products and businesses has greatly increased. Although the current demand in the consumer Internet industry is very saturated, we believe that each generation of young people will have different social needs and preferences.

This is our challenge and also our greatest opportunity. We have been working in this field for more than 12-years, and we have accumulated a lot of successful experiences and lessons learnt. With our strong capital and talent pool, I’m confident that through self-research and investments, we will continue to consolidate our leading position in the social field and explore new growth opportunities.

Hui Peng: Okay. Let me — this is Kathy. Let me give you some color on the size of the revenue from the new apps. To be clear, the revenues from the new applications is currently reported within the value-added service line under Momo segments. For example, in the second quarter 2023, value-added service revenue on an ex-compound basis was 1.3 — around RMB1.3 billion, roughly 20% of which came from the new applications. As SoulChill continues to gain momentum. This year, that 20% new piece within the value-added service line could grow I think, around 50% on a year-over-year basis. Such top line — the other thing we’re noting is the top line growth that I just mentioned also comes with margin improvement. So bottom line is growing even faster than top line.