Hello Group Inc. (NASDAQ:MOMO) Q3 2022 Earnings Call Transcript

Hello Group Inc. (NASDAQ:MOMO) Q3 2022 Earnings Call Transcript December 8, 2022

Hello Group Inc. beats earnings expectations. Reported EPS is $2.6, expectations were $2.14.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Third Quarter 2022 Hello Group Inc. Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. Please note this event 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: Thank you, operator. Good morning, and good evening, everyone. Thank you for joining us today for Hello Group’s third quarter 2022 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; and Ms. Peng Hui, CFO of the Company, who will discuss the Company’s business operations and highlights as well as the financials and guidance. They will both 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 related events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are 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’ll now pass the call to over to our CEO Mr. Tang Yan.

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Tang Yan: Good day, everyone. Thank you for joining our conference call. This is my first earnings call since returning to the CEO position. I’m very happy to have the opportunity to communicate with the investor community again in the third quarter. Thanks to the product and operational enhancement, we delivered good financial results and made solid progress in our businesses. Now, I’ll walk you through the details. I will start with a brief overview of our financial performance. For the first quarter of 2022, total revenue was RMB3.23 billion, down 14% year-over-year, but about 4% quarter over quarter. Revenue growth came in stronger than we expected as live streaming performed slightly better than our conservative estimate.

Adjusted operating income was RMB605 million up significantly by 30% sequentially with a profit margin of 19%. This was mainly attributable to solid execution of our strategy to optimize cost and improve efficiency, delivering good progress across all business lines. On an ex-Tantan basis, total revenue was RMB2.89 billion, down 11% year-over-year, but up 4% sequentially, and adjusted operating income with RMB643 million with the margin of 22%. The year-over-year decrease in total revenue was mainly due to pressure on the live streaming business cost by the pandemic and regulatory factors. However, this decrease was partially offset by rapid growth in standalone apps. Tantan total revenue for the quarter came in at RMB341 million down 33% year over year, but up 3% sequentially.

The year-over-year decrease was mainly due to the demonetization process we initiated in September last year to improve user experience and retention as well as an active impact of COVID and the reduction of channel investment on Tantan’s user growth and paying conversion. Adjusting that loss was significantly narrow to RMB38.84 million from RMB119 million in the in the second quarter, mainly due to our initiatives to optimize China marketing strategy since July. Now, I’ll discuss the execution of our strategic priorities during the third quarter. The goal we set for Momo, Tantan and our new endeavor this year are as follows. For the Momo app, our although goal is to maintain a stable user base with a limited marketing budget and seeks growth on top of that, while enjoying this cash flow business remains stable.

Although the consumer and regulatory environments were full of uncertainties, our team adopted well and did a good job in executing on almost Momo’s strategic goal. For Tantan, our goal set at the beginning of the year was to deliver solid user growth by improving marketing efficiency and the core dating experience. However, in the first half of the year, the COVID situation continues to deteriorate, which largely affected users’ dating sentiments and their propensity to pay for VAS, resulting in a significant decline in Tantan ROI. Therefore, in the third quarter, we decided to adjust Tantan’s goals to focus on narrowing net loss by reducing low-efficiency channel marketing spend and accelerating our efforts to develop products and monetization models, that are suitable for the Asian taking culture, in order to pursue profitable growth.

Tantan’s financial performance this quarter demonstrated the initial success we achieved in executing on its strategic goal. With respect to new products and businesses, our goal is to continue to enrich our product portfolio and push the boundaries beyond Momo and Tantan. We made steady progress on this front during this quarter. Next, I’ll discuss the progress we made with the aforementioned strategic priorities and our future plans. Firstly, regarding Momo app user growth and key operating metrics, Momo had a 108.8 million monthly active this quarter, down 2% sequentially. The negative impact of pandemic control measures pressures the overall open social sentiment throughout Q3, and the situation wasn’t starting in the middle of the quarter, resulting in the sequential decline, organic traffic retention, and users propensity to pay.

In terms of channel marketing in order to control cost, meet the pandemic with scaled back investments in channels with low paying conversion and less satisfactory retention, untitled our limited marketing budget toed channels with high ROI. The number of paying users for the quarter was 8.4 million down from 8.6 million in Q2. The 200,000 sequential decrease was mainly due to the decline MAUs. Paying conversion remains stable. Thanks to our team’s timely adjustments in use acquisition strategy, focusing on high ROI channels and paying conversion and continuous paying experienced optimization of commercial features. This laid a solid foundation for our cash cow business to remain stable. Now, I’ll discuss programs we made regarding the priority of ensuring the cash cow business remains stable, although the COVID control measures put pressure on our user base.

On an ex-Tantan basis, revenue grown sequentially and profit margins stayed largely stable, thanks to our team’s assets to adjust product and operational strategy in a timely manner. Our team managed to drive gross profit increase along with revenue growth, against the challenging external environment with the COVID and discretionary spending softness. This demonstrates our strong adaptability and execution skills. Momo’s live streaming revenue was RMB1.5 billion for the third quarter down 21% year-over-year, but up 8% sequentially. The year-over-year decrease was mainly due to COVID and regulatory factors. The sequential growth was mainly attributable to the increase in the number of high paying users, driven by promoter advanced targeting meet to high cohort users and designated broadcaster recommendation algorithm, which effectively enhanced the product experience of the relevant groups.

Our operation team controlled revenue sharing costs by adjusting the one policy and design of gamify features so that growth profit margins stayed relatively stable, while revenue increased sequentially, generating growth profit accretive revenue growth. Our ecosystem remains healthy and stable as we optimize the recommendation algorithm for different cohort of users driving sequential growth in live streaming DAU. On the supply side, the number of high quality talents grew significantly quarter over quarter. With regards to VAS, revenue from value-added services excluding Tantan totaled RMB1.34 billion for the third quarter, up 6% year-over-year or 1% sequentially. All incremental revenue from our new endeavors contributed to this — sorry, all incremental revenue came from our new endeavors.

VAS revenue from the main Momo app totaled RMB1.14 billion, down 3% year-over-year and flat sequentially. Revenue from the new app was RMB196 million, up 147% year-over-year and 8% sequentially. I will provide an overall update for our new endeavors later. For now, our focus on Momo apps last business. For VAS within the Momo app, Q3 had seen COVID situation deteriorating and lockdown measures getting increasingly stringent. As a result, user traffic and engagement level of highly LBS-related features such as the interest group and offline gatherings were particularly depressed by the pandemic control measures in Q3. This was re reflected in the relatively low overall spending on traditional gifts and revenue from membership services also decreased sequentially due to weaker traffic.

The revenue decline in traditional LBS-related social use cases was the main drag on the sequential performance of the Momo app. For audio- and video-based social entertainment experiences, we introduced new features to try paying conversion and sequential revenue growth, which offset the decline in traditional virtual gifting and kept Momo VAS revenue stable. With respect to Tantan, I will start with user trend and overall financials in response to uncertainties created by the pandemic and the macro environment. In the third quarter, management decided to pursue a cost control strategy to narrow Tantan’s network by reducing marketing spend and cutting investment in channels and methods with lower ROI. Such strategy had a clear impact on Tantan’s overall annual use.

In the near-term compounded by the escalated COVID measures in multiple regions in China since late August, Tantan’s MAUs decreased to 16% quarter-over-quarter to RMB20.9 million in September. The number of paying users for the quarter was 2 million down 200,000 sequentially, mainly due to the decline in MAUs. The sequential improvement in pending conversion was mainly attributable to two factors. First, the retention of paying users is better than that of non-paying users. Second, the optimization of our product and algorithm drove spending from users with a high propensity today. Now, I’ll briefly review Tantan’s financial performance. Total revenue for the third quarter was RMB341 million, down 33% year-over-year, but up 3% sequentially.

Tantan revenue for the quarter came in better-than-expected. The year-over-year decrease was mainly due to our demonetization strategy to improve user experience since September last year, although the number of paying users decreased the sequentially due to the decline MAUs. The significant improvement in ARPPU driven by live streaming and other high spending services offset the pressure on MAUs caused by the decline paying user account. For the third quarter, VAS revenue was RMB202 million down 6% sequentially, mainly due to a decrease in paying user accounts. The proportionally increase in ex-VIP sales like to slight increase in VAS ARPPU. Live streaming revenue for the third quarter was RMB140 million, up 20% sequentially. The sequential growth was mainly attributable to the significant increase in ARPPU driven by supply side optimization.

Now, let’s move to the cohorts Tantan has made against its strategic priorities and our future plan plans. Tantan’s goal for the second half of the year is to reduce spending in low efficiency channels to narrow net loss. At the same time, we are working hard to improve user retention and driving up ARPU growth through algorithm, product innovation and new non-membership VAS features. Once ROI turns positive, we will reinvent the profit into marketing to form a self-sustaining positive cycle. Tantan breakeven depends on two key factors. First, reducing the cost while ensuring the improvement of user acquisition efficiency; second, improving user retention and ARPU through new product experiences. Next, let me explain each of the two in detail.

First, regarding reduction in channel investments, in the third quarter, Tantan’s adjusted net loss meaningfully narrowed to RMB38.84 million from RMB119 million in the previous quarter. The better-than-expected net loss reduction was mainly due to our channel strategy to reduce and control marketing cost and improve user acquisition efficiency. Since July, we have gradually cut off channels and methods with low ROI, continued to optimize budget allocation for channel investments and adjusted feeding strategy timely according to market dynamics; in the third quarter, unit user acquisition cost decreased by nearly 30% sequentially and by more than 40% from a year ago. The continuous improved user acquisition strategy drove new user retention to increase both on year-over-year and on a sequential basis.

Thanks to the adjustment in user acquisition, advertisement material and targeting strategies for different user groups. The female ratio of new users reached the peak for the year and the average age of new users continue to get younger. The initial results of channel investment reduction has laid a solid foundation for us to further narrow Tantan’s net loss to achieve breakeven and enter into a positive business cycle next year. In the fourth quarter, we plan to further reduce marketing spend in the domestic market and continue to optimize our user acquisition strategy, so that excluding specific year end expenses such as annual bonuses. We can further narrow Tantan’s loss from operations. In the meantime, we will continue to improve user retention, new user retention, and the proportion of young users and maintain the female ratio of new users at a satisfactory level.

Although, we delivered good results in lowering marketing spend in the third quarter to achieve our goal of profitable growth, we need to address another critical factor, which is to increase ARPU. In the past, Tantan took a wrong path in driving ARPU. After the resumption of app store downloads in 2019, and before we initiated the demonization process in mid 2021, the way to increase paying conversion and ARPU was to make the payroll strategies more and more aggressive. In other words, this was a strategy to build more and higher payout around features deemed to be highly valuable to users and making it impossible for users to fully enjoy Tantan’s services without paying. Since membership subscription is limited in differentiating users in different paying capabilities.

In order to drive revenue growth, Tantan team at the time had to heavily focus on increasing paying conversion rather than driving both paying conversion and ARPPU at the same time. That was the fundamental reason why Tantan chose to push the membership subscription ratio higher and higher by increasing male user ratio and aggressively building payout between 2020 and the first half of 2020. Although doing so, may Tantan once very close to breakeven, so only aggressive payroll strategies via the package user’s experience resulting in a number problems such as the last disproportionate gender ratio, continuously deteriorating new users and female uses retention, lower membership renewal rates and growing customer complaints that did which ended up hitting a dead end taught us that is not visible to entirely rely on a membership model with limited options to differentiate users.

This model won’t put Tantan’s revenue growth into a scalable and sustainable cycle. Therefore, we have to try a better way to drive up ARPU growth. This goal can only achieve through greater product and operational innovations. Our solution to improve retention and ARPU is to introduce new product and services. On the user product front, our urgent priority is to explore effective social experiences beyond a swipe by matching mechanism. For commercial products, we will leverage non-membership paying models that compared to differentiate users to drive ARPU growth. Over the past few quarters, our team was dedicated to optimizing product experience for female users and those with without qualified photos to improve retention of these two specific groups, thereby enhancing overall retention.

For example, we introduced the female oriented VAS features to recommend potential matches for high-quality conversations and operate the maturation on the back end of this feature, drove a sequential increase in female users time spent, retention and number of average conversations. Another example I can share with you here is a chat room clearance. Users who feel reluctant to show their real photos can use avatar to chat with others and enjoy a sense of companionship. In the third quarter, we improved the chat room users’ engagement by leveraging innovative features and initiating hot topic discussions. In the fourth quarter, the key is on introducing more innovative features in the chat room in order to enhance product penetration and user engagement.

We will also going to be testing different monetization models. The goal is for the chat room to contribute more to APPU growth and improve monetization efficiency. Overall, in the third quarter, Tantan made good progress in narrowing the net by reducing low efficiency channel marketing spend. Although, we haven’t made breakthroughs in user experiences and product innovations, we have seen steady improvement in user engagements. This makes me feel more confident that we will continue to narrow operating loss in the coming quarters and eventually achieve profitable growth. We have enough confidence and patience to keep driving and gradually refining our products and operations. Lastly, I will review the progress we made with our new endeavors.

In the third quarter, total revenue for the profit driven hour oriented standalone apps was RMB203 million, up a 154% year-over-year and 2% sequentially. For the domestic products that are more mature, our strategy this year is to step up the monetization process, improve monetization efficiency, and scale up profits. As for overseas social apps in the expansion stage, our goal is to expand user base and grow profitable revenue by deepening operations in established markets and expanding into new markets. In addition, we will optimize supply side ecosystem, lower the revenue sharing ratio, and improve user acquisition efficiency. In the third quarter, user base of the ROI oriented products rule steadily and profit increased significantly from the previous quarter.

Such encouraging user and financial performances were mainly attributable to reduction in marketing spend due to improved free user acquisition efficiency, which in turn drove substantial growth in operating margin. In Q3, revenue generated by apps in the overseas markets surpassed that in the domestic market, and overseas apps showed greater growth potential. Going forward, we will continue our current management approach to ROI oriented products, namely to pursue steady growth and scale up profit contributions. We will launch new social apps and innovate modernization model to meet local users’ specific preferences while expanding into new markets. This concludes my remarks today. I will now pass the call over to Kathy for the financial review.

Cathy?

Peng Hui: Thank you, Tang Yan and Ashley. 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 2022 was RMB3.23 billion, exceeding the high end of our revenue guidance down 14% year on year but up 4% quarter over quarter. Non-GAAP net income attributable to the Company was RMB535.8 million compared to RMB571.6 million from the same period of 2021 or a 6% decrease. The year-on-year decrease on bottom-line was significantly narrowed from the previous quarters. Looking into the key revenue items for the quarter, firstly on live streaming, total revenue from live broadcasting business for the third quarter 2022 was RMB1.66 billion down 24% year-over-year, but up 9% quarter over quarter.

Core Momo’s live broadcasting revenue totaled RMB1.52 billion for the quarter for the third quarter down 21% year on year, but up 8% quarter over quarter. The year-over-year decrease was mainly due to the pressure cost by the COVID and the regulatory factors. The sequential growth was mainly attributable to an increase in the number of high paying users driven by product and operational efforts. Tantan’s live broadcasting revenue amounted to remember a RMB139.7 million down 40% from Q3 last year, but up 20% from the previous quarter. The year-over-year decrease was mainly due to product adjustments to improve user experience in September last year as well as the negative impact of the pandemic resurgence on the channel investment reduction.

In the third quarter, our efforts to reform Tantan’s live streaming service to make it more geared toward facilitating social interaction started to bear fruit, which coupled with the supply side optimization, drove a meaningful sequential increase in Tantan’s live streaming. Revenue from value added service was RMB1.54 billion the same as in Q3 last year and flattish sequentially. Revenue from value added service on an ex-Tantan basis reached RMB1.34 billion in the third quarter of 2022, a 6% increase year-over-year and a 1% increase sequentially. The growth in value added service on ex-Tantan basis was driven by incremental revenue contributed by the standalone new applications. Tantan’s value added service revenue amounted to RMB201.6 million, down 27% from Q3 last year and 6% from the previous quarter.

The year on year decrease was due to the demonization process to improve user experience and retention in the latter half of 2021, as well as the pressure on Tantan’s annual use and paying conversion caused by the COVID resurgence and reduction on marketing spend. The sequential decrease in Tantan’s value added service was largely attributable to the latter factor. Non-GAAP cost of revenue for the third quarter of 2022 was RMB1.88 billion compared to RMB2.16 billion for the same period last year. Non-GAAP gross margin for the quarter was 41.7% down less than 1 percentage point both from a year ago and from the last quarter. The decrease was mainly due to a couple of Tantan related factors. One, the decrease in Tantan’s revenue contribution to the group as Tantan bears higher gross margin than the Momo app; two, lower gross margin from Tantan at a live streaming contributed to more to the top-line.

With respect to the Momo application, gross margin in the third quarter remains largely stable compared to the same period last year and the previous quarter. Thanks to our team’s operational strategy to focus on gross profit and margin instead of just revenues. Non-GAAP R&D expenses for the third quarter was RMB223.4 million, compared RMB231.8 million for the same period last year or a 4% decrease year-over-year, which was due to the continuous optimization and personnel cost since the beginning of the year. We ended the quarter with 1,750 total employees of which 479 are from Tantan compared to 2,050 total employees of which 548 from Tantan a year ago. The R&D personnel as a percentage of total employees for the group was 62% compared with 59% Q3 last year.

Non-GAAP total marketing expenses for the third quarter was RMB458.6 million or 14% of total revenue compared to RMB637.1 million or 17% 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 shift marketing strategy to cut spending on low ROI channels and methods in order to take care of ROI in main COVID and lockdown. With respect to Momo application, we also trimmed low efficiency marketing spend and shifted our savings to promote new applications such as Tietie. We will continue to reallocate resources to support growth of those with higher ROI and promising potential. Non-GAAP G&A expenses was RMB82.6 million for the third quarter of 2022 compared to a RMB114.8 million for the same quarter last year.

The decrease was again the reflection of our continuous efforts to improve cost efficiency as well as some one-off cost items occurred in the third quarter of 2021. G&A expenses as a percentage of revenue remains stable. Non-GAAP operating income was RMB605.1 million, a decrease of 5% from Q3 2021, but up significantly by 30% from the previous quarter. Non-GAAP operating margin for the third quarter was 19%, up 2 percentage points from the same year last year and 4 percentage points from the previous quarter. Non-GAAP OpEx as a percentage of total revenue was 24% a decrease from twenty 26% from Q3 2021 and 29% from last quarter. Non-GAAP operating expenses saw a year-on-year and sequential basis decreased 22% and 15% respectively. The decrease in both absolute renminbi amounts and as a percentage of revenue for OpEx was mainly due to a reduction in total marketing expenses and to a lesser degree, our cost optimization strategy applied to other operating expenses line items since the beginning of the year in response to the macro and pandemic uncertainties.

Now briefly on the below the line items, during the third quarter, the Company generated RMB40.4 million other gain mainly from the repurchase of our convertible senior notes from certain bond holders, which was partially offset by impairment loss on other long-term investments. Now, briefly on income tax expenses, total income tax expenses was RMB156.0 million for the quarter with an effective tax rate of 22%. In Q3, the Company accrued withholding income tax of RMB42.9 million, which is 10% of undistributed profit generated by WFOE. Without withholding tax, our estimated non-GAAP effective tax rate was around 16% in the third quarter. Now turning balance sheet on cash flow items. As of September 30, 2022, Hello Group’s cash, cash equivalent, short term deposits, long term deposits and restricted cash totaled RMB13.02 billion compared to RMB15.71 billion as of December 31, 2021.

The decrease was due to a number of cash flow items, including our cash dividend payment of RMB841 million to shareholders, an aggregate payment of RMB2.14 billion for the repurchase of the Company’s convertible notes an aggregated RMB288 million in relation to the show purchase program and RMB300 million payment to Chinese tax authorities to repatriate cash from our WFOE in China to our offshore entity in the first nine months of 2022. Net cash provided by operating activities in the third quarter 2022 was RMB445 million compared to RMB560 million in the third quarter of 2021. Lastly, on business outlook, we estimated our fourth quarter revenue to come in the range from RMB3.15 billion to RMB3.25 billion, representing a decrease of 14.3% to 11.5% year-over-year, or a decrease of 2.6% to an increase of 0.5% quarter-over-quarter.

For Q4 2022, on a sequential basis, we expect the total revenue for the core Momo to be flattish toward a slight decrease due to the negative impact on that from the continued COVID control measures. On the Tantan side, we expect revenue to decline low single digit. Tantan’s membership revenue will decrease quarter-over-quarter due to a decline in user base as we further reduce marketing spend on low efficiency channels. The membership subscription revenue decrease will be partially offset by the growth of live streaming. Please be mindful that this forecast represents the Company’s current and preliminary review 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 over to Ashley to start Q&A. Ashley, please?

Ashley Jing: Just a quick reminder before we take the 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.

Q&A Session

Operator: Today’s first question comes from Thomas Chong from Jefferies. Please go ahead.

Thomas Chong: As Tang Yan returns as CEO, should we expect there would be any changes to the group’s overall strategies?

Tang Yan: Thank you for your question. Well, I was not directly involved in the daily management of the Company over the past two years. In my role of executive chairman of the board was closely following the overall operations and financial performance of the group. And I was involved in setting strategic priorities and in the decision making process on major issues. Therefore, our strategy will generally remain and changed, focusing on Momo, Tantan’s and our new endeavors. If there is anything different between my approach to strategic execution and the past, I would say that we will step up our efforts on new products and businesses with enhanced the results allocation and execution. Let me elaborate a bit on these three aspects.

First of all, our Momo app, as the product with the largest user scale and the most matured commercial experience in our brand portfolio. Momo’s goal for now is to maintain a steady user base and profit contribution to the group and seek growth on top of that. And especially when we are facing uncertainties created by the pandemic and the macro environment, the most important task for Momo app is to continuously and steadily generate decent level of net profit and cash flow. This requires our team to continuously improve cost control and capital utilization efficiency while doing an excellent job in product operations. We believe that by improving product and operational efficiency, maintaining stable profits is a very achievable goal for Momo, even in the current difficult external environment.

Secondly Tantan, as the second biggest the brand of the Group, in terms of connecting people for romantic purposes, we are seeing very clear growth potential for Tantan, both in China and in overseas markets. Especially in the Asian markets, we do not see any other products that can do a better job than us, in meeting users or dating needs. However, COVID control measures in the past few quarters went beyond our expectation at the beginning of the year. We therefore decided to control cost and reduce low efficiency marketing spend. Tantan’s user scale declined somewhat as we expected, and based on Tantan’s user the retention and financial performance in the recent months, I’m very confident that, we will drive Tantan into a positive business cycle and achieve our strategic goal of profitable growth through product innovation.

Thirdly, with respect to new products and businesses, our team has made encouraging progress over the past two years. Our ROI oriented products maintained strong growth momentum on top of profitability. Our goal is to develop a few more apps like this in the next three to five years, so that collectively, they can make more contribution to the Group’s bottom-line. And on the other hand, this year, we have also made an initial breakthrough in non-ROI oriented product. At the beginning of the year, we captured the opportunity of generation condition and launched our first large DAU product Tietie for Gen Z and Gen Alpha and its user base reached a very considerable level within a short period of time. This demonstrates our ability to discover new markets and sees new opportunities in the social in a photo space and creating a competitive advantage in the process.

Recently, we have made some adjustments to the organizational structure in order to clarify the functional positioning of each product. And at the same time, better reach R&D and channel marketing capabilities so that we can apply the successful experiences that why we accumulated to support the development of new products. I personally will directly lead our new endeavors team to explore and open new growth path for the Group.

Ashley Jing: I think that’s it for the questions, maybe let’s move on to the next question. Operator?

Operator: Absolutely. Our next question today comes from Leo Chiang with Deutsche Bank. Please go ahead.