With regards to the outlook about next year, next year in, I think in late August this year is still a little bit too far to — for me to see, a tract wise, I guess, SoulChill is going to continue to grow at a decent pace, driven mainly by new product launches and also some of the new regions that we’re pushing into at this point of time. And the other growth driver — potential growth driver for this new piece within value-added service is the new applications that we launched this year, as Sic just mentioned. Hopefully, next year, some of these new endeavors is going to start bearing fruits on the top line front. So that’s my answer to revenue outlook question. So let’s move on to the next question. Please, operator.
Operator: The next question comes from Xueqing Zhang from CICC. Please go ahead.
Xueqing Zhang: [Foreign Language] Thanks management for taking my questions. My question regards to Tanta. First could management share about the [Indiscernible] suddenly do you have some initiative on the [Indiscernible]. Lastly, what’s your outlook for Tantan’s revenue and the profitability in the second-half of this year. Thank you.
Zhang Sichuan: [Foreign Language] [Interpreted] Tantan has made good progress in improving channel ROI and ARPU over the past year, achieving breakeven ahead of schedule at the beginning of the year. Our next goal is to drive significant growth in ARPU and retention in order to create a positive business cycle and deliver sustainable growth. However, it’s not that easy to get as it requires us to make more substantial progress in both user and commercial products. Although we haven’t yet found a breakthrough point for this as the team has achieved breakeven, we have enough patience and confidence to continue exploring products and making Tantan a more effective dating app for users and creating more value to shareholders. And for the financial questions, I will leave it to Cathy.
Hui Peng: Okay. Before I talk about the financial outlook for Tantan, maybe just one quick point to add to what Sic just said about users. I believe the big part of Tantan team’s efforts for the rest of the year will be on cleaning up spammers and putting in a more comprehensive system to make sure we keep these bad actors of the platform. This is crucial for us to deliver the right kind of user experience for a dating platform. Other than that, the team is also going to be pushing harder on new product experiments, but pushing harder what I mean is probably time to pry out whatever that we believe is worth trying without worrying too much about short-term fluctuations in user count. With that in mind, it’s hard for me, at this point to put down a definitive number for Tantan’s MAU for the coming couple of months.
I think Q3 is going to be a period where the team allows bigger room for trial and error. So I think that’s the reason why we would rather defer that question on user target to next quarter. By then, we should have enough visibility to give you guys a user target for the near-term. So that’s the question on the user front for Tantan. With respect to financial outlook for the back half for Tantan, I think for Q3 guidance, we are modeling in a sequential decrease from high-single-digits to low-teens. That’s largely reflecting the macro impact on live streaming and to a lesser degree, the product adjustments as directed by MIIT, which I mentioned on in my prepared remarks. And that’s going to have a negative impact on the renewal rate of Tantan’s membership service.
On the other hand, the team is also working on new features to continue to drive the ARPU, which will be able to counter some of those negative factors. So overall, we do see some downward pressure in the second-half of the year on top line, but how exactly Tantan’s revenue may trend, especially as we enter into Q4 will depend on how good a job our team can deliver in driving the ARPU. With regards to Tantan’s bottom line, we’re still seeing opportunities to continue to optimize on important line items such as personnel and marketing. Depending on the pace of such optimization, bottom line, in the second-half should stay around breakeven level or slightly better than that. I hand back to Ashley.
Ashley Jing: [Indiscernible] Operator?
Operator: [Technical Difficulty] Please go ahead.
Unidentified Analyst: [Foreign Language] Thanks management for taking my questions. My question is about profit margins. On the gross profit side, the real room for reducing live streaming revenue share. On the OP side, is there a potential further narrowing OpEx? Lastly, could you give us an idea of the productive scale of the investment for the new app and overseas business expansion? Thank you.
Hui Peng: Yes. I’m hearing several pieces of the question. Firstly, on gross margin and overall payout structure I think on the prior earnings calls, we’ve said that currently, we’re seeing the supply side of the live streaming ecosystem at a pretty stable state, meaning that, yes there is still competition for the high-quality performers. But overall, we think market is much more stable, compared to a year ago or two years ago, where some of the bigger platforms were very aggressive in competing with us for high-quality performers. So with that in mind, I think right now, the overall payout structure that we offer on Momo platform should stay relatively stable, meaning that the payout ratio should also stay at a relatively stable level as well.
I think the question if I get it correctly, is asking about whether there is room to maybe lower the payout ratio to the broadcasters. Although we do not see competition as intense as it was like two years ago, I do not think it’s appropriate to lower the payout to agencies or broadcasters, either because it’s true that from the press, sometimes we hear stories about some broadcasters making a lot of money. There are such outliers like some of the top of the pyramid streamers making huge sum of money. But these are not the average, these are the outliers. If you look at the average level of income that broadcasters make. If you look at the margins of some of our — even some of our costs performer agencies, it’s very low. So if you want them to work hard in the ecosystem, if you want them to earn enough money to care about improving the content.
This is probably not the right time for us to lower the payout ratio either. So that’s my answer to the payout question. I think right now, we would rather let the status quo continue. So that’s gross margin. My answer to the gross margin for this year, I think it would stay more or less the same as we saw in last year. Maybe it could swing a little bit because of the change in revenue mix, more or less, it would stay quite stable versus last year. For operating margin, I think, in Q2 for the ex-Tantan part operating margin on adjusted basis go back to 24%, 25% on a non-GAAP basis. I think as we move into the second-half of the year with some pressure on top line, it’s possible that we could see non-GAAP operating margin on an ex-Tantan basis to dip a little bit from Q2’s level.
But as I said, we are also working very hard to continue to optimize the personnel cost, as well as the marketing. And we’re still seeing pretty decent room for us to continue to improve on those optimization front. So I think in any case, we’re going to exit 2023 with an adjusted operating margin safely above 20%. That’s my view for the ex-Tantan part. Tang Yan already talked about the overall bottom line outlook for Tantan. So I won’t repeat here. I think the last question is on management’s thinking about the expenditures needed for overseas expansion. As Sic mentioned, the new endeavors that we just launched in the Middle East, North Africa area. All of these are ROI-oriented shortage initiatives. This year, I think the focus will be on getting the product right, getting the user experience right, building up the infrastructure and back end needed to grow the business.
And when time is right, we’re going to put in some marketing dollars to build the initial user base. So overall, I would say the rest of the year would be an investment period for these new applications. But all in all, I think we are talking about if you count personnel and marketing dollars all in, we’re talking about maybe RMB20 million to RMB30 million in total for the rest of the year for these new applications. And next year, the — we should start to see revenue coming in from these new applications. For SoulChill like I said, it’s already in a stage where it’s generating bottom line profit faster than it’s generating revenues. So you don’t have to worry about the growth of social creating a drag on the bottom line. So that’s my overall answer to your question about margins.
Ashley Jing: So I think that’s it for today. And thank you guys for participating, and we’ll see you next quarter.
Operator: Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for participating. You may now disconnect.
