Hi, good afternoon everyone, and welcome to Momo Fourth Quarter Earnings Conference Call. It's great to see everybody once again. This is Terrisa, Momo's Head of Investor Relations. Today's event is being webcast live through our website, where you can also download our earnings report and the latest presentations. The format for today's event will be as follows. First, our President Jeff, will provide an overview of our operation highlights, followed by strategic focus. Afterwards, I will jointly share financial performance and business updates for the fourth quarter. Last, Jeff will take your questions during the Q&A session. As usual, I would like to remind everyone today's discussion may contain forward-looking statements that are subject to significant risk and uncertainties, which could cause the actual result to differ materially from what's contained in the forward-looking statement. Please refer to the safe harbor notice that appears on our presentation.
Now, I would like to turn the microphone over to Jeff.
Thank you, Terrisa. Thank you, everyone, for joining today's call. I will begin with a summary of our performance last year, followed by some key highlights from the fourth quarter's operations. Let's start with the 2024 performance overview. 2024 proved to be a challenging year for the e-commerce industry, with growth slowing to a single-digit level due to a variety of factors we have discussed in the past. As a result, Momo's annual revenue growth was modest, at just 3% year-over-year. Our EC GMV growth was stronger, but overall revenue was impacted by the decline in TV shopping and the application of different accounting principles in our 3P business. However, we observed a significant improvement in customer metrics, including an increased number of customers, visitors, and purchase frequency. This reflects a stronger relationship with our customers and higher satisfaction levels.
The 2024 take rate was slightly lower due to changes in product sales mix and customer trading down behavior. Investment in new business initiatives led to increased operating expenses. However, it was partially offset by improved operational efficiencies. Now, let's move to the fourth quarter's performance. In the fourth quarter, we saw retail sales growth of only 1.5% year over year, with e-commerce growing by 2%. Both numbers were below expectations, reflecting a weaker market. Consolidated revenue reached a record of TWD 33.48 billion, a 31% quarter-over-quarter increase, and a 1.9% year-over-year growth. While the YY growth was modest due to a high comparison base and conservative consumer spending, it remains a solid result. By business unit, media revenue decreased by 12.4% year-over-year, while e-commerce revenue grew by 2.5% year-over-year.
The combined 1P and 3P GMV growth outpaced this growth rate, with stronger performance in Beauty and Healthcare, with 6% year-over-year growth, and Household 3% year-over-year. While categories like smartphone, apparel, and luxury goods experienced subdued demand, contributing to a modest 1% year-over-year growth in these segments. Our take rate improved by 40 basis points to 13.8% in the fourth quarter, helped by 3P business and the retail media network. We also achieved a 50 basis point increase in gross margin, reflecting disciplined cost management. EBITDA reached TWD 1.78 billion, marking a 4.2% year-over-year increase, with an EBITDA margin expansion of only 10 basis points to 5.3%. It was due to the higher operating expenses from new business investments, including marketing and technology spending. Free cash flow totaled TWD 4.3 billion, supported by operating cash flow of TWD 6 billion.
In Q4, we also saw continued strong customer engagement, with monthly average user growing by 6% year-over-year and quarterly active user rising by 11% year-over-year. This result reflects the ongoing success of our enriched product offerings and enhanced data-driven capabilities. Regarding new business development and 2025 growth strategies, our 3P business, launched in mid-last year, is scaling rapidly, with over one million SKUs and thousands of merchants on board already. momo Ads, our retail media network, continues to gain traction with merchants, and we are both expanding our sales team and developing new features. We are confident in the long run. We can see the value and the profit potential of this business. On the logistics front, the launch of our Southern Distribution Center in November last year positions us well for 2025.
Our goal is to integrate the SDC with the Northern Distribution Center, transitioning to a more efficient two-hub operation. This will significantly improve customer service level, particularly in Southern Taiwan, and further streamline operations through automation and data technology. Our logistics investment will also expand our fleet to enhance last-mile delivery speed and improve customer experience. Lastly, let's touch upon strategic priorities for 2025. As we move into 2025, our focus is on driving long-term value through the following strategic priorities. First, grow market share across both 1P and 3P businesses. Second, leverage customer service and logistics as competitive advantages. Third, utilize technology to foster new business opportunities and operational excellence. Our primary focus for this year is GMV growth, and we will continue investing in 3P and retail media network.
We will elevate the service quality and streamline processes to maintain our position as the most preferred and trusted e-commerce brand. Additionally, we will work with our partners on ESG initiatives, with a particular focus on our Green Life membership program. Now, I will turn the call over to Terrisa.
Thank you, Jeff. We closed the fourth quarter with consolidated revenue of TWD 33.48 billion, reflecting a 1.9% year-over-year increase compared to TWD 32.85 billion over the same period in 2023, achieving another record-high performance. This is primarily driven by EC revenue of TWD 32.50 billion, accounting for 97% of total revenue, and delivered a 2.5% year-over-year increase. Our media business revenue stood at TWD 961 million compared to TWD 1,097 million during the same period in 2023. Supported by contributions from new business initiatives, company take rate improved to 13.8%, up from 13.4% in the fourth quarter of 2023. Through data-driven technology, automation, operating efficiency enhancement, and disciplined cost management, our gross margin increased to 9.8% compared to 9.3% during the same period in 2023. In terms of overall EBITDA margin, it increased by 10 basis points, primarily due to higher investment in strategic growth areas.
By business segment, e-commerce EBITDA margin increased by 10 basis points, and media EBITDA margin expanded significantly by 230 basis points. Net income to parent achieved TWD 1.11 billion, with earnings per share of TWD 4.440, based on 252 million diluted outstanding shares, which primarily attributes to the company's operating profit of TWD 1.44 billion, a 4.3% year-over-year increase. On a full-year basis, we achieved another record-breaking annual revenue of TWD 112.5 billion, marking a steady year-over-year growth from TWD 109.2 billion in 2023. EBITDA achieved TWD 5.65 billion compared to TWD 5.59 billion in 2023, with the EBITDA margin at 5% compared to 5.1% a year ago. A consolidated net income after-tax was TWD 3.5 billion. Let's bring 2024 earnings per share reported at TWD 13.69 per share.
Moving on to the balance sheet, as of year-end 2024, our cash positions stood at TWD 5.1 billion compared to TWD 3.3 billion in the third quarter and TWD 6.3 billion in the fourth quarter of 2023. Regarding cash flow and CAPEX, we generated TWD 3.16 billion in cash from operations, spent TWD 488 million in CAPEX. Overall, our free cash flow increased to TWD 2.67 billion, reflecting a 34.7% year-over-year increase, primarily driven by a 26.2% increase in cash flow from operations. The Board of Directors of Momo has approved a proposal to distribute a dividend of TWD 12.30 per share, along with an additional TWD 0.50 cash dividend and TWD 0.50 stock dividend from legal reserve and capital surplus to shareholders, leading to a total dividend of TWD 13.30 per share, with a payout ratio of 97%. This will be submitted to shareholder approval on May 27.
Turning to our e-commerce business, our top five product categories showed modest growth, reflecting prolonged weak consumer consumption and a shift in customers' preference toward low-price alternatives since the second quarter of 2023. Notably, beauty and healthcare remained a growth driver, delivering 6% year-over-year growth, with Households following with a 3% year-over-year increase. This result reflected our ability to capture shifting customer trends and deliver value at scale. We remain focused on driving customer engagement and retention on scale, supported by increased selections from our 3P business, which was just launched in May 2024. Investment in acquisition strategy remains our lead as the most preferred and trusted e-commerce platform that continues to resonate with our customers. As a result, monthly active users increased by 6% year-over-year, demonstrating our capability to attract and retain a growing customer base.
Meanwhile, customer time spent grew by double digits year-over-year, reinforcing the strength of our content personalization efforts and platform enhancements. Importantly, active user growth accelerated in the fourth quarter, reaching a new high of 11% year-over-year increase, the strongest since the first quarter of 2023. Moving on to logistics development, you can refer to our presentation slide, page 12. In 2025, we expect to own a total of 39 distribution centers, main warehouses, and satellite warehouses across Taiwan, down from 50 in 2024. As our SDC continues to scale operations, we will strategically phase out temporarily leased warehouses to enhance overall cost efficiency and operational effectiveness. This transition allows us to integrate and streamline two hub operations and the rest of the warehouses, improving our logistics efficiency, inventory management, and overall supply chain optimization through automation and data-driven technology. Let me touch on our green consumption initiative.
With sustainability becoming increasingly important worldwide, we are actively promoting green operations and expanding ESG initiatives. Since launching Momo Green Life in 2018, Momo has worked closely with a brand partner to provide more eco-friendly products. In September 2023, we introduced the Green Life membership program to encourage consumers to adopt greener shopping habits, for example, choosing circular packaging and consolidated shipping options, inviting customers to actively practice environmental stewardship in their daily lives. By the end of 2024, Green Life membership has increased to nearly 700,000 people, an impressive 107% increase from the previous year. Earlier this year, we also introduced the Carbon Reduction Dashboard, a tool that helps customers to visualize their eco-friendly actions and encourage greener shopping habits. We are very excited to see this initiative and look forward to driving even more sustainable growth in the future.
Finally, let me talk about this year's CAPEX budget and also the depreciation. You can refer to the presentation slide, page 9. We expect our CAPEX budget of TWD 686 million compared to TWD 911 million earlier. About 35% will be allocated to distribution centers and warehouse facilities, and about 56% will be spent on IT equipment expansion and upgrades. Regarding SDC depreciation, it will be around TWD 180 million over the full years of 2025. This concludes our key message, and thank you for your attention. We have reserved phone lines for you to dial in. Should you wish to ask any questions in the Q&A session, please dial in. Also, you are welcome to send your questions via a chat box on the webcast page. Operator, we are ready to take questions.
Thank you, ladies and gentlemen. If you wish to ask a question, please press star one on your telephone touchpad. Thank you. Once again, please press star one for questions. Thank you. We have a question from Daniel with UBS. Please go ahead. Thank you.
Hi, Jeff and Terrisa. This is Daniel from UBS. Could you hear me?
Yes, please.
Okay. Thank you, Jeff. So my first question is regarding the gross margin in Q4. So your Q4 gross margin expanded 0.5 percentage points compared to Q4 2023. Could you please quantify, out of this 0.5 percentage points, how much is contributed from disciplined cost management, and how much can be attributed to the support of new business? Thank you.
I don't have that detailed number yet, but I think probably the major part of it actually comes from the contribution of our 3P and the advertising business, because, as you know, most of the 3P will only recognize the commission part as revenue. Most of the revenue directly comes down to the profit. For the ad business, by its nature, it doesn't have much of the cost except the direct labor and the technology. Most of the revenue also will come down to the gross profit. I think also a small part from some savings in optimizing our logistics and the delivery services. That's overall what contributed and resulted in that 0.5 improvement.
Okay. Thank you, Jeff. So given that most is contributed by the new business, which is the 3P and also the advertisement, would it be possible for you to share any numbers regarding the new business, like GMV from 3P or sales from 3P commission advertisement? These kinds of numbers, would it be possible to share with us? Thank you.
I think it's still too early, too premature to disclose those numbers, but they are ramping up very quickly, particularly on the 3P part. That's the only thing I can say at the moment.
Okay. Thanks, and lastly, is there any quantitative guidance for the sales growth and operating margin for 2025? Thank you.
So we don't prepare to give any financial guidance for 2025. But however, we want to emphasize again, for us, the most important thing this year is to drive the GMV, particularly on the 3P part. But we also would like to see some increase on the 1P part. But in terms of the gross rate, we think the 3P should be much higher than 1P.
Okay. And one last follow-up. So I just want to make sure our key focus now is still finding the balance between sales and profitability, or are we shifting more towards the profitability side?
We are shifting a little bit more weight on the growth side. We want to grab the opportunity to make our GMV growth again because we have invested a lot in the new platform. So we want to fully utilize the benefit of the new platform and engage more in our customers, which has shown some positive numbers last year. As you can see from our last year's operation results, the number of users and also their buying frequency have all shown the increase. I think that majorly resulted from the enriched product offering, and as we all know, they're mainly introduced by our 3P business. And also, we attracted some new segments of customers, particularly the young segment. So all that actually helped us to gain the increase of the number of the customers and the buying frequencies. So we want that trend to continue this year.
Okay. Thank you so much, Jeff. Thank you.
Thank you. And the next question comes from Angela with Citi. Thank you.
Hello. Can you hear me?
Yes, please.
Yeah. Hi, Jeff and Terrisa. Thank you for taking my questions. And for third-party business, I wonder if there is any target or what are the major KPIs you and your team are closely watching for this year?
We do. We do have internal targets we want to achieve, but I just don't think we are not ready to disclose to the outside yet.
Got it. And for third-party and Momo Ads, do we still continue investing more resources in both businesses, or can we assume that the largest investment for both businesses has done last year?
We'll continue investing both in the technology and the marketing. I think in terms of the technology part, I think our platform has grown to a stage I think it is competitive enough. However, we want to make it better, particularly to utilize more of the data technology and to help us streamline the operation, and the other part is the marketing, as I said, because the GMV growth is an important strategy of this year, which means we also will spend more in terms of the marketing and drive more of the new customers and also the usage as well.
Got it. And for the Momo Ads, can you walk us through how it works, and how do we sell on this platform to our brand, and how do we charge the expenses, etc.?
For the Momo Ads, the major product so far is search, so we sell the keyword, and they use a bidding system, so merchants want to buy that keyword, and they will use the system to set the target price they would like to buy and what kind of a keyword they want to cover, and the machine will work out a suitable bidding price based on the click-through rate and what kind of a return they would like to look for, so it has a complicated logic behind to help them to manage their marketing budget, so most of our ad revenue currently comes through the search, and we are gradually gaining the share from the display ad as well, and so this year, two things for us were very important.
First, we need to have more inventory internally, and also we are cooperating with outside media so we can place ads beyond Momo's own properties. And secondly, we need to have more sales to cover those customers because there are some major customers that need more intensive sales help and also to formulate different marketing strategies to help them to target the customer or product as they would like to achieve. So we think we still have good potential to grow this business beyond current level. I think we're still in the very early stage.
Got it. That's very helpful. Thank you, Jeff.
Thank you. And the next question comes from Curtis Chan with Allianz Global Investors. Please go ahead. Thank you.
Hey, Jeff and Terrisa. Can you hear me?
Yes, please.
Yeah. Well, actually, I don't think I've put myself in the queue, but anyways. I want to ask about so Jeff, you mentioned just to make sure, so in terms of the new business, you still see 3P as the biggest growth driver this year, and then followed by ads. Is that correct? And how about membership?
Let me clarify this. I think 3P is going to be a big help in terms of driving the GMV. However, the ads will help on the profit side because you enjoy a good margin. However, not forgetting we still have a 1P business. It has a good size in terms of the revenue. So we are not de-emphasizing that. So we also push on to grow more on the 1P business. So both of them, so 1P and 3P, actually together, are going to help us to grow more of the new customers and also deepen the engagement with them. I don't know what kind of a membership you are referring about. If you're referring to our momo plus membership, which is a paid membership, as last reported, we have more than 20,000 paid members. So far, we still hold that number.
Now it's well beyond 20,000, but I cannot give you that exact number yet. However, this year, we will continue to enrich the members' benefit to make sure it's still a valuable program they would like to hold on. And maybe we will come up with some other tier of the different membership program, but we haven't decided yet.
Okay. Just to follow up on the membership. So I think last call, we were probably talking about 10K members, and right now, they have well beyond 20K. So just curious, is that kind of trajectory to think about? So the growth rate is still quite good quarter over quarter, or it's been kind of stable after you reach 20K?
Currently, Momo+ membership, I think it has a high. It's kind of designed for the VIP customers. It's an annual fee around TWD 2,400. So I think it's kind of one of the premium membership programs. So in order to enlarge the membership, we need to come up with other designs. And so I said that's part of our plan, but we don't have the set schedule yet. And yes, if we can have the paid membership, we can enlarge the paid membership. I think that would be also a good plus for our overall membership management.
Okay. Got it. And my final question goes to the customers. So it looks like your users' growth is still pretty good. I'm just curious, what kind of AOV are from these new incremental users versus your corporate average?
Sorry, what do you mean? AOV?
The basket or the ticket size for the.
Oh, the ticket size. Right.
Yeah, yeah. Compared to your core users.
Not much difference, actually, except the new customer is from the young segment. It will have a lower ticket size. That's what we actually anticipated. But one more word about the increased MAU and the increased frequency. However, on the downside of this is for the last year, our ticket size actually dropped. So we have more customers buying more frequently, but however, the average ticket size dropped. So the overall AOV for every user pretty much maintained the same level in terms of the previous year. So I think we're still in the situation customers are not that comfortable. They are still concerned about the economic uncertainties, which makes them more conservative in terms of what to spend and how to spend. And on top of that, we still see an increased number of the outbound travelers.
I think that also can have some impact on their spend of the money they can spend domestically. So we see that trend will continue for a while. So our main focus mainly is to drive their purchasing frequency through the help of our 3P business.
Yeah. Sorry, Jeff. I just want to make sure. So for your new users, besides the younger generation, do you also see the new users coming from different cohorts, let's say the spending, usually with lower tickets? I guess my question is, as you ramp up your 3P business, I would guess you probably could attract more users with lower spending power. But I'm not sure if that's something you've seen.
Well, we see that from the young segments, but we don't see that from other segments. Actually, we are very interested in also expanding on the elder group. Actually, we have more customers at the age beyond 50, actually. They have a very good spending on us. So except the young segment, because naturally, they spend less or they have a lower spending power in terms of the different customer segment. Except that, we don't see any major difference in terms of the new and old.
Thank you. That's all from me. Thanks.
Thank you. Once again, please press star one for questions. Thank you.
Okay. All right. Thank you, Jeff, and everyone. This concludes our Q&A session. So thank you, everyone, for joining us today. We hope everyone continues to stay well, and we hope you join our next quarter events again. Goodbye and have a good day.
Thank you for joining the conference. You may not disconnect. Goodbye.