Hello Group Inc.
Q3 2020 Earnings Call Transcript

Published: 1 Dec 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to Third Quarter 2020 Momo Incorporated Earnings Conference Call . Please note, this conference is being recorded today. I would now like to turn the conference over to your to first speaker for today, Ms. Cathey Peng. Thank you.

[Cathy Peng:]

Thank you, operator. Hello, everyone, and thank you for joining us today for Momo's Third Quarter 2020 Earnings Conference Call. The company's results were released earlier today and are available on the company's IR Web site. On the call today from Momo are Mr. Tang Yan, Executive Chairman of the Board; Mr. Wang Li, Chief Executive Officer of Momo. Mr. Wang Yu, Founder and Chief Executive Officer of Tantan; and Mr. Jonathan Zhang, Chief Financial Officer. 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.

[Tang Yan:]

Good morning and good evening, everyone. Thank you for joining our conference call today. As many of you know, I've already resigned as the Chief Executive Officer of the company and remain as the Executive Chairman of the Board. Going forward, unless I have anything special to say, I probably won't participate in regular earnings calls on quarterly basis. The job will be passed on to the long time , also the most trusted business partner of mine and now the new Chief Executive Officer of the company, Mr. Wang Li. Although, I'm no longer the CEO, I'm still going to be deeply involved in setting the strategic priorities and directing new product and business initiatives for the company that I built and still deeply committed to. As I'm not going to communicate with the investor community as often in the future as before, I would like to take this opportunity to share my views on what has taken Momo this far and where it is heading towards in the coming few years. Nine years ago, I started Momo with an idea to help people discover new relationships, expand their social connections and build meaningful interactions. This is a basic human demand that everybody needs regardless of geolocation and cultural background, but this is also something that we Chinese people particularly need because of the uniqueness we have here in China from economic, societal and cultural perspective. Today, in retrospect I'm glad to say that in so many different respects the mission has been accomplished. Every month, more than 100 million people are connecting, interacting and building romantic or otherwise meaningful relationships on our family of apps.

[Wang Li:]

Good morning and good evening, everyone. Thank you for joining our conference call today. This is my first earnings call as the Chief Executive Officer of the company. I'm going to spend the first part of my speech on reviewing the operational and business update. After that, I'd like to share some of the priorities that I set for my teams for the coming few quarters. Firstly a brief review of the financial performance. For the third quarter of 2020, total revenue was RMB3.77 billion, down 15% year-over-year. The year-over-year decrease was mainly due to structural reform that we are currently undertaking within Momo's core live video business as well as the fact that the financial condition of some of our high paying users deteriorated versus 2019 due to the lingering impact from COVID. Of course, the pressure from those two factors were partially offset by the robust growth from Tantan. Adjusted net income for the quarter was RMB654 million, representing a 17% profit margin. Excluding Tantan's net loss, adjusted income for the core Momo was RMB721 million or a 24% profit margin. In Q3, Tantan continued its strong momentum with total revenue reaching RMB729 million, up 135% on a year-over-year basis, driven by the growth momentum from its live streaming business as well as the gradual recovery of its membership business. Although, Tantan stepped up its marketing spending in Q3 to capitalize on the post-COVID recovery, the strong top line growth still enable us to narrow down the loss on the bottom line. Adjusted net loss from Tantan was 66.87 million for the quarter compared to RMB160 million for the year ago period and and 70.79 million from last quarter.

[Wang Yu:]

Thanks. So, let me briefly review Tantan’s operational and business development in the past quarter and our next plan. First, on user trends and related metrics. Total paying users reached 4.1 million for the quarter, a 200,000 net addition from 3.9 million for the previous quarter. The increase in the number of paying users was a general reflection of the recovery in Tantan’s domestic video use and user engagements, partially offset by the introduction of SVIP, which is a new subscription package that was getting gradually rolled out in the middle of September. I’m going to elaborate a bit more about this new monetization endeavor and how the dynamics may impact short term and long term paying subscribers in different ways a bit later in my remarks. Without the launch of SVIP in mid-September, the number of paying users would have already exceeded Q1’s level. Now, I’d like to echo the early comments from Wang Li about some recent trends that we’ve been seeing in terms of user acquisition. Towards late August, we started seeing a significant increase in user acquisition costs, as a result of aggressive marketing spending from some of the education companies and mobile game publishers. As our marketing strategy focuses heavily on ROI, we prefer not to acquire users when it’s heavily overpriced, our current views that the user acquisition unit price might remain high in Q4. If that turns out to be the case, our short term strategy is to time the marketing campaigns opportunistically to avoid unreasonable increase in user acquisition costs. As a result of this short term strategy, we expect Q4’s marketing cost to see a meaningful decrease from Q3’s level. And to some extent, that could also affect the pace of sequential revenue growth in Q4. We believe the current high pricing in the channel market is largely due to the fact that education and gaming companies have been extremely aggressive in seizing the post-COVID market surge, but we think things will ease up after Chinese New Year. We’re planning to use that window of opportunity to push the marketing button in a bigger way. Meanwhile, we are working to improve our marketing efficiency and we are confident that we will see solid results by Chinese New Year. Now, briefly on overseas development. As previously mentioned, we have adopted a strategy to temporarily pull back from the developing countries in Asia and shift the focus to higher ARPU markets. Overseas revenues have been seeing a steady increase since the beginning of the year due to growth of some of the high ARPU areas that we have entered. However, the number of paying users has trended down as we cut back the spending developing countries, where users are big but ARPU is extremely low. Looking beyond Q3, we may delay some of our overseas marketing plans due to the situations around the global pandemic but overseas expansion remains a critical part of our growth plan over the longer run. Now briefly on revenues. Total revenues for the third quarter reached RMB728.9 million, up 135% year-on-year and 41% quarter-on-quarter, driven by the continuous momentum from the live broadcasting business and to a lesser degree, the post-COVID recovery of the membership of the business. Average revenue per paying user or ARPPU reached RMB178 in Q3 compared to RMB69 for the same period last year and RMB133 last quarter. The substantial increase in ARPPU was again, primarily driven by the growth of the live streaming business. As said many times before, we believe Tantan still has a great deal of potential in driving ARPU growth. However, in the near term ramping up the ARPPU too fast may not be healthy for the bidding ecosystem. Therefore, we like to manage the pace of growth a little bit in the coming couple of quarters. Now let me give you an update on the progresses that we made on a number of other strategic fronts in Q3. First of all, improving the product experience. In the third quarter, we continue to push forward on two strategic fronts; one, enhancing the core dating experience and two, enabling the users to connect and interact in new ways on top of the core swipe and match system. During the quarter, we revamped the core swiping experience with an enhanced card display formats. We also redesigned the clicked in profile page making profile picture and other personal information more prominent. In addition, providing a safe and trustworthy environment for users to date always stays on top of our agenda. Verifying the authenticity of the user information is a critical step on that front. Last year, our real photo verification effort has played a very positive role in improving the dating ecosystem and keeping spammers away. This quarter we took the verification effort a big step forward by beginning to provide real name verification service to the users. Users who have been verified with ID information will be prioritized in our recommendation engine. The initiatives have been well received by the users so we plan to keep pushing on it to increase the adoption rate. On the front of enriching the product experiences, we’ve now begun a very small scale testing of a video, audio dating experience. While it’s still at an early experimental phase at this point, it represents an important direction that we’re moving towards. Of course, perfecting live streaming service is another important endeavor on that front as well. I’m going to elaborate a little bit more in my review of the monetization efforts. Now turning to business updates. In mid-September, we began to gradually roll out the new subscription package called SVIP. The new package includes some of the popular existing value added services items such as See Who Likes Me, SnapChat, and unlimited right swipes, as well as brand new premium features that according to test results, can add meaningful value to users. For example, one of these new features give users access to an advanced filter that could be set to get more desirable recommendations. Another new feature allows the users to customize the privacy setting to address the privacy demand that we’re seeing from the users. We also give the SVIP subscribers one opportunity per day to directly message someone they are interested in without being matched. On the pricing side, we adopted a dynamic pricing mechanism that some of our peers started adopting long time ago. After rollout of SVIP, we ceased to offer See Who Likes Me and Flash Chat as separate value added service items. Such a replacement in this strategy collectively led to a de facto price rate effect, which was well expected based on testing results. Price rate affect will cost SVIP when launched to be negative to the number of paying users. As a result, we expect Q4’s paying usage to decrease from Q3’s level as we rollout SVIP to larger scale. Our strategy is to through testing make sure that the initial launch is positive to the grossing. And for the users to choose not to migrate from the previous subscription to SVIP, we’re going to use different pricing wall tactics, as well as new added value services to board them back over time. Such a strategy could actually expand rather than limit the headroom for growth the paying user base in the future. Now turning to live broadcasting business. In Q3, we focused on optimizing the product and services within the live broadcasting business. Another priority is to make sure that the new service integrates well with a dating ecosystem without causing any unwanted results. So far we are progressing well on all of those priorities. Now Tantan has been roughly nine months into live streaming. So it's probably time to share some of my early thoughts about what role it is playing and how I'd like to steer the service and business going forward. Live streaming for Tantan is, of course, a powerful monetization tool. It allows the company to increase ARPU and make the financial model works. So we have bigger leverage to grow the user scale and keep investing for future drivers. At the same time, live streaming is also a consumer experience. In that respect, our main goal is to make live streaming a complementary service to the core dating experience and contribute positively to user engagement. The key to that goal is to stick to the social attribute of this consumer experience. In order to achieve that goal, we need to carefully pace its development as the monetization feature to avoid going top heavy too fast. Tantan's paying structure right now is still very long tail driven. Showrooms are small but very interactive, which is critical in making live streaming a gratifying user social experience. We would like to keep it that way in order to best leverage advantage of Tantan as a social platform. Those are the key things that I'd like to cover for today. Now let me pass the call over to Mr. Jonathan Zhang for a financial review. Jon, please?

[Jonathan Zhang:]

Thanks. Hi, everyone. Thank you for joining our conference call today. Let me briefly take you through the financial review. Total revenue for the third quarter 2020 was RMB3.77 billion, down 15% year-on-year or 3% quarter over quarter. Non-GAAP net income attributable to Momo was RMB653.8 million compared to RMB1.09 billion from the same period of 2019, or a 40% decrease year over year. As the revenue lines being covered comprehensively by Wang Li and Wang Yu earlier, let me just jump into the cost and expenses items directly. Our non-GAAP cost of revenue for the third quarter of 2020 was RMB2 billion compared to RMB2.18 billion for the same period last year. The non-GAAP cost of revenue as a percentage of total revenue was 53%, an increase from 49% from Q3 last year. Non-GAAP gross profit margin for the quarter was down 4 percentage points from a year ago. The decrease was attributable to the following four factors in order of magnitude of their respective impact. Number one, higher payout ratio from live streaming business due to the promotional events that we held to revise mid to long tail content ecosystem. The incentive program that we offered to golden broadcasters to stabilize our content supply, and higher revenue contribution from agencies represented broadcasters. Number two, higher payout ratio from VAS services due to the strong momentum coming from the audio and video social entertainment business, a big part of which big part of which involved third party professional moderators. Number three, lower gross margin from Tantan as its live broadcasting business is becoming increasingly sizable. And number four, certain fixed nature cost items such as headcount and depreciation of fixed assets related impacted the gross margin negatively as the total revenue declined and these items represent a higher percentage of total net revenue. On a sequential basis, the non-GAAP gross margin dipped by 1 percentage point, better than we originally expected. One thing worth mentioning here is that, as Mr. Wang Li said, in September, we started a program to renew the exclusive multiyear contracts of golden broadcasters by offering an additional incentive to revenue sharing. The incremental cost incurred was partially offset by a reduction of subsidies for operational events in Q3. We expect the ongoing gross margin impact from the contract renewal program to be from 1 to 2 percentage points. Together with the bonus we have budgeted for the year end gala, the gross margin in Q4 is expected to be down a couple of percentage points from Q3 level. Non-GAAP R&D expenses for the third quarter was RMB252.3 million, relatively flat compared to RMB254 million for the same period last year, representing 6.7% and 5.7% of total revenue respectively. The increase in R&D expenses as a percentage of revenue was mainly due to the decrease in revenue. We ended the quarter with 2,396 total employees of which 760 are from Tantan. The R&D personnel as a percentage of total employees for the group was 58% compared with 54% Q3 last year. Non-GAAP sales and marketing expenses for the third quarter was RMB696 million or 18.5% of total revenue compared to RMB701.7 million or 15.8% of total revenue for the same period last year. The year-over-year decrease in sales and marketing expenses was mainly due to the lower marketing spending from Momo, which was partially offset by higher spending from Tantan. On a sequential basis, the non-GAAP sales and marketing expenses, as a percentage of revenue, was up. 3.2%. The increase was attributable to our step up user acquisition efforts for Momo and Tantan to capitalize the post-COVID recovery. Non-GAAP G&A expenses was RMB105.8 million for the third quarter 2020 compared to RMB150.4 million for the same quarter last year, representing 2.8% and 3.4% of total net revenue respectively. The year-on-year decrease in G&A expenses was mainly due to the reduction of service costs related to our experimental project Zao launched last year and less bonus accrual during the third quarter of 2020. Non-GAAP operating income was RMB737.6 million, a decrease of 38% from Q3 2019, representing 19.6% non-GAAP operating margin for the quarter, down 7 percentage points from the same period last year. For the interest of timing lastly let me talk about the business outlook. We estimated our fourth quarter revenue to come in the range of RMB3.65 billion to RMB3.75 billion, representing a decrease of 22.1% to 20% year-on-year and a decrease of 3.1% to 0.4% quarter-over-quarter. Such estimation is based on the assumptions that Momo core revenue will be slightly down from Q3 level. There are two things worth mentioning here. Firstly, although the daily grossing during the nonevent days have been stabilized and meaningfully improved from the bottom seen in early August, July, as a prerestructuring month, set a high base for Q4. Secondly, Q4 is still a transition period where the focus is still on the content ecosystem. As a result, we're adopting a conservative principle for running the year-end computation event by not setting KPIs for the team in terms of revenue that comes out of it. Therefore, we expect the incremental revenues from the upcoming year-end gala to be much less comparing to that in the previous year. Given these two factors, we expect Momo's live broadcasting revenue to decrease slightly from Q3 level. Obviously, it is going to be partially offset by the continuous growth from our VAS services. We also expect Tantan’s revenue growth will be impacted by the following two factors. Number one, as mentioned earlier, the temporary intense competition in the marketing channels has put some pressure on new user acquisition and paying user growth. Number two, Tantan team is purposely managing the cadence of ARPPU pool expansion in live streaming services at current stage in order to make sure there's nothing negative to impact the dating ecosystem. Please be mindful that the forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to change. That concludes our prepared portion of today's discussion. With that, let me turn the call back to CAthy to start the Q&A. Cathy, please.

[Cathy Peng:]

With that, operator, ready for questions.

[Operator:]

First question comes from the line of from Thomas Chong of Jefferies.

[Thomas Chong:]

I have two questions. My first question is about the update on ARPU recovery trend among the high paying users up to November, and how we should think about the initial revenue outlook in 2021? And my second question is on Tantan. Can management also comment about the live streaming revenue versus the membership trend in 2021? Thank you.

[Wang Li:]

Let me translate the first part first. The structural reform that we are currently implementing within the live streaming business, at the very beginning, indeed, had some negative impact on the spending from the high paying users. We're hoping that by taking the short term pain, we could remove some of the bad stuff from the system that is going to be harmful for the content ecosystem over the long term. At the same time, gradually changing a very top heavy sort of model is also going to increase the safety level of our overall business structure in the new policy environment. And this is to make sure that Momo's live broadcasting business is going to grow healthily and steadily in the future several years. If you look at the data over the past several months, we can say with confidence that we are progressing very well in executing that goal. Because of management's commitment and the persistence from the team, we've successfully eradicated the bad apples from the system. And the other thing is that, if you look at the metrics reflecting the healthiness of the content ecosystem, things things things like DAU, their respective time spend and also their respective viewing time spend and also the total broadcasting time of the professional performers, as we entered into November, all of these metrics have been showing very positive trends. At the same time, so far, the team has largely completed the contract renewal process with the golden broadcasters with a pretty manageable incremental cost. We've successfully locked down the big, big majority of the broadcasters whose contracts are set to expire in the coming couple of years. And the renewed contracts are going to cover another at least three years. This is a very, very critical step in solidifying the content ecosystem, which provides a solid foundation on the supply end for Momo's live streaming business to grow healthily and steadily over the future several years. Now on the things that you guys are probably most concerned about, the revenue recovery. If you look at the average daily grossing on nonevent days and compare that data with what we saw in early August when things were at the bottom, we are seeing a pretty stable RMB3 million to RMB4 million per day increase between the two time spots, and the increase came in two separate step-ups, one seen in mid-August time frame and the other one in mid November time frame. That's a reflection of gradual recovery in the content ecosystem. We currently expect that the average grossing during nonevent days to sort of remain at that level. Of course, the year-end competition event is going to bring some incremental revenues. But as I said, the focus for the whole team in Q4 is going to be on the content after taking that big surgery on the product side, revenue is actually not one of the things on the priority list. And that same principle also applies in running the year end competition event in that we're not selling rigid KPIs for the team. And that conservative strategy has also been reflected in the guidance. For Momo's live -- now it's a little bit too early to talk about the outlook for 2021. But big picture wise here are some trends that I can share. For Momo's live broadcasting business, I think we are going to complete a whole transition period in connection with the structural reform by the end of this year. So next year, we're going to be shifting the focus more toward growing the revenues. I think other than the traditional seasonal fluctuation that we're going to see in Q1, I'm confident that revenue will see a steady improvement from Q4's level. For Momo's VAS business, I think this year, overall, the team has been rather disciplined in running different operational efforts to drive revenue. At this point, we're also seeing very steady growth opportunities on the chat room experience and we are also testing a few new paying experiences as well. So I think that next year this is going to be an area where we're going to see pretty solid continuous growth. For Tantan, as you guys can see since Q2 this year, Tantan's revenue has been growing very, very strongly. The temporary slowdown in Q4 is mainly due to two factors. One is due to considerations around keeping the content ecosystem safe. The team purposely wants to control the pace of monetization a little bit, especially the ramp up of ARPU. And the other factor is that the intensive competition in the user acquisition market in Q4, specifically the high pricing in the per user acquisition cost, is indeed putting some pressure on the growth of new registrations as well as the growth of the paying users. However, if you take a year-over-year sort of perspective, in Q4, Tantan will still be growing at 90 something percent versus same period last year. That sort of growth rate is a pretty satisfactory level given the current stage of development of Tantan, and that is also a safe and prudent sort of growth rate in keeping the dating ecosystem healthy. As we move into next year, there is no doubt that Tantan is going to continue to grow its user base and improve its ARPU. So I think revenue is still going to see very rapid growth as compared with the year 2020, and Tantan is still going to be a very important revenue growth engine for the whole group. And lastly from me, we have another key objective for next year, which is also going to be a long term trend that we're going to see happening on the company's level. And that is the VAS to live streaming revenue ratio is going to see continuous increase in a pretty meaningful way. I think that ratio in the year 2019 was somewhere around 30%. This year depending on which quarter, it's going to be 40% to 50%. At this point, we're definitely seeing more growth potential in offering richer value-added services in the social space versus in the live streaming space. My goal is that, in 2021, the VAS to live broadcasting revenue ratio should grow to above 60% to closer to 70%. That way, the overall business structure of the company is going to reach a pretty safe and stable state. And that is also going to be more resilient and defensive against the external risks and that is also the right sort of revenue structure for Momo as a social company. I think there's a second question about the revenue outlook for Tantan, specifically between live streaming and VAS…

[Jonathan Zhang:]

So regarding the revenue outlook, we haven't started projects and process for the period beyond Q4 yet, so it's too early to share anything too specific. But here are some of the drivers that we're looking at. First of all, the users are going to continue to grow versus this year and that will translate into paying user growth. We do not guide on user and paying user growth. But I'm confident that it will be meaningful against this year as COVID is behind and with the efforts in improving product and marketing efficiency. Second, next year on the VAS side, we're going to continue to optimize SVIP. Currently, we also have a few other membership features that we are testing and targeted to launch next year. One thing about next year is that we are looking to build a new monetization feature around video dating experiences and that we're just currently testing. The new monetization will be a la carte model. So if we're successful, we can be a meaningful ARPU driver as well. Thirdly, on live streaming. In the second half of this year, we largely focused on improving the product experience. Currently, I feel that we still have a lot of areas that need to be improved. For example, the recommendation engine, the in-channel experience and the way live video is connected to core products. So we've been pulling back on the ARPPU driven efforts since September. As we improve the overall user experience with live video, we're certain going to pull some of the revenue levers next year. So overall, I think both paying users and ARPPU pool people will see very meaningful growth in 2021. Thank you.

[Cathy Peng:]

Operator, please get to the next.

[Operator:]

Next question is from the line of Tian Hou of TH Capital.

[Tian Hou:]

So lots of guys compare Momo with Match Group or Tinder. However, if we look at how they grow during the COVID, it seems like there is a big diversion. So I wonder, in China, in the Chinese culture environment, what is the best way to grow dating and social networking business and what is the ceiling, how big the market can be? Also, what's the company's strategy for next five to 10 years? Are you guys going to continue to operate in the dating market, or are you going to bring the live broadcasting to the new area such as e-commerce, like a lot of other like broadcasting vendors are doing? Also related to the next several years strategy, you guys have a lot of net cash. How are you going to give cash to advance your strategy? Thank you. That's all my question.

[Wang Li:]

First of all, we believe there are still huge growth potential in China's open social space and the general dating market. According to some official statistics that I've seen, in China, we have from 200 million to 300 million single adult population. Right now, we are also seeing some new rising trends. For example, the late time for marriage, the rising divorce rates and also the fact that the younger generation are becoming increasingly receptive for the idea of online dating. And we are also actually seeing increasing dependence on the online dating services. All of these will lead to a continuous expansion in our addressable market. With the current status of China's economic development and the overall consumption power of China's mobile Internet population, I think open social business and the dating business should have huge potential for monetization and profitability. Momo and Tantan, we are offering in that open social space with different but very complementary positioning. So we are all going to be benefiting from that growing market demand. Other than Momo and Tantan, we are also actively pursuing the growth opportunities via new applications in the social and entertainment space. Momo's team has proven capabilities in product innovation. So overall, I'm extremely confident in the long term growth potential for such product portfolio approach. More specifically about the growth outlook for the Momo application, I think through how quickly the traffic of Momo recover from the COVID, we can actually see that the fundamentals of the social platform is, they are very solid. But at the same time, Momo is also longstanding and relatively mature social brand. So when we talk about user growth, we need to seek growth opportunities and try to build growth on top of pretty stable user base. At this point, we are still seeing pretty evident growth opportunities and penetrating into lower tier cities. But unfortunately this year a lot of our plans on that front stuck in the system due to restrictions in different geolocations to keep the virus under control. But next year, I think we're going to continue to push forward on that front. Besides user growth, the team is also going to continue to push harder and go deeper on the monetization side. I actually am still seeing a great deal of potential on that front for Momo for the core, especially in better utilizing the commercial traffic. I think what we need to do here is to be doing things more strategically and try to build a holistic traffic management system that goes across different business lines, including VAS and live streaming. Previously, because of the organizational structure that we had in the past, sometimes we could be putting in artificial barriers between VAS and live streaming that blocked traffic from flowing from one line to another. That actually led to significantly lower ROI utilizing the commercial traffic. Next year with a new work structure, we're going to break that sort of system and be adopting a pure ROI driven approach to allocate the commercial traffic in between different lines. We believe that Momo is going to continue to grow steadily and can also be very solid long term contributor to the bottom line and to the cash flow the group. Tantan, its brand name is much younger and its product mechanism is also more geared toward young people in China. So we do believe that as compared with Momo, Tantan is facing greater growth opportunities in growing its user base. We believe that, in China alone, Tantan should be able to at least double the size of its user base from where it is right now or it can be potentially much bigger than that. Beyond China, Tantan is also facing a very good revenue TAM-ing the overseas market. But of course, the team needs to be working very hard toward these goals. We are confident that through improvements on the product side and improvements on the user acquisition side, we're going to continue to approach these targets. So that's the answers to the first question. You're right in saying that we have a lot of cash. Currently, the company has, I think, close to RMB16 billion in cash sitting on the balance sheet, and that number is still rapidly growing. Other than returning cash to the shareholders in the form of dividends and share buybacks. In terms of capital allocation, one of the other things that we are considering is of course, the M&A opportunities that can strengthen the company's leadership and build future drivers. I would say that on the M&A front, the company's approach tend to be fairly prudent in analyzing and evaluating any potential targets. But if we do see opportunities as promising as Tantan, we are going to go in very aggressively without hesitation.

[Cathy Peng:]

Okay. It seems like this call has overrun pretty significantly. Operator in the interest of time, I think this is going to be the end of this conference call. Thank you guys for participating and thank you for the interest in Momo and Tantan. We'll see you next quarter. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, that concludes the conference for today. Thank you for participating. You may all disconnect.