Hello Group Inc (MOMO) Q4 2022 Earnings Call Transcript

Hello Group Inc (NASDAQ: MOMO) Q4 2022 earnings call dated Mar. 16, 2023

Corporate Participants:

Ashley Jing — Head, Investor Relations

Yan Tang — Chairman and Chief Executive Officer

Hui Peng — Chief Financial Officer

Analysts:

Leo Chiang — Deutsche Bank — Analyst

Thomas Chong — Jefferies — Analyst

Xueqing Zhang — CICC — Analyst

Henry San — JPMorgan — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Fourth Quarter and Fiscal Year 2022 Hello Group Inc. Earnings Conference Call. All participants are in a listen-only mode. [Operator Instructions]

I would now like to hand the conference over to your first speaker today, Ms. Ashley Jing. Thank you. Please go ahead, ma’am.

Ashley Jing — Head, Investor Relations

Thank you, operator. Good morning, and good evening, everyone. Thank you for joining us today for Hello Group’s fourth quarter and fiscal 2022 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; 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 both 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 related 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 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 statement, as a result of new information, future events or otherwise, except as required under law.

I’ll now pass the call to over to our CEO, Mr. Tang Yan.

Yan Tang — Chairman and Chief Executive Officer

[Foreign Speech]

Hello, everyone. Thank you for joining our call. 2022 was an extremely challenging year for many Chinese companies. So COVID resurgence brought a lot of uncertainties to the overall business environment. However, I’m pleased to see that our team was due to external pressures by timely adjusting strategic priorities and corresponding execution plans in the second half of the year with flexible product and operational measures.

[Foreign Speech]

Despite the challenges, we delivered solid financial results for shareholders, enabling us to conclude the year on a satisfactory note. Our first to review the main operating and business results in the fourth quarter and fiscal year 2022 and then our outline our strategic priorities for fiscal 2023.

[Foreign Speech]

I will start with a brief overview of our financial performance. For the fourth quarter of 2022, total revenue was RMB3.21 billion down 13% year-over-year, and 1% quarter-over-quarter. Adjusted operating income was RMB499 million with a margin of 16%. Total revenue for a Momo app and standalone new app was RMB2.87 billion, down 11% year-over-year, a 1% quarter-over-quarter and adjusted operating income was RMB514 million, down 21% year-over-year and 20% quarter-over-quarter.

[Foreign Speech]

With a margin of 18%, total revenue from Tantan came in as RMB347 million, down 21% year-over-year, but up 2% quarter-over-quarter. Adjusted operating loss was significantly narrowed to RMB15.17 million from RMB114 million in the same quarter of last year. On a sequential basis, adjusted operating loss continued to narrow further despite an increase in the year-end seasonal expenses. I’m pleased with the progress that Tantan made improving cost efficiency in the second half of the year.

[Foreign Speech]

For fiscal 2022, total revenue was RMB12.3 billion compared with RMB14.6 billion in 2021. Adjusted operating income was RMB2.03 billion with a margin of 16% compared with RMB2.59 billion in 2021. The decrease in total revenue and adjusted operating income was mainly due to the significant pressure on both Momo and Tantan caused by COVID related factors and regulatory factors. We adjusted some of our strategic priorities mid-year focusing on cost reduction and efficiency improvement to mitigate negative impact of external factors on our bottom line.

[Foreign Speech]

Total revenue from the Momo app and standalone app for fiscal year 2022 was RMB11.3 billion, down 10% from last year, the decrease was due to the decline in Momo revenue while the standalone apps maintain rapid growth momentum from a high base in 2021. Adjusted operating income was RMB2.36 billion in 2022, with a margin of 21% compared with RMB2.92 billion in 2021 with a margin of 23%. Tantan’s total revenue was RMB1.37 billion down 33% from 2021.

[Foreign Speech]

Adjusted operating loss were RMB330 million and be compared with RMB337 million and be in 2022 — sorry, 2021. Although revenue declined from last year, due to the impact of the pandemic and the reduction in channel investments, Tantan’s adjusted operating loss narrowed as a result of our initiatives to reduce costs and improve efficiency starting in July. Bottom line performance improved significantly in the latter half of the year, laying a solid foundation for Tantan to achieve breakeven in fiscal 2023.

[Foreign Speech]

Now, I’ll discuss the execution of our strategic priorities in 2022. At the beginning of the year, we set separate goals for Momo, Tantan, and our new standalone apps, given the different business cycles. For the Momo app, the product with the largest user base and most mature commercial experience in our brand portfolio, its main goal was to maintain a stable user base with a limited marketing budget and seek growth opportunities on top of that, while ensuring the cash cow of business remains stable.

[Foreign Speech]

Although many uncertainties surrounding the COVID and regulatory environment last year resulted in a relatively large gap between that goal and actual results, I’m pleased to see that in response to the external challenges, our team primarily mitigated the decline in profit by reducing cost and improving efficiency. This has laid a solid foundation for our cash cow business to turn to a growth trajectory, once the external environment improves this year.

[Foreign Speech]

Tantan’s goal was to deliver solid user growth by improving marketing efficiency and the quality experience. However, the COVID situation continued to deteriorate from the beginning of the year, and largely affected user savings sentiment and their propensity to pay for value-added services, resulting in a significant decline in China ROI.

[Foreign Speech]

Therefore, we decided to adjust the Tantan strategic goals in the second half of the year to focus on narrowing net loss, by reducing low efficiency channel marketing spend and accelerating our efforts to develop product and monetization models that are suitable for the Asian dating culture in order to pursue profitable growth.

[Foreign Speech]

Tantan’s financial performance in the past two quarters has clearly demonstrated the importance of our strategic adjustments and our team’s strong execution ability. With respect to the new products and businesses, our goal was to continue to enrich our product portfolio and push the boundaries beyond Momo and Tantan. We made steady progress on this front in 2022. Next, I walk you through the details.

[Foreign Speech]

Firstly regarding Momo app user growth and key operating metrics in 2022 user traffic and engagement level, so is the most of your challenges in comparison with the previous year. The main pressure came from the increasingly tightened COVID container measures throughout the year, as well as the COVID infection surge in many regions in China after the removal of the zero COVID policy in December.

[Foreign Speech]

In the fourth quarter, Momo has RMB94.6 million monthly active down 13% sequentially. The rapid spread of COVID led to a significant decline in organic traffic and retention. For our considerations, our team scaled back investments in channels timely to reduce unnecessary spending during the peak of the pandemic. The decline MAU cost the number of paying users to decrease by 600,000 to 7.8 million in the fourth quarter. In 2022 to improve marketing efficiency, our team continued to optimize channel strategy and shifted our user acquisition focus from MAUs to paying users.

[Foreign Speech]

The improvements in channel marketing efficiency mitigated all financial pressure in a challenging environment and had a positive impact on ensuring the stability of our cash cow business. With user social sentiment gradually recovering after the Chinese New Year, and they use started to continuously trend upward and have bounced back to the same level as Q3 last year. Meanwhile, use as time spent surpassed its peak level in 2022.

[Foreign Speech]

Now discuss progress we made regarding the priorities of ensuring our cash cow business remains stable. In 2022, multiple external factors brought severe challenges to Momo app top-line, particularly is the live streaming business. The incremental revenue contributed by the new standalone apps to Momo segment last line partially elevated the pressure from Momo app. For fiscal 2022, the revenue ratio of VAS and live streaming increased by 22 percentage points from the previous year to 87%. Our team leveraged VAS use cases to unleash the spending potential of long tail users, which created a more balanced revenue structure.

[Foreign Speech]

Must live streaming revenue was RMB1.56 billion for the fourth quarter, down 20% year-over-year, but up 3% sequentially. For fiscal 2022, revenue from live streaming totaled RMB5.97 billion down 20% year-over-year. In 2022, the pressure on live streaming revenue mainly came from two factors. Number one, the macro headwinds and spending softness as a result of the pandemic; and number two product adjustments we made in Q2 to meet regulatory requirements.

[Foreign Speech]

In the second half of the year, our live streaming team introduced the new features targeting high paying users to improve their product experience and the expansion in the number of top cohort users drove continuous growth in live streaming revenue. In December, a large number of broadcasters suspended work due to a high infection rate after the reopening, causing severe short-term disruptions to the supply side and revenue growth. However, the incremental revenue from the yen competition in November provided strong support for the live streaming revenue to grow sequentially in Q4.

[Foreign Speech]

In 2022 our live streaming team gradually shifted the operational focus from revenue growth to profitable growth and control costs by adjusting the operational policy and design of the Themify features. With this guideline in mind, we introduced some cost saving designs to the year in competition events. This partially reduced this pressure of large scale event on the gross profit margin. The sequential dip in GP margin in Q4 ’22, was milder than in the same period last year. The overall revenue sharing policy and supplies and ecosystem remain stable throughout the year.

[Foreign Speech]

With regards to last, revenue from value-added services excluding Tantan totaled RMB1.27 billion for the fourth quarter up 2% year-over-year and down 5% sequentially. The year-over-year growth was entirely attributable to the incremental revenue from the new standalone apps. In the fourth quarter, past revenue from the Momo app totaled RMB1.04 billion in the down 9% both year-on-year and quarter-over-quarter, revenue from the standalone apps was RMB220 million up 129% year-over-year and 15% sequentially.

[Foreign Speech]

For fiscal year 2022, revenue from value-added services excluding Tantan totaled RMB5.18 billion, up 7% year-over-year. VAS revenue from the Momo app decreased 2% year over year to RMB4.45 billion, due to the continuous pressure from COVID. Momo Advanced revenue was considerably lower than our expectation at the beginning of 2022. In order to offset this revenue decline, our team pushed harder on monetization of new apps, driving revenue from these new apps collectively to increase 143% year-over-year to RMB737 million.

[Foreign Speech]

As COVID control measures became increasingly strict in 2022, social use cases with higher conversion of online to offline activities saw significant pressure on both traffic and revenue fronts. For example, uses enthusiasm on virtual gifts consumption in interest group and ingredients from the nearby [Indecipherable] list significantly weakened compared with before the strict COVID control measures were implemented.

[Foreign Speech]

Revenue from membership subscriptions also declined, because this service represents paying features designed to increase user’s efficiency to make new connections that they can potentially meet offline. In contrast, the audio and video based social entertainment experiences with less RBS attributes were able to effectively offset the impact of COVID on traffic and users’ propensity to pay and drove steady revenue growth in 2022, by leveraging innovative products and features.

[Foreign Speech]

With respect to Tantan, I’ll start with user trends and overall financials. In response to the business and financial impacts on Tantan, caused by the escalating pandemic control measures, since the beginning of the year, the management decided to pursue a cost control strategy in the second half to narrow Tantan’s net loss by reducing marketing spend and cutting investments in channels and methods with low ROI.

[Foreign Speech]

Since the removal of the zero COVID policy in early December, many regions across the country experienced a surge in COVID infections, which put a lot of pressure on user traffic, compounded by the reduction in China investment. China’s overall and a huge decrease to 12% quarter-over-quarter to RMB18.4 million in December, down 26% from June before we initiated call controls.

[Foreign Speech]

The number of paying users was 1.7 million down to 100,000 sequentially, mainly due to the decline in both MAU and paying conversion amid the fast growing COVID infections. As infection gradually eased off after the Chinese New Year, traffic started to resume growth. DAU in early March has recovered to the level before the pandemic outbreak in December last year.

[Foreign Speech]

Now, I’ll briefly reveal Tantan’s financial performance. Total revenue for the fourth quarter was RMB347 million, down 21% year-over-year, but up 2% sequentially. The year-over-year decrease was mainly due to the decline in the number of paying users. The sequential growth was due to the improvement in ARPPU, driven by live streaming and the new premium Black Gold membership service, which offset the pressure on revenue caused by the decline in paying users.

[Foreign Speech]

Last revenue was RMB184 million, down 9% sequentially although the sales of new memberships service played a positive role in improving VAS ARPPU, the increase couldn’t fully offset the pressure from paying user decline because membership revenue is highly correlated with the number of paying users.

[Foreign Speech]

On the other hand, the live streaming business, which is more sensitive to revenue oriented operational efforts, our team was able to drive significant ARPPU growth through product improvements and new features. As a result, live streaming revenue for the fourth quarter was up 17% sequentially to RMB163 million.

[Foreign Speech]

For fiscal year 2022, Tantan’s total revenue was RMB1.37 billion, down 33% year-over-year, mainly due to the decrease in paying user count resulting from COVID and our initiative to reduce channel investments. Lost revenue in 2022 was RMB824 million, down 27% year-over-year and live streaming revenue was RMB544 million, down 40% year-over-year.

[Foreign Speech]

Tantan’s adjusted net loss for fiscal year 2022 was RMB306 million in the compared with RMB337 million in 2021. Although the net loss in 2022 was still relatively large, adjusted net loss was substantially narrowed in the latter half of the year. Thanks to our effective strategy to control costs and optimize channel investments. The average quarterly adjusted net loss significantly improved from RMB140 million be in the first half of the year to RMB14 million and in the second half. And the efficiency of results investments greatly improved.

[Foreign Speech]

Now, let’s look at the progress Tantan has made against these strategic priorities. The strategic goal is that at the beginning of the year before the pandemic situation deteriorated was to deliver solid use of rolls by improving marketing efficiency and call dating experience. However, during the second quarter, tighten COVID control measures had a severe negative impact on user retention and paying conversion.

[Foreign Speech]

User retention and pain conversion are key indicators that determine the LTV and channel ROI. The significant decline in both metrics led to a negative third cycle where the more user we acquired, the greater the financial loss. Growing the user base without making a profit not only makes no economic sense, but it’s also unsustainable. In response to the uncertainties created by the pandemic, in the second half of the year, we adopted a more prudent marketing strategy rather than grow at the expense of bottom line.

[Foreign Speech]

We reduce the spending in low efficiency channels to narrow net loss. At the same time, we continue to focus on improving user retention and ARPU. ARPU growth through algorithms, product innovation and new non membership VAs features once all items positive, we will realize the profit into marketing to create a self-sustaining growth cycle.

[Foreign Speech]

Next, let’s look at the progress we have made in terms of improving user acquisition efficiency and enhancing retention and ARPU. Firstly, on the channel front, since the beginning of the year, our team continued to improve channel efficiency by optimizing ad materials and adjusting the proportion of new users and domain users. Therefore, although the large-scale outbreak of the pandemic in December led to a larger-than-expected decline in user base, the key user acquisition indicators such as the unit acquisition cost, retention and new user ARPU have all improved to varying degrees compared with the previous year.

[Foreign Speech]

The average unit acquisition cost for fiscal year 2022 was down nearly 20% year-on-year and especially in Q4 user acquisition cost was down 50% from the year ago period. And new user ARPU increased by more than 40%. Compared with the previous year, the average user age tended to be younger and the proportion of new female users remained at a satisfactory level. Our team maintained the stability of the user experience and of the platform ecosystem despite the deteriorating pandemic situation and the decline in new users, resulting from the channel investment reduction.

[Foreign Speech]

In terms of improving ARPPU through new product experiences, we have clarified two important directions: First, for user products, we need to explore effective social experiences beyond the swipe and match features. Second, for commercial products, we need to introduce non-language advanced paying models to improve per user revenue.

[Foreign Speech]

During the year of 2022, we made a few important optimizations to the chat room experience, which has played a positive role in improving retention and the time span of female users, and of those who are reluctant to show their real photos. At the same time, as the consumer experience based on virtual gifting, chat room can also effectively unleash the spending potential of different cohort of users, when it comes to monetization.

[Foreign Speech]

In 2022, in addition to exploring non-membership VAS features, our team also continued to dig deeper in the direction of membership subscriptions. In the second half of the year, we launched high-end Black Gold membership service on top of that VIP. This was immediately well received by a high spending cohort, making a positive impact on ARPPU expansion.

[Foreign Speech]

I’ll review the progress we made with our new endeavors. For the new standalone apps, financials of the profit oriented VAS and gaming apps are consolidated and Momo’s P&L in our segment reporting. In the fourth quarter, revenue from the standalone apps totaled RMB229 million doubled from the year ago period and up 13% sequentially.

[Foreign Speech]

For fiscal 2022, total revenue of our new endeavors was RMB791 million, up nearly 150% year-over-year. All standalone social apps have started to contribute to the group’s profits this year, while delivering rapid top-line growth. We expect the three standalone apps to continuously contribute meaningful revenue and profit to the group.

[Foreign Speech]

In addition to profit oriented products, we made breakthroughs in non-ROI oriented products for the first time in 2022. At the beginning of the year, we took the opportunity of the generational transition to launch the first large DAU product targeting Gen Z and Gen Alpha users and the user base quickly reached to a considerable level.

[Foreign Speech]

This confirms our team’s competitive advantage in discovering new markets and seizing new opportunities in the social space. Going forward we’ll accelerate the pace of new products exploration based on trial and error and strive to provide better social products for users of different ages and with different needs.

[Foreign Speech]

This concludes our business updates. Now, I’ll briefly go through our strategic priorities for 2023. Firstly for the mature Momo app, our goal is to keep the users and revenue scale stable, and continuing to optimize on cost structure and maintain the productivity of the cash cow business. To achieve this goal, we will continue to optimize product operations and introduce new monetization features as well as improve cash utilization and personnel efficiency.

[Foreign Speech]

Secondly, for Tantan, our goal is to achieve breakeven for the year and pursue sustainable growth on the back of a positive business cycle. To achieve this, we’ll walk on both channel and product fronts. So, we can build product and monetization models that are suitable for the Asian dating culture.

[Foreign Speech]

And thirdly, with respect to new products, we’re willing enrich our product portfolio, push the boundaries beyond Momo and Tantan and develop long-term growth engine. Specifically, our plan for ROI oriented standalone apps is to continue to scale up profit and to contribute more incremental revenue and profit to the group top line and bottom line. In addition, we’ll further explore opportunities for large DAU products to open up a new growth top.

[Foreign Speech]

Lastly, I would like to conclude by announcing that our board has declared as special cash dividend in the amount of $0.72 per ADS, which will amount to a total cash payment of approximately $137 million or 50% of the adjusted net income attributable to Hallo Group Inc., in 2022.

[Foreign Speech]

Investors who have been following us long enough will know that this is the fifth consecutive year that we have shared the fruits of our work with our shareholders. Whatever decision we’re making in terms of driving organic growth, business growth, identifying decent investment opportunities or paying back shareholders with dividends or in the form of equity buyback, the fundamental principle of our capital allocation strategy is to create long-term value for our shareholders.

[Foreign Speech]

I would like to thank you all for your faith in us. Now, let me pass the call over to Cathy for financial view.

Hui Peng — Chief Financial Officer

Hello everyone. Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total revenue for the fourth quarter 2022 was RMB3.21 billion down 13% year-on-year and less than 1% quarter-on-quarter. Non-GAAP net income attributable to the Company was RMB487.9 million excluding the impact of accrued income tax expenses on the undistributed earnings, which were not on a comparable basis for the two periods. Non-GAAP net income in the fourth quarter of 2022 was up 8% from the year ago period, despite the top line decrease as a result of our cost control efforts.

Looking into the key revenue line items for the quarter, firstly, a live broadcasting, total revenue from live broadcasting business for the fourth quarter of 2022 was RMB1.72 billion down 20% year-on-year but up 4% quarter-over-quarter. Momo apps live forecasting revenue totaled RMB1.56 billion for the quarter, down 20% year-on-year, but up 3% quarter-over-quarter. The year-over-year decrease was due to the pressure caused by the COVID and regulatory factors.

The sequential growth was mainly attributable to the incremental revenue generated by the year-end competition event. Tantan’s live broadcasting revenue amounted to RMB152.9 million, down 19% from Q4 last year, but up 7% from the previous quarter. The year-over-year decrease was mainly due to the negative impact of the pandemic and reduced channel investment, resulting in a significant decrease in the paying user count. The sequential increase was driven by ARPU growth thanks to our product and operational efforts.

Revenue from value-added service for the fourth quarter of 2022 was RMB1.45 billion, down 2% from Q4 last year and 6% sequentially. Revenue from value-added service on an ex-Tantan basis reached RMB1.27 billion in the fourth quarter of 2020 a 2% increase year-on-year, but down 5% sequentially.

The year-over-year growth was driven by incremental revenue contributed by the standalone new applications. The sequential decrease was due to pressure on Momo app, LBS-related features caused by the deteriorating COVID situation in China in Q4 2022.

Tantan value-added service revenue amounted to RMB183.8 million, down 22% from Q4 last year and 9% from the previous quarter. The decrease was due to the pressure on Tantan’s MAUs and paying conversion caused by the COVID-related factors as well as the reduction on marketing spend.

Non-GAAP cost of revenue for the fourth quarter of 2022 was RMB1.91 billion compared to RMB2.19 billion for the same period last year. Non-GAAP gross margin for the quarter was 40.4%, same as the year ago period and down 1.3% from last quarter, mainly due to the incremental expense in connection with the year-end competition event for live streaming.

Non-GAAP R&D expenses for the fourth quarter was RMB250.5 million, compared to RMB279.7 million for the same period last year or a 10 % decrease Y-o-Y. The decrease was due to continuous optimization and personnel costs, since the beginning of the year. Non-GAAP R&D expenses as a percentage of revenue remained stable at 8% from the year ago period.

We ended the quarter with 1,705 total employees of which 459 are from Tantan, compared to 2,051 total employees of which 552 from Tantan a year ago. The R&D personnel as a percentage of total employees for the group was 63% compared with 62% Q4 last year.

Non-GAAP sales and marketing expenses for the fourth quarter was RMB388.6 million, or 12% of total revenue compared to RMB648.6 million or 18% of total revenue for the same period last year. The significant year-over-year decrease both in terms of absolute renminbi amount and as a percentage of revenue was primarily attributable a compound shift in marketing strategy to cut spending on low efficiency approaches in order to take care of ROI and to a lesser degree reduction of Momo’s marketing spend amid a pandemic outbreak.

Non-GAAP G&A expenses was RMB84.9 million for the fourth quarter of 2022, compared to RMB89.4 million for the same period last year, representing 3% and 2% of total revenue respectively.

Now, briefly on other operating loss, other operating income/loss items. Other operating loss for the quarter was RMB65.2 million, compared to an income of RMB38.6 million for the same period last year. In Q4 2022, we accrued RMB92.9 million of potential loss related to a Momo users alleged illegal activity and embezzlement of funds, which was retrieved and consumed on Momo platform. There is no suspected or alleged wrongdoing on the part of the group.

The RMB92.9 million involved in the case is recorded as restricted cash on our balance sheet. Until the ruling of the court is announced, we won’t know for sure whether the fund will be ultimately released or instead drawn from our account to compensate a plaintiff in the case. However, for conservative purpose, we’ve decided to take the item into our P&L as an operating loss in Q4 2022. Other operating loss caused by the accrued amount was partially offset by a couple of income items.

Non-GAAP operating income was RMB499.2 million, a decrease of 2% from Q4 2021 and 18% from the previous quarter. Non-GAAP operating margin for the quarter was 16%, up 2 percentage points from the same period last year, but down 3 percentage points from the previous quarter.

Non-GAAP OpEx as a percentage of total revenue was 23%, a decrease from 28% for Q4 2021 and 24% from last quarter. Non-GAAP operating expenses on a year-over-year basis decreased 28%. The decrease in both absolute R&D amount and as a percentage of revenue for all pass was mainly due to the reduction in social marketing expenses and to a lesser degree optimization in personnel costs. Non-GAAP operating expenses decreased 4% sequentially. This is attributable to the decrease in marketing expenses, which offset the increase in seasonal expenses such as year-end bonus.

Now briefly on income tax expenses, total income tax expenses was RMB110.3 million and then before the quarter with an effective tax rate of 19%. In Q4 the Company accrued a withholding tax income of RMB39.7 million, which is 10% of undistributed profits generated by our WFOE. Without a withholding tax our estimated non-GAAP effective tax rate was around 12% in the fourth quarter.

Now, turning to balance sheet and cash flow items. As of December 31, 2022, whole group’s cash, cash equivalents, short-term deposits, long-term deposits, short-term investments and restricted cash totaled RMB13.4 billion, compared to RMB15.71 billion as of December 31, 2021.

The decrease was due to a number of cash flow items, including our cash dividend payments, repurchase of the Company’s convertible notes, repurchase of the Company’s equity under the ongoing buyback program and payment to Chinese tax authorities to repatriate cash from WFOE in China to our offshore entity. Net cash provided by operating activities in the fourth quarter 2022 was RMB539 million compared to the RMB666 million in the fourth quarter of 2021.

Lastly, on business outlook, we estimated our first quarter revenue to come in the range from RMB2.65 billion to RMB2.75 billion representing a decrease of 15.8% to 12.6% year-on-year, or a decrease of 17.5% to 14.4% quarter-over-quarter.

For Q1 2023, on a sequential basis, we expect the total revenue from both Momo and Tantan to decline mid teens due to the infection surge after reopen coupled with the Chinese New Year negative seasonality. Please be mindful that this forecast represents the Company’s current and preliminary view on the market and operating conditions which are subject to changes.

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.

Ashley Jing — Head, Investor Relations

Thanks. Just a quick reminder before we take the questions, please ask your questions in Chinese and followed by English translation by yourself. Operator, we’re ready for questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Leo Chiang with Deutsche Bank. Please go ahead.

Leo Chiang — Deutsche Bank — Analyst

[Foreign Speech]

Thank you, management for taking my question. My question is regarding to the Momo app. As the offline activities resume normalization, can management sure the latest user and revenue recovery trend of the Momo app? Additionally, what is the target of Momo’s revenue in 2023?

Yan Tang — Chairman and Chief Executive Officer

[Foreign Speech]

Let me translate first. So, as I mentioned earlier, the opening in early December severely affected our user base in a short period of time resulting in a sharp sequential decline and the use in Q4. In early January after the infection rate reached its peak in many regions, mainly in the northern part of China, as local users started to gradually come back as the pandemic subsided. However, the recovery trend was interrupted by the traditional low seasonality of Chinese New Year.

When people started to return to their hometown in January to get ready for the holiday celebration, DAU rebounded rapidly in early February after the Chinese New Year trough and the growth rate was actually significantly higher than that in early January and it was also better than our previous expectations. And currently Momo user base has rebounded to the same level as the end of summer holiday last year.

In terms of operation strategy, Momo app will remain focused on the ecosystem and product experience. We will continue to take a conservative approach in terms of event operation and competition arrangements. That means, we will prioritize stabilizing profit over driving non-profitable revenue growth.

And I’ll leave it to Cathy for financial details.

Hui Peng — Chief Financial Officer

Sure. Let me briefly share what we can say at this point about that good old question. For Q1, as you can see from our guidance, Momo’s live streaming is going to see mid- to high-teens decrease from last year. The biggest reason here is that, last quarter was — last Q1 was relatively a high base because if you remember correctly, it was before the regulatory changes in May — regulatory changes that happened in May 2022 that sort of made a prior Q1 sort of top-on for us.

On top of that, I suspect that not having full visibility into the macro conditions for the rest of the year is still weighing on the mind of some of our high paying users, at least that the general sentiment that we are getting from talking to a portion of our top standards. We will see if the sentiment gets better overtime as the year progresses and we are stimulating policies get released. So that’s Q1.

Looking out to Q2 onwards, we are definitely going to see quarter-over-quarter increase as both traffic and the whole economy continues to recover from the past three years of COVID restrictions. Plus, it looks like that the fluid regulatory situation that have been hanging over the sector over the past two to three years is also going to see some stabilization from — for the coming few quarters.

The only uncertainty is, I would say, is the — is how strong the macro gets, as we move deeper into the year because that’s really going to determine the spending sentiment of the top of the pyramid users for live streaming. For value-added service, Q1 this year is also a bit tough due to the January trough related to China’s reopen infection search.

Another factor here was related to SoulChill which was heavily impacted in Q1 due to the Turkey earthquake as well as heavy depreciation of the Egyptian pound against U.S. dollar. Some of our payment channels actually, some of our payment channels in Egypt, was actually suspended by local authorities due to that reason. We are currently shifting the both in marketing dollars as well as some of the other resources to other Gulf countries, where the growth momentum remains quite strong.

Overall, we expect value-added service to continue to grow this year, with second half being substantially stronger than first half due to the aforementioned several factors. So if you put all these different pieces together, I guess for the ex-Tantan part, we’re going to probably see continued quarter-over-quarter improvement throughout this year driven by the gradual recovery as well as the strong momentum that’s coming from the smaller new apps. How fast the top-line a ramp up throughout the year is really going to, as I said, heavily depends on the macro conditions. So I hope that sort of answers your question.

Ashley Jing — Head, Investor Relations

Operator, let’s take the second question please?

Operator

The next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong — Jefferies — Analyst

[Foreign Speech]

Thanks, management for taking my question. My question is about Tantan. Can management share about the latest user trends as well as the outlook for 2023 revenue and profitability? On the other hand in terms of the revenue scale, can management share about the chat room in 2023? Thank you.

Yan Tang — Chairman and Chief Executive Officer

[Foreign Speech]

Can I use the base showed a similar trends to Momo. Falling sharply during the surge of the infection and voting out after the Chinese New Year. And currently, the DAU has rebounded to the same level as November last year whether or not we can continue to grow from that and at what pace and he depends on if we can see continuous improvement in product experience and user retention, as well as our ability to introduce new payment features that can effectively improve channel ROI.

I don’t think the pursuit of user growth at the expenses of profits like in the past a year or two is still a viable model. So whatever we need is revenue growth that can generate profits. We will resume channel investment to accelerate user growth, if there is a significant improvement in ROI and investors put into it to be a bit patient with us on this round. So in terms of revenue growth, revenue growth is likely to come early and faster than user growth, and because both Black Gold membership and the chat room experience actually build on well established the monetization models, and both features play a positive role in enhancing user experience and retention.

So, therefore, even if user scale remains at the current level, we will continue to grow sequentially from Q1. And as for chat room experience, we will focus on refining its products and operations for now. And so, we don’t expect the chat room to bring large amount of revenue this year, but however, we have full confidence in the monetization model and revenue potential of the term experience.

I will let Cathy talk about the bottom line.

Hui Peng — Chief Financial Officer

Okay, about Tantan’s bottom line, well, if you look at the trajectory of the non-GAAP operating loss in 2022, you can see that we’ve been consistently narrowing down the offering loss quarter-over-quarter throughout the year. In Q4, non-GAAP operating loss was already at RMB15 million kind of run rate. We expect that narrowing trend, overall narrowing trend to continue into this year into 2023, which means that we should be looking at a positive bottom line for Tantan toward back half of the year, if not earlier this year.

The other thing worth calling out here is that as Tantan, as Tang Yan mentioned, as long as marketing ROI remains positive, we won’t focus too much on growing the bottom line margins at this point for Tantan because there are still a great deal of growth opportunities for the new products in the China market.

Instead, we could let part of the profit flow back into marketing to drive sustainable user growth as well as top line growth. That’s what we meant by getting into a positive cycle, which is the most important strategic priority for Tantan this year.

Ashley Jing — Head, Investor Relations

So operator, next question please?

Operator

The next question is from Xueqing Zhang with CICC. Please go ahead.

Xueqing Zhang — CICC — Analyst

[Foreign Speech]

Thanks management for taking my questions. My question is about standalone new applications. Should management share more color on these strategies and revenue expectations of new apps this year? Thanks.

Yan Tang — Chairman and Chief Executive Officer

[Foreign Speech]

In 2022, ROI oriented new product turned profitable with revenues up nearly 150% from 2021. And our goal for this app this year is to further scale up revenue and profit. For the domestic apps, which are at a more mature stage, the user base is relatively stable at the moment. So, we will continue to expand profits by driving ARPPU and margins.

And for the overseas apps, which are facing a much broader market space, our goal is to expand new revenue markets on top of deepening the existing territory. Turkish and Egyptian markets may be affected to some extent this year. But overall, we see strong revenue and profit growth opportunities for social apps in the mainland market. We will continue to make efforts in this direction.

In addition to the ROI oriented products that focus on revenue and profit, we will continue to invest and explore opportunities in DAU oriented products. And in fact, in addition to this year, we have several DAU oriented products in the pipeline currently in beta. We will share more information with the investor community as we accumulate our more data.

Ashley Jing — Head, Investor Relations

Operator, do we have any more questions on the queue?

Operator

Yes. We have one more from Henry San [Phonetic] with JPMorgan. Please go ahead.

Henry San — JPMorgan — Analyst

[Foreign Speech]

Thanks management for taking our question. My question is about margin. As you mentioned in the prepared remarks, optimizing costs will continue to be a key for this year. Could management share more color on the cost control strategy and the overall margin trend this year? Thanks.

Hui Peng — Chief Financial Officer

Sure, sure. Yes, that’s for me. For gross profit margin, the biggest driving force here is the payout ratio. I remember someone asked that question last quarter as well. Actually, probably every quarter, we all face this good old question. My answer remains pretty consistent with what I said at that time last quarter, which is that, the supply side factors are at this moment pretty stable. That means payout is going to remain largely stable as well, of course, different business of ours there are different margin profiles. So, revenue mix is always going to be another variable in the equation you should consider, when modeling out the GP margin. So that’s the GP margin line.

Moving down that line, last year, we did a pretty good job in optimizing the key operating expenses items such as personnel expenses, marketing costs as well as infrastructure spending. We just finished the annual budgeting cycle and it seems that, we still have some room to further improve the efficiency across all those spending areas. So we expect the operating expenses to further shrink down on a pretty — in a pretty meaningful way this year. And with top-line trend improving, as the year progresses, both bottom-line and bottom-line margins are going to improve as well.

So, just, I’m trying to sort of put things into a nutshell, if you look at the top-line and the OpExtrends that I mentioned earlier, and try to think about how the math overall math works to this year. There are probably two key takeaways. One is that top-line wise 2023 is going to see continuous quarter-over-quarter improvement driven by the overall COVID recovery as well as the strong growth momentum coming from the smaller new applications.

And the second takeaway is that we’re going to continue to optimize our costs and expenses. So bottom-line is going to see pretty meaningful growth on a year-over-year basis, especially in the second half of the year. So that’s basically the overall financial picture that I can lay out at this point. I have visibility to layout at this point.

For other stuff, I guess we’ll have to wait and see as the year progresses. I guess, for the interest of time, that’s going to be the last question that we take. I’ll hand back to Ashley for closing remarks.

Ashley Jing — Head, Investor Relations

Thank you everyone for participating our call and we’ll see you next quarter. Have a good night and good morning. Bye.

Operator

[Operator Closing Remarks]