Hello Group Inc. (MOMO) Q1 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Hello Group's First Quarter 2026 Earnings Conference Call. [Operator Instructions] 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, operator. 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 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, who 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, 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. Ms. Zhang, please?

Thank you, Ashley. Hello, everyone. Thank you for joining today's call. The group maintained steady business momentum in Q1 guided by the strategic priorities that last year. Our domestic business a 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 have full confidence in each business line to continue to advance along the strategic road map in 2026. Now I'll walk you through the key updates. Starting with the financials. For Q1 '26, total group revenue was RMB 2.39 billion, down 5% year-over-year. Domestic revenue reached RMB 1.79 billion, down 15% year-over-year. Overseas revenue was RMB 597 million, up 44% year-over-year. Overseas revenue accounted for 25% compared to 16% in the same period last year. Adjusted operating income was RMB 349 million, up 1% year-over-year with a margin of 14.6%. Building on the strategic direction from 2025, our '26 priorities continue along 3 main tracks. For Momo, the growth is still ensuring stable sustained productivity of our cash cow business. For Tantan, to continue exploring updating experience and efficient business model tailored for Asian users. And for our new business, to different overseas presents enrich our brand portfolio and build a long-term growth engine. Let me walk 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 track experience. Our network feature improves connection [indiscernible] by analyzing users historical check patterns to optimize matching algorithm. Driving sustained growth in 2A and [indiscernible]. In real-time check scenario, building on a steady ramp-up of voice features, we have also introduced video features to enrich our portfolio of instant interactions. The combined upgrades in Argo recommendation and product experience has lowered the barrier for users to [indiscernible]. This is the main driver behind the steady improvement in retention among existing users. In tenure, we undertook a number of meaningful installations in leveraging AI to improve users' social efficiency with encouraging initial results. For example, our AI buildings and AI chat assist features improve the female users experience. This drove higher [indiscernible] from male users and more in-depth conversation overall. In Q1, the product team explored AI-driven innovations such as voice [indiscernible], guiding users complete voice profiles. Also generating voice content and releasing it on to the platform in a message in the [indiscernible] format to spot users desire to connect. For user acquisition, China ROI has remained fully profitable since the beginning of the year. Ongoing audio room, game plan updates and better channel conversions lifted payment intent among net and small spending users. This drove study or TV growth and channel ROI improved model quarter-over-quarter. Overall, acquisition spend continue the refined 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 [indiscernible] offline gathering and close friends and family. This temporary pullback platform activity and paying scale with Momo's paying users decreasing by RMB 200,000 quarter-over-quarter to RMB 3.7 million. That's thanks to a year of product refinement focus on chat experience, organic traffic grew compared to last year and retention among existing users improved slightly. Turning to Chinese New Year, the team ran targeted operational events at a low point of the cycle, narrowing the decline in user activities compared to last half 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 more commercial performance. In Q1, Momo's glass revenue was RMB 1.52 billion, down 15% year-over-year. and 9% quarter-over-quarter. The year-over-year decline mainly reflects the ongoing impact of the new tax regulations and stricter local enforcement that came into effect in the second half of '25. The motivation of some high grossing agencies and broadcasters is still recovering. The [indiscernible] decline was largely seasonal, driven by the Chinese New Year alongside persistently soft consumer spending sentiment. In response to these external shift, the teams continue to direct gameplay innovation and operational resources towards mid-tier and long-tail users giving revenue from audio scenarios and social games such as parking was relatively resilient. This has partially absorbed 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 demotion 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 streamer, lifting organic revenue through content quality improvements. In audio scenario, we roll out the new PA game play to further motivate users to give one another. With some mid-tier and non-car broadcasters and agencies on our platform facing ongoing profit pressure during the test combining process, we have rolled out new incentive base revenue sharing policy. This has decided to enable the quality performance to deliver greater value to the platform while ensuring their sale of the mixed stable income in turn. Now let's turn to Tantan. As of the end of Q1, Tantan had 0.6 million paying users a modest decrease of 30,000 quarter-over-quarter. This decline was driven by 2 factors. First, the carryover from ongoing MAU decline and second, Alipay changes through its ultra renewal paying rules, billing rules, which placed short-term pressure on our membership conversion. Under the continued factor of our strategic marketing cuts, content user base remain on the downward trajectory through so the magnitude of the client was has narrowed meaningfully through algorithm innovation and refined operations, engagement and retention among younger users show slight improvement contributing positive to user base stability. On the product side, the team optimized recommendation strategies in our core wet-based scenario. For example, we introduced her restrictions on female users metrics, allowing only [indiscernible] or upward matching a benefit for female users, we will show expectations. This drove a near 3 percentage point increase in average swipe or female user [indiscernible] improving the retention. On new scenario in portion, we piloted MAC-based [indiscernible] and AI chat assist features. Our user acquisition alter the year-over-year reduction in China investment led to a lower required volume. The meaningful narrowing the unit acquisition costs, partially [indiscernible] Additionally, because organic traffic outperformed 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 up. Sequentially, both spend and user acquisition costs narrowed by various degrees. So the China volume decline was relatively limited. While Alipay will policy created near-term ARPU pressure. Channel [indiscernible] was sustained well above 100% throughout the quarter. On the financial side in Q1, Tantan's domestic business generated RMB 125 million 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 [indiscernible] payments. On monetization, the team unbundled membership issues into [indiscernible] card offerings while enriching fresh chat game plan and stepping up in app promotion to ease top line pressure. On profitability, thanks to ongoing cost in channel investment and personnel costs Net profit grew significantly year-over-year. Lastly, our new businesses. Our 2026 gold carries forward from '25 to deepen our overseas presence in which our brand portfolio and our long-term growth engine. In Q1, overseas revenue totaled RMB 597 million, 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 so to pace during the quarter, which rated on our overseas business overall. Excluding SoC, the rest of our overseas businesses continue to deliver healthy growth this quarter. Further validating the value of diversified product portfolio in this sensing risk from a single product volatility. Our 2 new product in [indiscernible] continue their rapid growth trajectory with both delivering triple-digit revenue growth year-over-year in Q1, driven by continuously improving localized operations a more precise scraps of local user preferences and sustain game plan innovation, both products of concurrent improvement in revenue and profit. This quarter, Yahoo is approaching net income breakeven, and Amar achieved positive marginal contribution for the first time. This is a significant milestone making our shift in MENA from a social dominated model to a multiproduct portfolio. Beyond our audio and video social products in MENA region, our dating business focused on developed markets is another important pillar of our overseas footprint, also deliver satisfying progress this quarter. Tantan International, met by our Singapore team completed a full upgrade of product positioning and branding over the past year. And in second half of '25, began migrating from share domestic international app built to [indiscernible] overseas. 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 is try to further optimizing product experience and improving monetization efficiency separately, happen, which down 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 sequential and the year -- our year-over-year revenue growth came mainly from improvements in paid conversion rate and people, reflecting greater efficiencies in operating the existing user base. In Q1, we began testing happens entry into new markets, laying the foundation for the brand's mid- to long-term growth. As a voluntary newer segment for our overseas funds, we remain confident in the dating businesses, continued release of growth potential in 2006. This concludes my remarks. Now let me pass the call to Cathy for the financial review. Cathy, please.

Thanks, Sic. 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 2026 was RMB 2.39 million, down 5% year-on-year and 7% quarter-over-quarter. Non-GAAP net income attributable to the shareholders of the company was RMB 288 million compared to RMB 403.8 million in the same period of 2025 and RMB 281.3 million 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 RMB 2.35 billion, down 6% year-on-year and 7% quarter-on-quarter. On a geographic basis, PRC Mainland value-added service revenue was RMB 1.76 billion, down 15% year-over-year and 9% quarter-over-quarter. The decrease was primarily due to heightened tax scrutiny on the agencies for Momo's Entertainment business, combined with softened consumer sentiment amid broader macro pressures and, to a lesser degree, a decline in paying users on Tantan. BaaS overseas revenue reached RMB 593.7 million, 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 factors, namely Ramadan as well as some external challenges in MENA area during the quarter. Turning to cost and expenses. Non-GAAP cost of revenue for the first quarter of 2026 was RMB 1.46 billion, compared to RMB 1.57 billion for the same period last year. Non-GAAP gross margin for the quarter was 38.8% compared to 37.9% from year ago period. Gross profit margin, or GPM, in Q1 '26 rose by around 1 percentage point Y-o-Y. 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 staining products. This was partially offset by a decline in Momo's GPM 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 RMB 165.2 million compared to RMB 185.9 million for the same period last year, representing an 11% decrease Y-o-Y. 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 employees for the group was 56% compared with 58% from Q1 last year. Non-GAAP sales and marketing expenses for the first quarter was RMB 335.4 million compared to RMB 22.1 million for the same period last year, representing a 14% and 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 Soulchill also temporarily scaled back channel investments amid external challenges. Non-GAAP G&A expenses was RMB 89.4 million for the first quarter compared to RMB 114.8 million for the same period last year, representing a 4% and 5% of total revenue, respectively. The decrease in G&A expenses was primarily attributable to a high base effect in Q1 '25, resulting from a self-inspection related to tax matters. Non-GAAP operating income was RMB 349.2 million representing a margin of 14.6% compared with RMB 345.3 million and a margin of 13.7% from Q1 '25. The increase was driven by improvement in GP non-GAAP OpEx 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 RMB 81.5 million for the quarter with an effective tax rate of 20%. In Q1, the company accrued withholding tax withholding income tax of RMB 21.2 million, which is 10% of undistributed profit generated by our ROFE. 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, Hello Group's cash, cash equivalents, short-term deposits, long-term deposits from investments and restricted cash totaled RMB 8.56 billion compared to RMB 8.68 billion as of December 31, 2025. Net cash provided by operating activities in the first quarter of 2026 was RMB 158.9 million. 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 RMB 2.45 billion to RMB 2.55 billion, representing a decrease of 6. 1 -- I'm sorry, 6.5% to 2.7% year-on-year. This is based on the assumption that at midpoint on a year-over-year basis, revenue from our Mainland China business will decline by high teens percentage-wise while overseas revenue is expected to grow by high 50s 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.

[Operator Instructions] Operator, we're ready for questions, please. Thank you.

[Operator Instructions] Your first question today comes from Xueqing Zhang with CICC.

[Foreign Language] My question about the overseas business. Regarding the [indiscernible] prepared remarks, the [indiscernible] challenges from external factors in the first quarter. Management provide more details on what happened and will this have an impact on the full year revenue abroad for the overseas business. In addition, she also mentioned that the 2 new products continue to see revenue growth, while the losses kept narrowing. So could management share on this new business 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 to our profitability?

[Foreign Language]

Let me start with [indiscernible] in Q1. So the sequential revenue decline came down to 3 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 user acquisition in Turkey. And number 2 is a consumer sentiment in the MENA region doing Ramadan was relatively softer. As a large and rather mature product, Socio was more noticeably impacted by this seasonal kind of [indiscernible] and number 3 is the ongoing complex in the Middle East. That has also had some drag on Social's revenue in the Gulf region.

[Foreign Language]

We are confident that [indiscernible] compliance 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. So thus 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.

[Foreign Language]

So the [indiscernible] manner products had a strong 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 gross margin improvement over the past year and we have selectively increasing marketing spend where ROI targets are being met and actively testing markets while keeping the losses -- the loss trajectory moving in the right direction each quarter. Our path for these 2 [indiscernible] products is pretty clear, build scale first. Optimize the gross margin structure, keep marketing ROI driven and net profitability flow naturally. [indiscernible] should keep net profitability within a quarter [indiscernible] about half a year behind on that trajectory. And for the full year overseas revenue outlook, I will hand it over to Cathy.

Let me first break the overseas I'll walk into 3 separate pieces. First is our flagship overseas app, Social. As [indiscernible] mentioned earlier, Soulchill 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 East. That said, I think the team has adapted reasonably well to the changing environment. While revenue in Turkey remained somewhat pressured, performance in other Middle East -- other Middle Eastern markets has actually been quite solid. So overall, I would say that social 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 the -- if you look at the second piece, for the 2 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 a 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 stating our membership business model pretty attractive compared with entertainment-driven platforms, the revenue visibility and forecasting clarity are generally much higher. So putting these 3 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 RMB 2 billion. This year, for 2026, we are likely to hit RMB 3 billion 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 RMB 100 million variation either to the upside or to the downside of that RMB 3 billion 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 questions.

Operator, next question, please.

Our next question comes from Thomas Chong with Jefferies.

[Foreign Language] In Q1, we saw domestic revenue declined by 15% year-on-year and year-on-year decline widened versus 2025. Management comments, this is related to the new tax rules which affects 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 Tantan paying conversion. Can management comment about the scope for this adjustment? And how long did 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?

[Foreign Language]

So let me first address the impact of tax policies on Momo. I mean new tax regulations introduced in the second half of 2025, combined with stricter local tax collection and enforcement of affected agency's 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 the policies targeting agencies in early 2026, resulting in 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 caused 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.

[Foreign Language]

So as for when Momo Vas will return to year-over-year growth, beyond the tax issue, it also depends on when broader consumer sentiment picks back up. What we can control is making sure the product fundamentals are rock solid and operating efficiency is maximized. And we are very confident in Momo's modernization capabilities.

[Foreign Language]

So on the auto renewal -- Alipay auto renewal policy changes, yes, this did impact Tantan's membership business primarily manifesting as the temporary decline in renewal rates and resulting in some subscriber churn. Team actually responded swiftly. On the monetization side, we launched an unbundling strategy, separating high-frequency pubs that were previously bundled into membership packages such as super likes and booths and offering them as a stand-alone purchases. And we have also enhanced our [indiscernible] features like FlashChat to help offset 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.

[Foreign Language]

So in terms of scope, the Alipay policy changes primarily affected subscription or membership products. Momo's core 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 up store or Google Play payment channels, which remain unaffected. Overall, this is a relatively contained issue, primarily impacting only Tantan's 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 Cathy.

Okay, time for an update on how we are thinking about the revenue outlook for the rest of 2026. I will, as in previous quarters, used the same framework, which is set upon 3 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 you 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 as the content 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 tightened 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 Sic 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 become 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 -- full year outlook. Previously, we were guiding to a low teens decline for the domestic business. Based on what we see so far happened 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. .

Yes. So in the interest of time, let's just take one last before we close the line, and we're ready. Thank you, operator.

Your next question comes from [indiscernible] with UBS.

[Foreign Language] [indiscernible] System futures to newly launched AI voice [indiscernible] quarter. So could you please share more details on the group's AI product road map going forward? And more broadly, how do you view the contribution of innovation to our longer-term earnings growth? And should we expect any nice impact on near-term profitability from AI investments? And given the external [indiscernible] domain overseas business at [indiscernible] how do we assess the group's full year prospect or [indiscernible]

[Foreign Language]

AI is particularly meaningful for a company like ours where social products are the core. On the essence of our product features and recommendation logic is to lower the barriers for users to for connections and enable long-term and effective interactions and deliver emotional value. AI that can genuinely transform the user experience in this space.

[Foreign Language]

Based on what we have built so far, AI is advancing in 2 distinct directions on the product side. And first, enhancing connections between users by breaking the eyes and lowering social areas. Examples include our AI-assisted chat features and the AI voice drift bottle, which we are currently testing. The concept is that AI guys users to provide basic profile information through voice input and then automatically generates more vivid and engage in self-introduction and greetings using the user's actual voice. And this is then published on the platform as a gift bottle. So these AI tools are particularly valuable for users who have dating needs but relatively weaker social skills. And second, enabling new product formats. For example, like Donut is fully AI-powered voice social products that has already begun monetization in China. And on the overseas side, our AI role play dating app, [indiscernible], has shown solid early traction in Japan and is now expanding to other Asian markets. And these products represent our exploration of what next-generation social experience can look like.

[Foreign Language]

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 penetration across our products is still in a rapid expansion phase. Over the past year, we focused on refining the AI greeting and AISC chart algorithm on the Momo platform. Going forward, we will be replicating that tax at across more use cases. including AI agents for Momo live streaming, AI shop dramas generation based on broadcasters images as well as smart matching and content distribution [indiscernible] and AI-assisted chatting features. This kind of horizontal reuse of the Tax Act helps maximize the return on investment for the group's profitability outlook, I will pass it over to Cathy.

Okay. 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 amount. 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 will see you next quarter. Thank you. Bye.

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