Earnings Call Transcript - MOMO Q4 2024

Operator, Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Fourth Quarter and Fiscal Year 2024 Hello Group Inc. Earnings Conference Call. Please note that 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, Moderator

Thank you, operator. Good morning, and good evening, everyone. Thank you for joining us today for Hello Group's fourth quarter and fiscal 2024 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. Sichuan Zhang, 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. 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 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, Mr. Tang Yan. Mr. Yan, please?

Tang Yan, CEO

Hello, everyone. Thank you for joining our call. 2024 was a year filled with challenges and opportunities. Our team navigated external uncertainties well and achieved satisfactory financial and operational results. The Momo Cash cow business continues to thrive with a healthier ecosystem than last year. Our overseas business sustained its strong growth momentum and made significant contributions to the group's financial performance. This encourages us to take bolder actions to drive growth and innovation in international markets moving forward. I will now pass the call over to Sichuan for more details. Sichuan, please?

Zhang Sichuan, COO

Hello, everyone. Thank you for joining our call. I will now update you on our business in the fourth quarter and fiscal year 2024 and outline our strategic goals for fiscal year 2025. Starting with an overview of our financial performance, for the fourth quarter of 2024, total group revenue was RMB2.64 billion, down 12% year-over-year. Adjusted operating income was RMB280 million, with a margin of 10.6%. Our fourth-quarter costs included RMB94 million in film production-related expenses. Excluding these costs, adjusted operating income would have been RMB374 million, with a margin of 14.2%. Revenue from the Momo app and standalone new app totaled RMB2.42 billion, down 11% year-over-year. The decrease was mainly due to an 18% year-over-year decline in the Momo app resulting from our proactive product adjustments and the weak macroeconomy. Meanwhile, standalone new app revenue increased 37% from a year ago, thanks to the rapid growth of our overseas business. Adjusted operating income from the Momo app and standalone new apps was RMB269 million, with a margin of 11.1%. Excluding film-related costs, adjusted operating income would have been RMB363 million, with a margin of 15%. As for Tantan, fourth-quarter revenue totaled RMB213 million, down 22% year-over-year due to the decreased number of paying users. Adjusted operating income was RMB11.37 million, compared to RMB27.04 million from a year ago. For fiscal year 2024, total group revenue was RMB10.6 billion, compared with RMB12 billion last year. Adjusted operating income was RMB1.173 billion with a margin of 16.3%. Revenue from the Momo app and standalone new apps totaled RMB9.7 billion, down 11% year-over-year. Momo app revenue decreased 16%, mainly due to our proactive product adjustments and macro factors. Revenue from standalone new apps grew 40%, driven by our overseas expansion. Adjusted operating income from the Momo app and standalone new apps was RMB1.65 billion, with a margin of 17.1%. Regarding Tantan, total revenue for fiscal year 2024 was RMB900 million compared with RMB1.2 billion in the previous year. The adjusted operating income was RMB75.94 million compared with RMB101 million in the previous year. I will now update you on our execution, strategic priorities for each business line in 2024, challenges we are facing, and how we plan to address them. First, on the Momo app, our goal is to maintain the productivity of this cash cow business with a healthy social ecosystem. Over the past year, our proactive product adjustments combined with macro softness put a lot of pressure on revenue. However, the quality of content and a strong ecosystem will lay a solid foundation for the stable productivity of our cash cow business next year. In 2024, our product team focused on improving the female user experience and optimizing real-time Soulchill use cases to drive effective interactions. We introduced an AI-assisted chat tool for male users in various voice and tech-based chat experiences such as greetings and Soulchill. The AI tool can generate greetings based on female users’ text and picture-based profile information as well as their historical posts to improve the quality of ice-breaking conversations, thus increasing the response rate from female users. Additionally, we promoted several matching-based real-time voice chat features on the homepage, which proved effective for deeper user interaction and paying conversion, thus further strengthening Momo's Soulchill attributes. On the user acquisition front, we have shifted from a focus on overall user growth to a more pragmatic profit-focused ROI-driven growth model. We have made good progress in optimizing the efficiency of transitional fee channels and reducing user acquisition costs. The continued improvement in ROI has allowed us to decrease overall marketing spend while keeping traffic volatility stable. Given the significant cost optimization achieved over the last few years, the space to further reduce costs in transitional channels is limited. In 2024, we will explore new ways to acquire traffic through KOL collaborations with short video influencers on platforms such as Douyin and Red Note. We have increased brand exposure and gradually shifted our budget from high-cost transitional channels to KOL channels, reducing unit acquisition costs. In the fourth quarter, the Momo app had 5.7 million paying users, a sequential decrease of 1.2 million, due to our cost reduction and efficiency improvement strategies. We reduced the acquisition of some extremely low-paying users with a negative ROI, which benefits profitability. Regarding Momo's live streaming revenue, in the fourth quarter, it was RMB1.19 billion, down 16% year-over-year. This decline was wider than in the previous three quarters, mainly due to reduced revenue from competition events, resulting in a significant decrease in incremental revenue compared to previous years. For fiscal year 2024, live streaming revenue totaled RMB4.8 billion, down 14% year-over-year, primarily due to our proactive operational adjustments to maintain a healthy social ecosystem, as well as spending softness among top paying users due to the weak macroeconomy. To mitigate revenue pressure from the decline in top paying users, we stepped up our efforts to promote live streaming on the homepage to improve its channel penetration and paying conversion. Furthermore, we increased product innovation efforts targeting mid and long-tail users to stabilize the revenue scale of this group. In the early stages of our operational adjustments, we found that reduced competition bonuses were resulting in insufficient profits for supply-side partners and reduced their motivation to work hard on our platform. Therefore, in the second half of the year, we modestly adjusted the incentive policy for daily events, which resulted in a slight increase in the revenue sharing ratio for 2024 compared to 2023. The increase in sales of live streaming showrooms, costumes, and PK props, which do not require revenue sharing, positively stabilizes the profit level of our cash cow business. Turning to our value-added services, in the fourth quarter, revenue from VAS, excluding Tantan, totaled RMB1.2 billion, down 5% year-over-year. VAS revenue from the Momo app was RMB800 million, down 15% year-over-year, while revenue from standalone apps was RMB400 million, up 24% year-over-year. For fiscal year 2024, revenue from value-added services, excluding Tantan, totaled RMB4.177 billion, down 6% year-over-year. VAS revenue from the Momo app was RMB3.28 billion, down 17% year-over-year, and revenue from standalone apps was RMB1.49 billion, up 35% year-over-year. The incremental revenue from our new endeavors largely offset declines in our legacy business revenue. Declines in Momo app VAS revenue were mainly due to proactive product and operational adjustments in audio and video-based VAS experiences over the past year to mitigate regulatory risk, where we significantly reduced the monetization level of agency-driven and heavily monetized use cases. Similar to live streaming, we promoted the chat room experience on the homepage, introduced interactive gifting features for mid and long-term users, and launched new categories such as mini-games and love fortune telling to improve chat room penetration and paying conversion while driving organic revenue growth. For Tantan, the strategic goal for the year was to improve its core dating experience and develop an efficient business model that drives profitable growth. We initiated a product upgrade in 2024 focusing on user experience. To encourage more experimentation, we decided not to constrain the team with short-term metrics during the pilot phase, allowing for some fluctuation in user scales and revenue. By the end of the year, these product adjustments had positively impacted user experience, but user retention and organic growth did not improve significantly. The user scale and revenue continued to show a gradual downward trend. Regarding Tantan's user trends and financials, while the continuous cost reduction and efficiency improvements over the past two years brought Tantan to breakeven, there was no breakthrough in user retention driven by product experience or organic user growth. Additionally, ongoing reductions in channel investments significantly pressured the user base, leading to a 10% sequential decline in Tantan's MAU to 10.8 million in September. By the end of the fourth quarter, Tantan had 860,000 paying users, down 80,000 sequentially due to the decline in MAU. Tantan's fourth quarter total revenue was RMB213 million, down 22% year-over-year, mainly due to the decreased number of paying users. For fiscal year 2024, total revenue was RMB900 million, down 25% year-over-year. In terms of business lines, VAS revenue was RMB550 million, down 18% year-over-year due to the decline in the number of paying users. By subdividing member paying features, optimizing guidance narratives on paying experiences, and promoting relatively high-priced products such as SVIP, Black Gold, and additional pay-as-you-go privileges for members, we achieved significant year-over-year growth in VAS ARPPU, resulting in VAS revenue declining at a much smaller rate than user numbers. Live streaming revenue was RMB313 million, down 38% year-over-year, mainly due to our strategic decision to de-emphasize live streaming, which has a low correlation with the dating experience. For fiscal year 2024, Tantan's adjusted operating income was RMB75.94 million compared with RMB101 million from the previous year. Now, moving on to our efforts regarding Tantan's product and user acquisition. Like Momo, Tantan implemented KOL collaborations and offline integrated campaigns in 2024, including promotion events in bars, music festivals, and youth-centered venues, coupled with online campaigns across new media channels, effectively optimizing user acquisition costs while expanding brand influence. On the product side, we identified major issues affecting user experience through interviews and surveys at the beginning of the year. In the second half of the year, our product team addressed two core issues: uncertainty about user identity authenticity and lack of responses to chats after matching. After a year of effort, while we largely achieved our goal to improve Tantan's core dating experience, overall user retention has not significantly improved. In 2025, we will implement more extensive cost reduction and efficiency improvement measures, maintaining a low-cost modest profit level while continuing to explore dating products. Regarding our new endeavors, our goal is to further enrich the brand portfolio, expand the business beyond Momo and Tantan, and establish a long-term growth engine. In the fourth quarter, the total revenue of the new apps was RMB416 million, up 37% year-over-year. For fiscal year 2024, the total revenue of the new apps was RMB1.67 billion, up 40% year-over-year. The rapid expansion of the overseas business, especially Soulchill, was the key driver of this sustained growth, in contrast to our domestic businesses, which faced significant macro and regulatory uncertainties. Our overseas businesses offer clear growth potential and trajectory, and our expertise in Soulchill products and operations reassures us that reallocating human and financial resources towards overseas business will yield better returns on investments for the group's revenue and profit. Since the beginning of 2024, we have been committed to localizing our overseas business and improving operational efficiency across cross-border team collaboration. On the product front, we introduced virtual gift design and interactive features aligned with local user preferences in chat rooms and began exploring the transition from a voice base to live streaming. On the operational front, we refined our services for high-paying users, which drove growth in the number of top cohort users, increasing overall ARPPU. We also enhanced our supply-side collaboration strategies, significantly increasing the number of new agencies and broadcasters. On the user acquisition front, while maintaining a stable ROI, we moderately increased marketing efforts to strengthen our presence in existing markets while expanding into new regions. Our combined efforts in product, operations, and channels led to an increase in paying users and ARPPU, driving rapid revenue growth. Our swift expansion in the Turkish market and live streaming business mitigated temporary consumption dips in the MENA region due to potential risks at year-end, maintaining strong growth momentum for Soulchill from its high base in 2023 and continually increasing its revenue contribution to the group. Over the past two years, we have launched more brands and new products in the MENA region, building on Soulchill's success. Among them, Yaahlan and AMAR, a voice-based social product, entered the initial marketing and monetization phase in 2024 after finalizing product and monetization models. By the end of the year, these two products achieved a certain revenue scale and maintained stable ROI, even as we significantly increased marketing investments. The initial success of Yaahlan and AMAR validates our strategy that the MENA market can accommodate multiple brands and platforms, instilling confidence that our overseas business will play an increasingly significant role in our group's revenues and profits in the future. In 2025, we will continue to increase our investments in Yaahlan and AMAR, striving for ongoing improvements in ROI and profitability. If we can scale revenue for these two apps to a certain level and achieve profitability, we will replicate our successful experiences and models across other social entertainment apps, building a more diverse product portfolio. That concludes our business review for 2024. I will now briefly outline our priorities for 2025. We will maintain the strategies for Momo, Tantan, and our overseas businesses from 2024, making adjustments based on new developments and market dynamics. For the Momo app, our goal is to ensure long-term stable operation with a healthy social ecosystem to sustain productivity at Tantan. Tantan's strategic goal this year is to reduce costs and improve efficiency while preserving profitability, focusing on exploring efficient business models suitable for agents. Our new endeavors aim to further enrich the brand portfolio, expand the business beyond Momo and Tantan, and act as a long-term growth engine. We will boost our overseas efforts and implement bolder measures to drive innovation in international markets. Lastly, I am pleased to announce that our Board has approved a special cash dividend of $0.30 per ADS, totaling approximately $50 million, or about 30% of the adjusted net income attributable to Hello Group Inc. in 2024. This marks the seventh consecutive year we have shared the fruits of our business with shareholders through cash dividends, underscoring our commitment to creating long-term value for our shareholders. Now, I will hand the call over to Cathy for the financial review.

Hui Peng, CFO

Thanks, Sichuan. Hello, everyone. Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total revenue for the fourth quarter 2024 was RMB2.64 billion, down 12% year-on-year and 1% quarter-over-quarter. Non-GAAP net income attributable to the company was RMB230.5 million, compared to RMB514.7 million from the same period of 2023 and RMB493.3 million from Q3 '24. Our Q4 costs included some film production-related expenses. At year end, we also conducted a thorough impairment review on certain assets on our balance sheet, including capitalized film production costs and other long-term investments, and made provisions in accordance with the principle of prudence. Excluding these costs and expenses of RMB141 million, adjusted net income for Q4 2024 would have been RMB371.1 million. Looking into the key revenue items for Q4. Firstly, our live broadcasting, total revenue from the live broadcasting business for the fourth quarter of 2024 was RMB1.26 billion, down 17% year-on-year and 2% quarter-over-quarter. The year-over-year decrease was mainly due to a decline in the core mobile live streaming business and to a lesser extent, the decrease in Tantan. Momo live broadcasting revenue totaled RMB1.19 billion for the quarter, down 16% year-on-year and 3% quarter-over-quarter. Tantan's live broadcasting revenue amounted to RMB75.7 million, down 24% year-over-year, but up 14% quarter-over-quarter. Revenue from the value-added services for the fourth quarter of 2024 was RMB1.33 billion, down 7% from Q4 last year and 2% sequentially. Revenue from value-added service on an ex-Tantan basis was RMB1.2 billion in the fourth quarter of 2024, down 5% from Q4 last year and 2% from the previous quarter. Momo app value-added service revenue decreased both on a year-over-year and quarter-over-quarter basis. This was due to a weak standing sentiment, as well as our proactive product adjustments. However, revenue from the standalone new apps continued to grow nicely partially offsetting the revenue pressure from Momo value-added services. Tantan's value-added services revenue amounted to RMB127.8 million, down 20% year-over-year and 7% sequentially. The decrease was due to a decline in paying users, which was in turn, due to a reduction in channel investment. However, the continued improvement in ARPPU resulted in revenue declining much less than user count. Now turning to cost and expenses. Non-GAAP cost of revenue for the fourth quarter of 2024 was RMB1.72 billion compared to RMB1.77 billion for the same period last year. Non-GAAP gross margin for the quarter was 34.7%, down 6.5 percentage points from the year-ago period. Cost of revenue in Q4 included RMB94 million film production costs, as well as impairment costs provided for earlier film production. Excluding these costs, gross profit margin would have been 38.2%, down 2.9 percentage points from Q4 last year. The year-over-year decrease was due to a number of factors. Number one, higher payout ratio, which in turn was due to two factors. One factor is that overseas business continued to contribute a larger percentage of total revenue while having a higher payout ratio, especially during the new region expansion and initial phase of video service offerings. And to a lesser degree, higher payout from Momo cash cow business to incentivize the supply side considering the downward revenue trend. Number two, deleverage, where direct personnel and infrastructure cost takes up a higher percentage of revenue. Number three, payment channel costs represent slightly higher percentage of total revenue as revenue mix shifts towards overseas business where channel fees as a percentage of revenue are much higher than those for domestic business. Non-GAAP R&D expenses for the fourth quarter was RMB212.4 million compared to RMB218.1 million for the same period last year, or a 3% decrease year-over-year. The decrease was due to optimization in personnel costs. Non-GAAP R&D expenses as a percentage of revenue was 8% compared with 7% from the year-ago period. We ended the quarter with 1,390 total employees, of which 276 are from Tantan compared to 1,382 total employees of which 301 from Tantan a year ago. The R&D personnel as a percentage of total employee for the group was 61% compared with 63% Q4 last year. Non-GAAP sales and marketing expenses for the fourth quarter were RMB311.7 million or 12% of total revenue compared to RMB296.0 million or 10% of total revenue for the same period last year. The year-over-year increase was primarily attributable to the increase in channel investment for the overseas app, whereas marketing spend for Momo core business and Tantan was narrowed to varying degrees. Non-GAAP G&A expenses was RMB117.6 million for the fourth quarter of 2024 compared to RMB87.2 million for the same quarter last year, representing a 4% and 3% of total revenue, respectively. The year-over-year increase in G&A expenses was due to a combination of factors including provision for some pending legal matters, self-inspection on tax related matters, and due diligence related costs in connection with potential investments. Non-GAAP operating income was RMB279.9 million, with a margin of 10.6% compared with RMB264.2 million with a margin of 22.1% from the same period last year. Excluding film production related costs, as mentioned earlier, non-GAAP operating income would have been RMB373.9 million, with a margin of 14.2%. Non-GAAP operating expenses as a percentage of total revenue was 24%, an increase from 20% for Q4 2023. Non-GAAP operating expenses on a year-over-year basis increased by 7%. The increase in both absolute renminbi amount and as a percentage of revenue for operating expenses was mainly due to an increase in G&A expenses and to a lesser degree increase in sales and marketing expenses. Now briefly on income taxes. Total income tax expense was RMB89.5 million for the quarter, with an effective tax rate of 28%. In Q4, the company accrued withholding income tax as RMB19.5 million, which is 5% as part of undistributed profits generated by ROCE. In Q4 2024, as a result of our self-inspection of tax-related matters, we also paid some taxes that were due but unpaid in earlier years. Without such adjustments and withholding tax, our estimated non-GAAP effective tax rate in Q4 would have been around 17% in the fourth quarter. Now turning to balance sheet and cash flow items. As of December 31, 2024, Hello Group's cash, cash equivalents, short-term deposits, long-term deposits, short-term investments and restricted cash totaled RMB14.73 billion compared to RMB13.48 billion as of December 31, 2023. Net cash provided by operating activities in the fourth quarter of 2024 was RMB423.6 million. Lastly, on business outlook, we estimated our first quarter revenue to come in the range from RMB2.4 billion to RMB2.5 billion, representing a decrease of 6.3% to 2.4% year-on-year or a decrease of 9% to 5.2% quarter-over-quarter. At segment level, for Q1 2025, on a year-over-year basis, we expect Momo segment revenue to decrease around mid to low-single digits due to the continuous macro headwinds offset by the rapid growth of overseas business. On the Tantan side, we expect revenue to decrease around 20% due to value-added service revenue contraction caused by a decline in user base and to a lesser degree, our operational adjustment to de-emphasize less dating centric live streaming services. 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 our prepared portion for today's discussion. With that, let me turn the call back to Ashley to start Q&A.

Ashley Jing, Moderator

Thank you. For those who speak Chinese, please ask your questions in Chinese first, followed by English translation by yourself. Operator, we're ready for questions, please. Thank you.

Operator, Operator

Thank you. Your first question comes from Xueqing Zhang with CICC.

Xueqing Zhang, Analyst

Thank you management for addressing my question. I would like to inquire about core Momo. In the first quarter, the number of paying users on core Momo declined by 1.2 million compared to the previous quarter, which is significantly higher than the historical average. What is the main reason for this decline? What effects does this have on revenue and profit? Can we anticipate the number of paying users for this year? Additionally, how does management assess the changes to live streaming and VAS products over the past year? Are there any further changes planned for this year? Finally, how should we expect the revenue and profit of core Momo to look in 2025? Thank you.

Zhang Sichuan, COO

I will take this answer. So about the question of paying users, for the last few years, we pushed hard to get a lot of small ticket paying users because we thought we could keep improving our earnings and we spent quite a bit on different channels to acquire them, but the cost could not be recouped. Now given the tough economic and our growth to be more focused on profit, we have decided to cut back on trying to bring in this low return paying users in the fourth quarter. And that's why we saw a big drop in long-term paying users, which is more than what we usually experience at the end of this year. So in the months ahead, we will keep reducing our efforts to acquire this low return small-ticket user. This means we expect a number of paying users to drop more than usual even though this will lower our overall count of paying users. The users generally don't engage much or spend. So stopping our efforts to bring them in for replace the platform. In fact, the shift should help us boost the profitability of our main business. Regarding the product adjustments of Momo, after a year of efforts, we think Momo's content has greatly improved. So we won't make any changes to reduce earnings right now. Instead, we're going to focus on adding fun features and ways to engage users. At the same time, we will keep looking for ways to save costs to make sure our main business continue to pull in good profits even with our revenue goes down a bit. Cathy, will share more about Momo's financial plans for this year.

Hui Peng, CFO

That's a very extensive question, so let me try to break it down into a few key components and take them one-by-one. First of all, on revenue outlook for the cash cow business, I'd like to crack it down by considering both internal factors and external factors. Internally, if we look at Momo's fundamentals, I would say that the foundation of our business remains very solid and resilient. First of all, Momo continues to be the go-to social platform for users looking to discover new friends and expand their circles. Our core user engagement such as the number of meaningful connections and a number of interactions remain pretty strong, which give us confidence in the platform's resilience. On paying user metrics, which might have caused some concerns this quarter, I don't think investors need to really worry about it either, and here is why. It's true that extremely high spending users, which we sometimes call the whales, have faced pressure in recent years due to economic challenges. Many of them, especially business owners, saw their net worth shrinking during COVID and subsequent real-estate meltdown, which impacted spending. It's also true that, as Sichuan mentioned earlier, the long-time users, those spending around RMB10 per month or even less have been deprioritized in our user acquisition strategy due to normalization potential and negative ROI. However, we're happy to see that mid-tier users, which we sometimes call dolphins in comparison with the whales, have been the backbone of our platform. This group of dolphins has remained remarkably stable throughout the past few years. Perhaps some former whales have also transitioned into this category. Looking ahead, we expect this group of dolphin users to continue driving the business and providing a solid revenue base. Now turning to two external factors impacting revenue. First off, on the regulatory environment, over the past few years, you probably know that policy changes have posed pretty serious challenges for Momo, the cash cow business. In response, we proactively adjusted our monetization strategies to reduce regulatory risk. However, since late 2024, the environment has stabilized a little bit, allowing us to focus on revenue recovery rather than risk management. So that's the regulatory factor. And on the macro environment, I would say that consumer sentiment at this point remains a key variable on which there is not much we can do really, but to adapt. From what we've seen from how users performed so far into Q1, it looks like the very top of the pyramid users or the whales are going to continue to be very cautious in terms of spending. So live streaming may continue to see pressure, but value-added services should be doing relatively well. And as the year progresses, if consumer sentiment continues to recover and government policies further boost consumer confidence, especially, the confidence from the business owners, we could see upside potential in user spending. But at this stage, it's still too early to make a very strong call on the macro front. So if you're looking for a more quantitative outlook, here's what I can share at this point. As reflected in our guidance, we expect some seasonality in Q1, but should see a slight rebound in Q2, where we land post-rebound really depends on macro. For now, I would put in a low-teens revenue decline in the cash cow business for 2025 and see if macro would help us perform better as we head deeper into the year. That's for the cow, that's for the cash cow. And if you throw in the overseas piece and the Tantan piece into the pod and look at the group level rate, the year-over-year decrease will likely narrow pretty substantially to low-single digits as the overseas is still gaining pretty strong traction at this point. Of course, in absolute dollar terms, this will still be a meaningful year-over-year decrease from 2024. So we are further optimizing headcount as well as improving marketing efficiency to absorb part of the top line pressure and reallocate some of the resources to the overseas business as well. As a result, while revenue will decline, profitability impact will be less severe due to cost optimization for the cash cow. However, we may invest a big part of the cost savings, especially the marketing savings, to grow our overseas business. So I would say that at the group level, the picture is a little bit more complicated. For the whole group, meaning combining the cow, Tantan, and the fast-expanding overseas business altogether, we are targeting a non-GAAP operating margin range from 12% to 13%. However, you may want to take that range with an understanding that it is a very soft kind of guidance rather than a firm commitment because as you can understand, we are at the beginning of the year and there are still too many moving pieces that could move the bottom line margins one way or another. So this is what I can share at this point. Back to Ashley to take the next question.

Ashley Jing, Moderator

Operator, next question, please?

Operator, Operator

Your next question comes from Thomas Chong with Jefferies.

Thomas Chong, Analyst

Thank you, management, for addressing my question. I would like to know about our overseas application. Can you provide insights on the key market for Soulchill as well as its revenue and earnings? Additionally, regarding the two new apps, can you explain how they are positioned differently than Soulchill? What is the revenue potential and spending for these two apps? Looking ahead to 2025, how should we view the overall expectations for overseas revenue and earnings, as well as the growth opportunities in the international market? Thank you.

Zhang Sichuan, COO

Regarding the question about Soulchill and other apps. So in the past few years, Soulchill has become the fastest growing product in our group, both in revenue and profit. In 2024, its revenue grew by 50% from 2023, nearing RMB1 billion and also surpassing Tantan's earnings. So this growth is mainly due to improving localization strategies we started last year and focusing on three main areas. One is reaching to mature markets; two, expanding into new regions; and also adding features like live streaming. We have also strengthened our partnerships, which has helped increase revenue. Soulchill is doing well in Turkey, Egypt, and Gulf countries showing very strong market demand. We also launched two new apps in the MENA regions at the end of 2023. So the first one is Yaahlan and a social game app and AMAR. Similar to Soulchill but voice focused, both products were ROI-driven from the start and have shown promising potential in revenue and user acquisitions. So in 2025, if the ROI remains promising, we plan to increase marketing for both. So the surface of Soulchill and our new products shows that the knowledge we gain in our home market works well support, especially in the MENA region, which can accommodate multiple Soulchill brands. So in 2025, we will invest more in exploring international markets since our overseas products are focused on profits, increasing investments will heavily affect the group's net profit. So Cathy will provide specific details on revenue and profit forecast.

Hui Peng, CFO

Our overseas growth strategy for 2025 can be broken down into two buckets, the good old Soulchill and the other new initiatives. For Soulchill, as Sichuan mentioned earlier, we're focusing on three main drivers this year. The first one is better localization; the second one is geographic expansion into developed countries, where our current penetration is not as deep; and the third driver is new media services. If we make strong progress across all those three areas, we could reach the higher end of our growth target, if certain areas require more time, we might land in the mid to lower range of our target. In 2025, we are going to have a second growth driver for our overseas business, which are the two newer applications, Yaahlan and AMAR. Both applications are gaining pretty strong traction at this point and we are significantly increasing our marketing efforts to accelerate revenue growth because the ROI is looking pretty promising. Despite stepping up the marketing dollars, ROI remains quite stable, which is a very positive sign. If we can maintain strong ROI as we continue to scale by the end of the year, the combined quarterly revenue run rate of the new overseas apps could reach where Soulchill is today. If you annualize that, that would mean the overseas revenue contribution for 2026 will become very meaningful. However, if marketing efficiency declines as we scale, we may pause marketing expansion to focus on product improvements and operational refinements before ramping up again. In that case, revenue growth for those two applications could come in a bit slower. So looking at the full overseas portfolio, we expect revenue from it to grow from around RMB1 billion in 2024 to a range between RMB1.7 billion to RMB2 billion in 2025, that's a pretty impressive growth for this year already. Profitability is not a priority for overseas expansion this year, as we are focused on scaling. That said, because we grow our overseas business with a high level of focus on ROI, as we continue to scale, bottom-line for overseas business should improve over time. So that's what we have to share at this point.

Ashley Jing, Moderator

Operator, we're ready for the next question. Thank you.

Operator, Operator

Your next question comes from Leo Chiang with Deutsche Bank. Leo Chiang from Deutsche Bank, your line is open.

Leo Chiang, Analyst

Thank you management for taking my question. My question is about Tantan. After one year of business adjustments, we see that Tantan's user base and revenue are still on a declining trend. Can management share the plans for Tantan this year regarding product and operations? How should we consider Tantan's revenue and profit outlook for 2025? Thank you.

Hui Peng, CFO

I'll address the question about Tantan. Let me elaborate on Tantan's strategy for 2025 and explain our approach. Tantan has always focused on two main strategic objectives. The first is to provide a great dating experience for users in China and the wider Asia market, which remains our primary goal as we navigate past challenges. We still see a significant unmet demand in the Chinese market, and we believe we have a strong chance to lead in this area among our competitors. The second objective is to establish a sustainable and profitable business model. Given the highly competitive and expensive user acquisition environment in China, there are limits to how much we can optimize user acquisition costs. Our past focus on boosting monetization prioritized increasing ARPPU, but this often conflicted with user experience, leading to an uncomfortable balancing act that we haven't managed well. This year, we are changing our approach. Rather than prioritizing ARPPU growth, we will focus on dramatically reducing user acquisition costs. Our strategy is that while aggressive user acquisition typically raises costs, lowering our acquisition volume will also reduce unit costs. This year, we intend to significantly cut back on user acquisition spending until we achieve a positive ROI, meaning we will aim to cover all acquisition costs, including fixed costs such as personnel and related network expenses. This adjustment will allow us to recover marketing costs and minimize losses from acquisitions, resulting in a healthier business cycle. However, there is a trade-off; the reduction in user acquisition spending will likely result in a quicker decline in active users, but many of these users were maintained at the expense of profitability, so we are prepared to sacrifice some scale in the short term. The benefit of this shift is that it provides us time to improve user experience and retention strategies, as well as to experiment with new premium features that can foster sustainable monetization. If these efforts are successful, they will set the stage for future growth where user experience and revenue generation can expand alongside each other. This marks a significant strategic shift for Tantan in 2025, and we will monitor its progress throughout the year. Regarding Tantan's revenue outlook for 2025, two key factors will influence quarterly trends. Firstly, product and operational adjustments will impact ARPPU; last year, we implemented some changes to enhance the dating experience, which were tested on a smaller user group and will now be fully rolled out in the first half of 2025. This rollout is expected to negatively affect ARPPU, which will weigh on revenue in the short term. Secondly, we will significantly reduce marketing expenses, as previously mentioned in our overall strategy for Tantan in 2025. Starting in Q2 2025, we plan to cut quarterly marketing spending from approximately RMB40 million to RMB50 million down to around RMB20 million to RMB30 million. This will naturally lead to a decrease in active users and revenue. Therefore, it's challenging to provide a precise revenue forecast right now, but I estimate a rough decline range of 20% to 30% year-over-year for 2025. In terms of profitability outlook, despite the top-line decline, our focus on achieving better ROI should lead to improved profitability for domestic Tantan. In addition to optimizing marketing spend, we will also significantly reduce personnel costs to align with our profitability objectives. We expect Tantan to remain profitable in the next couple of years, although at a reduced level. We may need to invest in expanding Tantan internationally, but this will be an experimental approach focused on ROI. This summarizes Tantan's financial outlook.

Ashley Jing, Moderator

Okay, let's see if we have any more requests on the line. If we do, let's take one last question before calling the night. Thank you.

Operator, Operator

Thank you. Your next question comes from Jenny Wang with UBS.

Jenny Wang, Analyst

Thank you to management for addressing my question. I would like to discuss our capital return. As mentioned, this marks the seventh consecutive year of issuing special dividends. Looking ahead, are we planning to maintain our regular dividend policy? It seems that this year's dividend is not significantly lower than in previous years. However, we have also increased our share buyback program. Does this suggest a strategic shift towards prioritizing share buybacks over dividends or shareholder returns in general moving forward? Thank you.

Hui Peng, CFO

I understand that there are several questions being raised. Regarding whether we intend to establish our dividend program as a regular one, the straightforward answer is no. We don't find a compelling reason to transition our special dividend plan into a regular format. First, for long-term investors who have been monitoring us, it's clear that management follows a disciplined approach to capital allocation. When we have surplus cash, we return it to shareholders thoughtfully and in a way that adds value. Since this expectation is already well understood, we don’t feel the need for a fixed dividend policy just to formalize it. We prefer to maintain flexibility in our capital allocation. If we identify attractive investment opportunities, we would rather allocate our capital towards growth, either through organic initiatives or acquisitions, rather than adhere to a strict dividend schedule. The second point relates to how we choose between a cash dividend and share buybacks. Even when returning capital to shareholders, we need the flexibility to opt for dividends or buybacks. Considering that our stock is currently trading significantly below its cash value, buybacks present a better return for shareholders compared to a set dividend payout. Therefore, a rigid dividend policy would restrict our ability to optimize capital allocation. We would rather keep our options open to ensure that every dollar is invested in a manner that maximizes value for our shareholders. That's my response to the question, and with that, I’d like to conclude today’s conference.

Ashley Jing, Moderator

So thank you all for joining us. I will see you next quarter. Operator, we're ready to close. Thank you.

Operator, Operator

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