Hello Group's First Quarter 2026 Earnings Conference Call

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 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, Alpreta. 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 available on the company's IR website. On the call today are Mr. Tang Yan, CEO of the company, Ms. Jiang Sichuan, 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 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 Security 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 Zichuan. Ms. Zhang, please.

Thank you, Ashley. Hello, everyone. Thank you for joining today's call. The group maintains steady business momentum in Q1, guided by the strategic priorities set last year. Our domestic business stays 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. Now, I wrote you through the key updates. Starting with the financials, for Q1-26, total group revenue was $2.39 billion RMB, down 5% year-over-year. Domestic revenue reached $1.79 billion RMB, down 15% year-over-year. Overseas revenue was $597 million RMB, up 44% year-over-year. Overseas revenue accounted for 25% compared to 16% in the same period last year. Adjusted operating income was $349 million R&B, half 1% year-over-year with a margin of 14.6%. Building on the strategic direction from 2025, our 26 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. And for our new businesses, to deepen overseas presence, enrich our brand portfolio, and build a long-term growth engine. Let me work 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 not-lock feature improves connection accuracy by analyzing users' historical chat patterns to optimize matching algorithms. Striving sustained growth in two-way and in-depth chats. In real-time chat scenarios, building on a study roundup of voice features, we have also introduced video features to enrich our portfolio of instant interactions. The combined upgrades in our goal recommendation and product experience have lowered the barrier for users to find chat partners. This is the main driver behind the study improvement in retention among existing users. In 2025, we undertook a number of meaningful inspirations 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-dripped bottles, guiding users to complete voice profiles, auto-generating voice content, and releasing it onto the platform in a message in a model format to spark users' desire to connect. For user acquisition, channel ROI has been made fully profitable since the beginning of the year. Ongoing audio room, gameplay updates, and better channel conversions lifted payment intent among meet and small spending users. This drove study LTV growth and channel ROI improved monthly quarter over quarter. Overall, acquisition spend continued the refluent, 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 shorter 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. That's that, 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 vast revenue was $1.52 billion RMB, down to 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 recovery. The sequential decline was largely seasonal during the Chinese New Year, alongside persistently soft consumer spending sentiment. In response to these external shifts, 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 walls is relatively resilient. This helps partially absorb the external pressure on overall revenue. On the product and operations 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 continue to introduce and selectively support high-quality talent streamers, lifting organic revenue through content quality improvements. In audio scenarios, we roll out the new PK gameplay to further motivate users to give one another. With some mid-tier and long-tier broadcasters and agencies on our platform facing ongoing profit pressure during the test compliance process, we have rolled out a new incentive-based revenue-sharing policy. This has decided to enable the quality performance to deliver greater value to the platform while ensuring they are safe or they make stable income in turn now let's turn to town town as of the end of q1 town town has 0.6 million paying users a mortis decrease of 30,000 quarter over quarter this decline was driven by two First, the carryover from ongoing MEU decline, and second, Alipay's changes to its auto-renewal paying rules, billing rules, which place short-term pressure on membership conversions. Under the continued effect of our strategic marketing cuts, content's user base would main on the downward trajectory, though the magnitude of the client has narrowed meaningfully. Through algorithm, innovation, and refined operations, engagement, and retention among younger users showed slight improvement, contributing positive to user-based stability. On the product side, the team optimized recommendation strategies in our court select-based scenario. For example, we introduced tiered restrictions on female users' matches, allowing only horizontal or upward matching, a benefit for female users' real-world social expectations. This drove a near 3 percentage point increase in average swipe per female user, slightly improving the retention. On new scenario, inspiration, we piloted Mac-based social and AI chat-assisted 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 costs partially accept the impact. Additionally, because organic traffic outperforms channel traffic on both user engagement and retention, the overall decline in our user base has far smaller than the channel-driven decline implied by our strategic cuts. Secondary, both spent and user acquisition cost narrowed by various degrees, so the channel volume decline was relatively limited, while Alipay's new policy created new near-term output pressure. Channel ROI was sustained well above 100% throughout the quarter. On the financial side in Q1, Tantan's domestic business generated 125 million RMB in revenue, down 25% year-over-year and 8% quarter-over-quarter. The primary driver remains MAU construction, leading the fewer paying users, compounded by the short-term impact of Alipay's policy adjustments on VAS payments. On monetization, the team unbundled membership features into a lack-of-heart offering while enriching fresh chat gameplay and stepping up in-app promotion to ease top-line pressure. On profitability, thanks to ongoing cuts in channel investment and personal 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 597 million RMB, 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 rated on our overseas business overall. Excluding Solchil, the rest of our overseas businesses continue to deliver healthy growth this quarter, further validating the value of diversified product portfolio in dispensing risk from single product volatility. Our two newer products in MENA, YAHALAN and AMAR, continue their rapid growth trajectory with both delivering triple-digit revenue growth year-over-year in Q1. Driven by continuously improving localized operations, amorphousized graphs of local user preferences, and sustained game-plane innovation, both products sought concurrent improvement in revenue and profit. This quarter, Yafalem is approaching net income break-even, and Amara has achieved positive marginal contribution for the first time. This is a significant must during making our shift in MENA from a social-dominated model to a promoted product portfolio. Beyond our audio and video social products in the MENA region, our dating business focused on the developed market is another important pillar of our overseas footprint. Also deliver satisfying progress this quarter. Panda International, met by our Singapore team, completed a full upgrade of product positioning and branding over the past year. And in second half of Shinify, began migrating from a shared domestic international app built 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 speed. Starting in Q2, the team's focus was trying to further optimizing product experience and improving monetization efficiency. Secondly, Heaven, which joined the group last year, has continued a steady healthy growth trajectory since the beginning of this year. Happens user base has remained relatively stable over the past year, and both the control and over-year revenue growth came mainly from improvements in paid conversion rates and app people, 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 brand, we remain confident in the dating businesses' continued release of growth potential in 2026. This concludes my remark. Now, let me pass the call to Kathy to start for the financial review. Kathy, please speak.

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 of 2026 was 2.39 RMB, down 5% young year and 7% quarter over quarter. Non-GAAP net income attributable to the shareholders of the company was 328.8 million RMB compared to 403.8 million RMB in the same period of 2025 and 281.3 million RMB 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 2.35 billion RMB, down 6% year-on-year and 7% quarter-on-quarter. On a geographic basis, PRC mainland value-added service revenue was 1.76 billion RMB, down 15% year-over-year and 9% quarter-over-quarter. The decrease was primarily due to heightened tax scrutiny on the agencies for Homo's entertainment business, combined with softened consumer sentiment amid broader macro pressure, and to a lesser degree, a decline in paying users on Tantan. VAS overseas revenue reached 593.7 million RMB, 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 the MENA area during the quarter. Turning to cost and expenses, non-GAAP cost of revenue for the first quarter of 2026 was 1.46 billion RMB compared to 1.57 billion RMB for the same period last year. Non-GAAP gross margin for the quarter was 38.8% compared to 37.9% from a year-ago period. A growth profit margin, or GPN, in Q1-26 rose by around 1 percentage point, while 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 saving products. This was partially offset by the decline in Momoa's GPN, 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 165.2 million RMB compared to 185.9 million RMB for the same period last year, representing an 11% decrease worldwide. 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 $335.4 million RMB, compared to $322.1 million RMB 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 Xochio also temporarily scaled back channel investments amid external challenges. Non-GAAP GNA expenses was 89.4 million RMB for the first quarter compared to 114.8 million RMB for the same period last year representing a 4% and 5% of total revenue respectively. The decrease in GNA expenses was primarily attributable to a high-base effect in Q125 resulting from a self-inspection related to tax matters. Non-GAAP operating income was 349.2 million RMB, representing a margin of 14.6%, compared with 345.3 million RMB and a margin of 13.7% from Q125. The increase was driven by improvement in GPM. Non-GAAP OPACs as a percentage of total revenue stood at 25%, unchanged from the year-ago period. Now briefly on income tax expenses. Total non-GAAP income tax expenses was 81.5 million RMB for the quarter with an effective tax rate of 20%. In Q1, the company accrued withholding income tax of 21.2 million RMB, which is 10% of undistributed profit generated by our loan fee. Without a withholding tax, our estimated non-GAAP effective tax rate was around 15% in the first quarter. Now, turning to balance sheet and cash flow items. As of March 31, 2026, Hollow Group's cash-cash equivalents, short-term deposits, long-term deposits, short-term investments, and restricted cash totaled 8.56 billion RMB compared to 8.68 billion RMB as of December 31, 2025. Net cash provided by operating activities in the first quarter of 2026 was 158.9 million RMB. 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 13-month payroll. Lastly on Business Outlook, we estimated our second quarter revenue to come in the range from 2.45 billion RMB to 2.55 billion RMB, representing a decrease of 6.5% to 2.7% me This is based on the assumption that, at midpoint, on a year-over-year basis, revenue from our mainland China business was declined by high teens percentage-wise, while overseas revenue is expected to grow by high fifties 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.

Quick reminder for those who can speak Chinese, please ask your questions in Chinese first and follow by English translation by yourself. And please also limit the number of questions to maximum two. Apurita, we're ready for questions, please.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Suking Zhang with CICC. Please go ahead.

Thank you. Thank you. for taking my question and my question about the open space business uh uh regarding the mean not any segmentation in her prepared remarks the social face some challenges from external factors in the first quarter a commandment provide more details on what happened and will this have any impact on the four-year revenue approach for the overseas business In addition, Sik also mentioned that the two new products continue to see revenue growth while the loss is kept narrowly. So, can management share when this new business is expected to turn profitable? Going forward, will the company continue to increase marketing investment to scale these products? Or will you focus more on narrowing losses and moving toward profitability?

Thank you. 我先从说出陈佳的具体原因说起来吧 一季度流水环比下滑主要有三个原因 第一个是这个土耳其政府加强对这个社交直播内的产品的监管 暂时对全行业相关的产品进行了统一下下处理 这是我们土耳其市场新增用户获取造成了阶段性的压力 第二个是这个季节性的因素 在月期间中东北非地区的消费情绪整体偏弱 Let me start with what was dragging Sochil down in Q1.

So the sequential revenue decline came down to three main things. Number one 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 Year's acquisition in Turkey. And number two is seasonality. Consumer sentiment in the MENA region during Ramadan was relatively softer. As a large and rather mature product, Socio was more noticeably impacted by this seasonal kind of headwind. And number three is the ongoing conflict in the Middle East that also has some drag on Sochi's revenue in the Gulf region. We are confident that Socio fully complies 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.

Sochi's business has already begun to see a steady recovery from the Q1 low, and we do not believe investors need to be overly concerned about it. 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 我们在货客ROI回收达标的前提下 适度加到了投放规模 积极测试新的潜力市场 与此同时 亏损规模在逐渐收窄 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RY为导向 让净利润自然兑现 亚海赖应该一个季度之内 可以实现净盈利 阿曼发展阶段 大概落后半年左右 至于海外今天整体的收入预期 请Cassie介绍

So 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 spans where ROI targets have been met, and actively testing new markets, while keeping the loss trajectory moving in the right direction each quarter. Our path for these two-man products is pretty clear. Build scale first, optimize the growth margin structure, keep marketing ROI driven, and let net profitability flow naturally. YAHALAN should keep net profitability within a quarter. AMA is about half a year behind on that trajectory. And for the FUYA 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, Sochil. As Tangso mentioned earlier, Sochil 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 That said, I think the team has adapted reasonably well to the changing environment. And while revenue in Turkey remains somewhat pressured, performance in other Middle Eastern markets has actually been quite solid. So overall, I would say that Socio, 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. And 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. And third, for the dating and membership-oriented business outside of the MENA region, that part of the portfolio has remained very much on track. And honestly, that's one of the things that makes dating and membership business model pretty attractive. Compared with entertainment-driven platforms, the revenue visibility and forecasting clarity are generally much higher. So 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 2 billion renminbi. This year, for 2026, we are likely to hit a 3 billion RMB 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 100 million RMB of variation, either to the upside or to the downside of that 3 billion RMB number. But based on what we see today, we remain pretty comfortable with that original range. So hopefully that answers your question. Back to Ashley for the question. Hi. Thank you.

I'll read the next question, please.

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

Thank you for the question. Thank you very much. Thank you very much. 最后的问题是关于我们应该如何去看待国内业务传联收入的预期。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 time-time paying conversion. Can management comments about the scope for this adjustment and how long will it last? and 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.

Thank you very much.

So let me first address the impact of tax policies on Womuo. New tax regulations introduced in the second half of 2025, combined with the stricter local tax collection and enforcement, affected agencies' operating chatroom scenario. To elevate 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 a decline in agency-related revenue during March and April. In response, we selected a group of high-quality agencies in May and began assisting them with tax compliance. To help offset the profit pressure cost by additional compliance costs, we introduced a new incentive program and provided further financial support to these selected agencies. And 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MOMOVAS核实回到同比的增长 除了税务因素外 还取决于宏观消费情绪和之回暖 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 So as for when MOMOVAS will return to year-over-year growth Beyond the tax issue It also depends on when broader consumer sentiment peaks back up What we can control is making sure the product fundamentals are rock solid And the operating efficiency is maximized

And we are very confident in MoMo's modernization capabilities 关于支付宝代扣规则调整的问题 确实对贪贪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 商业化层面采取了猜拳售卖的策略 把原本捆绑在会员套餐里的 例如超级喜欢优先推荐 这类高频特权单独猜出来卖 同时还升级了闪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

So 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 superlikes and boosts, and offering them as standalone purchases. We have also enhanced our a la-car 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. In terms of scope, the Alipay policy changes primarily affect its subscription or membership products. Muomo's call payment model is based on consumable virtual gifts, which do not rely on auto-renewal, so 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 10 times the 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. So for the full-year domestic revenue outlook, I will hand it over to Cassie.

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. But 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. And if we 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 constant 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. And we do expect June performance to benefit from these adjustments. That said, April and May were clearly impacted by the Titan 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 Sik mentioned in the prepared remarks, the core business itself remains very solid. So 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. So 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. So that's how we are currently thinking about the domestic revenue outlook. Back to Ashley, maybe for one more question.

So in terms of time, let's just take one last question before we close the line. And we're ready. Thank you, Operator.

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

Thank you so much. 曾經對於長期業績的一個拉動作用。 那麼 AI 的頭顱是不是會影響我們短期的一個利潤的情況? 然後針對年初國內和海外業務都面臨的一些外部壓力, 讓我們如何看待集團成年這一個利潤的情況? 從來裙川,看來自我自己, 所謂的書開始提到AI-driven product innovation 幾年有幾年發生產品的發生產品。 So could you please share more details on the group's AI product roadmap going forward? And more broadly, how do you view the contribution of AI innovation to our longer-term learning And should we expect a meaningful impact on near-term profitability from AI investment? And given the external challenges fit by both domestic and overseas citizens at the end of the year How do we affect the group's four-year profit How can margin trajectory for the four-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

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. 信息真实声音自动生成,更加生动有趣的自我介绍和照顾内容,并以漂流屏的方式发布在平台,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驱动的云社交产品 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 Minamand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 这对产品代表了我们用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. And this is then published on the platform as a drift bottle. So these AI tools are particularly valuable for users who have dating needs but relatively weaker social skills. And second, enabling new products formats. For example, like Donut is a fully AI-powered voice social product that has already begun modernization in China. And on the overseas side, our AI role-play dating app, Milaimind, has shown solid early attractions in Japan and is now expanding to other Asian markets. These products represent our exploration of what next generation's social experience can look like. 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 space. 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 more and more live streaming, AI short dramas generation based on broadcasters' images, as well as smarter matching and content distribution 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 three-year profitability outlook, I will pass it over to Kathy.

On profitability outlook, I will 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. And 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. So, 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. So 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. So I think that wraps up the call. Now I'm handing back to Ashley for closing remarks.

Well, so thank you for participating today, and that's going to be the end of the call, and we'll 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.