MOMO

Ladies and gentlemen, thank you for standing by, and welcome to Hello Group's first quarter 2026 earnings conference call. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. Please note this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms. Ashley Jing. Thank you. Please go ahead, ma'am.

Thank you, operator. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's first quarter 2026 earnings conference call. The company's results were released earlier today and are available on the company's IR website. On the call today are Mr. Yan Tang, CEO of the company, Ms. Sichuan Zhang, CEO of the company, and Ms. Hui Peng, 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. As 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 statements as a result of new information, future events, or otherwise, except as required under law. I will now pass the call over to our CEO, Ms. Sichuan Zhang. Ms. Jiang, please.

Thank you, Ashley. Hello, everyone. Thank you for joining today's call. The group maintained steady business momentum in Q1, guided by the strategic priorities set last year. Our domestic business stayed healthy through focused product innovation and refined operations despite external pressures. Leveraging the synergy of a diversified product portfolio, our overseas business has remained a positive trend. Looking ahead, we are fully confident in each business line to continue to advance along the strategic roadmap in 2026. I'll walk you through the key updates. Starting with the financials. For Q1 2026, total group revenue was RMB 2.39 billion, down 5% year-over-year. Domestic revenue reached RMB 1.79 billion, down 15% year-over-year. Overseas revenue was RMB 597 million, up 44% year-over-year. Overseas revenue accounted for 25%, compared to 16% in the same period last year.

Adjusted operating income was RMB 349 million, up 1% year-over-year, with a margin of 14.6%. Building on the strategic direction from 2025, our 2026 priorities continue along three main tracks. For Momo, the goal is to ensure stable, sustained productivity of our cash cow business. For Tantan, to continue exploring a dating experience and efficient business model tailored for Asian users. For our new businesses, to deepen overseas presence, enrich our brand portfolio, and build a long-term growth engine. Let me walk you through each, starting with Momo. On the product side, our key focus in recent years has been to optimize user experience and stabilize our user base. This year, we have continued to refine the chat experience. Our Knock Knock feature improves connection accuracy by analyzing users' historical chat patterns to optimize matching algorithms, driving sustained growth in two-way and in-depth chats.

In real-time chat scenarios, building on a steady ramp-up of voice features, we have also introduced video features to enrich our portfolio of instant interactions. The combined upgrades in our group recommendation and product experience have lowered the barrier for users to find chat partners. This is the main driver behind the steady improvement in retention among existing users. In 2025, we undertook a number of meaningful explorations in leveraging AI to improve users' social efficiency with encouraging initial results. For example, our AI greetings and AI chat assist features improved the female users' experience. This drove higher reply rates from male users and more in-depth conversation overall. In Q1, the product team explored AI-driven innovations such as voice-driven bottles, guiding users complete voice profiles, auto-generating voice content, and releasing it onto the platform in a message in a bottle format to spark users' desire to connect.

For user acquisition, Channel ROI has remained fully profitable since the beginning of the year. Ongoing audio room gameplay updates and better channel conversion lifted payment intent among mid and small spending users. This drove steady LTV growth and channel ROI improved moderately quarter-over-quarter. Acquisition spend continued a refined, disciplined approach, narrowing slightly from last quarter. This is worth noting that Q1 was affected by the Chinese New Year, as some users shifted their social time to offline gathering and close friends and family. This temporary pullback platform activity and paying scale, with Momo's paying users decreasing by 200,000 quarter-over-quarter to 3.7 million. Thanks to a year of product refinement focused on chat experience, organic traffic grew compared to last year, and retention among existing users improved slightly.

During the Chinese New Year, the team ran targeted operational events at a low point of the cycle, narrowing the decline in user activity compared to past holidays. As a result, the post-holiday recovery was meaningfully better than in the same period last year. This set a solid foundation for stabilizing our user base over the full year. Turning to Momo's commercial performance. In Q1, Momo's revenue was RMB 1.52 billion, down 15% year-over-year and 9% quarter-over-quarter. The year-over-year decline mainly reflects the ongoing impact of the new tax regulation and stricter local enforcement that came into effect in the second half of 2025. The motivation of some high-grossing agencies and broadcasters is still recovering. The sequential decline was largely seasonal, driven by the Chinese New Year, alongside persistently soft consumer spending sentiment.

In response to this external shift, the teams continued to direct gameplay innovation and operational resources towards mid-tier and long-tail users, keeping revenue from audio scenarios and social games such as Parking Wars relatively resilient. This helped partially absorb the external pressure on overall revenue. On the product and operation side, our live streaming business organized a series of user-oriented events during the Chinese New Year, effectively cushioning the dilution of online behavior from the long holiday. As a result, the post-holiday recovery in key operational metrics, including user engagement, paying conversion rate, and streamer return rate, was meaningfully stronger than in the same period last year. At the same time, we continued to introduce and selectively support high-quality talent streamer, lifting organic revenue through content quality improvements. In audio scenarios, we roll out the new PK game play to further motivate users to gift one another.

With some mid-tier and long-tail broadcasters and agencies on our platform facing ongoing profit pressure during the tax compliance process, we have rolled out a new incentive-based revenue-sharing policy. This is decided to enable the quality performance to deliver greater value to the platform while ensuring they make stable income in turn. Now let's turn to Tantan. As of the end of Q1, Tantan had 0.6 million paying users, a modest decrease of 30,000 quarter-over-quarter. This decline was driven by two factors. First, the carryover from ongoing MAU decline, and second, Alipay's changes to its auto-renewal paying billing rules, which placed short-term pressure on membership conversion. Under the continued effect of our strategic marketing cuts, Tantan's user base remained on the downward trajectory, though the magnitude of decline has narrowed meaningfully.

Through algorithm innovation and refined operations, engagement, and retention among younger users showed slight improvements, contributing positive to user base stability. On the product side, the team optimized recommendation strategies in our core swipe-based scenario. For example, we introduced tiered restrictions on female users' metrics, allowing only horizontal or upward matching, a benefit for female users through our social expectations. This drove a near three percentage point increase in average swipe per female user, slightly improving the retention. On new scenario exploration, we piloted map-based, social, and AI chat assist features. On user acquisition, although the year-over-year reduction in channel investment led to a lower required volume, the meaningful narrowing the unit acquisition cost partially offset the impact. Additionally, because organic traffic outperformed channel traffic on both user engagement and retention, the overall decline in our user base was far smaller than the channel-driven declines implied by our strategic cuts.

Sequentially, both spend and user acquisition costs narrowed by various degrees. The channel volume decline was relatively limited. While Alipay's new rule policy created new near-term app pull pressure, channel ROI was sustained well above 100% throughout the quarter. On the financial side in Q1, Tantan's domestic business generated RMB 125 million in revenue, down 25% year-over-year and 8% quarter-over-quarter. The primary driver remains MAU contraction leading to fewer paying users, compounded by the short-term impact of Alipay's policy adjustments on various payments. On monetization, the team unbundled membership features into a la carte offerings while enriching Flash Chats game playing and stepping up in-app promotion to ease top-line pressure. On profitability, thanks to ongoing cuts in channel investment and personnel costs, net profits grew significantly year-over-year. Lastly, our new businesses.

Our 2026 goal carries forward from 2025 to deepen our overseas presence, enrich our brand portfolio, and build a long-term growth engine. In Q1, overseas revenue totaled RMB 597 million, up 44% year-over-year with a slight 2% sequential decline. Overseas now accounted for 25% of group revenue compared to 16% in the same period last year. The sequential softness was mainly due to some external challenges Social faced during the quarter, which weighted on our overseas business overall. Excluding Social, the rest of our overseas businesses continued to deliver healthy growth this quarter, further validating the value of diversified product portfolio in dispensing risk from single product volatility. Our two newer product in MENA, Yaahlan and amar, continued their rapid growth trajectory with both delivering triple-digit revenue growth year-over-year in Q1.

Driven by continuously improving localized operations, a more precise grasp of local user preferences, and sustained game plan innovation, both products saw concurrent improvement in revenue and profit. This quarter, Yaahlan is approaching net income break even, and amar achieved positive marginal contribution for the first time. This is a significant milestone making our shift in MENA from a Social-dominated model to a multi-product portfolio. Beyond our audio and video social products in MENA region, our dating business focused on developed markets is another important pillar of our overseas footprint. Also deliver satisfying progress this quarter. Panda International, led by our Singapore team, completed a full upgrade of product positioning and branding over the past year. In second half of 2025, began migrating from a shared domestic international app build to a standalone overseas app.

The migration was completed in Q1 with 99% of paying users successfully transferred, minimizing the revenue impact of the version split. Starting in Q2, the team's focus will turn to further optimizing product experience and improving monetization efficiency. Separately, Happn, which joined the group last year, has continued a steady, healthy growth trajectory since the beginning of this year. Happn's user base has remained relatively stable over the past year, and both sequential and year-over-year revenue growth came mainly from improvements in paid conversion rate and app pull. Reflecting greater efficiencies in operating the existing user base. In Q1, we began testing Happn's entry into new markets, laying the foundation for the brand's mid to long-term growth. As a relatively newer segment for our overseas front, we remain confident in the dating business' continued release of growth potential in 2026. This concludes my remarks.

Now let me pass the call to Cathy for the financial review. Cathy, please.

Thanks, Vic. Hello, everyone. Thank you for joining our conference call today. Now let me take you through the financial review. Total revenue for the first quarter 2026 was RMB 2.39, down 5% year-on-year and 7% quarter-on-quarter. Non-GAAP net income attributable to the shareholders of the company was RMB 328.8 million compared to RMB 403.8 million in the same period of 2025, and RMB 281.3 million in the previous quarter. Looking into the key revenue items for Q1. Total revenue for value-added services for the first quarter of 2026 was RMB 2.35 billion, down 6% year-on-year and 7% quarter-on-quarter. On a geographic basis, PRC mainland value-added service revenue was RMB 1.76 billion, down 15% year-over-year and 9% quarter-over-quarter.

The decrease was primarily due to heightened tax scrutiny on the agencies for Momo's entertainment business, combined with softened consumer sentiments amid broader macro pressure, and to a lesser degree, a decline in paying users on Tantan. VAS overseas revenue reached RMB 593.7 million, up 44% year-over-year, driven by the rapid expansion of our diversified product portfolio. Overseas VAS revenue decreased slightly by 2% sequentially due to seasonal factor, namely Ramadan, as well as some external challenges in MENA area during the quarter. Turning to cost and expenses. Non-GAAP cost of revenue for the first quarter of 2026 was RMB 1.46 billion compared to RMB 1.57 billion for the same period last year. Non-GAAP gross margin for the quarter was 38.8% compared to 37.9% from year-ago period. Gross profit margin or GPM in Q1 2026 rose by around one percentage point year wide.

The increase was primarily driven by improved margins in MENA products after lowering the revenue sharing ratio to promote quality growth, together with a greater revenue mix from higher margin overseas dating products. This was partially offset by decline in Momo's GPM resulted from increased payout ratio to agencies in order to cushion the impact from the tax scrutiny. Non-GAAP R&D expenses for the first quarter was RMB 165.2 million compared to RMB 185.9 million for the same period last year, representing an 11% decrease year wide. The decrease was due to overall labor cost savings from the optimization of our personnel structure. Non-GAAP R&D expenses as a percentage of revenue was 7%, same as Q1 last year. We ended the quarter with 1,396 total employees, compared to 1,336 from a year ago.

The R&D personnel as a percentage of total employee for the group was 56%, compared with 58% from Q1 last year. Non-GAAP sales and marketing expenses for the first quarter was RMB 335.4 million, compared to RMB 322.1 million for the same period last year, representing a 14% and a 13% of total revenue, respectively. The year-over-year increase in sales and marketing expenses was mainly driven by increased marketing investments in our new overseas apps. This was partially offset by continued cost control in our PRC mainland operations, as both Momo and Tantan reduced marketing spend, while Sochio also temporarily scaled back channel investments amid external challenges. Non-GAAP G&A expenses was RMB 89.4 million for the first quarter, compared to RMB 114.8 million for the same period last year, representing a 4% and 5% of total revenue, respectively.

The decrease in G&A expenses was primarily attributable to a high base effect in Q1 2025, resulting from a self-inspection related to tax matters. Non-GAAP operating income was RMB 349.2 million, representing a margin of 14.6%, compared with RMB 345.3 million and a margin of 13.7% from Q1 2025. The increase was driven by improvement in GPM. Non-GAAP OPEX as a percentage of total revenue stood at 25%, unchanged from the year-ago period. Briefly on income tax expenses. Total non-GAAP income tax expenses was RMB 81.5 million for the quarter, with an effective tax rate of 20%. In Q1, the company accrued withholding income tax of RMB 21.2 million, which is 10% of undistributed profit generated by our loan fee. Without the withholding tax, our estimated non-GAAP effective tax rate was around 15% in the first quarter. Turning to balance sheet and cash flow items.

As of March 31st, 2026, Hello Group's cash equivalents, short-term deposits, long-term deposits, short-term investments, and restricted cash totaled RMB 8.56 billion, compared to RMB 8.68 billion as of December 31st, 2025. Net cash provided by operating activities in the first quarter of 2026 was RMB 158.9 million. The difference between operating net cash and Non-GAAP net income was mainly due to a significant increase in accounts receivable caused by temporary payment collection delays on one of our apps, as well as higher other current liabilities from the accrual of year-end bonuses and the 13th-month payroll. Lastly, on business outlook. We estimated our second quarter revenue to come in the range from RMB 2.45 billion to RMB 2.55 billion, representing a decrease of 6.5%-2.7% year-on-year.

This is based on the assumption that at midpoint, on a year-over-year basis, revenue from our mainland China business would decline by high teens percentage-wise, while overseas revenue is expected to grow by high 50s percentage-wise. Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to change. That concluded our prepared portion of today's discussion. With that, let me turn the call back to Ashley to start Q&A. Ashley, please.

Just a quick reminder for those who can speak Chinese, please ask your questions in Chinese first, followed by English translation by yourself. Please also limit the number of questions to a maximum of two. Operator, we're ready for questions, please. Thank you.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Xueqing Zhang with CICC. Please go ahead.

Thanks.

Thanks, management, for taking my question. My question is about the overseas business. Regarding the MENA business, she mentioned in her prepared remarks that Sochio faced some challenges from external factors in the first quarter. Could management provide more details on what happened, and will this have any impact on the full-year revenue outlook for the overseas business? She also mentioned that the two new products continue to see relative revenue growth while the losses kept narrowing. Could management share when this new business is expected to turn profitable? Going forward, will the company continue to increase marketing investments to scale these products, or will you focus more on narrowing losses and moving toward profitability? Thank you.

Let me start with what was dragging Social down in Q1. The sequential revenue decline came down to three main things. Number 1 is the Turkish government tightened regulation on social and streaming apps, which temporarily resulted in a blanket removal of all related products across the industry. That created a headwind for us in terms of new user acquisition in Turkey. Number 2 is seasonality. Consumer sentiment in the MENA region during Ramadan was relatively softer. As a large and rather mature product, Social was more noticeably impacted by this seasonal kind of headwinds. Number 3 is the ongoing conflict in the Middle East. That has also had some drag on Social's revenue in the Gulf region.

我们认为Social完全符合土耳其当地对于社交产品的各项法律法规和监管的政策。目前Social团队正在和土耳其的有关部门进行沟通，希望可以尽快上架。同时我们也会加快其他地区的本地化拓展，来弥补土耳其地区的缺口。目前Social的业务从Q1的低点已经开始稳步回升，投资人无需对此过于担心。

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

中东北非地区的另外两款新产品，一季度收入保持快速增长，亏损也在迅速缩窄。给大家一些数字概念，收入同比三位数的增长。随着业务的不断规模化，团队可以逐步调整分成比例。毛利率在过去一年持续显著提升。我们在获客ROI回收达标的前提下，适度加大了投放规模，积极测试新的潜力市场。与此同时，亏损规模在逐季缩窄。整体来说，我们对于中东市场这两款新产品的发展路径非常清晰，先把规模做起来，把毛利结构优化好，投放以ROI为导向，让净利润自然兑现。然后应该一个季度之内可以实现经营利。amar发展阶段大概落后半年左右。至于海外今年整体的收入预期，请Cassie介绍。

The other two new Mana products had a strong Q1, triple-digit year-over-year revenue growth with losses narrowing rapidly. As the business has scaled, the team has been able to gradually adjust the revenue-sharing structure, driving meaningful and sustained growth margin improvement over the past year. We have selectively increasing marketing spends where ROI targets are being met, and are actively testing new markets while keeping the loss trajectory moving in the right direction each quarter. Our path for these two Mana products is pretty clear: build scale first, optimize the growth margin structure, keep marketing ROI-driven, and let net profitability flow naturally. Yaahlan should keep net profitability within a quarter. amar is about half a year behind on that trajectory. For the full year overseas revenue outlook, I will hand it over to Cassie.

Okay. Let me first break the overseas outlook into three separate pieces. First is our flagship overseas app, Social. As Tang Zou mentioned earlier, Social was under some pressure in Q1, mainly due to regulatory changes in Turkey, as well as the prolonged geopolitical tensions in parts of the Middle East. That said, I think the team has adapted reasonably well to the changing environment. While revenue in Turkey remains somewhat pressured, performance in other Middle Eastern markets has actually been quite solid. Overall, I would say that Social, particularly in the first half of the year, is likely to come in a bit below our original expectations, but the business itself remains fundamentally healthy. If you look at the second piece, for the two newer social entertainment apps we've been scaling in the MENA region, their trends are actually developing very much in line with our plans.

Third, for the dating and membership-oriented business outside of the MENA region, that part of the portfolio has remained very much on track. Honestly, that's one of the things that makes dating a membership business model pretty attractive. Compared with entertainment-driven platforms, the revenue visibility and forecasting clarity are generally much higher. Putting these three pieces together, if you recall what we said on the last earnings call, we mentioned that overseas revenue for 2025 was, I think, somewhere around RMB 2 billion. This year, for 2026, we are likely to hit RMB 3 billion milestone. At this point, our overall view really hasn't changed materially. Depending on how market expansion progresses across different regions, there could still be somewhere around RMB 100 million of variation, either to the upside or to the downside of that RMB 3 billion number.

Based on what we see today, we remain pretty comfortable with that original range. Hopefully that answers your question. Back to Ashley for the question. Hi. I'll bring the next question, please.

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

晚上好，谢谢管理层接受我的提问。我们看到Q1的话呢，国内的业务的收入同比下降大概是15%，比2025年全年降幅的幅度有所扩大。想问管理层可以介绍一下主要的压力来自于刚刚在earnings call提到那个税务新规对Momo的影响。另外呢，再想多了解一下这个外部的因素，我们什么时候可以完全地消化？这个第一。第二的话，刚刚也是提到，在Alipay自动续费这个调整下了，对Tantan的付费转化做成一个短期的影响。可否具体说明一下这个调整的影响的范围，还有持续的时间？这个会否在扩散到Momo还有其他订阅类的产品？最后的问题是关于我们应该如何去看待国内业务全年收入的预期？谢谢。Hi, good evening. Thanks management for taking my question. In Q1, we saw domestic revenue declined by 15% year on year, and the year on year decline widened versus 2025.

Management comments this is related to the new tax rules which affect Momo. May I understand when should we expect these external factors to be fully digested? On the other hand, management comments Alipay automatic renewal has some changes which need to short term impact to Tantan conversion. Can management comments about the scope for this adjustment and how long will it last? Should we expect this will affect Momo and other subscription products as well? Lastly, how should we think about the full year outlook for the domestic revenue? Thank you.

我先讲一下税务对Momo的影响吧。2025年下半年，税务新规和地方强化征管，对聊天室相关的公会造成比较明显的冲击。为了缓和这个供给侧的压力，2025年下半年我们适度调整了部分核心公会的分成，对去年受到影响的公会起到了积极的作用。但今年年初，税务局对公会进行了新的一轮政策收紧，这对我们三四月的公会流水造成了比较大的影响。因此我们在5月中旬选定部分优质的公会，来帮助他们实现这个税务合规。对于额外的税务合规给这些公会带来的利润压力，我们推出了新的公会激励政策，对这些优质公会给予了进一步的让利。从5月下旬到目前的流水情况来看，这些公会的工作积极性和流水都在快速地恢复，希望三季度能够回归到一个正常的水平。

Let me first address the impact of tax policies on Momo. New tax regulations introduced in the second half of 2025, combined with stricter local tax collection and enforcement, affected agencies operating chat room scenario. To alleviate the pressure on the supply side, we moderately adjusted the revenue sharing ratios for key agencies in the latter half of last year, which yield positive results for those impacted. However, tax authorities further tightened their policies targeting agencies in early 2026, resulting in a decline in agency related revenue during March and April. In response, we selected a group of high-quality agencies in mid-May and began assisting them with tax compliance. To help offset the profit pressure caused by additional compliance costs, we introduced a new incentive program and provided further financial support to these selected agencies.

Since late May, both operational enthusiasm and revenue among these agencies have rebounded actually rapidly. We expect their performance to return to normal level by Q3.

至于Momo Ask何时回到同比的增长，除了税务因素外，还取决于宏观消费情绪何时回暖。我们能控制的是把产品的基本盘做扎实，把运营效率最大化。我们对Momo的商业化效率还是非常有信心的。

As for when Momo will return to year-over-year growth, beyond the tax issue, it also depends on when broader consumer sentiment picks back up. What we can control is making sure the product fundamentals are rock solid and operating efficiency is maximized. We are very confident in Momo's monetization capabilities.

关于支付宝代扣规则调整的问题，确实对探探一季度的会员收入造成了一定影响，主要体现在续费转化率阶段性的承压，导致一小部分的存量会员流失。团队应对很迅速，商业化层面采取了拆权售卖的策略，把原本捆绑在会员套餐里的，例如超级喜欢、优先推荐这类高频特权单独拆出来卖。同时还升级了散聊这种按次数付费的玩法，因此对冲会员续费下滑。目前我们正在丰富支付渠道，引导用户使用受影响较小的支付方式，购买长周期的会员产品。

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

至于影响范围，支付宝代扣调整主要影响的是订阅类的会员制产品。Momo的主要付费模式是消耗型的虚拟礼物，不依赖自动续费代扣，所以影响很小。海外业务用的是App Store和Google Play的支付通道，也不受影响。所以这是一个相对局部的影响，主要集中在探探的国内会员业务上。持续时间方面，预计影响主要集中在上半年。下半年随着我们支付通道和会员结构调整完成，影响会逐步出清。关于国内业务全年的收入预期，还是请Cassie来给大家分享。

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

Okay. Time for an update on how we are thinking about the revenue outlook for the rest of 2026. I will, as in previous quarters, use the same framework, which is set upon three key elements: the macro environment, the regulatory environment, and our own platform fundamentals. Along those lines, starting with the macro side, honestly, consumer sentiment looks largely unchanged from what we saw at the end of last year, and through Q1. It remains relatively soft, importantly, we are not seeing any meaningful deterioration either. On the regulatory front, this is really where most of the incremental pressure came from in Q1 and Q2. You are right that the year-over-year decline in Q1 widened versus last year. If you look at our Q2 guidance, the domestic revenue decline is expected to widen further from Q1's level.

The main reason is tighter tax scrutiny on some of the small and medium-sized agencies in our ecosystem, which hit March, April, and early May particularly hard. In response, we rolled out new agency incentive policies to encourage tax compliance. The goal here is very straightforward. We want to maintain the long-term health and stability of the content ecosystem and continue supporting the agencies that create the most value on the platform. Since rolling out these measures in late May, we've already started seeing encouraging feedback and some improvement in operating trends. We do expect June performance to benefit from these adjustments. That said, April and May were clearly impacted by the tightened regulatory environment, and that pressure is reflected in our Q2 guidance. Some of the impact could still carry into Q3, but at this stage, we believe the most difficult period is likely behind us already.

Now turning to platform fundamentals, as Sig mentioned in the prepared remarks, the core business itself remains very solid. Outside of the regulatory pressure, there really hasn't been any material change in the underlying business fundamentals compared with what we saw in Q1. Looking into the second half of the year, we still expect the year-over-year decline rate to narrow meaningfully. Part of this is because the regulatory impact should gradually normalize as the year progresses, and part of it is simply because the comparison base becomes significantly easier in the second half of 2025. For the second half, we still expect the domestic business decline rate to improve to somewhere below 15% year-over-year. That said, given the additional disruption that we saw in the first half from tax tightening, we are modestly adjusting our full year outlook.

Previously, we were guiding to a low teens decline for the domestic business. Based on what we see so far happen in the first half, we now expect the full year decline to be closer to somewhere around mid-teens year-over-year. That's how we are currently thinking about the domestic revenue outlook. Back to Ashley, maybe for one more question.

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

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

管玉臣晚上好，谢谢管玉臣提问机会。我的问题是关于我们的AI的创新应用，以及对于我们盈利能力的潜力展望。管玉臣在过去一年财报中多次也提到了AI相关的产品创新，从今年的AI招呼破冰、深度助聊，到本季度我们提到的AI语音漂流瓶。我就想了解一下集团现在对于AI产品功能上还有哪些部署？怎么看待AI创新对于长期业绩的一个拉动作用？那么AI的投入是不是会影响我们短期的一个利润情况？能针对年初国内和海外业务都面临的一些外部压力，那我们如何看待集团全年的一个利润情况？

Let me translate myself. Management has highlighted AI-driven product innovation in several releases over the past year. Ranging from AI-powered ice-breaking feature, AI assistant chat features, to the newly launched AI voice message drift bottles this quarter. Could you please share more details on the group's AI product roadmap going forward? More broadly, how do you view the contribution of AI innovation to our longer-term money growth? Should we expect any meaningful impact on near-term profitability from AI investment? Given the external challenges faced by both domestic and overseas business at the end of the year, how do we expect the group's full year profit outlook and margin to capture a full year? Thank you.

AI对于我们这种以社交产品为核心业务的公司来说，有非常直接的意义。我们的产品玩法和推荐逻辑本质上是降低用户间建立连接的门槛，实现长期有效互动，提供情绪价值。AI在这方面是能够让用户体验产生质变的技术工具。

AI is particularly meaningful for a company like ours, where social products are the core. The essence of our product features and recommendation logic is to lower the barriers for users to form connections, and enable long-term and effective interactions, and deliver emotional value. AI is a tool that can genuinely transform the user experience in this space.

我们目前的实践看，AI在产品侧具备两种不同的发展方向。第一，用户之间辅助破冰，降低社交门槛，比如我们的AI助聊的功能，以及正在测试的AI语音漂流瓶。通过AI引导用户以语音的形式完善基本的个人信息。AI基于用户真实信息、真实声音，自动生成更加生动有趣的自我介绍和招呼内容，并以漂流瓶的方式发布在平台。这类AI辅助工具对有交友需求但社交能力不足的用户群体非常有价值。第二，新产品的形态。例如甜甜圈，是一款全AI驱动的语音社交产品，目前在国内已启动商业化尝试。海外的AI角色扮演恋爱产品MiraiMind在日本市场也取得了不错的早期数据，目前正在向亚洲的其他市场延伸。这类产品代表了我们用AI探索下一代社交产品形态的方向。

Based on what we have built so far, AI is advancing in two distinct directions on the product side. First, enhancing connections between users by breaking the ice and lowering social barriers. Examples include our AI-assisted chat features and the AI voice drift bottle, which we are currently testing. The concept is that AI guides users to provide basic profile information through voice input, and then automatically generates more vivid and engaging self-introduction and greetings using the user's actual voice. This is then published on the platform as a drift bottle. These AI tools are particularly valuable for users who have dating needs, but relatively weaker social skills. Second, enabling new products formats. For example, Donut is fully AI-powered voice social product that has already begun monetization in China.

On the overseas side, our AI role-play dating app MiraiMind has shown solid early traction in Japan, and is now expanding to other Asian markets. These products represent our exploration of what next-generation social experience can look like.

关于投入对利润的影响，我们的判断是AI投入是高回报，它能够直接提升用户体验，进而提升用户的付费意愿。执行层面，AI在我们产品中的渗透还在快速的扩展阶段。过去一年，我们重点跑通了AI招呼和辅助聊天在Momo主站的算法迭代。后续我们会把这套技术体系横向复用到更多的场景，包括Momo直播AI经纪人功能，基于主播形象生成AI短剧，Tantan的智能匹配与分发以及辅助聊天功能。这种技术资产的横向复用，有助于AI技术投入的回报最大化。至于集团全年的利润预期，还是请Cassie来回答吧。

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

Okay. On profitability outlook, I'll just go back to the framework that we laid out at the beginning of the year on our March earnings call. Starting from the top line, if you combine our updated view on the domestic business with what I just discussed on the overseas side, we now expect group revenue for 2026 to see a slight year-over-year decline versus 2025, probably down by a couple of percentage points at the top level. At the beginning of the year, we also said that we were targeting adjusted operating margin in the low teens. Based on what we see today, that target still looks quite achievable. That said, because the domestic business faced additional pressure from the tax-related disruption in Q1 and the early part of Q2, our full year revenue outlook in absolute dollar terms is now somewhat lower than where we started the year.

Naturally, that creates more pressure in terms of absolute profit amounts. Internally, we are looking at additional opportunities to optimize spending wherever appropriate and necessary, whether on personnel side, marketing efficiency, or other operating areas where we believe we can improve productivity without affecting long-term growth initiatives. Overall, I would say that we remain broadly on track to achieve the profitability targets that we laid out at the beginning of the year. I think that wraps up the call. Now I'm handing back to Ashley for closing remarks.

Right. Thank you for participating today. That's going to be the end of the call, and we will see you next quarter. Thank you. Bye.

Thank you.

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

Ladies and gentlemen, thank you for standing by and welcome to Hello Group's fourth quarter 2025 earnings conference call. All participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. Please note this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms. Ashley Jing. Thank you. Please go ahead, ma'am.

Thank you, operator. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's fourth quarter and fiscal 2025 earnings conference call. The company's results were released earlier today and available on the company's IR website. On the call today are Ms. Sichuan Zhang, CEO of the company, and Ms. Peng Hui, CFO of the company. They will discuss the company's business operations and highlights as well as the financials and guidance. They will 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 statements as a result of new information, future events, or otherwise, except as required under law. I'll now pass the call over to our COO, Ms. Sichuan Zhang. Ms. Sichuan Zhang, please.

Thank you, Ashley. Hello, everyone. Thank you for joining today's call. In the second half of 2025, our domestic business faced fresh external headwinds. That said, through the team's agile response and strong execution, we kept our cash cow business stable while sustaining a healthy ecosystem. To better show you our ongoing structural transition towards overseas growth, we began providing a geographic revenue breakdown in 2025 to improve transparency for investors. Our overseas business delivered exceptional results last year, fueled by organic product incubation and targeted M&A. This allowed us to diversify our portfolio and rapidly expand our global presence, leading to accelerated revenue momentum. The overseas business is now a solidified revenue contributor and a key engine for our future growth.

Next, I'll walk you through the major highlights from Q4 and the full year of 2025 across our business lines, followed by our strategic priorities for 2026. Starting with the financials. For Q4 2025, total group revenue was RMB 2.58 billion, down 2% year-over-year. Domestic revenue reached RMB 1.97 billion, down 14% year-over-year. Overseas revenue was RMB 608 million, up 70% year-over-year. Overseas revenue accounted for 24% compared to 14% in the same period last year. Adjusted operating income was RMB 354 million, up 26% year-over-year, with a margin of 13.7%. For fiscal 2025, total group revenue was RMB 10.37 billion, a slight decrease of less than 2% year-over-year.

Domestic revenue reached RMB 8.37 billion, down 11% year-over-year. Overseas revenue reached RMB 2 billion, up 71% year-over-year. Overseas revenue now accounts for 19% of our total, up from 11% in 2024. Adjusted operating income was RMB 1.55 billion, down 10% year-over-year with a margin of 15%. Next, I'll review the execution of the strategic priorities for Momo, Tantan, and our new endeavors in 2025. Let's start with Momo. Our goal is to maintain the productivity of this cash cow while keeping the social ecosystem healthy. Over the past year, all products and channel efforts are centered on this core objective. On the product side, we focus on two major upgrades.

First, we upgraded the AI greeting and AI chat assist models to help users break the ice with personalized messages and keep conversation going. Our tech team is consistently iterating these models to make them more human-like and diverse. These upgrades, combined with tailored exposure strategies, significantly boosted the adoption rate of our AI features. Second, we optimized our product strategy for real-time chat scenario. By using historical data to target users with high chat intent, we have made matching more accurate and interactions smoother. This led to an increase in key matches such as number of two-way chats and the rate of in-depth chats. For user acquisition, we proactively cut negative ROI marketing spends, refined channel and material by ROI, and we balanced spend between new acquisitions and dormant user reactivation. This helped us to reduce average acquisition costs despite intensifying channel competition.

We also boosted conversation in high ARPU paying scenario, sustaining ARPU growth and delivering profitable ROI all year. We are highly satisfied with 2025 channels results. Early marketing cuts led to some churn among ultra low spenders, but with very limited revenue drag. In fact, reducing the inefficient spending help stabilize our profit. While paying users declined sharply in the first half of the year, the impact bottomed out in the second half. Our new features in audio and video scenarios drove gains in paying ratio, resulting in 3.9 million paying users on Momo in Q4. That's up 200,000 quarter-over-quarter. With some sequential growth in two straight quarters, we see clear evidence of healthy recovery. This validates our strategy to broaden low ticket payment scenario.

In the current economic environment, by focusing on non-wow users and a profit-centric channel approach, we have strengthened Momo's position as a resilient 15-year-old cash cow. This strategy has enabled the platform to preserve strong operational health, exhibit a solid resilience against external pressures, and consistently deliver stable results. Turning to Momo's commercial performance. In Q4, Momo's live revenue was RMB 1.68 billion, a year-over-year decrease of 14% and a sequential decrease of 6%. As mentioned last quarter, the decline was mainly due to the new tax regulations in October and stricter enforcement, which significantly dampened the motivation of high-grossing streamers and agencies. For the full year 2025, Momo's live revenue totaled RMB 7.09 billion, down 11% year over year. Beyond tax factors, macro softness also affected spending sentiment among high-value users. Product and operation-wise, we focus...

We continue to focus on our top cohort users in live streaming through specialized events and gameplay innovations. Meanwhile, we pivoted our emphasis towards audio and video scenarios that better align with mid-tier and long-tail users. This shift helped offset some of the external headwinds on revenue. Furthermore, the growing proportion of the revenue from higher margin audio and video scenarios contributed to our overall gross margins stable. Now let's turn to Tantan. Our 2025 goal was to build a dating experience and an efficient business model tailored for Asian users. As of Q4, Tantan has 600,000 paying users, a decrease from 700,000 from last quarter. Marketing cuts have driven user declines in recent years, but our return to brand building and experience optimization have kept organic traffic stable.

Currently, vast majority of new users on Tantan come from organic flows, and the platform is no longer reliant on channel acquisition. At the same time, retention has improved slightly. On the financial side in Q4, Tantan's domestic business generated RMB 136 million in revenue, down RMB 41 million year-over-year and RMB 16 million quarter-over-quarter. For the full year 2025, domestic revenue totaled RMB 613 million, compared to RMB 733 million in 2024. The decline was a deliberate result of reducing channel investments. Through study, active growth provided a partial offset. On the product side, we roll out our new version in the first half of 2025. Focusing on real person verification and a clear interface. We further advanced AI tools for profile enrichment and chat assistance while improving the female users recommendation.

This reduced noise from poor matches and irrelevant chats, boosted female users' retention and likes per user. To balance the revenue impact of declining paying users, we also restructured membership tiers to improve low-end coverage and increase paywall exposure for users with high payment potential. This product and algorithmic optimization drove increases in both pay conversion rates and ARPU. Regarding channels, we focus on achieving 100% return on acquisition costs. By cutting high cost negative ROI channels, we significantly narrowed acquisition costs compared to last year. Combined with ARPU improvements driven by product upgrades, Tantan achieved full payback on channel investment in Q1, with ROI reaching new highs throughout the year. Based on this trajectory, we expect Tantan to generate around RMB 100 million in annual operating profit for the foreseeable future.

This gives the team a comfortable window to focus on what matters most, the long-term retention of the Tantan users. This can be achieved only through providing a better dating experience and building a brand image as a dating platform uniquely for Asian daters. We will continue to plow this land until we get the reward we deserve. Lastly, our new businesses. In 2025, our goal was to deepen our overseas presence, enrich our brand portfolio, and build a long-term growth engine. In Q4, overseas revenue reached RMB 608 million, up 70% year-over-year and 14% quarter-over-quarter. For the full year 2025, overseas revenue totaled RMB 2 billion, a 71% year-over-year growth. This growth has largely offset the revenue dip in the domestic market.

This rapid growth was driven by audio and video social products in MENA region, especially Yaahlan and amar. These two new apps that begins monetization at the end of 2024, leveraging the successful experience of SoulChill, which has driven continued revenue growth while narrowing the net loss. Meanwhile, SoulChill remained our largest contributor, although its growth fell slightly short of our initial expectations due to slower localization, which slowed our plans to expand into live streaming and the wealthier Gulf countries. For 2026, strengthening our regional operation remained a top priority. Beyond MENA, we have seen great progress with MiraiMind in Japan. As mentioned before, MiraiMind is an AI-powered anime style companion and romance app. Its AI-driven character creation and natural language model has been very well received, and we see a clear expansion opportunities there.

In our dating segment, Tantan International officially separated its domestic and overseas version in the second half of 2025, allowing for a more tailored international experience. This separation removed historical, technical, and operational constraints, laying on a solid foundation for Tantan's long-term international growth. We also make a major breakthrough by acquiring Happn, a well-known European dating product, which was an important driver of the accelerated year-over-year overseas revenue growth in Q4. This, along with other recent acquisitions, has allowed us to rapidly penetrate key untapped markets, including Europe, Turkey, and South America. Moving forward, we plan to bring these premium global brands into Asian markets to create even more synergies across our ecosystem.

Overall, in 2025, our overseas business delivered robust gains in both scale and quality, driven by a multi-product strategy, deepening penetration in core regions, leveraging our proven expertise, and complementing organic growth with strategic acquisition. Moving forward, we remain committed to solidifying our market position in MENA region, rapidly enter high potential new markets, and maximizing synergies across our core business segments. Thereby establishing overseas operation as a key driver of the group's sustained long-term growth. That concludes our business review for 2025. For 2026, we will continue our strategy, our strategic priorities, Momo for productivity, Tantan for the Asian dating experience, and new businesses for the growth engine.

Lastly, I'm pleased to announce that our board has approved a special cash dividend in the amount of $0.28 per ADS for a total cash payment of approximately $42.6 million or about 30% of the adjusted net income contributed to Hello Group Inc. in 2025. This is the 8th consecutive year of dividends, reflecting our stable operations and commitment to creating long-term value for shareholders. This concludes my remarks. Now, let me pass the call over to Cathy for financial review. Cathy, please.

Thanks, Sic. Hello, everyone. Thank you for joining our conference call today. Now let me take you through the financial review. Total revenues for the fourth quarter 2025 was 2.58 billion RMB, down 2% year-over-year and 3% quarter-over-quarter. Non-GAAP net income attributable to the company was 281.3 million RMB, compared to 230.5 million RMB in the same period of 2024, and 404.5 million RMB in the previous quarter. Looking into key revenue items for Q4. Total revenue for value-added services for the fourth quarter of 2025 was 2.53 billion RMB, down 2% year-over-year and 3% quarter-over-quarter.

On a geographic basis, PRC mainland VAS revenue was RMB 1.93 billion, down 14% year-on-year and 3% quarter-over-quarter. The decrease was primarily due to three factors. Number one, heightened tax scrutiny on the supply side, which diverted their operational focus. Number two, softened consumer sentiment amid broad macro pressures. Number three, a decline in paying users on Tantan. VAS overseas revenue reached RMB 604.4 million, up 70% year-on-year and 13% quarter-over-quarter. This robust growth was primarily fueled by the rapid expansion from multiple social entertainment and dating brands across our diverse portfolio. Turning to costs and expenses.

Non-GAAP cost of revenue for the fourth quarter of 2025 was RMB 1.6 billion, compared to RMB 1.72 billion for the same period last year. Non-GAAP gross margin for the quarter was 37.8% compared to 34.7% from a year ago period. In Q4 2024, our non-GAAP cost of revenue included certain one-off items. Excluding these special items, gross profit margin in Q4 2025 was slightly down 0.4 percentage points year over year. The decrease was the net impact from several factors due to the same structural shift of revenue toward membership subscription revenue in the overseas market, especially in developed markets. These factors are, number one, payment channel costs accounted for a higher proportion of total revenues. Two, personnel costs increased as a percentage of revenue.

Number three, revenue share to the content providers and agencies decreased as a percentage of revenues. The first two are headwinds to gross margin, and the third one is a tailwind. Non-GAAP R&D expenses for the fourth quarter was RMB 203.9 million compared to RMB 212.4 million for the same period last year, representing a 4% decrease year-over-year. The decrease was attributed to optimization of engineering personnel. Non-GAAP R&D expenses as a percentage of revenue was 8%, same as Q4 last year. We ended the quarter with 1,400 total employees compared to 1,390 from a year ago. The R&D personnel as a percentage of total employee for the group was 56% compared to 61% from Q4 last year.

Non-GAAP sales and marketing expenses for the fourth quarter was RMB 339.9 million, compared to RMB 311.7 million for the same period last year, representing 13% and 12% of total revenues respectively. The year-over-year increase in sales and marketing expenses was primarily driven by marketing investment in our overseas apps. This increase was partially offset by our ongoing cost control measures in the PRC mainland businesses, where both Momo and Tantan reduced their marketing spend. Non-GAAP G&A expenses was RMB 85.7 million for the fourth quarter, compared to RMB 117.6 million for the same quarter last year, representing 3% and 4% of total revenue, respectively.

The decrease in G&A expenses was due to a combination of factors that resulted in a high base in Q4 2024, including provisions for some pending legal matters, as well as due diligence costs in connection with potential investments. Non-GAAP operating income was RMB 354.1 million, representing a margin of 13.7%, compared with RMB 279.9 million at a margin of 10.6% from Q4 2024. Excluding certain one-off costs and expenses items, operating margin for Q4 2024 would have been 14.2%. Non-GAAP operating expenses as a percentage of total revenue stood at 24%, unchanged from the year ago period. Now briefly on income tax expenses. Total non-GAAP income tax expenses was RMB 72.0 million for the quarter, with effective tax rate of 17%.

In Q4, the company accrued withholding income tax of RMB 18.4 million, which is 10% of undistributed profit generated by our WFOE. Without a withholding tax, our estimated non-GAAP effective tax rate was around 13% in the fourth quarter. Now turning to balance sheet and cash flow items. As of December 31, 2025, Hello Group's cash equivalents, short-term deposits, long-term deposits, short-term investments, and restricted cash totaled RMB 8.68 billion, compared to RMB 14.73 billion as of December 31, 2024. The decrease in cash reserves was attributable to bank loan repayments, distribution of a special cash dividend, settlement with withholding tax accrued for prior periods, together with certain acquisitions and investments, and ongoing repurchases of the company's own shares throughout 2025.

Net cash provided by operating activities in the fourth quarter 2025 was RMB 549.7 million. Lastly, on business outlook. We estimate our first quarter revenue to come in the range from RMB 2.3 billion to RMB 2.4 billion, representing a decrease of 8.8% to 4.8% year-over-year. This is based on the assumption that at midpoint, on a year-over-year basis, revenue from our Mainland China business will decline by mid- to high-teens percentage-wise, while overseas revenue is expected to grow by high 40s percentage-wise. Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to change. That concludes 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. Before we take the questions, for those who can speak Chinese, please ask the questions in Chinese first, followed by English translations by yourself. Please, limit the number of questions to maximum two. Thank you. Operator, we're ready for questions.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Thomas Chong with Jefferies. Please go ahead.

Good evening. Thanks, management, for taking my questions. Based on the guidance just given out, Q1 domestic business is expected to decline more than what we saw in Q4 last year and full year 2025. Can management provide some color about the trend for domestic revenue this year? What are the measures undertaken on this cash cow business? When should we expect the domestic revenue to stop declining year-over-year and stabilize? Thank you.

Thank you. Looking back, our 2025 revenue hit the overall targets. This past, there was a little bit of surprise. We actually started the year very strong by tapping into our mid-tier and regular users, which helped us beat expectations in the first half. However, things got tougher in the second half. New tax policies really hits our supply side and momentum slowed. That said, the mobile team did an incredible job staying steady, a really challenging environment, and we are very happy with how they handle it. While the top tiers users started to tighten their belts, we pivoted, and we did it fast. We moved our focus from to small ticket spender. Think social games and direct chat features that don't need as expensive agencies.

We kept moving our AI tools to make the social experience smoother. This strategy worked. We added 400,000 new paying users in the second half of the year. For a mature platform like Momo, growing that much in this economy is not easy. This shows our business is becoming more resilient and less dependent on top-tier users. Protecting profits, I think I want to highlight that we have been very proactive with cost-cutting. Because we streamlined our teams and reduced channel spending, our profits didn't drop nearly as much as our revenue did. We are keeping the cash cow healthy. Looking into 2026, we are not expecting the macro environment to fix itself overnight, so we are sticking to the game plan that worked in 2025.

On the product side, more AI, better chat features, and more social games to keep users glued to the platform. On the money side, we'll keep focusing on audio and video scenarios that regular users love. We also expect revenue pressures to continue this year, similar to what we saw in 2025. Our commitment to efficiency is ironclad. Even if the top-line numbers fluctuated, we are fully confident that we can keep our profit stable. Let me hand it to Cathy to get into the numbers.

Okay. I would like to frame the 2026 revenue outlook around my good old 3 key drivers. Number 1 is regulatory environment, number 2, macro conditions, and number 3, platform fundamentals. Firstly, on regulation, the tech scrutiny on agencies and broadcasters in the second half of 2025 materially impacted our value-added services revenues. But we believe most of the negative impact from that scrutiny has been absorbed by the end of Q1 2026. Assuming no incremental regulatory tightening from here, Q1 should provide a cleaner base to assess underlying trends. Second factor, macro. Consumer sentiment remains soft, perhaps even a little bit softer compared to a year ago. That said, macro conditions have been challenging for the past several years, and we have been adapting our monetization and product strategies accordingly.

Encouragingly, our revenue mix is, as Six said, becoming less top-heavy, reflecting improved contribution from mid and long-tail users. We have additional initiatives rolling out in the coming quarters that aimed at improving monetization efficiency under weak demand conditions. The third factor, platform fundamentals. Since Q3 2025, we have seen a meaningful shift. After multiple years of decline, paying users have returned to net growth. Roughly, I think we've been adding roughly 200,000 net adds per quarter. Retention metrics for both users and paying customers have also improved modestly. We see this as evidence that product optimization and user experience upgrades are working, particularly in expanding monetization beyond heavy spenders.

If you put these three factors together and assuming no incremental regulatory tightening and broadly stable macro conditions, our baseline view for 2026 is first of all, full year revenue decline should be around low- to mid-teens% year-over-year. If you break the timeline down, first half of 2026, you know, should decline in the mid-teens%, and perhaps the second half 2026, you know, would moderate meaningfully due to easier comps and improving fundamentals. That's the outlook for 2026. I think there is another question which is when does the domestic business bottom? It's difficult to precisely call the bottom at this stage.

However, based on the trajectory that we're seeing, like I said, we expect the year-over-year decline to moderate in the second half of 2026. If the external conditions are stable by Q4 this year, we may narrow the year-over-year decline rate to below 10%, if we are lucky. That said, the timing of a full bottom will depend significantly on, of course, macro recovery. Our current focus is on strengthening controllable fundamentals so that when macro stabilizes, we are positioned to return to growth. Back to Ashley for more questions.

Operator, next question, please.

Thank you. Your next question comes from Zouyi Qianjiang with CICC. Please go ahead.

谢谢管理层接受我的提问，我的问题是关于海外业务的。管理层在发言中有分享2025年海外业务加速增长，主要来自于MENA地区新产品的商业化，以及M&A带来的指标贡献。那想请教一下，我们2025年MENA地区的音视频产品、新APP和social对于海外收入贡献，分别在什么量级？我们该如何判断2026年海外收入的一个增长趋势？然后也想请教一下，近期中东战事是否会对我们在MENA地区的业务有所影响？最后想问一下，考虑到当前海外整体还处于投入期，那2026年对于利润的影响大概会是怎么样的？什么时候能看到海外业务在利润层面有所贡献？谢谢。 Thanks, management, for taking my question. My question is about the overseas business.

As you mentioned in your prepared remarks, overseas business accelerated in 2025, mainly driven by the commercialization of new products in MENA regions, as well as contribution from M&A consolidation. Could management share more color on the revenue contribution from MENA, specifically for audio and video products, new apps and social? What kind of scale are we looking at for each of these? How should we think about the growth trend of overseas revenue in 2026? Also, has the recent geopolitical situation in the Middle East had any impact on the operations in the region? Lastly, considering the overseas business is still in the investment phase, what's the margin impact in 2026? When do you expect overseas operations to start contributing meaningful profit? Thank you.

Thank you for the question. First, let's look at the big picture. Back in 2024, our overseas revenue was almost entirely driven by SoulChill and Tantan International. In 2025 was a total breakout year for us. Our overseas revenue dropped more than 70%, hitting the RMB 2 billion mark. In terms of mix, SoulChill is still the heavy hitter. It brings in over half of our international revenue. The real growth engine right now is our new MENA products, Yaahlan and amar. They are scaling incredibly fast, and they will be the main drivers for us as we head into 2026. It's not only just about the Middle East, though. Our other markets are also picking up serious speed.

We have got Tantan International in Asia, mikke Live in Japan, and Happn, which started in Europe and is now moving into Turkey and South America. In 2026, we are focusing on going deeper into these markets. We expect this dating segment to become our first largest revenue pillar right behind Social and our new MENA apps. Long term, we see massive potential there. These developed markets are more mature and stable, so we are staying fully committed to them for the long haul. As for the revenue trends and the finer details for 2026, I will let Cathy walk you through the numbers.

Okay, let me break this down into two parts, growth trajectory of overseas business and profitability. With regards to the revenue growth outlook, unfortunately, it's a bit hard to give you a precise quantitative outlook for 2026 because, as Six said in her remarks, if you look at the overseas part of the business, it's a piece that spans across different markets, including both developing markets and developed markets. In addition, it also spans across different business sectors, including social entertainment and dating. Each of these markets and sectors presents different growth dynamics and associated risks/uncertainties. All of those make it hard to pin down a very precise outlook at the beginning of the year, specifically at the time when a lot of these business are still developing so fast.

What I can do is to try to sort of unpack the growth dynamics in each of the different sectors along the lines that are just outlined by Six. In MENA area, what we are doing mostly involves social entertainment. Social, which is our flagship brand, has already surpassed RMB 1 billion revenue. As the base scales, growth rates will naturally moderate. Additionally, we also have to admit that some of our product and geographical expansion plans didn't progress as fast as we planned in 2025. There is gonna be a further slowdown in its growth in 2026, especially in first half. In absolute terms, it will remain a meaningful contributor this year. At the same time, newer products such as Yaahlan and Amar are still in rapid expansion phase.

Their continued scaling should be able to offset the moderation at SoulChill. With regards to the impact from the Iran war, so far, the negative impact on our business is quite limited. However, if it becomes a prolonged conflict or keeps escalating, it certainly would have adverse effects on our business, especially our expansion plan into the Gulf countries and existing business in regions such as Saudi and perhaps Iraq as well. Outside MENA, our dating and AI-driven products in developed markets are gaining very strong traction. The AI-powered application, MiraiMind, is scaling quickly in Japan, and we are beginning to replicate that model in other markets. The various dating brands that we have are also growing stronger in their established markets.

In 2026, we're also investing to expand our dating footprint in new markets as well. Overall, we expect the non-MENA piece to grow rapidly and reach a pretty sizable level in 2026. If you take all of these together based on current run rate and expansion plans, we believe something like RMB 3 billion in overseas revenue for 2026 is a pretty achievable target. That compares to around RMB 2 billion in 2025. I would take that RMB 3 billion number as the baseline scenario, perhaps add in a couple of hundred millions as potential upside or downside, depending on execution and the pace of geographical rollout. Now moving on to the second question, which is on profitability, specifically when the overseas business is gonna turn profitable.

Again, I don't want to sound too prescriptive on that because we are still early stage in our overseas development and facing so many different growth opportunities as well as associated uncertainties. You're generally right in thinking that overseas remains in an investment phase. I can perhaps talk more about where we are right now in terms of bottom line for our overseas business, and hopefully by explaining how we manage the growth with financial discipline, we can help you form your own view about when we can expect overseas business to reach a break-even point. At an operational level, overseas was loss-making in 2025, primarily due to continued investment in the two new MENA apps and AI-driven products.

While we do not disclose segment-level operating profit, directionally, the overseas operating loss should be roughly in the RMB 200 million range for 2025. That's my best estimate at this point. If you break things down among different applications, the picture is actually quite mixed. More mature apps such as SoulChill has long been profitable. Established dating brands are also profitable, but instead of trying to grow the profit, we are going to invest part of the profit into growing into new markets because we do believe these acquired brands have a lot of potential to be unleashed outside of their existing strongholds. Yaahlan and amar are scaling rapidly and narrowing losses with clear payback visibility. We expect Yaahlan to turn profitable within this year, and amar should be behind it by half a year or so.

The AI-driven product, the MiraiMind, remains in investment mode as we prioritize user growth and product capability. We don't want to focus too much on reaching profitability ability for that product. Of course, for each of the region we are in, we also have a payback period that's required. On timing, overall timing to profitability for the overseas piece, while I don't have a clear answer, here is the principle how we exercise financial discipline when talking about you know growing into various markets. Structurally, our internal requirement is that new products should achieve payback within either 1-3 years, depending on the maturity of the market and the business model.

That means if we were to moderate top-line expansion, then we should see profits coming in sooner. However, as long as we see attractive new investment opportunities, be it new markets or new products, we are willing to reinvest to maximize long-term value creation. The key point is this: we are not pursuing growth at any cost. We are pursuing scalable, only scalable growth with defined payback periods and disciplined capital allocation. I guess that's what I can say at this point about overseas profitability. Now back to Ashley for more questions.

Next question please, operator.

Thank you. Your next question comes from Leo Chiang with Deutsche Bank. Please go ahead.

谢谢问啊，这次的提问。我的问题是，我们原本预期下半年默默分层的调整，像海外低毛利视频业务收入占比提升会导到利润率进一步下滑，但实际上，四季度的毛利率保持相对稳定，甚至略好于管理层此前给的36到37%的指引。是否可以理解为集团在2026年的毛利率有望维持在2025年Q4的这个水平？我的第二个问题是，管理层提到2026年国内业务收入预计同比下降，在低到中十几个百分点区间，而海外收入则有望从人民币二十亿提升至三十亿。这是否意味着2026年整体收入有望大致持平？考虑到海外业务仍处于投入期，管理层是否可以在利润层面给我们一个方向性的指引？I'll translate myself. Thank you, management, for taking my question.

We had initially expect that an adjustment in revenue mix in the second half, again, with the rising contribution from low-margin overseas audio and video business would drive a sequential decline in gross margin in Q4. However, Q4 gross margin held relatively stable and even came slightly above management previous guidance of 36%-37%. Should we interpret this as an indication that group gross margin in 2026 could remain broadly at the Q4 2025 level? My second question is, management indicate that domestic revenue in 2026 is expected to decline year-over-year and low- to mid-teens%, while overseas revenue is projected to increase from RMB 2 billion-RMB 3 billion. Does this suggest that overall revenue for 2026 could be roughly flat?

Given that overseas operations are still in the investment phase, could you provide us with some directional guidance on profitability for the 2026? Thank you.

Okay. I'll take this question. I'm hearing many questions, firstly on gross profit. The second question is revenue at the group level. Third question is perhaps, you know, asking for guidance on the group level profit. Let me sort of flip the sequence of the question a little bit. Let me talk about group level revenue. Before that, I would like to throw out a disclaimer here that we do not really have, you know, visibility to give any guidance on either top or bottom line at this point. My comments below should be taken as a sort of a working assumption rather than firm targets, especially given uncertainties in both domestic macro environment and the pace of overseas expansion. With that in mind, here are how we think about 2026.

On revenue, your math is broadly in line with how we are thinking about it. If we take the baseline assumption we previously discussed, domestic business declining roughly low to mid-teens% year-over-year and overseas revenue increasing from around RMB 2 billion in 2025 to roughly RMB 3 billion in 2026, then at the group level, either a flattish or slightly downtick top line versus 2025 would be a reasonable baseline assumption. The question on gross margin. You're right that Q4 came in better than we had guided in Q3, and the outperformance mainly came from two areas. Number one is on the domestic side, we had expected to further compress margins by raising payout ratios to support agencies under tax scrutiny. In practice, we faced a payout increase in several rounds.

After the first two rounds, we saw motivation among agencies and broadcasters recover more strongly than expected. As a result, we didn't need to deploy as many promotional incentives as originally planned. That helped domestic margin come in better than we had assumed. Second, on the overseas side, particularly in MENA region, we are starting to see operating leverage as revenue scales. Gross margin there improved faster than we initially modeled as well. Given those dynamics, I think it's reasonable to use Q4 gross margin as a reference point when thinking about 2026. If overseas continues to scale as expected, there could be some upside at the group level.

However, I want to be careful not to overextrapolate one quarter, one specific quarter. There is still macro uncertainty domestically, and if we feel additional investment is needed to support the content partners and sustain revenue quality, we would be willing to do that. At this stage, stability around the 2025 level feels like a prudent base case with potential variability on either side. On the last question on profitability, if you look at operating expenses, personnel and marketing remain the two largest components. Here is my thinking along those lines. Because overseas markets are still in an investment phase, we do expect absolute engineering and personnel costs to increase slightly. But at the same time, we're gonna continue to optimize some of the non-performing businesses.

For R&D, currently, you know, I'm thinking low single digits year-over-year. Marketing could grow in the, you know, somewhere around high teens range or 20-something%. A lot of it, I mean, how much we end up spending on marketing will depend on ROI in new markets. If certain regions are delivering strong returns, we may lean in more aggressively in that region. If returns are below expectations, we can dial back relatively quickly. There is a built-in flexibility in our cost structure and how we manage revenue against marketing investments.

Putting this together, if revenue is broadly flat and operating expenses grow at low teens, then on a reported basis, the bottom line will likely come in below 2025 levels. If we were to frame it in margin terms, in 2025, we delivered somewhere around 15% adjusted operating margin for 2026. At this point of time, our internal objective is to keep the operating margin above 10%, likely in the low teens range. Overall, I would describe this year as a year where we are balancing profitability with disciplined investment. We see opportunities overseas, but we also want to maintain flexibility. These assumptions reflect what we can see today with the understanding that we will adjust as conditions evolve.

With that, I would like to turn back to Ashley for closing remarks.

Yeah, in the interest of time, I think we're gonna call it a day. Thank you for joining us, and see you next quarter.

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