Hello Group Inc.MOMONASDAQ
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Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2025 Hello Group, Inc. Earnings Conference Call. Please note, this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms. Ashley Jing. Thank you. Please go ahead, ma'am.
Ashley Jing: Thank you, operator. Good morning, and good evening, everyone. Thank you for joining us today for -- hello Group's Second Quarter 2025 Earnings Conference Call. The company's results were released earlier today and are available on the company's IR website. On the call today are Mr. Tang Yan, CEO of the company; Ms. Zhang Sichuan, COO of the company; and Ms. Peng Hui, CFO of the company. They will discuss the company's business operations and highlights as well as the financials and guidance. We will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking 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 COO, Ms. Zhang Sichuan. Mr. Zhang?
Sichuan Zhang: Thank you. Appreciate it. Hello, everyone. Thank you for joining our call. In Q2, both our domestic and overseas business continued to see positive trends again at the start of the year, achieving good results across various operational and financial metrics. Next, I will give you an update on execution of our strategic goals. Starting with the financial performance. For Q2 '25, total group revenue was RMB 2.62 billion, down 3% year-over-year. Domestic revenue reached RMB 2.18 billion, down 11% year-over-year, while overseas business was RMB 442 million, up 73% year-over-year. Adjusted operating income was RMB 448 million, down 6% from Q2 last year with a margin of 17%. Our key priorities for 2025 include the following: for Momo, the goal is to maintain the productivity of this cash cow business with the healthy social ecosystem. For Tantan, the goal is to maintain and improve its core dating experience and build an efficient business model that drives profitable growth. For the new endeavors, our goal is to continue deepening our presence in overseas markets, enriching our brand portfolio and building a long-term growth engine. In the first half of 2025, our domestic business gradually stabilized with both revenue and profit exceeding our initial expectations. For overseas business, we continue to drive rapid revenue growth with controllable costs and expenses. And now let me walk you through the details. First, on Momo app, all products and user acquisition efforts were focused around the goal of ensuring the productivity of the cash cow business. On the product side, the focus was to enhance user track experience to ensure long-term stability through our healthy social ecosystem. In Q2, we fully roll out in-house developed AI greeting feature, which have male users to generate personalized reading, driving the rates up by a high single-digit percentage. Using our use of AI to enhance icebreaking chat experience, we have also been testing an AI chat assistant feature, which provides content suggestion for male users during the ongoing conversations. This feature drives an increase in number of multiround conversation and rate of in-depth tracks, thereby improving retention and playing positive growth in stabilizing Momo's user base. On the user acquisition front, we further refined our approach based on ROI and reduced the budget of inefficient channels. We also optimized acquisition materials for high ARPPU users and drove sequential growth in ARPPU by enhancing the on-boarding experience for paying features among users from these channels. The reduction in unit acquisition costs combined with the ARPPU growth drove further improvement in ROI, which has already achieved a target greater than 100% in Q1. The overall user retention remained stable despite increased channel investments thanks to the improved user experience driven by product enhancements and algorithm optimization as well as the ability to accommodate channel users more effectively. In Q2, Momo app had 3.5 million paying users, a sequential decrease of 0.6 million due to our ongoing efforts to cut user acquisition investments with negative ROI. Since the ultra low paying users that we proactively abandon, make very limited contribution to the top line. The absence of this group has had a very minimal negative impact on revenue. Instead, their absence contribute to an improvement in profitability. We believe that the current user acquisition environment in China has fundamentally changed from the pre-pandemic experience and our user acquisition strategy to also evolve to achieve ongoing improvements in ROI. I believe that -- I'm confident that both Momo and Tantan still have room for continuous improvement in this area. Now on the productivity of the cash -- of Momo cash cow capital. In Q2, Momo value-added service revenue reached RMB 1.85 billion, down 11% year-over-year. The decline was mainly due to the soft spending sentiment among high-paying users, particularly in live streaming experience amid the weak macro environment. In light of this, we increased operational efforts in chat room experience, which is popular among mid cohort users. We adjusted common recommendation algorithm to enhance penetration rates and user scale of the audio and video-based experiences thereby stimulating consumption amongst mid cohort users. After the seasonal lows in Q2, reorganized non-bonus driven competition events in live streaming and increased the exposure rate of high-quality broadcasters to high-paying users in our algorithm. On the product side, we introduced new interactive gifts that further facilitate relationship building and paying conversion between users and broadcasters. With the joint efforts of our algorithm and product, we enhanced our traffic monetization efficiency, coupled with a seasonal recovery. VAS revenue increased 4% from last quarter. Turning to Tantan. In order to maintain profitability amid revenue pressure, we continue our strategy of reducing channel investments in Q2. A plan initiated at the start of the year with a target ROI of over 100%, we further scaled back budgets for underperforming channels. This decrease in channel traffic puts some pressure on the overall user scale. However, organic user growth show a positive trend since the beginning of the year and increased steadily over quarter-over-quarter, which potentially offset the decline in user numbers caused by the reduction in marketing expense. In June, Tantan's MAU reached 10.2 million, down 5% from last quarter. As of the end of Q2, Tantan had 740,000 paying users, a decrease of 80,000 from Q1. In addition to a decrease in MAU, another reason for the decline in paying users is the short-term pressure on the paying conversion caused by the improvement in user experience associated with the product upgrade. Following the full-scale rollout of the pilot projects, there was a slight quarter-over-quarter decrease in paying ratio. Turning to Tantan's financials. Revenue from the onshore business in Q2 was RMB 160 million, down 18% year-over-year and 4% quarter-over-quarter. The revenue decrease was due to a decline in the number of paying users, but ARPPU increased 18% year-over-year and 8% quarter-over-quarter, which particularly alleviated the pressure on revenue. At the product level, to explore dating experiences for Asian, we launched product upgrades from last year. Our key efforts included: first, strengthening view user application to enhance user authenticity and brand trust. Number two, we're focusing on the core dating experience by simplifying the UI layout to focus on key information, while downplaying noncore dating features such as fees and good track. The improvement in user experience has a certain negative impact on paying ratio and user retention. The upgraded version was fully rolled out in Q2. And currently, we are mitigated the negative impact of the new version on user metrics and amortization through continuous product fine-tuning. On user acquisition, our goal was to achieve 100% ROI including personnel costs and to eliminate budgets from the underperforming channels. The unit acquisition cost narrowed significantly and ARPPU will slightly compared to last quarter. In Q2, ROI remained stable at a level far exceeding 100%. The improvement in organic traffic and in the channel ROI has led to a significant year-over-year and quarter-over-quarter growth in Tantan's profitability. In terms of monetization, we mitigated the impact of the product upgrade on paying ratio by restructuring the membership package and refining the operations of core cities and user groups. The differentiated product design and pricing schemes has driven a continuous increase in ARPPU, recording a revenue decline that is significantly smaller than the decrease in the number of paying users. Lastly, on the overseas business. In Q2, overseas revenue reached RMB 442 million, up 17.3% year-over-year and 7% quarter-over-quarter. The overseas revenue accounted for 17% of the group revenue compared to 10% in the same period last year. In Q2, overseas revenue maintained its rapid growth momentum driven by the audio and video-based social product in the MENA region. Soulchill product optimization to the core chat room experience, boosted both the paying conversion ratio and the paying user accounts, thereby driving the crucial revenue growth from a high base. for Yahale and Amar, the local teams drove growth involves the number of paying users and ARPPU by continuously optimizing product features and strictly adhering to a paying user-oriented acquisition strategy. We initiated expected the overseas revenue would have grow even faster with more aggressive marketing expansion. We decided to be more prudent due to the following reasons. Number one, train -- Soulchill expansion to an affluent Gulf region, we felt the need for a better segmentation among different user groups. Therefore, we are currently trying to penetrate the market with a stand-alone app, which might take a bit more time. Number two, we noticed that the unit acquisition costs increased a bit too fast as we increased channel investment in two new apps. Therefore, we decided to move a bit slowly on the marketing expansion plans, focusing on improving ARPPU and optimizing acquisition costs, first. We will increase our channel investment again once ROI reaches a satisfactory level. We prefer such kind of prudent model that balance growth and bottom line because it prevents the from entering an awkward offer situation, where the rapid top line expansion is achieved through bottom line sacrifice. It's worth to mention that our overseas business is not limited to audio and video-based social product in the MENA market. Another key focus of our overseas business lies in the dating market across developed countries. Turning the overseas dating products led by our Singapore team already contributed a double-digit percentage of our total overseas revenue, primarily driven by Tantan International. After checking over last year, the Singapore team, we evaluated the brand positioning and product strategy for overseas Chinese and other Asian country users. Tantan International shifted from balancing entertainment and dating to focusing on the core dating experience. Based on this, we have initiated the product and branding. After 1 year's effort, Tantan International revenue has now stabilized. Moving forward, we will focus on dating and the growth opportunities in overseas Chinese communities and the Southeast Asia market. We plan to take Tantan International as a pilot product to our presence in our overseas stating field, providing users with some more dating brands that facilitate the discovery of romantic relationships and effectively establish connection from online to offline. This concludes my remarks. Now let me pass the call over to Cathy for the financial review. Cathy, please.
Cathy Peng: Thank you, Sic. Hello, everyone. Thank you for joining our conference call today. Now let me take you through the financial review. Total revenue for the second quarter 2025 was RMB 2.62 billion, down 3% year-on-year, but up 4% quarter-over-quarter. Non-GAAP net loss was RMB 96.0 million compared to RMB 449.2 million from the same period of 2024. In the second quarter, we accrued an additional amount of withholding income tax of RMB 547.9 million, associated with profits generated by our -- in China for prior periods. I will elaborate on this accounting treatment later. This tax expense item is one-off in nature and did not reflect the normal business operations of the current and future periods. Excluding this special item, non-GAAP net income for the quarter would have been RMB 451.9 million, up 1% from Q2 last year and 12% from last quarter. Looking into the key revenue items for Q2. Total revenue from value added services for the second quarter of 2025 was RMB 2.58 billion, down 3% year-on-year, but up 4% quarter-on-quarter. On a user geography basis, PRC Mainland SaaS revenue was RMB 2.14 billion, down 11% year-on-year, but up 3% quarter-over-quarter. The year-over-year decrease was primarily due to soft consumer sentiment stemming from the macro factors, which put pressure on Momo business, and, to a lesser degree, a decline in compound paying users. The sequential increase was primarily driven by the recovery from Q1 seasonal weakness. VAS overseas revenue came in at RMB 440.7 million, up 73% year-over-year and 7% quarter-over-quarter. The year-over-year and sequential growth was mainly driven by the rapid expansion from multiple social entertainment and dating brands across our rich portfolio. Turning to cost and expenses. Non-GAAP cost of revenue for the second quarter of 2025 was RMB 1.60 billion compared to RMB 1.59 billion for the same period last year. Non-GAAP gross margin for the quarter was 38.8%, down 2 percentage points from the year ago period. The year-over-year decrease was due to three factors. Number one, an elevated payout ratio driven by structural revenue shifts towards overseas markets, which have a higher payout ratio, especially during fast expansion phases. Number two, workforce optimization leading to one-off severance payments. Number three, payment channel costs and structure -- infrastructure expenses accounted for a larger revenue proportion due to geographic mix tilting towards international operations, where fee structures are systematically higher compared to domestic business. Non-GAAP R&D expenses for the second quarter was RMB 172.0 million compared to RMB 179.7 million for the same period last year, representing a 4% decrease year-over-year. The decrease was attributed to personnel optimization. Non-GAAP R&D expenses remained stable at 7% of revenue, consistent with the figure from the previous year. We ended the quarter with 1,268 total employees compared to 1,364 from a year ago. The R&D personnel as a percentage of total employees for the group was 58% compared with 62% from Q2 last year. Non-GAAP sales and marketing expenses for the second quarter was RMB 239.7 million compared to RMB 360.6 million for the same period last year, both representing 13% of total revenue. The year-over-year decrease in sales and marketing expenses was attributable to the ongoing cost control strategy for the PRC Mainland businesses where both Momo and Tantan narrowed their marketing spend. This decrease was partially offset by the increase in channel investment for the overseas app. Non-GAAP G&A expenses was RMB 67.5 million for the second quarter compared to RMB 89.5 million for the same quarter last year, both representing 3% of total revenue. Non-GAAP operating income was RMB 447.7 million with a margin of 17.1% compared with RMB 476.5 million with a margin of 17.7% from the same period last year. Non-GAAP operating expenses as a percentage of total revenue was 22%, a decrease from 23% from Q2 2024. Now on income tax expenses. Total income tax expenses was RMB 638 million for the quarter. In Q2, the company accrued withholding income tax of RMB 578 million, of which RMB 547.9 million was a special item -- special nonrecurring item related to prior periods, namely that in the second quarter of 2025, we accrued an additional withholding tax of RMB 547.9 million, related to dividends paid or payable by our WOFE in Mainland China to its offshore parent company in Hong Kong. This accrual followed a notice received by our WOFE Momo Beijing from the Chinese tax authorities requiring it to withhold tax at the standard rate of 10% instead of the previously applied preferential rate of 5%. While the company continues to believe our initial assessment was reasonable, we note the authorities most recent interpretation and position and have complied accordingly. Among the total amount accrued, RMB 356.1 million was related to dividends paid by WOFE in 2024 and in the first half of 2025, and this amount has been paid in September 2025. The remaining RMB 191.8 million was the additional 5% withholding tax accrued for the undistributed retained earnings of Momo Beijing as of March 31, 2025. So from Q2 2025 onwards, we will accrue withholding tax rate at 10% and for profit generated by our Beijing WOFE. Without withholding tax, our estimated non-GAAP effective tax rate was around 11% in the second quarter. Now turning to balance sheet and cash flow items. As of June 30, 2025, Hello Group's cash, cash equivalents, short-term deposits, long-term deposits and restricted cash totaled RMB 12.39 billion compared to RMB 14.73 billion as of December 31, 2024. The decrease in cash reserves was largely attributable to the repayment of RMB 1.76 billion bank loan, including accrued interest in the first half of 2025. Additionally, in Q2, we paid an equivalent of RMB 346 -- we paid an equivalent of RMB 346 million cash dividend to our shareholders. Net cash provided by operating activities in the second quarter 2025 was RMB 250.1 million. Lastly, on business outlook. We estimated our third quarter revenue to come in the range from RMB 2.59 billion to RMB 2.69 billion, representing a decrease of 3.2% to an increase of 0.6% year-on-year. This is based on assumption that on a year-over-year basis, PRC Mainland business will decrease mid- to low teens, while overseas revenue is expected to grow in mid-60s. Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to changes. That concluded the prepared portion of today's discussion. With that, let me turn the call back to Ashley to start Q&A. Ashley, please.
Ashley Jing: Thank you. Just before we take the questions, for those who can speak Chinese, please ask your questions in Chinese first, followed by Enrich translation by yourself. Thank you. And operator, we're ready to take questions, please.
Operator: [Operator Instructions] Your first question comes from Thomas Chong from Jefferies.
Thomas Chong: [Foreign Language] We have seen Momo fundamentals in first half came in better than expectations set in early 2025. Can you talk about our second half outlook. On the other hand, we just talk about different AI tools like AI greetings and AI chat assistance. Can you also talk about what are our thoughts and strategy on AI application?
Ashley Jing: [Interpreted] Let me translate this first. So Momo revenue achieved a sequential growth in the second quarter, primarily due to seasonal recovery. Additionally, with some the relatively stable consumer sentiment and regulatory environment, we took this opportunity to organize a number of nonbonus-oriented competition events. By offering the winners incentives such as training tours abroad or production of heat music videos, instead of simply cash rewards. We simulated broadcasters participation in this competition events at a relatively low cost. Whether this trend can be sustained in the second half of the year, largely depends on the overall consumer sentiment as well as the enthusiasm of agency and broadcasters. Regarding consumer sentiment. We currently do not see any significant deterioration, but are relatively fragile overall. On the other hand, due to some new tax regulations, agents and broadcasters may be affected in the second half of the year. Internally, we are adjusting our operational policies to address this issue. The main goal of our policy adjustment is to help the supply side enhance compliance while maintaining the normal and reasonable income and profit. This may put some pressure on the platform's revenue and gross margin, but our team will strive to mitigate this impact through improved product operations. Currently, Momo's overall revenue and profit in the second half of the year expected to be relatively controllable. Moreover, tax compliance across the entire industry is also a good thing for the long-term stability of the social entertainment platform. Okay. Let me translate this. So the second question is about application of AI in the social field. Since 2022, the group has done a lot of explorations and innovations in this area with significant strategic deployment and efforts. At the application level, it mainly involves several aspects. Firstly, we are integrating AI into existing social products to enhance user experience. And Chinese users generally struggle with icebreaking conversations, which posted a significant barrier to building new connections and maintaining ongoing interactions. This has been a key user of pain point we have sought to address through product operations. AI, however, can play a substantial supporting role in this area. Momo's previous product practice in AI-assisted icebreaking have observed a strong evidence of this. We believe AI has broad application potential in this area, such as offering chat advice and providing other similar systems functions. In addition to existing applications, we have recently launched a stand-alone AI character role play in chat in Japan. Users can choose their preferable IPs and storylines to be engaged in chat and role playing. This app is currently doing very well in Japanese market, and we have initiated preliminary monetization efforts. And beyond these application level exploration, we have also made significant efforts in underlying technology and infrastructure. Since there are no off-the-shelf AI vertical models tailored for the social sector available on the market, our group has set up a dedicated team for large model applications and continuously invested resources in this area. Based on Momo's we are conducting in-depth research and model training on how to leverage AI to better help users build and maintain new connections more efficiently. Our progress achieved in this area will significantly enhance the product and commercial value to Momo and Tantan and many of our new social products in the overseas markets. Thomas, I think that's the answer to your question. So operator, we're ready for the next question.
Operator: Your next question comes from Leo Chiang from Deutsche Bank.
Leo Chiang: [Foreign Language] Management mentioned in the prepared remarks that the company has taken measures to restructure the membership package and require the operations of core cities and user groups to mitigate the impact of the product upgrade on paying ratio. Can management elaborate more details of what measures you have taken?
Sichuan Zhang: I will take this. So the recent Tantan product upgrade has led an increase in the number of users completing real person verification and profile pages now show more comprehensive information. User feedback shows that it feels like they can see more real people on Tantan. However, this improvement has resulted in users which has put some pressure on revenue to adjusted -- in Q2, we adopted a user classification approach, specifically with group user base on whether they have complete real personification, engagement level, paying history and factors such as appearance. For different user groups, we implemented tailor exposure strategy and monetization approaches. For example, for users with high paying potential, we moderately adjusted their matching rate and pay design to improve their paying conversion and ARPPU. Additionally, we divided domestic cities into several tiers based on user engagement level and regional consumption capacity. We developed suitable membership packages and pricing plans. Our goal is to maximize revenue, either by increasing the paying ratio to grow the number of paying users or by boosting ARPPU to drive revenue growth. In terms of UI design, we focus on core saving features by the previously quarter images and test information on the homepage. We now highlight the key information such as age, online status and systems. The revenue pressure caused by the product upgrade was fully evaluated in Q2. Recent product and algorithm adjustments gradually mitigated the negative impact of the upgrade on the revenue. So therefore, it's worth noting that the improved user experience has helped drive organic user growth and user retention. Previously, the vast majority of new users on Tantan were acquired to pay marketing channels. However, since the start of this year, the number of organic users have been steadily increasing. In Q2, the number of new organic users significantly bypassed acquired through channels. We believe the enhanced user experience provided by the product has established a solid foundation for recovering our user base and revenue following a reduction in channel investment.
Ashley Jing: Yes, that's it for the answer.
Operator: Your next question comes from Yicheng Yuan from UBS.
Yicheng Yuan: [Foreign Language] So we've seen like overseas revenue grow over -- grew by over 17% year-over-year for two consecutive quarters. So could management please share your views on sustainability of the strong growth? And what are your expectations for overseas revenue in the second half?
Sichuan Zhang: Thank you for the question. I will kick this to sum up the rapid growth of the overseas business in the first half of the year in one line that is pretty well across the board. For the social entertainment business, Soulchill has maintained steady growth momentum. The accelerated growth in the first half of the year is mainly driven by continuous breakthrough with Yahale and Amar. Despite the ongoing increase in channel investments, the ROI has constantly met target, allowing us to achieve revenue growth while improving profitability. This marks our most significant breakthrough since the start of the year. In fact, our social entertainment business could have grown even faster in Q2 and Q3. However, given the strict profit requirements set by the group, aiming for higher growth will sacrifice on profits, and we are conscious about the risky growth model at the moment. So in Q2 and Q3, we will focus on increasing ARPU and optimizing user acquisition costs. Although year-on-year growth may slow slightly, these three apps targeting MENA is still expecting to deliver very healthy and robust growth overall. So beyond social entertainment, our overseas dating business has also performed very well this year. This includes the stabilization of Tantan's overseas operation and other overseas dating products that managed by our Singapore team. We have also recently completed the acquisition of the -- although this scale is larger, isn't large compared to our overall overseas business. This brand has significant untapped potential in terms of user user possession in European markets and team capacity -- capabilities. We believe that this overseas dating brands will become key growth driver for our international revenue in the future. As for the revenue outlook, I will turn it over to Cathy.
Cathy Peng: Okay. Sic has already given pretty clear and detailed answers about the growth dynamics of our overseas business. Let me try to translate into those comments into more quantifiable terms that model builders can work with. First of all, as you can see in Q1, Q2, we delivered over 70% overseas growth, which reflects strong momentum across both social and our -- some of our emerging brands. We -- as Sic mentioned, we could have moved a little bit faster in Q2 in terms of top line growth. However, we purposely slowed down a bit towards mid Q2, so we didn't have to sacrifice profit for faster top line and market expansion. It was really a decision out of strategic discipline and priority on growth with profit rather than growth at the expense of profit. And for that same reason, in Q3, we expect a temporary moderation maybe toward a year-over-year growth of around 60% as we deliberately pace marketing spend and focus on improving ROI through optimizing user acquisition costs and enhancing ARPU. That said, nonsocial emerging brands as a whole are continuing to accelerate at a triple-digit pace and will become an increasingly important growth driver as the year progresses. This is a good thing for the group because a lot of the new brands are subscription-based with higher margins. And these brands -- as these brands mature, we could see gradual improvement in our overall margin profile. By Q4 as ROI optimization take effect and with the contribution from some of the newer brands, we expect overseas growth to reaccelerate again. Hopefully, that answers your question. Back to Ashley to take more questions.
Ashley Jing: Okay. So in the interest of time, maybe let's just take one last question before we wrap up for today's conference. Please, operator, if we have any.
Operator: Your final question comes from Xueqing Zhang from CICC.
Xueqing Zhang: [Foreign Language] The management just share the revenue outlook the second half of this year. And I would like to know if there will be any change in terms of profit margin. In particular, regarding the withholding tax issue that Cathy just mentioned in the prepared remarks. Can you will share more details. I believe investors are quite concerned about whether this is an issue specific to the company itself are effectively related to industry-wide process.
Cathy Peng: Okay. On margins, it's hard to separate the discussion on margin from our overall top line outlook. So here is a recap on how to think about revenue outlook for 2025 at the group level, again, in a more quantifiable way. As mentioned earlier, we expect some pressure on Momo's value-added services in the second half, primarily due to recent tightened up in tax scrutiny affecting a lot of our performers and agencies. And of course, macro remains an uncertainty factor here as well. For these reasons, there could be some fluctuations in revenue and gross margins, particularly in Q3 and Q4. That said, we've been adjusting our revenue sharing policies to offset part of the impact. So the overall effect on top line should remain pretty manageable. On the other hand, content's performance, as you can see, has been a positive surprise after the restructuring at the beginning of the year where we substantially cut down personnel and marketing costs. Despite significantly reducing marketing spend, product improvements and monetization enhancements have kept revenue more resilient than expected. And the revenue is stabilizing as we move through the back half of the year. So it looks like we've achieved stabilizing revenue trend on top of significant cost savings for Tantan, which will give us pretty meaningful improvement in Tantan's profitability compared to last year. Now moving back to group level revenue outlook for 2025. We continue to see somewhere around the low teens year-over-year decline for domestic revenue, offset by strong growth in overseas where we anticipate a year-over-year growth around 70% taken for the whole year. Taken together, this implies that group top line in 2025 could either see a slight downtick from or remain flattish versus 2024. That's the current view of mine. Turning to margins. On the gross margin line, there are mixed forces that sometimes oppose one another. First, we are slightly raising payout ratios to support domestic agencies as well as performance as they adapt to the new tax environment, that could mean a 1 to 2 percentage point increase in overall payout on normal. Second, as the overseas revenue contribution becomes increasingly meaningful, mix shift across businesses could swing gross margin one way or another, making it difficult to pin down the group level margin expectations. For example, if the dating brands continue to outperform, margin will improve. However, if some of our newer entertainment brands grow faster, it could shift the margin profile the other way around. That said, I can give you guys my best estimate at this point. As a reference point, adjusted gross margin was 39% in 2024. Last quarter, we guided for -- if I remember correctly, somewhere around 36%, 37% for 2025. Given the recent developments in the live streaming and value-added services space in China, we now expect 2025 gross margin to land closer to the lower end of that range. So that's for gross margin. Below the gross margin line, R&D will trend lower in absolute dollar terms as we continue to optimize headcount. Sales and marketing will increase low teens percentage-wise, reflecting our investment to drive overseas growth, especially some of the newer applications that we are launching in the second half, especially in Q4. At the operating margin level, last quarter, we guided for -- from 13% to maybe 14% on an adjusted basis for 2025. Our current view is that we will probably land in the lower end of that range depending on where the top line ends. So overall, despite some near-term challenges faced by some of our agencies from tax scrutiny, our annual margin profile remains broadly stable and, I believe, aligned with prior guidance as we continue to exercise cost discipline and fund overseas expansions. So now the big question, moving below the operating profit line, it's probably worth elaborating a little bit more on the big special tax item for Q2. Basically, here is what happened. Recently, actually towards end of August, the tax authorities provided an interpretation that we believe represents a new position regarding the applicable withholding tax rate for dividends distributed by our WOFE to its Hong Kong parent company, Momo Hong Kong. The authorities have determined that the standard 10% rate should apply rather than the 5% preferential rate under the Mainland China and Hong Kong tax arrangement that we have applied in prior periods. Actually, from April 2025 to -- I'm sorry, from April 2024 to April 2025, our tax filings with 5% preferential dividend tax rate were subject to multiple routine reviews by the local tax bureau -- local tax authority, which raised no objections or concerns at the time. In addition, we believe the practice we previously followed was a common industry approach for companies in similar situations. That's why we were surprised by the subsequent reassessment of the authorities. While we continue to believe our initial assessment was reasonable, we note that the application of tax laws can involve very complex interpretation. As a reasonable corporate citizen, we have complied with the authority's latest guidance and have adjusted our accounting accordingly. As to the question about whether this is industry-wide or specific to Hello Group, from our recent dialogues with the third-party advisers who have been involved all along in this specific matter as well as the dialogues with the authorities, it is our belief and our understanding that the latest scrutiny that Hello Group experience is not unique to us alone. Our original approach was not unique either. Many companies with similar structures have followed the same practice. And if so, according to the authorities, there is a possibility that they could face similar scrutiny as well. That's what I can say at this point. So maybe back to Ashley to wrap up the call.
Ashley Jing: Yes. I think times up. So let's call the day, and thank you for joining us today, and we will see you next quarter. Operator, we're ready to close. Thank you.
Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]