Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter and Full Year 2019 Momo Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today. I would now like to hand the conference over to our first speaker today, Ms. Cathy Peng. Thank you. Please go ahead, ma'am..

Thank you, operator. Hello, everyone, and thank you for joining us today for Momo's fourth quarter and fiscal 2019 earnings conference call. The company's results were released earlier today and are available on the company via our website. On the call today from Momo are Mr. Tang Yan, Co-Founder, Chairman and Chief Executive Officer; Mr.

Wang Li, President and Chief Operating Officer; 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. We 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 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 the 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 statements as a result of new information, future events or otherwise, except as required under law.

I will now pass the call over to Mr. Tang. I will translate for him. Mr. Tang , please..

[Foreign Language].

[Interpreted] Good morning, and good evening, everyone. Thank you for joining our conference call today. Q4 was another solid quarter, closing out our fiscal year of 2019. Now my team and I will take you through the details..

[Foreign Language].

[Interpreted] Firstly, a brief overview of the financial performance. For the fourth quarter 2019, total revenue reached RMB 4.69 billion, up 22% year-on-year. Adjusted operating income for the quarter was RMB 1.46 billion, up 42% from the same period last year..

[Foreign Language].

[Interpreted] For fiscal year 2019, total revenue came in RMB 17 billion, up 27% year-over-year. Adjusted operating income reached RMB 5.12 billion, up 30% year-on-year or a 30.1% operating margin, 1 percentage point higher than that of last year.

Excluding Tantan's financial impact, adjusted operating income for the core Momo would have been RMB 5.54 billion, up a 35.2% or a 35.2% adjusted operating margin, 2.8 percentage points higher than that of 2018. I'm very proud that the financial performance of the year has exceeded our expectations at both top line and bottom line levels.

It's a testament of the execution capabilities of our teams..

[Foreign Language].

[Interpreted] Now a deeper dive into the quarter. Firstly, our community continued to grow. The core Momo app had 114.5 million monthly active for the fourth quarter, up 1% year-over-year and representing a 400,000 net addition from the previous quarter.

The user acquisition environment in the fourth quarter was not ideal, which puts some pressure on the number of new registrations and caused our MAU net adds to be modest. Despite the pressure at the top of the funnel, I'm happy to see that we were making impressive improvement within the user funnel.

First, retention continued to improve during the quarter and have bounced back to the pre suspension period. Second, per user time spend, per day reached a record high in the recent 2 years.

And lastly, total paying users for the core Momo platform accelerated its growth and reached 9.3 million in Q4 2019, a 400,000 net addition from the last -- from last quarter. These positive improvements laid a solid foundation for us to drive further user growth in 2020.

We were made -- they were made possible by our relentless focus on product innovation and operational efforts throughout the year, which my team and I will elaborate a bit later..

[Foreign Language].

[Interpreted] Now quickly on Tantan. Paying user for Tantan was 4.5 million in the fourth quarter, flattish from last quarter, partly due to the slower-than-expected user recovery and partly due to the change in the IOF 13 [ph] subscription management policy, which in turn led to a one-off increase in the churn.

Tantan saw some downward pressure around its retention ratio starting from late Q3, which led to a slower-than-expected recovery process. We were able to pin down the cost of that issue toward late November. The team then took effective measures to resolve the problem.

By mid-January, the retention has been gone -- has already gone back to the pre suspension level allowing Tantan to experience rapid user growth to mid-February. Since then, Tantan has started to see substantial pressure around daily new registrations.

We believe this stress can be largely attributed to the social distancing control in connection with the COVID-19 outbreak. That said, we remain confident that after this temporary disruption is over, Tantan will be able to see rapid growth in its users and paying users, while we will have more details about their user growth strategy later..

[Foreign Language].

[Interpreted] As we closed out the year 2019 and started -- and start going into 2020, I would like to review the few things that we've done well on the product and operational side last year, followed by our plan to grow the user base and drive revenue growth in 2020..

[Foreign Language].

[Interpreted] Our mission is to help users discover new relationships and build meaningful interactions on our platform -- our platforms.

One of the biggest highlights on the product side for 2019 is that we've significantly improved the products and operations of the audio and video experiences outside of the talent showrooms, represented by the chat room, Party and Werewolf experiences.

As a result, both the users' [indiscernible] and engagement metrics of these experiences have seen substantial increase during the year. In addition, in Q4 2019, the team started to test a video-dating experience called matchmaking.

We believe it has the potential to become a popular way to connect people in lower-tier cities, which is a new front that we are pushing hard on right now..

[Foreign Language].

[Interpreted] In 2019, we also introduced a virtual community service, represented by the parking lot and the farm. These new experiences take the form of mini-social games. When integrated with the social features and relationships on Momo, they can help the users easily break the ice and connect to others in a more effective manner..

[Foreign Language].

[Interpreted] We believe these progresses on the product and operational side create a vital role in improving the retention and engagement within the user funnel, which I mentioned in earlier part of my speech. Moreover, they also create new business opportunities. Wang Li will have more details on the monetization endeavors around them later..

[Foreign Language].

[Interpreted] Now I'd like to talk about the one area where I like to see better performance in 2020. That is user growth. Currently, we are seeing some secular tailwinds in China's open social space. Momo and Tantan are the 2 biggest platforms in this sector with high level of complementarity. Together, we still have a lot of growth opportunities.

In order to capture these opportunities, here are a number of things, our teams need to execute well in 2020..

[Foreign Language].

[Interpreted] Firstly, we need to continue to improve the social experience on our platform. If we can keep doing a better job in satisfying the demand that we were not able to serve well in the past, we always have the opportunity to call back the dormant users and see if we can better retain them.

Currently, we are looking at a pool of hundreds of millions of dormant accounts that we can draw on, which presents a real opportunity for user growth..

[Foreign Language].

[Interpreted] The second expected growth driver for 2020 lies in the lower-tier cities. There are plenty of growth opportunities there. In the past, we didn't have particular strategies, either on the product side or channel side, targeting the lower-tier demand. Our approach on that front will be different this year.

In January, we rolled out Momo Lite, a light version of the core app in order to more effectively penetrate into the lower-tier demand. Initial stats are encouraging, and we will continue to push hard on that front. For the core Momo, we have also developed specific product and operational plans to better serve the users in lower-tier cities..

[Foreign Language].

[Interpreted] Thirdly, we are looking to significantly improve the marketing efficiency at Tantan this year. Compared with the addressable market size and where we believe we should get to, Tantan still has a big headroom to grow.

More effective marketing approaches, together with improved product experience and user retention are the 2 engines that will drive Tantan closer to our target..

[Foreign Language].

[Interpreted] Other than Momo and Tantan, we are also making new bets with separate applications in order to pursue the growth opportunities in other vertical areas within the open social space, both in China and in overseas markets. We have accumulated some valuable experience in this area and made remarkable progress as well.

Next -- this year, I would like to see the team continue to push forward and take bigger strides on this front..

[Foreign Language].

[Interpreted] In addition to user growth, revenue and profit also stays on top of management's priority list.

As investors can see in our Q1 guidance, since late January, we have been experiencing some pressure on the revenue side due to the negative impact from the coronavirus outbreak and adjustments to some interactive features on the core Momo platform.

In order to effectively counter these stress points and continue to drive revenue growth, the biggest priority on the business side for Momo this year is to focus on effective products and operational initiatives and keep introducing new experience to improve the user experience.

Our live streaming and VAS team have plenty of experience and expertise in driving growth via our product and operational innovations. We have proven our capabilities through many different adverse situations coming from the outside or at a macro level. As a matter of fact, the team are already making progress on that front.

We have full confidence that the team will take effective measures to cope with the current challenges and steer the business back onto the growth track as soon as possible. Wang Li and Wang Yu will have more details for you on our opportunities and execution plans to drive revenue growth later..

[Foreign Language].

[Interpreted] Lastly, I would like to finish my speech today by announcing that our board has declared a cash dividend in the amount of USD 0.76 per ADS, which will amount to a total cash payment of approximately USD 161 million or 25% -- over 25% of our adjusted net income attributable to Momo Inc. in 2019.

This is the second time we share the fruits of our operations to our shareholders. It demonstrates management's commitment to creating and delivering shareholder value.

If Momo continues to generate excess cash flow compared to the need for operation and reinvestment and if approved by our Board of Directors, we would like to continue to share our prosperity with the shareholders in the form of future dividends. Thank you for trusting Momo team. With that, I'm handing over to Wang Li for our business review.

Wang Li, please..

[Foreign Language].

[Interpreted] Thanks. Now let me take you through the progresses we've made across our key business lines..

[Foreign Language].

[Interpreted] Firstly, on live broadcasting. Total revenue from live broadcasting business for the fourth quarter was RMB 3.38 billion, an increase of 14% from the same period last year. Total live broadcasting revenue for fiscal 2019 was RMB 12.4 billion on, up 16% from last year.

The growth in 2019 was driven by the effective growth strategy to apply different product and operational efforts for different cohorts of users. For the middle cohort, we introduced interactive gift represented by the Penguin at the beginning of 2019.

Such innovation greatly enhance the sense of participation and improve the paying experience from the middle cohort. For the high-paying users, since the second quarter, we've started to methodically introduce a series of new operational efforts to drive spending. The most successful ones include the mobility system and the off-line, VIP music tours.

Collectively, these efforts have allowed us to see impressive growth in the number of core paying users in 2019, in Q4, the number of core paying users grew 20% from the same period last year..

[Foreign Language].

[Interpreted] During the year 2019, we also substantially strengthened the supply end of the Live Broadcasting ecosystem. In Q4, the number of professional broadcasters increased 19% year-over-year. And the number of sizable talent agencies who crossed the RMB 2 million grossing threshold increased 44% compared with the year-ago period.

These hardworking performers and agencies have formed a solid foundation for us to continue to drive better user experience in 2020..

[Foreign Language].

[Interpreted] In the year 2019, we've also made adjustments to the operational strategy in order to reduce the reliance on the quarterly competition events as a revenue driver and increased the revenue during the nonevent days. Less dependence on the tournament events has led to a more stable and healthier revenue structure.

In addition, it has also led to reduce bonus spending around the competition events, allowing us to improve the efficiency in using the payout. As many of the investors know, in 2019, the live streaming space saw intense competition, where many bigger platforms offered higher payout ratio than we did.

However, I'm proud that in such an environment, we have been able to maintain a stable payout ratio compared with 2018, and at the same time, have achieved healthy top line growth..

[Foreign Language].

[Interpreted] Now turning to VAS. Wang Yu will talk about Tantan's business later, and I'll be focusing on the VAS business for the core Momo. Revenue from VAS on an ex Tantan basis reached RMB 819.3 million in the fourth quarter of 2019, a 64% increase on a year-over-year basis.

For fiscal 2019, VAS revenue, ex Tantan, totaled RMB 2.85 billion, up 94% year-over-year. Such growth rate significantly outperformed our expectations at the beginning of the year, driven by the team's relentless focus on the product innovation and effective operational efforts..

[Foreign Language].

[Interpreted] The biggest drivers for VAS and Momo was the audio and video-based social entertainment experiences, which mainly include pre chat and Party, Werewolf and the chat room experience.

As Tang Yan mentioned, one of the biggest highlights for 2019 was that we substantially improved the products and operations of the audio and video experiences outside of the talent showroom. For example, for the Party experience, our team took the ideas from some of the popular reality shows and transplanted them onto our platform.

These new gamified activities together with a contribution from professional modulators, greatly improve the social experience and the monetization potential of the Party experience.

In addition, in Q2, we also started to gradually expand the scale of the monetization within the chat room experience, which is currently the biggest use case in terms of DAU penetration within all audio/video entertainment experiences on the core Momo.

Within the chat room experience, there are commercially operated channels that are moderated by professional hosts. These channels have been gaining traction since the second quarter and have now become a powerful growth engine for us.

We also have channels that are set up and maintained by regular Momo users to organize their own social activities there. Currently, 90% of the traffic within the chat room were directed to these noncommercial channels, with only 10% going into the high RP pool commercial one.

Compared to the older experiences such as the Party and Werewolf, the chat room is still meaningfully under monetized. With the size of this user base and the current level of monetization, we still have a lot of growth potential within the chat room experience.

We plan to make it a new engine for 2020 by directing more traffic to the higher ARPU channels and improving the operational efforts in the noncommercial channels as well..

[Foreign Language].

[Interpreted] Virtual gifting within the traditional use cases, such as the greeting, the IM chat and the interest groups also grew pretty meaningfully in 2019, driven by product optimizations as well as operational events, such as the Romancecar.

In addition, we also saw initial success with demonetization efforts in the virtual community services, such as the parking lot. We have planned to roll out more such kind of experiences and replicate our monetization model in them..

[Foreign Language].

[Interpreted] Now briefly on other business lines. Mobile marketing has not been one of the priority areas throughout the year 2019, mainly due to the challenging macro environment and the fact that it does not enhance the user experience in the same way as value-added services do.

We will continue to apply the same strategy to the marketing business in 2020. As said on the prior calls, jointly operated games will gradually phase out on our platform..

[Foreign Language].

[Interpreted] Lastly and most importantly, I wanted to address the investors' concerns around the pressure that we are recently seeing on the revenue side as indicated by our Q1 guidance. We believe such pressure could be attributed to the compound of several different factors.

First, based on the survey conducted by the live-streaming team and also based on management's assessment of the current situation, we believe that the uncertainties at the macro level caused by the COVID-19 outbreak has adversely affected the sentiment of our high-paying users.

Secondly, the virus outbreak has caused a significant portion of our users to delay their time to leave their home town and get back to the big cities for work. This prolonged Chinese New Year impact has led to a slower recovery of DAU and MAU on the core Momo platform than what we saw in prior years.

Moreover, the nationwide social-distancing control and associated decline in the outdoor activities due to the virus outbreak have also been limiting the user's intention to use open social products. Thirdly, in late January, we made adjustments to some interactive features on the core Momo Platform..

[Foreign Language].

[Interpreted] Since after Chinese New Year, we've been developing product and operational plans to overcome the above-mentioned difficulties. A big focus here is to introduce new products and experiences to revise the consumer sentiment. The team has already started to put some of the planned efforts into the system.

Some of them are making good progress. But of course, the team still have a lot of hard work to do in the coming few quarters -- in the coming few months. We have a strong team and a track record of executing well in these challenges and uncertainties.

On the product side, Momo plus Tantan are also poised well to benefit from the secular trends favoring the online dating and open social platform. I have high conviction that the team will be able to overcome the temporary difficulties and continue to drive value for our shareholders..

[Foreign Language].

[Interpreted] With that, let me hand over to Mr. Wang Yu to review Tantan's product and business development. Mr. Wang Yu..

First, as Tang Zong mentioned, we need to significantly increase the efficiency of our user acquisition efforts. We believe we still have a great deal of opportunities to improve on that front. Second, we need to continue to focus on enriching the product features and enhancing user experience of Tantan.

Not being able to get quality matches and build meaningful conversation is a key reason for user churn to using Tantan.

If we can get more and more effective in helping users discovering new relationships and build meaningful interactions on and off our platform, we'll be able to lower the churn and include the long-term retention on Tantan, which is a critical importance for user growth for the end products.

Of course, this is not an easy task, but we are committed to working very hard and patiently to get there. Thirdly, we expect to continue to grow the average revenue per users so that we can invest more aggressively into user acquisition with a positive ROI in the satisfactory bottom line. These are the 3 components of our user growth plan for 2020.

We are off to a not so easy start in Q1 due to the COVID-19 disruptions. However, that temporary difficulties doesn't change long-term vision or our strategic plan for the Tantan platform.

Now a quick update on our second priority, which is to drive monetization through the optimization of existing feature -- premium features and the introduction of new paying experiences. In Q4, our main focus was on testing and tweaking the new non-subscription monetization feature.

The new feature is not just for monetization, but the new use consumer experience can have an impact on the user experience and engagement as well. We have been making progress with testing and seeing gradual improvements in the different metrics that we are monitoring.

The team has also had a -- had new learnings about how to make it work better within the dating ecosystem. For this new feature, Q1 is still largely about refining the products and operations, making sure that the key stats continue to improve to the point where we feel comfortable to release more traffic to it.

Looking into 2020, the priorities on the monetization side will still revolve around 3 pillars. One is optimizing the existing monetization features to drive better adoption. The second pillar is introducing new premium features and services.

Within the ladder, the biggest project is obviously the non-subscription feature that is currently under testing. Our goal for 2020 is for it to start generating meaningful revenues towards the back half of the year.

In addition to that, we are also looking to experiment on other new monetization features on both subscription and non-subscription basis. The third pillar is our overseas development. In the past year, we have built up a sizable user base in some parts of Asia and reach possible ROI in many of the markets we are in.

Our findings in these new markets prove our earlier belief that Tantan poses universal appeal to users outside of China. By 2020, our goal is to scale the revenues and profits in markets that we are already in and keep pushing into new markets that make sense in terms of ROI. With that, I'm now passing the call to Mr.

Jonathan Zhang for financial review. Jon, please.

Thanks. Hello, everyone. Thank you for joining our conference call today. Let me brief you -- briefly take you through the financial review. Total revenue for the fourth quarter 2019 was RMB 4.69 billion, up 22% year-on-year, 5% quarter-over-quarter, and exceeding the high end of our revenue guidance.

Our total revenue for fiscal year 2019 was RMB 17.02 billion, compared to RMB 13.41 billion for 2018, a 27%, year-over-year, growth. Non-GAAP net income attributable to Momo for 2019 was CNY 4.49 billion compared to CNY 3.46 billion for 2018, an increase of 30% year-on-year.

Now let me jump directly into the review of cost and expenses items as revenue line has been covered comprehensively by Mr. Wang Li and Wang Yu earlier. Our non-GAAP cost of revenue for the fourth quarter of 2019 was CNY 2.32 billion compared to CNY 2.08 billion for the same period last year.

Non-GAAP cost of revenue as a percentage of total revenue was 49.6%, a decrease from 54% from Q4 2018. Non-GAAP cost of revenue for Q4 2018 included the production cost for Phanta City, which was CNY 56 million excluding the Phanta City impact.

The non-GAAP gross margin for Q4 2019 was up 3.1% year-on-year due to a lower payout ratio from both live broadcasting and VAS businesses.

We are very proud that the team has been able to drive robust revenue growth at substantially lower payout ratio, especially given that many other platforms have been trying to compete with the rising payout since the beginning of 2019. On a sequential basis, the non-GAAP gross margin decreased less than 1% from 51.1% to 50.4% in Q4.

The decrease was caused by costs incurred in connection with the live streaming year-end tournament. Non-GAAP R&D expenses for the fourth quarter was RMB 244.3 million compared to RMB 193.9 million for the same period last year, representing 5.2% and 5% of total revenue, respectively.

On a sequential basis, non-GAAP R&D expenses decreased in absolute RMB amount due to less year-end bonus accrued during the quarter. We ended the quarter with 2,350 total employees, of which 675 are from Tantan. The R&D personnel as a percentage of total employees for the group was 58% compared to 55% Q4 last year.

Non-GAAP sales and marketing expenses for the fourth quarter was CNY 654 million, or 14% of total revenue compared to CNY 557.3 million or 14.5% of total revenue for the same period last year. On a sequential basis, sales and marketing expenses decreased from CNY 701.7 million.

In Q3, we spent incrementally on marketing to recover from the home page and download suspensions. In Q4, the core Momo was able to scale on it back. Our Tantan's domestic marketing costs also decreased Q-on-Q in Q4, offset by the increase in marketing spending, push into the overseas market.

Non-GAAP G&A expenses was RMB 151.7 million for the fourth quarter of 2019 compared to RMB 133.1 million for the same quarter last year, representing 3.2% and 3.5% of total revenue, respectively.

Non-GAAP operating income was 1.6 -- RMB 1.46 billion, an increase of 42% from Q4 2018, representing 31.1% non-GAAP operating margin for the quarter, up 4.4% from the same period last year.

One thing I'd like to mention here is that for the core Momo, the annual non-GAAP effective income tax rate for 2019 was a 15.5%, as one of our major profit-making subsidiaries Beijing Momo Information Technology Company Limited, has enjoyed a 12.5% preferential income tax rate for the past 3.

Years, Starting from 2020, renewable every 3 years, it will be subject to a preferential income tax rate of 15% for a qualified high-end new technology enterprise, we expect our annual non-GAAP effective income tax rate for Momo will be increased to 17.5% going forward. Now turning to balance sheet and cash flow items.

As of December 31, 2019, Momo's cash, cash equivalents and term deposits totaled CNY 14.93 billion compared to CNY 11.29 billion as of December 31, 2018. Net cash provided by operating activities for the fourth quarter was CNY 1.6 billion compared to CNY 1.16 billion for the same quarter last year.

Before we turn to our first quarter 2020 revenue guidance, on behalf of our company, I'd like to express our condolences to those deeply affected by COVID-19 virus outbreak and pay tribute to people who work diligently to fight for public health and wellbeing.

We have also been seeing adverse impact on our business from the virus outbreak, together with the certain other factors that Wang Li mentioned earlier.

We expected our first quarter revenue to come in the range from RMB 3.45 billion to RMB 3.55 billion, representing a decrease of 7.3% to 4.6% year-on-year, a decrease of 26.4% to 24.3% quarter-over-quarter.

Please be mindful that the forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to changes. That concluded our prepared portion of today's discussion. With that, let me turn the call back to Cathy to start Q&A..

So just a brief reminder before the Q&A. For those analysts who can speak Chinese, please ask the question in Chinese first, followed by English translation by yourself. And also, if you could limit 2 questions per person, that would give other people opportunities to ask questions. Operator, we are ready for questions..

[Operator Instructions] We have the first question coming from the line of Thomas Chong from Jefferies..

[Foreign Language] Maybe I try and take the first. As we are seeing that the business is starting getting back to normal in the month of March. And we are actually seeing the coronavirus is also under control.

And just want to get a sense to see whether we are seeing traffic as well as our revenue is coming back in terms of the business trend? And how should we think about the coronavirus as well as the adjustment in the interactive features to last for how long? And what are the strategies to offset the pressure coming from there? And how should we think about Momo 2020 revenue outlook as well as the overall impact from the coronavirus? That's my first question.

And then I have a very quick follow-up. Thank you..

[Foreign Language].

[Interpreted] I believe that's a question that is on every investor's mind at this point of time. So now let me firstly talk about the revenue impact and the whole year outlook. We've already given our Q1 guidance. As you guys can see, due to the 3 factors that Wang Li talked about -- actually, it's the compound of these 3 factors.

It's because of the compound of these 3 factors, our Q1 revenues, especially live broadcasting revenues, has been under some pressure. That is also going to be adversely effective, but the stress is not going to be as big. So that's the overall revenue situation in Q1.

But if we try to break the quarter down by month and look at the monthly trajectory, for the most part of January, things were pretty much at a normal state. And February was obviously struck the hardest by the different factors that we talked about.

And actually, starting from March, at core Momo, we are already seeing some gradual recovery in trends. So both in terms of traffic and in terms of revenues..

[Foreign Language].

[Interpreted] So if you look at the several factors that we talked about, for the first factor, the pressure around the traffic in connection with the virus outbreak that pressure is going to start to gradually ease up from the second quarter.

For another factor, the economic impact of the virus outbreak is probably going to have some lingering impact on consumer sentiment. For that, our plan here is to cope with it via proper product and operational methodologies.

I think starting from the second quarter, the live broadcasting and the VAS team are going to be stepping up their revenue-driving efforts on a graduated basis. With regards to the future adjustments, the team has been trying to make up for the loss via the introduction of new experiences.

As a matter of fact, some of the new experiences that we introduced into the system are already beginning to play a positive role in driving revenues. This is an area where Momo's team has very rich experience and expertise.

I'm extremely confident that we will be able to mitigate the impact from that specific factor via continuous innovations on the product side and also on the operational side.

So if we try to look through Q1 into the rest of the year, and based on the current trajectories that we're seeing, our expectation is that at the company level, Q1 should be the low point of the year. And the second quarter is going to start to see sequential rebound.

And as management of the company, we are very confident that as we enter into the second half of the year, we can have a growth level that we feel happy with..

[Foreign Language].

[Interpreted] With regards to our growth strategy, there are some key points for live broadcasting. At this point, the most important thing to do is to keep introducing new experiences in order to revise the consumer sentiment as soon as possible, especially the sentiment among the higher paying cohorts.

Last Q4, we introduced a new experience called (foreign language) in Chinese. In English, it's something like the family experience, which allows a bunch of high-paying users to band together and be identified as a so-called family so that they could enjoy the glory of fight for and enjoy the glory of that family.

Since its introduction, the feedback towards that experience has been very positive. So this year, we are looking to maybe connect that experience with some of our competition events and create something new on top of that.

And also for [Foreign Language] or the off-line [Foreign Language] music towards, we are also looking to introduce a new upgraded version of that. For example, in April, we will be introducing a new competition -- form of competition events called, The Producer Project. That's an example of what we are trying to do here..

[Foreign Language].

[Interpreted] VAS and Tantan, these 2 business lines tend to be relatively under-monetized. So we do see a lot of things that we can do on the product side to drive further revenue growth. With regards to exactly what we're going to do, we've already laid out a fair amount of details in the previous section. So I won't be repeating here.

I think there's a second question from you, Thomas?.

[Foreign Language] Thanks for taking my follow-up questions. My follow-up question is about our overall spending, as well as profitability for this year.

Is there any preliminary assessment that can be shared? And also any cost saving plan they are going to pursue?.

This is Jonathan. Let me address your second question. On the cost side, actually, given the current circumstances and competitive environment, it is very likely, as a percentage of total revenue, the overall cost will go up by a couple of percentage points.

That means the gross margin is likely to dip by a couple of percentage points due to the payout ratio of fluctuations as agencies revenue continue to increase and also the various operating efforts to be rolled out in connection with our live-streaming business in the VAS business.

On the OpEx side, due to the revenue pressure caused by the virus outbreak, we are surely going to be more disciplined on the OpEx side. But in order for us to continue to support our user expansion, our user recovery at current stage, we definitely need to maintain certain level of marketing spending in terms of absolute dollar amount.

So as a percentage of total revenue, we would see the OpEx probably will go up, especially in the first half of the year. Things will get better in the second half.

In terms of the operating margin outlook, currently for the whole year, for core Momo, we are still shooting at around 30% operating margin with the Q1 being the lowest below average, and our Q2 will start to ramping up gradually.

On the Tantan side, the net loss will also significantly narrow down for the year, especially as we enter into the second half. We are going to have more quantitative view after the virus situation gets behind us and people are back in their normal lives..

We have the next question coming from the line of Jialong Shi from Nomura..

[Foreign Language] I will translate my questions. I would like to follow-up on the new non-subscription feature Tantan is currently testing. Just wonder if management may provide more details on this new feature. And also management mentioned earlier, you have identified the past issues with some of your efforts to recover Tantan's users.

So I just wonder, based on management's current estimate, how long it may take -- it will have to take -- it may take for Tantan's DAU to fully recover to its previous peak level.

Lastly, I just wonder if management can provide any colors on the -- or guidance on the revenue growth for Tantan in 2020?.

Okay. So first, regarding the non-subscription revenue stream. We have already provided quite a few details, and we have provided all the details for you to feel comfortable providing as of this point in time. We will provide more and more details as service progresses.

Regarding the general outlook, given the uncertainties caused by the virus outbreak, the related social distancing and the related social distancing control measure, it's hard for us to pinpoint the timing for a full recovery to the peak user level.

Trend-wise, the number of active users picked up rapidly in January for about 2 weeks -- in January and until about 2 weeks after Chinese New Year holiday, and has since been under pressure due to the spreading of the virus and nationwide social distancing in control.

We expect the user and paying users start ramp up again after the off-line dating activities recover in scale. It's likely to happen sometime in the middle of Q2, but it's going to be a progressive process instead of an immediate downsize as soon as the quarter starts.

So Q1 will be under pressure, Q2 could be of gradually ramping up quarter depending on when the activity start to pick up the scale. And currently, we are very optimistic about the growth outlook in the second half of the year. Regards to user growth strategy, I've already laid it out and the 3 things in my remarks.

Revenue outlook, again, it's hard to be too quantitative about revenue numbers now, but here are my thoughts on the trends. Subscription revenue will largely follow the user trend with the deferral as the swing factor.

So the first half could be under some pressure, but the subscription revenue can ramp up meaningfully from Q3 as the virus shadow fades away. Non-subscription revenue is also likely to materialize in the second half. Given these 2 factors, the revenue growth will be more heavily loaded into the back half of the year..

Yes, I hope that answers your question, Jialong. Given the time, I'm sorry about the overrun of the previous parts of the call, but I guess, that concludes the conference call for today. Thank you for joining us. We will see you next quarter. Operator, we are ready to close..

Certainly. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect your lines now. Thanks..