Yiqun Chen

Yiqun Chen asked about the drivers behind the strong operating margin in Q1, particularly the contribution from cost reduction plans, and sought an outlook for operating margin in Q2 and for the full fiscal year.

Answer

Executive President and CFO Stephen Yang attributed the 100 basis point margin expansion in Q1 to better utilization, operating leverage, effective cost control (initiated in March of the last fiscal year), and profit contribution from East Buy. He expressed optimism for greater margin expansion in Q2 for both core and East Buy businesses, expecting it to surpass Q1's improvement, and aims for full-year margin expansion across the group.

Yiqun Chen from BOCI Research, also known as Raphael Chen, questioned the expected user and financial impacts of the strategic adjustments to tournament procurement and streamer contracts.

Answer

Co-CEO Simin Ren provided a detailed breakdown. For copyrighted content, she stated the company will forego some high-cost, low-ROI tournaments in 2025, which will significantly decrease copyright costs but may temporarily affect traffic. For streamer content, she explained that fine-tuning resources and using flexible contracts will reduce compensation costs and pressure on gross margin, acknowledging this will also likely cause a short-term decline in traffic and livestreaming revenue. Overall, she expects a significant year-over-year decrease in content costs and a notable improvement in gross margin for 2025.

Yiqun Chen inquired about the estimated cash balance by the end of the year and the company's plans for cash usage and capital allocation.

Answer

Hao Cao, Vice President of Finance, reported a Q2 cash balance of RMB 6.56 billion. He noted that significant recent cash expenditures were for shareholder returns, including a USD 20 million share repurchase program and a USD 300 million special cash dividend. Cao assured that the remaining cash is sufficient for operations and continued investment in the community ecosystem and new business ventures for long-term growth.

Yiqun Chen of China Renaissance inquired about the primary growth drivers for Hello Group's overseas business in Q3, requesting the latest revenue and profit figures and the outlook for Q4 and 2025.

Answer

CEO Tang Yan attributed the accelerated growth to improved operational efficiency and a robust localization strategy, noting that new apps' revenue reached nearly RMB 220 million, with Soulchill contributing 60-70%. CFO Cathy Peng projected Soulchill's Q4 YoY growth at over 40%, leading to a full-year 2024 growth of nearly 50%. She emphasized a focus on 'profitable growth,' expecting overseas apps to contribute meaningfully to both top and bottom lines in 2025.