Hello Group Inc. (MOMO), a leading provider of mobile-based social and entertainment services in China, announced its fiscal third-quarter 2024 results, revealing a net revenue decline of 12.1% year-on-year, settling at $381.14 million. This figure, however, surpassed analyst expectations of $366.41 million, sparking a positive market reaction. Furthermore, the company reported an adjusted net income per ADS of $0.38, significantly outperforming the anticipated $0.27. The stock price responded enthusiastically to this better-than-expected performance, demonstrating investor confidence despite the overall revenue decrease.
The positive earnings surprise comes amidst a backdrop of declining user engagement. Monthly Active Users (MAU) on the company’s Tantan application dropped to 12.0 million in September 2024, a significant decrease from 15.7 million a year prior. Similarly, the Momo app witnessed a decline in paying users, falling from 7.8 million to 6.9 million during the same period. Tantan also experienced a reduction in paying users, decreasing from 1.4 million to 0.9 million. This user base contraction is a critical factor influencing the company’s overall revenue performance.
A closer examination of the segment-wise performance reveals a consistent trend of decline. Revenues from the Live video service decreased by 16.0% year-over-year (Y/Y) to $183.3 million, while Total value-added service revenues fell by 7.5% Y/Y to $193.3 million. Mobile marketing revenues remained relatively flat at $4.4 million. The core Momo segment’s net revenues experienced a 10.2% Y/Y decline, reaching $350.9 million, largely attributed to decreased revenues from value-added services and live video. The Tantan segment witnessed a more substantial drop, with revenues decreasing by 28.1% to $30.2 million.
Despite the revenue challenges, Hello Group demonstrated strong financial resilience. Adjusted income from operations decreased by 33.3% to $64.8 million. The company’s robust cash position, holding $2.11 billion in cash and equivalents, and the generation of $48.6 million in operating cash flow, highlight the company’s financial stability. Chair and CEO Yan Tang emphasized the company’s commitment to its international expansion strategy, stating that the reacceleration of overseas business growth is driven by investments in localization and product diversification. The company’s focus on expanding its presence in diverse global markets suggests a long-term strategic vision aimed at mitigating its dependence on the domestic Chinese market.
Looking ahead, Hello Group anticipates fourth-quarter revenue in the range of 2.56 billion to 2.66 billion Chinese yuan, representing a year-over-year decrease of 14.7% to 11.4%. This projection is slightly below the consensus estimate of 2.61 billion Chinese yuan. This cautious outlook underscores the ongoing challenges in the Chinese market, but the overall results and the positive market response suggest investor optimism regarding the company’s future prospects, particularly considering the broader context of rising US-listed Chinese stocks in anticipation of potential economic stimulus measures from the Chinese government. The premarket surge of MOMO stock by 6.35% to $7.20 reflects this confidence.
