• Total Revenue: RMB2.67 billion, down 12% year-over-year.
• Adjusted Operating Income: RMB455 million, down 33% year-over-year, with a margin of 17.0%.
• Momo App Revenue: RMB2.46 billion, down 10% year-over-year.
• Tantan Revenue: RMB212 million, down 28% year-over-year.
• Live Broadcasting Revenue: RMB1.29 billion, down 16% year-over-year.
• Value-Added Services Revenue: RMB1.36 billion, down 8% year-over-year.
• Non-GAAP Net Income: RMB493.3 million, down 19% year-over-year.
• Non-GAAP Gross Margin: 39.4%, down 2 percentage points year-over-year.
• Cash and Cash Equivalents: RMB14.78 billion as of September 30, 2024.
• Net Cash from Operating Activities: RMB341.0 million.
• Fourth Quarter Revenue Guidance: RMB2.56 billion to RMB2.66 billion, representing a decrease of 14.7% to 11.4% year-over-year.

• Warning! GuruFocus has detected 4 Warning Signs with MOMO.

Release Date: December 09, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hello Group Inc (NASDAQ:MOMO) reported total group revenue of RMB2.67 billion for Q3 2024, close to the high end of their guidance.
• The company's overseas business, particularly the Soulchill app, showed strong growth with a 41% year-over-year increase in revenue.
• The company has been successful in optimizing user acquisition costs through KOL channels, improving ROI.
• Hello Group Inc (NASDAQ:MOMO) has maintained a strong cash position with cash, cash equivalents, and investments totaling RMB14.78 billion as of September 30, 2024.
• The company has prioritized the allocation of resources to its overseas business, which is expected to continue driving revenue and profit growth.

Negative Points

• Total group revenue decreased by 12% year-over-year, indicating a challenging market environment.
• The Momo app experienced a 16% year-over-year decline in revenue due to proactive product adjustments and weak macroeconomic conditions.
• Tantan's revenue decreased by 28% year-over-year, primarily due to a decline in the number of paying users.
• The company's non-GAAP operating income decreased by 33% year-over-year, reflecting margin pressures.
• Hello Group Inc (NASDAQ:MOMO) anticipates further revenue declines in Q4 2024, with expected decreases in both Momo and Tantan segments.

Q & A Highlights

Q: Could management share the main contributors driving the overseas business growth in the third quarter? Also, what are the latest revenue and profit figures for the overseas business and the growth outlook for the fourth quarter and 2025? A: The growth in the third quarter was driven by optimization in cross-border personnel management, improving operational efficiency, particularly for Soulchill. Soulchill contributed 60% to 70% of the new apps' revenue, surpassing Tantan's revenue scale. We expect Soulchill and other Middle Eastern apps to continue rapid growth and potentially break even next year. The overseas business is expected to play a significant role in driving future revenue and profit growth.

Q: What is the outlook for the Momo cash cow business, and when might we see a recovery in growth? A: Operational adjustments have been made to create a healthier social ecosystem, impacting financial performance. We will continue to focus on monetizing mid- to long-term paying users and enhancing platform capabilities. After a year of adjustments, we are satisfied with the Momo app's ecosystem, laying a foundation for maintaining productivity next year. However, revenue decline may continue due to macroeconomic factors.

Q: What are the plans for Tantan's product upgrades and the timeline for improvements in user retention and revenue? A: Tantan is focusing on improving product experience and business model. Efforts include enhancing user identity authenticity and chat interaction rates. We plan to complete the current round of upgrades by the first half of next year. User and revenue decline may continue for the next two quarters, but we aim to stabilize the user base and explore growth opportunities in China's dating market.

Q: What are the company's plans for shareholder returns, including dividends and share buybacks? A: Given the significant undervaluation of our stock, we prioritize share buybacks over cash dividends. However, liquidity constraints limit the buyback amount. If excess cash remains, we will consider cash dividends. The current buyback program may be exhausted by early 2025, but the Board will continue to make decisions to enhance shareholder value.

Q: How does the company plan to manage the productivity of the cash cow business in 2025? A: After significant operational adjustments in 2024, we do not foresee additional adjustments needed for 2025. Revenue may continue to decline year-over-year, but we aim to control costs to mitigate bottom-line impact. The overseas business growth will help offset some revenue declines in the Momo segment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.