Hello Group Inc. Navigates Growth Amid Challenges

Hello Group Inc. ((MOMO)) has held its Q1 earnings call. Read on for the main highlights of the call.

Hello Group Inc.’s recent earnings call painted a picture of a company navigating through a challenging domestic market while achieving impressive growth overseas. The sentiment expressed during the call was cautiously optimistic, with significant achievements in user engagement and return on investment (ROI) improvements. However, the company faced hurdles such as domestic revenue declines and gross margin pressures. Despite these challenges, the focus on expanding in overseas markets suggests a positive long-term outlook.

Overseas Revenue Growth

Hello Group Inc. reported a remarkable increase in overseas revenue, which accounted for 16% of the total revenue in Q1 2025, up from less than 10% in the same quarter of the previous year. This represents a year-over-year growth of 72%, highlighting the company’s successful international expansion efforts.

Successful Product Innovations

The introduction of AI algorithms in the Momo and Tantan apps has significantly boosted user engagement and retention. These innovations have led to noticeable increases in metrics such as two-way chats and user retention, showcasing the company’s commitment to enhancing user experience.

Social Entertainment in MENA Region

Hello Group’s social entertainment products in the MENA region, including Socho, Yahala, and Amar, have shown rapid growth. The company expects these products to maintain a strong growth momentum, contributing positively to the overall revenue.

Tantan’s Improved ROI

Despite a decrease in marketing spend for Tantan, the app has seen a significant improvement in ROI. This has provided the company with the flexibility to optimize product experiences and support profitability.

Domestic Revenue Decline

The company reported a domestic revenue of RMB2.11 billion, marking a 9% year-over-year decline. The forecast for the full year 2025 suggests a further decline of around 10%, indicating ongoing challenges in the domestic market.

Decreased Operating Income

Adjusted operating income for Q1 2025 was RMB350 million, down 33% from the previous year, with an operating margin of 14%. This decline reflects the pressures faced by the company in maintaining profitability.

Gross Margin Pressure

The non-GAAP gross margin for Q1 2025 was 37.9%, a decrease of 3.5 percentage points from the previous year. This was mainly due to the overseas business mix and higher payout ratios, which have impacted the company’s gross margins.

Challenges from Political Unrest

Political unrest in the Middle East and the Ramadan period affected user spending sentiment, impacting revenue growth for social entertainment products in the region. This highlights the external challenges the company faces in its overseas markets.

Forward-Looking Guidance

For the second quarter, Hello Group Inc. forecasts revenue between RMB2.57 billion and RMB2.67 billion, anticipating a decrease of 4.5% to 0.8% year over year. The company plans to continue focusing on overseas expansion and product innovation, aiming to leverage the strong performance of its international business.

In conclusion, Hello Group Inc.’s earnings call reflected a company that is effectively capitalizing on overseas opportunities while grappling with domestic challenges. The overall sentiment was one of cautious optimism, with key takeaways including significant overseas revenue growth and successful product innovations. Despite domestic revenue declines and gross margin pressures, the company’s strategic focus on international markets suggests a promising future.