Hello Group Inc. ((MOMO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Hello Group Inc. painted a mixed picture for the company. While there were significant strides in overseas revenue growth and advancements in AI integration, these were overshadowed by declines in overall and domestic revenue, alongside a notable one-off tax expense. Despite the challenges, there is optimism surrounding the company’s overseas expansion and technology adoption.
Overseas Revenue Growth
Hello Group Inc. reported impressive growth in its overseas business, with revenue reaching RMB 442 million. This marks a 73% increase year-over-year and a 7% rise quarter-over-quarter. Overseas revenue now accounts for 17% of the group’s total revenue, up from 10% in the same period last year, highlighting the company’s successful expansion beyond domestic borders.
AI Integration and Innovation
The company has made significant advancements in AI integration, enhancing the user experience of its social products. Notable efforts include AI greeting and chat assistant features, as well as the launch of a stand-alone AI character role play app in Japan. These innovations underscore Hello Group’s commitment to leveraging technology to improve user engagement.
Non-GAAP Net Income Increase
Excluding a one-off tax expense, Hello Group’s non-GAAP net income for the quarter would have been RMB 451.9 million, reflecting a 1% increase from the same quarter last year and a 12% rise from the previous quarter. This indicates a stable financial performance when adjusted for extraordinary items.
Stabilization and Growth in Tantan International
Tantan International, a subsidiary of Hello Group, has stabilized its revenue following a strategic shift to focus on its core dating experience. The company plans to expand further in Southeast Asia, indicating potential growth opportunities in the region.
Overall Revenue Decline
Despite positive developments, Hello Group’s total group revenue declined to RMB 2.62 billion, a 3% decrease year-over-year. Domestic revenue also fell by 11% to RMB 2.18 billion, reflecting challenges in the domestic market.
Withholding Tax Adjustment
The company faced a significant financial impact due to a withholding income tax adjustment. The applicable tax rate was increased from 5% to 10% by Chinese tax authorities, resulting in a one-off tax expense of RMB 547.9 million, affecting prior periods.
Decrease in Momo Value-Added Services Revenue
Momo’s value-added service revenue decreased by 11% year-over-year, reaching RMB 1.85 billion. This decline is attributed to a soft spending sentiment among high-paying users amid a weak macroeconomic environment.
Decrease in Paying Users
The Momo app experienced a decrease in paying users, with numbers dropping by 0.6 million to 3.5 million. Similarly, Tantan saw a decline of 80,000 paying users from the first quarter, reflecting challenges in user retention.
Forward-Looking Guidance
Looking ahead, Hello Group projects its third-quarter revenue to be between RMB 2.59 billion and RMB 2.69 billion. The company is focusing on maintaining the productivity of its cash cow business, Momo, and improving Tantan’s core dating experience. Despite a decrease in Tantan’s revenue, there was an 18% increase in ARPPU, suggesting potential for future growth. The company also addressed adjustments to tax compliance, which impacted its financials due to a change in the withholding income tax rate.
In summary, Hello Group’s earnings call highlighted a mixed performance with promising growth in overseas markets and AI advancements, tempered by domestic revenue challenges and tax adjustments. The company’s forward-looking strategies suggest a focus on leveraging technology and expanding its international footprint to drive future growth.