Leo Chiang

Leo Chiang asked about Hello Group's M&A strategy, specifically the key factors considered (industry, geography, revenue, profit) and the extent of active management involvement in acquired businesses.

Answer

Yan Tang (CEO) explained that M&A focuses on social and dating sectors, with a recent shift to overseas markets for growth. Common characteristics for targets include understanding and recognizing product/team value, confidence in sustainable profitability, and reasonable valuation. The degree of management involvement varies, delegating to local teams if they perform better, but willing to engage deeply if needed, adapting to specific circumstances. Ashley Jing (Head of Investor Relations) translated and reiterated these points.

Leo Chiang inquired about the specific measures Tang Tang has implemented, such as restructuring membership packages and refining operations for core user groups, to mitigate the negative impact of recent product upgrades on paying ratios.

Answer

COO Zhang Sichuan explained that Tang Tang adopted a user classification approach based on verification, engagement, paying history, and appearance, implementing tailored exposure and monetization strategies. They also tiered domestic cities to develop suitable membership packages and pricing plans. UI design was streamlined to focus on core dating features. These adjustments, coupled with improved user experience, have driven organic user growth and retention, with new organic users surpassing acquired users in Q2 2025.

Leo Chiang inquired about the specific measures Tang Tang implemented to restructure its membership packages and refine operations for core user groups, aiming to mitigate the negative impact of recent product upgrades on paying ratios.

Answer

COO Zhang Sichuan explained Tang Tang's user classification approach based on verification, engagement, paying history, and appearance, leading to tailored exposure and monetization strategies. She highlighted differentiated membership packages and pricing plans across city tiers, and UI design focused on core dating features. Zhang Sichuan also noted that product and algorithm adjustments are mitigating negative impacts, while improved user experience has driven organic user growth and retention.

Leo Chiang inquired about the specific measures Tang Tang has taken to restructure its membership package and refine operations for core cities and user groups, aiming to mitigate the product upgrade's impact on paying ratios.

Answer

Sichuan Zhang (COO & Director) explained that Tang Tang addressed revenue pressure from product upgrades by adopting a user classification approach, implementing tailored exposure and monetization strategies, and developing differentiated membership packages and pricing plans based on city tiers. UI design was streamlined to focus on core dating features. These adjustments have mitigated negative impacts, driven organic user growth, and improved user retention.

Leo Chiang of Deutsche Bank asked for a breakdown of the overseas revenue, questioning if newer apps contributed significantly, and requested the growth plan for these products and the overall overseas revenue outlook for the year.

Answer

COO Sichuan Zhang and CFO Cathy Peng responded. They confirmed that other social entertainment products beyond Sochou saw significant breakthroughs. CFO Cathy Peng provided a detailed breakdown, stating Sochou contributed 60-70% of overseas revenue, Tantan's overseas business about 10%, and emerging brands the remainder. She projected that overall overseas revenue growth would accelerate beyond the 70% YoY rate seen in Q1.

Leo Chiang questioned the continued decline in Tantan's user and revenue scale despite a year of adjustments. He asked for management's plan for Tantan's product and operations in 2025, as well as its revenue and profit outlook.

Answer

COO Sichuan Zhang announced a major strategic shift for Tantan in 2025, moving from prioritizing ARPPU to drastically cutting user acquisition costs to achieve positive ROI, even if it leads to a faster decline in active users. This strategy is intended to create space to refine the user experience. She forecasted a 20-30% revenue decline for Tantan in 2025 but expects profitability to improve due to significant cost reductions in marketing and personnel.

Leo Chiang of Deutsche Bank inquired about the MRO industry outlook for 2025 and the long term, as well as ZKH's specific 2025 guidance for GMV and performance across different customer verticals.

Answer

CEO Eric Chen (via interpreter) expressed a positive long-term outlook, citing the global opportunity for Chinese MRO companies, industry consolidation, and ZKH's leadership in digitization and overseas expansion. He stated that despite geopolitical factors, Chinese MRO firms retain a competitive advantage. For 2025, he noted that as of Q1, order GMV from both large clients and regional SMEs saw nearly 20% year-over-year growth, with key sectors like EVs and electronics growing over 20%. He projected that overall business growth in 2025 would be significantly higher than in 2024.

Leo Chiang of Deutsche Bank inquired about ZKH's third-quarter performance by specific product and industry verticals, and also requested an outlook for China's MRO market and the company's business for 2025.

Answer

Executive Long Chen detailed that sectors like EVs and electronics showed high growth, while traditional auto and mining declined. High-growth products included spare parts and PPEs, which also carry higher margins. Chen stated the overall MRO market remains vast and is shifting online, with competition now centered on in-house supply chain capabilities, private label development, and overseas expansion, expressing strong confidence in ZKH's strategic position.

Leo Chiang of Deutsche Bank inquired about the impact of U.S. tariffs on ZKH's domestic and U.S. operations and asked for a timeline for expansion into new markets, such as Europe.

Answer

Founder, Chairman, and CEO Long Chen positioned U.S. tariffs as a tailwind, creating new opportunities. He explained that the U.S. relies on imports for MRO products and that ZKH has proactively built a diverse supplier base in China and Southeast Asia to ensure sourcing flexibility. Mr. Chen confirmed plans to enter the European market in the second half of the year, initially focusing on Germany and Hungary, while also noting that operations have already commenced in Thailand to serve existing Chinese clients in Southeast Asia.

Leo Chiang of Deutsche Bank AG inquired about the impact of U.S. tariffs on ZKH's domestic and U.S. operations and asked for a timeline for expansion into new markets, such as Europe.

Answer

Long Chen, Founder, Chairman, and CEO, explained that U.S. tariffs are viewed as a tailwind, creating opportunities as the U.S. relies on MRO imports. He highlighted ZKH's proactive strategy of building a supplier base in Southeast Asia to ensure sourcing flexibility. Mr. Chen confirmed plans to enter the European market in the second half of the year, initially focusing on Germany and Hungary, while also noting that operations have already commenced in Thailand to serve Chinese companies in Southeast Asia.