Cathy Peng - VP, IR Jonathan Zhang - CFO.

Good day, ladies and gentlemen. Welcome to Momo's Fourth Quarter Earnings Conference Call. The participants are on a listen-only mode. With that, I would like to pass the call over to our host for today, Ms. Cathy Peng, Vice President of Investor Relations. Ms. Peng, please go ahead..

Thank you, operator. Hello everyone, and thank you for joining us today for Momo's fourth quarter 2015 earnings conference call. The company results were released earlier today and are available on the company's IR website. Joining me today is our Chief Financial Officer, Mr. Jonathan Zhang. Mr.

Zhang will discuss Momo's business operations followed by financial review. Due to the pending going-private transaction, we will not be hosting a Q&A session following the end of the call. If you have any additional questions, please contact us at ir@immomo.com or 861-057-310-538.

Before we begin, I would like to remind you that this call may contain forward-looking statements made under the Safe Harbor provisions 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 these 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 statement as a result of new information, future events or otherwise, except as required under law.

With that, I would like to pass the call over to Mr. Zhang, who will now go over the business and financial highlights for the quarter. Mr. Zhang, please..

Thank you, Cathy. Good morning and good evening everyone. Thanks for joining our conference call today. In the absence of our CEO, Mr. Tang Yen, I will walk you through operational review followed by the financial update.

The net revenues for the fourth quarter 2015 grew by 112.7% to $39.5 million and non-GAAP net income reached $11.8 million representing a 30% non-GAAP net margin. With that, we concluded the year of 2015 with impressive growth for both top line and bottom line. Net revenues for the whole year grew 199.4% year-over-year to $134 million.

Non-GAAP net income for the year 2015 was $31.1 million representing a 23.2% non-GAAP net margin. Diving into the quarter, let me start with operation matrix; monthly active users for MAU was 69.8 million in December 2015 compared with 69.3 million a year ago.

The number of location-based interest groups increased 6.1 million as of the end of December, up from 5.1 million a year ago. The pressure in MAU trends we have seen since the third quarter continued into Q4. As briefly mentioned in our previous earnings call, we think there were a couple of different negative factors impacting our user growth.

First of all, the growth of new smartphone users has been slowing down substantially in 2015, inhibiting the growth of new users for many mobile social applications including ourselves. Secondly, on the product side, there are areas that we need to work on in order to optimize user experience and appeal to a broader user base.

This challenge comes in two folds, one is to better serve the core demand of meeting new friends through optimizing of existing products and services. The other one is to create new use case for users and potential users to socialize and have fun on the platform.

We have to admit that some of the explorations during the past year have not performed up to our internal expectations. We have spent the past few months analyzing each of these factors as well as developing and implementing our strategies in dealing with these challenges.

I would like to briefly share a few high level observations here to help investors understand the initiatives we have taken as well as our plans to drive user growth going forward. First of all, the foremost foundation for our user growth is product optimization and innovation.

We are placing equal importance on refining the core user experience and creating new use cases in order to appeal to the next cohort of users.

On the front of refining the core, we launched a number of upgrades in the fourth quarter in order to optimize our user experience, for example, we introduced a short video sharing feature enabling our users to shoot video clips of up to thirty seconds and share to message port to group or to one to one communications.

This video provides an important tool for our users to better express themselves and overtime to enrich the contents on the platform as we built more activities around it.

In addition, during Q$ our team devoted a significant amount of time and resources to optimize the onboarding experience and break the barriers in converting downloads to active users.

At the same time, we continued our efforts in testing our effectiveness of various online, offline marketing channels such as application search, optimization and pre-installations. All of these initiatives are paving roads for us to effectively drive user growth through more aggressive channel marketing programs in 2016.

Heading into 2016, we are lining up a series of upgrades, campaigns and new product releases to drive user growth. January to February 2016, we launched a themed campaign that allowed our users to send red envelopes both to nearby people and their friends at Momo.

Leveraging the unique value proposition of an open social platform we created a brand new experience for both the red envelope givers and the recipients, allowing Momo to differentiate from other platforms running similar campaigns.

We are happy to see that the campaigns drove meaningful user engagements on our platform and to such an extent offset the negative seasonality impact from Lunar year holiday. In pushing our boundaries beyond the core service and user base, we also made some encouraging progress as mentioned in our Q3 results.

Last September we launched our interactive music service Momo Live which has been well received by our users. On top of that we unveiled an open platform to connect more talented performers and started to build a scalable business around it. Now our live music service is supported by two pillars.

One is the Momo Live that features professionally produced shows in a studio for a couple of sessions per day. The other is set on the open platform where a vast amount of performers can build and connect to their fan base a Momo by broadcasting a simple PC based video devices or with their mobile phone.

Since the launch of the open platform in mid-December we have been seeing a steep ramp-up in nearly all key performance indicators for our music service.

More importantly, we are seeing not only synergies between our core product offerings and music service but also opportunities to bringing in new users and create new ways for people to connect and to have fun on the platform.

We have more exciting product releases coming up in our roadmap and are confident that this service will become a meaningful contributor to both revenues and user activities in 2016. As said earlier, product optimization and innovations form the foundation of our user growth.

On top of that the other trends that we will be pushing very hard in 2016 is our market age. As many investors know historically we have not been very active in paying marketing channels and instead more relying on organic growth in new registrations.

As the growth of China's smartphone users gradually comes to a halt, we are going to be more aggressive in paying for both online and offline marketing channels in order to keep growing up users at the top of the funnel. At the same time, we are also planning to step up our efforts in increasing the resurrected users through multiple approaches.

Through this concentrated product and marketing efforts we are confident that we can bring active users back on the growth track. Now turning to the monetization; total net revenue reached $39.5 million in fourth quarter of 2015, up 113% year-over-year.

Mobile marketing delivered the most impressive growth with revenues reaching $15.3 million for the fourth quarter compared with $1.6 million in the same period last year. Over the past year, we have built our mobile marketing business from scratch.

Now we have established our self as a well-recognized mobile marketing platform for a broad range of businesses including brand owners, local merchants, and application developers as well as other small and medium size businesses. In Q4 2015 mobile marketing revenue became the biggest revenue segment for Momo.

Our native in-feed marketing offerings which is backed by our proprietary RTB [ph] system continued to generate strong momentum as average effective CPM improved significantly.

In the fourth quarter we upgraded the system with more campaign management features as well as multi-dimensional data points for our customers to more effectively measure their campaigns against ROIs. At the same time our network of distributors also, continued to expand and now covers a nation-wide scope.

Looking into 2016 our efforts will be focused on product development to improve the ad effectiveness which is the underlying drivers of CPMs. On top of that, we are also optimizing our distributor network to create stronger driving force on the demand side. We believe that native ads will continue to be most powerful growth engines for Momo in 2016.

In the area of brand marketing, we have made outstanding achievement during the past year in building out and growing our ad customer base especially in the auto and e-commerce sectors. We had 36 brand owners during Q4 2015 compared with only 30 names for the same period last year.

That said, there is still significant room for us to further penetrate and build a much larger brand marketer based on the quarters ahead. We are now building out our sales team in order to keep expanding our ad customer base in 2016. At the same time, we are also beefing up on the backend to offer more indoor active packaged marketing services.

In clothing, not just banners but also normal life and other native elements on our platform. As our proprietary marketing solutions continue to gain traction, ad revenue from third party relationships such as co-operations with Ali and 58.com have become less significant for the past quarter.

However, we still believe in the value that our partners can bring to our platform. We will keep exploring potential opportunities to deepen the partnerships in the future. Memberships, subscriptions, revenue were $14.6 million in the fourth quarter of 2015, an increase of 22.7% over the same period last year.

Paying members totaled 2.9 million as end of December 31, 2015. The growth in membership subscription revenues primarily came from the increase in ARPUs which in turn was driven by the growth in the number SVIP members.

Going into 2016, we will focus on increasing the conversion ratio while keeping the ARPU higher to deliver further growth in this revenue segment. In addition, we are also working on plans to introduce more innovative value-added services other than membership subscriptions.

Mobile games revenue were $7.8 million in the fourth quarter 2015 up 79% year-over-year. We have 35 revenue generative games on the platform in operation during the quarter compared to only 12 the year ago. Momo has become one of the mainstream mobile game distribution channels for mobile game developers and publishers.

Overall, we are confident that the growth perspective of our gaming business for the coming years. Revenues from other services which mainly consist of revenues from the interactive live music services and emoticons totaled $1.8 million compared to $0.7 million in the first quarter 2014.

The increase primarily came from interactive live music business which is now growing in folds and will continue to ramp up rapidly as we move up into 2016.

Due to the growth trajectory that we can see, we will consider reaching out the live music revenue, music live service revenue from other services line as a separate revenue segment going forward. Now turning into the cost and expenses.

For the fourth quarter 2015 our cost and expenses on a non-GAAP basis totaled $30.5 million compared to $19.1 million for the same period last year. The year-over-year increase in cost and expenses was primarily due to the continuing expense in our business.

By the end of December 2015, our total number of the employees reached 779 compared 456 a year ago making personnel related costs and primarily -- making the personnel related cost the primary driver on year-over-year basis.

Part of the incremental costs were in connection with our interactive live music services which involved in spending on content production, facilities, personnel, bandwidth as well as promotions. As the revenue ramps up quickly in 2016 we will continue to invest in order to further expand this business.

In Q4, cost and expenses as a percentage of revenue continued to go down significantly on a year-over basis reflecting the scale efficiencies of our business model providing us a strong leverage to keep investing in building new business drivers such as our live music businesses. Non-GAAP net income attributable to Momo Inc.

was $11.8 million in the fourth quarter of 2015 compared to a non-GAAP net loss of $0.1 million in the same quarter last year. Quickly, on the key balance sheet and cash flow items. As of December 31, 2015, Momo's cash, cash equivalents and prime deposits totaled $469.4 million compared to $451 million as of December 31, 2014.

Over 81% of our cash balance are deposited offshore in U.S. dollars and thus we do not expect the volatility in foreign exchange rate to have a material negative impact on the value of our cash assets. In the fourth quarter of 2015, we generated a strong operating cash flow of $31.7 million compared to $2.5 million for the same period last year.

Capital expenditures and the cash used in investing in activities were around $6.5 million for the quarter.

To sum up, we are happy that we closed our 2015 with a strong financial results, the fourth consecutive quarter of profitability serves as a strong statement to scale efficiency of our business and our ability to drive continuous bottom line expansion while investing in new business drivers.

Heading into 2016, user growth will continue to stay on top of our priority list. At the same time we are going to be digging deeper into various monetization opportunities in order to deliver stronger financial results to our shareholders. Operator, we will now open the call up for questions..

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect. Thank you..