Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter and Fiscal Year 2021 Hello Group, Inc. Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Ashley Jing.

Please go ahead.

Ashley Jing: Thank you, operator. Good morning, and good evening, everyone. Thank you for joining us today for Hello Group's Fourth Quarter and Fiscal 2021 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. Wang Li, CEO of the company; and Mr. Jonathan Zhang, CFO of the company. They will discuss the company's business operations and highlights as well as the financial 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 provisions of 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 this and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law.

I will now pass the call to Mr. Wang. I will translate for him. Mr. Wang.

Wang Li: [Foreign Language] Good day, everyone. Thank you for joining our conference call today. 2021 was a busy year for us despite a variety of external challenges. Our team was able to methodically execute our strategic priority set at the beginning of the year and delivered solid results. In my remarks today, I will begin by reviewing the key operational and business results for the fourth quarter and fiscal year 2021, followed by outlining our strategic priorities for FY 2022 and our execution plan.

[Foreign Language] I will start with a brief overview of our financial performance. For the fourth quarter of 2021, total revenue at the group level was CNY 3.67 billion, down 3% year-over-year and 2% quarter-over-quarter. Adjusted operating income for the quarter was CNY 507 million, representing a 14% profit margin. For the core Momo business, total revenue was CNY 3.24 billion, up 6% from Q4 last year and flattish from last quarter. Adjusted operating income was CNY 652 million with a 20% margin.

Tantan’s total revenue for the quarter came in CNY 437 million, down 41% year-over-year and 14% sequentially. The decrease was due to the demonetization process to improve user experience and retention. Adjusted net loss from Tantan was CNY 130 million for the quarter compared with CNY 8.84 million for the year ago period. [Foreign Language] For fiscal 2021, total revenue at the group level was CNY 14.6 billion compared with CNY 15 million in 2020. The year-over-year revenue decrease was due to our strategic decision to lower Tantan's monetization level in the second half of the year to improve user experience and retention to drive overall user growth.

Excluding Tantan, revenue for the core Momo was slightly down 1% from last year with the second half of 2021 back onto the year-over-year growth track. Adjusted operating income at the group level was CNY 2.59 billion, with an 18% margin. Excluding Tantan, operating income for the core Momo was CNY 2.92 billion with a 23% margin. Adjusted net loss for Tantan was RMB 337 million. [Foreign Language] Now a deeper dive into other aspects of the year.

I'm going to focus on the core Momo business and move on to Tantan later. As for the key operating metrics, core Momo had 114.1 million monthly active for Q4 '21, up slightly from a year ago and down slightly from the previous quarter. The sequential decline was due to COVID-19 resurgence and related control measures in various regions in China towards the end of the year. This had a clear negative impact on users' social sentiment. In addition, the peak e-commerce season drove up unit appreciation costs for channel marketing.

As a result, we lowered our channel investment for ROI considerations. The number of paying users for the quarter was 8.9 million compared with 9.0 million a year ago. On a sequential basis, paying user accounts decreased 400,000. This was mainly due to the decrease in MAUs. And on top of that, COVID-19 having a negative impact on paying conversion.

Despite external challenges, our product team managed to enhance user engagement by improving the basic social experience on the platform. The number of 2-way interactions grew meaningfully from the year ago period, and the number of greetings and response rate also increased -- continued to trend up. Product organization, together with channel strategy refinement, led new user retention to hit a record high since the beginning of the panoramic while the overall retention ratio reached a year high in Q4. This shows that the fundamentals of the core Momo as a social platform continued to remain stable. [Foreign Language] Next, let me walk you through the progress we made with our strategic priorities for the financial year 2021.

[Foreign Language] Firstly, on core Momo's user front, COVID-19-related control measures surprised the overall open social sentiment throughout 2021, especially in the second half of the year. Meanwhile, Tantan traffic became increasingly concentrated on a few platforms, resulting in a more intensive competition for channel resources and driving up unit acquisition cost for new users. Our goal has been to maximize ROI by seizing favorable marketing windows to step up user acquisition efforts. We have been subtly adjusting the allocation of marketing spend for new user acquisition and reactivation of common users. We offset the overall cost pressure caused by the increase in the unit price of new users by shifting resources to reactive dormant users because the retention ratio and paying conversion of dormant users are considerably higher than that of new users, and the unit price is meaningfully lower, thanks to the continued improvement in China ROI and product efforts, we were able to achieve our strategic goal for core Momo users to deliver a moderate increase in MAUs at a slightly lower cost compared to last year.

It has proven to be an effective way for us to maintain a stable user base in 2022. [Foreign Language] On the product side, the core Momo product team made good progress in optimizing core user experience while making continuous product innovation throughout 2021. The introduction of the mini verse experience in the first half of the year allows users to share their relationship stories and express their feelings without releasing the profile information. It played a positive role in enhancing female users' engagement and retention. The revamp of the new by People list in the second half of the year has also enhanced the users' experience by decentralizing the distribution of traffic.

Improving the efficiency of relationship discovery within the core experiences and introducing new features that provide incremental value to previously underserved users are key means for the product team to improve retention and ultimately drive users -- steady user growth. [Foreign Language] In addition to core Momo, in 2021, we continue to execute our strategic priorities of enriching product portfolio and pushing the boundaries beyond Momo and Tantan. One highlight here is SoulChill, a voice-based social app targeting the MENA area. Our team leveraged our rich product experience accumulated in China and combined it with a localized operational approach with user retention and ROI gradually improving, we stepped up our marketing efforts in the second half of the year. As a result, user scale and revenue showed rapid growth.

Although SoulChill is still in the early stages of user and monetization, its monthly revenue has already caught up to the level of Hertz and [indiscernible] combined. In the second half of the year, we launched ferritin, a Disney like simulation game, specifically targeting overseas female users. As we stepped up our marketing efforts during the holiday season, revenue grew rapidly in Q4 and ROI continue to improve steadily. [Foreign Language] In addition to SoulChill, [indiscernible], the two audio and video-based social apps targeting domestic markets also made impressive progress in 2021. For these 2 relatively mature apps, our strategy was focused on reducing costs and improving efficiency during the second half of the year.

As a result, both apps turned profitable within Q4. [Foreign Language] Next, I'll review the progress that we've made regarding our priority of bringing the cash cow business back on to the growth track. [Foreign Language] Firstly, with respect to live streaming, core Momo live streaming business revenue totaled CNY 1.95 billion for the first quarter, up 1% year-on-year and flattish sequentially. For fiscal 2021, revenue from live streaming totaled CNY 7.48 billion, down 13% compared with 2020. During last year, we continue to focus on the improvement of the content ecosystem by beefing up the supply end.

Revenue entered a sequential growth track after Chinese New Year low seasonality, and this growth momentum was maintained until Q3. The non-event day’ daily gross revenue came down quite a bit in Q4 compared with the summer peak, due to the increasingly challenging macro headwinds starting in September. In order to overcome spending softness, we hosted a series of small-scale promotional events to keep various cohorts of standards and performance well engaged, so that we could keep daily gross revenue at a decent level through relatively mild simulative measures, although the related costs associated with these additional event put some pressure on gross margin, we believe it was a necessary expense to help our content ecosystem partners whether tough economic conditions. [Foreign Language] Despite the market challenges, the overall content ecosystem continued to show steady improvement. The new incentive program continues to take effect in enabling us to secure the supply of high-growth revenue broadcasters and making us more attractive when recruiting new talents.

The amount of high-quality new talents grew 60% compared to the beginning of the year, and the retention and share of revenue contribution increased significantly. [Foreign Language] Now turning to VAS. Revenue from value-added service, excluding Tantan, totaled CNY 1.24 billion for the fourth quarter, up 16% year-over-year and down 1% sequentially. The sequential decrease was mainly due to the pandemic suppression of users' social sentiment and propensity to pay, resulting in the number of long gifting paying users, particularly in the interest group declining significantly. The number of membership subscriptions also showed a slight sequential decrease.

Core Momo VAS revenue was CNY 1.14 billion, up 11% from the same period last year. Revenue from the new bucket of apps totaled CNY 97.84 million, up 142% from Q4 last year, making a more meaningful contribution to our top line. [Foreign Language] For fiscal 2021, revenue from VAS, excluding Tantan, totaled CNY 4.85 billion, up 29% year-over-year. Core Momo VAS revenue totaled CNY 4.54 billion, up 24% year-over-year. Rapid growth from a high base was mainly driven by the introduction of unified features and operational events into the audio and video social entertainment experiences.

For instance, in Q2, we brought in the [indiscernible] my experience in the Chatroom where each grassroot talents are concurrently available and users can send virtual gifts to request performances ranging from singing to script writing. In Q3, we introduced [indiscernible] or [indiscernible], a unified gift feature in the Chatroom. These features were well received by users across the board. In addition to audio-video social entertainment, the team also introduced innovations into the traditional gifting category. To illustrate this, we may see seasonal gifts available in the increase group at the beginning of the year, where we theoretically reinvented gift ideas that effectively stimulated spending enthusiasm amongst the users.

Furthermore, [indiscernible] is a good example of how we keep users fresh and engaged through operational events. [Foreign Language] Now briefly about the new apps. For fiscal 2021, revenue from the new bucket totaled CNY 304 million, almost triple that of last year. driven by both user and ARPU growth. The performance was collectively driven by [Socio, Hezi and Tudou] and the performance of each of these apps were already reviewed in the previous product session.

So I'll quickly skip here. [Foreign Language] Now turning to Tantan. I will start with user trends and overall financials. The COVID resurgence had a clear negative impact on people's spending sentiment, which made large-scale marketing campaign less effective. We, therefore, took a moderate approach in terms of marketing investments.

Users’ scale decreased significantly in regions where COVID containment measures were severe. Internally, we focused our efforts on product adjustments aimed at improving user experience through rapid iterations. The steady product improvement led to an upward trend in user scale in regions that were free of pandemic and the control was more relaxed. Tantan had 27 million monthly active users for the fourth quarter up 1% from September and 8% from June are lower than our media expectation. Tantan paying user count came in at 2.5 million at the end of Q4 '21, down from 2.9 million last quarter.

The 400,000 net decrease was mainly attributable to

3 factors: First, the demonetization process to improve user experience and retention had a negative impact on paying conversion and AP Pool. Second, the pandemic suppressed the user’s dating sentiment and inclination to pay. Third, our current product efforts mainly focused on experiences beyond the swipe and match mechanism, which diverts traffic away from the existing vast pain features. This is obviously a negative factor to the membership paying conversion and revenues. However, this is a temporary problem, which can be addressed by introducing new mass futures beyond the swipe and match system.

[Foreign Language] Now let me briefly review Tantan's financial performance. Total revenue for the fourth quarter was CNY 437 million, down 41% year-on-year and 14% quarter-over-quarter. Mass revenue decreased 14% sequentially to CNY 236 million. The sequential decrease was due to the decrease in both paying user count and ARPPU for reasons explained earlier. Livestreaming revenue decreased 14% sequentially to CNY 201 million.

The sequential decrease was due to the decline in paying user counts as we substantially deemphasize live streaming in the September product upgrade. ARPPU grew on a sequential basis driven by the promotional events held at the end of 2021. [Foreign Language] For fiscal '21, total revenue for Tantan was CNY 2.03 billion, down 14% year-on-year. Adjusted net loss was CNY 337 million compared with a net loss of CNY 250 million in 2020. The decrease in the top line and bottom line was mainly caused by our initiatives to improve user experience and retention including marketing strategy adjustments to increase the female ratio at the beginning of the year and the demonetization process in the second half.

In addition, the COVID-19 resurgence in Q4 also had a further negative impact on revenue. ARPPU improved partially -- improvement partially offset the impact of a decrease in paying user count. VAS revenue for fiscal '21 decreased 18% year-on-year to CNY 1.13 billion. Total revenue from livestreaming business decreased 10% to CNY 903 million. [Foreign Language] Now I'll quickly recap Tantan's execution of strategic priorities in FY '21.

The single most important over time during the year was to deliver solid user growth by improving marketing efficiency and quality experience. several external and internal challenges over the past few years led to a decline in Tantan's user base from a peak in the first half of 2019. The external challenges mainly came from the ongoing COVID-19 pandemic since the beginning of 2020 and other factors that were out of the company's control. In retrospect, we could have done much better in important areas, including core product experience, channel marketing efficiency and brand building. As a result, we haven't been able to take full advantage of the tremendous market opportunities that we were seeing in the past few years.

Our most important move in 2021 was to put Tantan back on track by deploying a viable strategic target together with an execution plan as well as assembling a fully competent team after group realignment. In this process, we encountered unexpected obstacles growth but also achieved encouraging results. Now I'll go through the details [Foreign Language] First of all, let me talk about the aspects that we didn't do well enough. During the management transition, our assessment about how fast we can push forward the product and operational reform was a bit too optimistic. This compounded with the COVID-19 resurgence in Q4 have caused us to miss the user growth target I set in mid-2021 -- [Foreign Language] Although user growth was lower than we originally hoped for, we were pleased to see that the entire management and execution team was in place by the end of the year.

Before that, we had spent 2 quarters thoroughly reviewing Tantan's product experience, marketing strategy and branding plans. Based on large-scale research surveys and in-depth studies of user behavior, we identified key problems in these 3 areas and formulated corresponding solutions. [Foreign Language] On the marketing side, the most important area of progress we've made was to adjust increasingly unbalanced user structure. In the past few years, in order to control ROI and paying conversion to meet quarterly numbers in paying user count and revenue, Tantan compromised the quality of new users acquired through channels. Marketing efforts were tilted towards mail users with a strong competency to pay, resulting in a gradual deterioration of the gender mix.

We believe a balanced gender ratio is crucial to overall user experience in the dating community and the long-term healthiness of the ecosystem. Percentage of female users acquired through channels increased significantly since we introduced new ad material, specifically targeting women. We managed to keep the proportion of female users from channels within a reasonable range of 40% to 50%. After several months of adjustments, Tantan's overall gender ratio returns to early 2018 level with a stable upward trend. [Foreign Language] On the product side, one of the most important areas of progress made in 2021 was that we determined that the key to increasing user retention to improve the experience of female users and users without qualified photos.

Our survey shows that due to the passive nature of Asian women, 40% of female users on content swipe in an extremely selective way, resulting in them hardly getting any matches or interactions. In addition, for those who failed to provide qualified photos and were, therefore, denied access to the swiping system, 60% of them express their genuine desire to use Tantan staging service. Currently, this group of people represents around 1/3 of our state new registrations. The swipe and match product mechanism tends to be less effective in terms of addressing the needs of these 2 categories of users. That's why the retention has always been significantly lower than average.

We believe providing richer alternative features can help improve their dating experience and retention, ultimately making a significant incremental contribution to MAUs. While the team has yet to make a breakthrough in this aspect, we have seen some encouraging test results. We will continue to explore this with rapid iteration in 2022. [Foreign Language] On the product side, in addition to clarifying that, the key to drive user growth is to provide rich alternative dating experience on top of the swiping mechanism. The other important initiatives that we undertook in the Q3 product upgrade was to remove the excessive paywall features and merchandising tactics that cost the customer complaints.

Such as the monetization process has led to a decrease in commercial, including paying conversion, paying user accounts, ARPPU and revenue in the short run. However, in the months following the product upgrade, the membership renewal rate showed a substantial increase and the retention ratio also improved in January and February, overall paying conversion returned to a steady improvement track. The improvement in membership renewal rate made started foundation for us to balance user experience and further grow revenues. [Foreign Language] In parallel with our domestic efforts, our team made impressive progress in overseas expansion since taking over Titan execution. We made it forward back into the Indonesia market in Q2 by introducing audio and video-based real-time interactive features on top of the swiping experience.

We were able to leverage live streaming and non-membership VAS monetization model to break through the ARPU seeding that is often seen in developing countries. The combination of innovative consumer and monetization products drove steady improvement in channel marketing ROI. Meanwhile, engagement on the supply side, user penetration and time spend continue to trend up as well. Statistics from data show us Tantan user and revenue scale in Indonesia was ahead of Tinder throughout the second half of the year and its December revenue was 1.4x last year. [Foreign Language] The more favorable general ratio improved the subscription renewal rate and solid progress we've made in Indonesia have collectively contributed to the user growth during the latter half of FY '21.

These positive changes have given us firm confidence that small yet solid steps in the right direction can be an effective way towards user growth. The journey won't be easy, but will be an extremely rewarding one in the end. Along that journey, commitment matters, patients matters, perseverance matters, perhaps the important of our focus on the long-term matters. [Foreign Language] This concludes the business update. Now I'll move on to the most important part of my speech today, the group level strategic priorities for 2022 and how we plan to achieve them.

[Foreign Language] For core Momo, our goal continues to be able to maintain a stable user base with a limited marketing budget and try to see user growth on top of that. Our action plan consists of 2 pillars. First, we'll continue to optimize user acquisition model and increase the proportion of dormant users to balance overall ROI. Second, on the product side, we'll continue to identify underserved users' needs and optimize female-oriented social experiences to improve retention and leverage new technologies to push forward product innovation to meet the needs of young generation and attract new users. [Foreign Language] On the other hand, we need to continue to enrich our product portfolio and push the boundaries beyond human Tantan.

In addition [indiscernible] where our profitability has already been proven. We plan to replicate this model in other apps. Our goal is to have other profitable app that can take leading positions in niche markets in the next 3 to 5 years. [Foreign Language] In addition to these vertical apps, I'd like to share my views on something better. As technology evolves, we can see a clear long-term trend of people screen time shifting from mobile devices to other types of smart hardware.

Technological breakthroughs bring new opportunities for open social experiences in terms of how people can connect and interact with each other. We have been paying close attention to the development of technologies such as 3D rendering, motion capturing, AI and XR devices, all of which can help enhance social experiences in multiple dimensions, and we are making bold explorations on this front. As a leading company with over a decade of experience in creating an open social space, we help more than 100 million users discover new relationships, expand the social connections and build meaningful interactions on a monthly basis. This is the core value of our business. I look forward to helping users better meet the more basic human needs through technological advancements.

[Foreign Language] For the Momo team, the third strategic goal for the year is to ensure the cash cow business remains stable for 2022 the biggest uncertainty will arise from the impact of the macroeconomy and pandemic on consumer sentiment, which brings significant challenges to achieving this specific goal. Our plan is to enhance commercial product innovation while ramping up the monetization level of new apps to drive overall growth of apps. [Foreign Language] With respect to Tantan, the strategic goal this year remains to deliver solid user growth by improving marketing efficiency and the quality experience. [Foreign Language] On the product side, we'll continue to focus on improving the retention ratio of female users and both with our qualified photos. We are currently trying to resolve these 2 issues through efforts mainly in 2 areas.

-- number one, in reaching user profile information as well as other contents that can review personality; number two, expanding the way people connect and interact with one another. [Foreign Language] In terms of improving marketing efficiency, 3 key areas are crucially important for us to achieve our goal, optimizing unit acquisition cost, enriching ad content and enhancing brand equity. Our China marketing experience over the past few months made us realize that driving user growth by simply allowing user acquisition costs to go up is costly and inefficient. On the contrary, improving ad material can bring considerably more high-quality new users. This will be the key direction for channel marketing optimization this year.

In addition, we are seeing huge potential for Tantan to enhance this brand equity. The key to creating a virtual circle in user growth is to increase organic portion of new users as opposed to those coming from paid channels. This goal can be achieved only through continuous investment into branding, which also needs to go hand in hand with generating improvement in product experience. This is going to be so much more efficient than simply pouring money into marketing channels. This year, we will further explore opportunities and invest in talent lending.

We will time the branding efforts with progress on the product side. [Foreign Language] Lastly, I would like to conclude by announcing that our Board has declared a cash dividend in the amount of USD 0.64 per ADS, which will amount to a total cash payment of approximately USD 127 million, or 40% of adjusted net income attributable to the Hello Group Inc. in 2021. This is the fourth consecutive year that we've shared our fruits of our work with our shareholders. It demonstrates management's confidence in the fundamentals of the company as well as our commitment to creating and delivering shareholder value for the long term.

Thank you for your faith in the Hello Group team. [Foreign Language] This is what I'd like to cover today. Now let me pass the call over to Mr. Jonathan Zhang for financial review. So, please?

Jonathan Zhang: Thanks.

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 of 2021 was CNY 3.6 billion, down 3% year-on-year or 2% quarter-over-quarter. Non-GAAP net income attributable to Hello Group was CNY 280.9 million compared to CNY 836.4 million from the same period of 2020 or a 66% decrease year-over-year.

During the fourth quarter, the company accrued CNY 407.4 million withholding tax on undistributed earnings generated in 2021 by our wholly owned foreign enterprise due to our plan to continue to repatriate profit from the OFI to support our capital allocation demand, including, not limited to, returning cash to our shareholders and overseas business investments, et cetera. Excluding this special item, non-GAAP net income for the quarter would have been CNY 488.3 million. As Wang Li has covered revenue analysis in a great level of detail in the interest of time, I will skip it. and dive directly into the cost and expenses items for the quarter. Our non-GAAP cost of revenue for the fourth quarter of 2021 was CNY 2.19 billion compared to CNY 2.02 billion for the same period last year.

The non-GAAP cost of revenue as a percentage of total revenue was 59.6%, an increase from 53.2% from the Q4 2020 non-GAAP gross profit margin for the quarter was down by 6.3 percentage points from a year ago. The decrease was attributed to the

following factors: number one, which is the biggest one, higher payout ratio from core Momo live broadcasting business on a year-over-year basis due to our adjustments to the broadcaster and agency incentive program; and number two, Tantan accounted for a smaller percentage of the group's total revenue as its gross margin is higher than core Momo; number three, fixed nature cost items such as headcount and IDC CDN expenses represented a higher percentage of revenue as total revenue declined, particularly on content side, which was due to the demonetization plan. On a sequential basis, the non-GAAP gross profit margin for the quarter was down by 2.2% from Q3. The cost of revenue in Q3 2021 included $49 million production costs. Excluding this quarterly specific item, we would have seen a 3.4% sequential decrease.

The non-GAAP gross margin for the quarter, which was primarily attributable to the higher payout ratio in connection with the year-end gala and more promotional events to help the agencies and broadcasters weather through the macro headwind. We currently expect the non-GAAP gross margin to see a rebound of a couple of percentage points from Q1 onwards due to less competition events related costs as well as positive revenue mix change as we expect VAS revenue to represent an increasingly higher percentage of total revenue. Non-GAAP R&D expenses for the fourth quarter was CNY 479.7 million compared to CNY 486.5 million for the same period last year, representing 7.6% and 7.5% of total revenue, respectively. The decrease was mainly due to decrease in employee salaries and social welfare resulting from a reduction in headcount. We ended the quarter with 2,051 total employees, of which 552 are from Tantan.

R&D personnel as a percentage of total employees for the group was 62% compared to 57% Q4 last year. Non-GAAP sales and marketing expenses for the fourth quarter was CNY 648.6 million or 17.7% of the total revenue compared to CNY 654.1 million or 17.2% of total revenue for the same period last year. The year-over-year decrease in sales and marketing expense in RMB amount was mainly due to a lower user acquisition investment for Tantan, as Wang Li mentioned earlier. The decrease was also partially offset by our stepped-up marketing efforts to promote a recent launched simulation game in overseas market. Non-GAAP G&A expenses was CNY 89.4 million for the fourth quarter of 2021 compared to CNY 134 million for the same period last year, representing 2.4% and 3.5% of total net revenue, respectively.

It's worth mentioning here due to the fact that the group fair market value, as indicated by its market cap, has been significantly below its net book value of equity for competitive -- conservative perspective, we recorded a CNY 4.397 billion as an impairment loss during the quarter, which represented a total value of all goodwill and intangible assets with the exception of the group's operational license and permits on the consolidated statement of operations for the year ended December 31, 2021. This impairment resulted in a CNY 4.02 billion GAAP operating loss for the Q4 2021. Now briefly on income tax expenses. As I mentioned at the beginning, in Q4, we accrued withholding income tax of CNY 207.4 million on undistributed earnings generated in the year of 2021. This amount was recorded as income tax expenses for the company.

In the past, we recorded withholding income taxes in connection with the repatriation of UFI's profit whenever it actually happened as we intended to permanently reinvest the undistributed earnings from our fees in China. Starting from Q4 2021, all undistributed profit generated by OFI will be subject to 10% withholding tax accrual based on the company's repatriation history and expected ongoing demand for U.S. dollar funding needs including, but not limited to returning cash to our shareholders as well as offshore business development. Therefore, going forward, on a quarterly basis, we will accrue 10% of net income from OFI for the quarter and report as income tax expenses. Now turning to balance sheet and cash flow items.

As of December 31, 2021, Hello Group's cash, cash equivalents, short-term deposits, long-term deposits, restricted cash and long-term restricted cash totaled CNY 15.71 billion compared to CNY 16.48 billion as of December 31, 2020. Net cash provided by operating activities in the fourth quarter of 2021 was CNY 665.5 million. Lastly, on the business outlook, we estimated our first quarter of 2022 revenue to come in the range from CNY 3.1 billion to RMB 3.2 billion, representing a decrease of 10.7% to 7.8% year-on-year or a decrease of 15.6% to 12.9% quarter-over-quarter. The Q1 2022 -- for Q1 2022, we expect total revenue for core Momo to decrease in mid-single digit from Q1 last year due to macro weakness and the pandemic control negatively impact users' spending sentiment. On content side, we expect the revenue to be in the trough in Q1, mainly due to the combination of factors, including resurgence in COVID lagging VAS revenue impact from the demonetization process last year as well as restructuring of our Tantan's live streaming business.

which could translate into a similar level of year-over-year decrease rate as seen in Q4 2021. However, we do expect Tantan's revenue to improve from Q1's level as the year progresses. Please be mindful that this forecast represents the company's current and preliminary review on the market condition 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 Ashley to start the Q&A.

Ashley Jing: Thanks, Jon. Just a quick reminder before we take in the questions. For those Chinese, please ask your questions in Chinese first, by English translation. And also, please leave it in the number of questions to maximum 2. Thank you.

Operator, we are ready for questions.

Operator: [Operator Instructions] Our first question comes from Thomas Chong with Jefferies.

Thomas Chong: [Foreign Language] I have 2 questions. The first question is about core Momo. Can management share about the 2022 user growth expectations and the revenue trend for VAS and live streaming together with the full year profitability profile? And the second question is about, can management comment about the user trend, revenue as well as the earnings profile?
WangLi: [Foreign Language] So Thomas, to answer your question on the core Momo part, our user growth target for the core Momo in 2022 remains the same as last year, which is to remain a stable user base with a flattish marketing budget and try to seek user growth on top of that.

And as far as the current channel marketing environment is concerned, to achieve this goal, we need to continue to optimize our strategy for reactivating government users and expanding marketing channels. However, MAU in Q1 may experience a decline due to the impact of the pandemic and the negative seasonality. In terms of revenue outlook, there are a few factors that need to be taken into consideration. First of all, is the macro economy. Our Q1 guidance reflects the severe challenges to our live streaming business from the macro headwinds.

And besides changes in the external environment have had quite an impact on the engagement of agencies. So if the macro and other external conditions ease in the second half, the live streaming business may very well improve; otherwise, the downward pressure will continue. To address this, we will try to make more efforts on the product and operational side to enhance user experience and ensure stable content supply. And in terms of value-added service, the macro environment and pandemic have had a negative impact on the core Momo value-added service. But compared with live streaming business, VAS is a lot more resilient to the economic cycles.

So in particular, as the new bucket of standalone long app is taking off, so we will moderate the ramp up monetization efforts this year to drive overall user growth of VAS. We expect value-added service to grow as a whole in the double-digit in 2022. As for the revenue structure, revenue contribution from value-added service will continue to increase, while the proportion of live streaming will further decrease. At the group level, we expect live streaming revenue contribution to drop from 60% at the end of last year to around 50% at the end of this year. Given the net income in Q1 will be quite low due to negative seasonality in revenue, here, I would like to provide a bit more color about profitability this year.

In response to current pressure on revenue from market uncertainty, management has a strong focus on optimizing operating expenses. We expect OpEx to reduce significantly this year. Although there are some uncertainties on the revenue front, we expect profit to rebound after Q1. And excluding Tantan, the annual profit margin for the core Momo is expected to remain above 20%, which is about the same as last year. [Foreign Language] I think Tantan's user growth in the upcoming year will depend on both external and internal factors.

The external factors include when the pandemic and the related control measures will ease. In Q1, the COVID-19 resurgence has been quite serious, and the related control measures were very strict. As a result, active user base decreased significantly in areas where COVID resurgence was severe. However, the steady product and marketing improvement led to an upward trend in user scale in regions where COVID-19 containment measures were relatively relaxed. On the whole, we need to wait until the pandemic situation becomes clearer before we can make a more realistic estimate of the user growth.

The internal factors come from progress on the product side and the pace of our marketing efforts. Last year, the target we set at which how fast we should push forward the product and operational plans was a little bit too aggressive. Yet user growth has bottomed out and returned to a growth track. As for now, we are making steady progress in various product iterations and channel marketing optimization. We expect to see a steady upward trend in MAUs when the pandemic subsides.

Our target is to deliver a steady CAGR growth of 20% for MAUs over the next 3 years. [Foreign Language] On the revenue front, we expect VAS revenue to be in a trough in Q1, mainly due to the pandemic impact and revenue deferral. However, VAS revenue should gradually pick up after Q1, mainly due to the following factors. First one is the steady recovery of MAUs after the pandemic ease out. Second factor is that we should benefit from a stable paying conversion.

We're done with our demonetization initiatives and paying per version is back on a steady growth track in Q1. Here, I will share some recent developments to give you more insight on the situation. Although COVID resurgence led to a sequential decrease in MAUs in the first couple of months of the year, and thanks to the improvement in paying conversion, the number of paying users in February remained pretty much stable compared to last December. And the third driving factor for revenue growth is the contribution of new value-added service products. For example, FlashChat, Chatroom and some other new membership-based paying features are very much likely to bring in incremental revenue and steady growth in overseas market will also make incremental contribution to the top line.

Although, we expect VAS revenue to be on a sequential upward trend after the trough in Q1, total VAS revenue for the year 2022 will still be lower than last year due to our substantial demonetization strategy in the second half of '21. As for live streaming, since it's not Tantan's current business focus, we expect its revenue to further decline significantly in Q1. We will shift our strategic focus to multiplayer live video, which fits better with the overall social atmosphere on Tantan. [Foreign Language] In terms of cost and expenses, according to our annual budget, we will make measures to optimize -- we'll take measures to optimize cost controls across various areas, including labor costs and expenses for IDC and CDN. However, since we will start to invest in Tantan's brand building as planned this year, marketing expenses will go up depending on the effectiveness of the campaigns.

We will control the annual net loss to be somewhere around CNY 500 million. Revenue in the first half of the year will be relatively low. So net loss will widen from Q4 level. However, we expect the net loss to narrow as revenue growth in the second half.

Ashley Jing: So I think I hope we've answered your question, Thomas.

I think in the interest of time, we are getting quite close to market open. So maybe we're just going to wrap up here for today's call. And thank you all for participating to our Q4 earnings conference call, and we'll see you next quarter.

Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.