Hello Group Inc. Announces Unaudited Financial Results for the Second Quarter of 2023

BEIJING, Aug. 31, 2023 /PRNewswire/ -- Hello Group Inc. (NASDAQ: MOMO) ("Hello Group" or the "Company"), a leading mobile social and entertainment platform in China, today announced its unaudited financial results for the second quarter of 2023.

Second Quarter of 2023 Highlights

• Net revenues increased by 0.9% year over year to RMB3,137.7 million (US$432.7 million*) in the second quarter of 2023.
• Net income attributable to Hello Group Inc. increased to RMB568.4 million (US$78.4 million) in the second quarter of 2023, from RMB345.6 million in the same period of 2022.
• Non-GAAP net income attributable to Hello Group Inc. (note 1) increased to RMB632.1 million (US$87.2 million) in the second quarter of 2023, from RMB463.5 million in the same period of 2022.
• Diluted net income per American Depositary Share ("ADS") was RMB2.82 (US$0.39) in the second quarter of 2023, compared to RMB1.68 in the same period of 2022.
• Non-GAAP diluted net income per ADS (note 1) was RMB3.14 (US$0.43) in the second quarter of 2023, compared to RMB2.22 in the same period of 2022.
• Monthly Active Users ("MAU") on Tantan application were 17.3 million in June 2023, compared to 24.8 million in June 2022.
• For the Momo app total paying users was 7.9 million for the second quarter of 2023, compared to 8.6 million for the same period last year. Tantan had 1.4 million paying users for the second quarter of 2023 compared to 2.2 million from the year ago period.

First Half of 2023 Highlights

• Net revenues decreased by 4.8% year over year to RMB5,956.5 million (US$821.4 million) for the first half of 2023.
• Net income attributable to Hello Group Inc. was RMB958.7 million (US$132.2 million) for the first half of 2023, compared to RMB635.5 million during the same period of 2022.
• Non-GAAP net income attributable to Hello Group Inc. (note 1) was RMB1,104.1 million (US$152.3 million) for the first half of 2023, compared to RMB862.0 million during the same period of 2022.
• Diluted net income per ADS was RMB4.78 (US$0.66) for the first half of 2023, compared to RMB3.11 during the same period of 2022.
• Non-GAAP diluted net income per ADS (note 1) was RMB5.49 (US$0.76) for the first half of 2023, compared to RMB4.16 during the same period of 2022.

"We delivered solid results in the second quarter, with strong financial performance and good progress on the execution of our various strategic priorities." Commented Yan Tang, Chairman and CEO of Hello Group.

"We celebrated Momo's 12th anniversary recently. I am glad to see how we have grown from a single-function app to a multi-brand listed company with a presence in several countries and regions. In Q2 we achieved the first year on year topline growth since the beginning of the pandemic three years ago, thanks to the stabilization and recovery of Momo's cash cow business. The Group level profitability improved significantly both year on year and from the previous quarter, mainly due to our effective cost control initiatives, which led to Tantan's break-even and the stable performance of Momo." Commented Sichuan Zhang, COO of Hello Group.

Second Quarter of 2023 Financial Results

Net revenues

Total net revenues were RMB3,137.7 million (US$432.7 million) in the second quarter of 2023, an increase of 0.9% from RMB3,110.4 million in the second quarter of 2022.

Live video service revenues were RMB1,588.8 million (US$219.1 million) in the second quarter of 2023, an increase of 4.5% from RMB1,520.0 million during the same period of 2022. The increase was primarily attributable to the increase in average revenues per paying user ("ARPPU") driven by new operational events and gamified features.

Value-added service revenues mainly include virtual gift revenues and membership subscription revenues. Total value-added service revenues were RMB1,499.5 million (US$206.8 million) in the second quarter of 2023, a decrease of 2.4% from RMB1,536.4 million during the same period of 2022. The decrease was mainly due to a decline in Momo and Tantan's paying user, which put pressure on respective businesses value-added service revenues. However, the decrease was partially offset by the rapid revenue growth from the new standalone apps.

Mobile marketing revenues were RMB37.0 million (US$5.1 million) in the second quarter of 2023, an increase of 3.0% from RMB35.9 million during the same period of 2022.

Mobile games revenues were RMB2.6 million (US$0.4 million) in the second quarter of 2023, a decrease of 84.8% from RMB17.2 million in the second quarter of 2022. The decrease in mobile game revenues was mainly due to the Company's strategic decision to pivot away from game distribution business.

Net revenues from the Momo segment increased from RMB2,779.5 million in the second quarter of 2022 to RMB2,816.6 million (US$388.4 million) in the second quarter of 2023, primarily due to the increase in net revenues from live video service and the new standalone apps. The increase completely offset the decrease of value-added service on Momo application. Net revenues from the Tantan segment decreased from RMB330.8 million in the second quarter of 2022 to RMB320.7 million (US$44.2 million) in the second quarter of 2023, due to the decrease in net revenues from membership subscription.

Cost and expenses

Cost and expenses were RMB2,515.5 million (US$346.9 million) in the second quarter of 2023, a decrease of 10.3% from RMB2,804.8 million in the second quarter of 2022. The decrease was primarily attributable to: (a) a decrease in sales and marketing expenses due to our initiatives to control cost and optimize Tantan's channel marketing strategy and our reduction of marketing costs of new apps; (b) a decrease in salary expenses and share-based compensation expenses, due to our continuous optimization in personnel costs and the decreased fair value of newly granted share options. The decrease was partially offset by the increase in revenue sharing with broadcasters related to our live video service and with virtual gift recipients for new standalone apps.

Non-GAAP cost and expenses (note 1) were RMB2,451.8 million (US$338.1 million) in the second quarter of 2023, a decrease of 8.7% from RMB2,686.9 million during the same period of 2022.

Other operating income

Other operating income was RMB22.9 million (US$3.2 million) in the second quarter of 2023, a decrease from RMB40.6 million during the second quarter of 2022. The other operating income mainly consisted of government incentives and additional input VAT deduction.

Income from operations

Income from operations was RMB645.1 million (US$89.0 million) in the second quarter of 2023, compared to RMB346.2 million during the same period of 2022. Income from operations of the Momo segment was RMB618.8 million (US$85.3 million) in the second quarter of 2023, which increased from RMB483.5 million in the second quarter of 2022. Income from operations of the Tantan segment was RMB30.2 million (US$4.2 million) in the second quarter of 2023, compared to a loss from operations of RMB131.3 million in the second quarter of 2022.

Non-GAAP income from operations (note 1) was RMB708.8 million (US$97.8 million) in the second quarter of 2023, compared to RMB464.1 million during the same period of 2022. Non-GAAP income from operations of the Momo segment was RMB680.8 million (US$93.9 million) in the second quarter of 2023, which increased from RMB589.2 million in the second quarter of 2022. Non-GAAP income from operations of the Tantan segment was RMB31.9 million (US$4.4 million) in the second quarter of 2023, compared to a non-GAAP loss from operations of RMB119.0 million in the second quarter of 2022.

Income tax expenses

Income tax expenses were RMB166.0 million (US$22.9 million) in the second quarter of 2023, compared to RMB146.0 million in the second quarter of 2022. The increase was primarily due to the higher profit from Momo segment in the second quarter of 2023.

Net income

Net income was RMB567.6 million (US$78.3 million) in the second quarter of 2023, compared to RMB344.3 million during the same period of 2022. Net income from the Momo segment was RMB542.4 million (US$74.8 million) in the second quarter of 2023, compared to RMB482.0 million in the same period of 2022. Net income from the Tantan segment was RMB29.1 million (US$4.0 million) in the second quarter of 2023, compared to a net loss of RMB131.7 million in the second quarter of 2022.

Non-GAAP net income (note 1) was RMB631.3 million (US$87.1 million) in the second quarter of 2023, compared to RMB462.3 million during the same period of 2022. Non-GAAP net income from the Momo segment was RMB604.4 million (US$83.4million) in the second quarter of 2023, which increased from RMB587.6 million in the second quarter of 2022. Non-GAAP net income of the Tantan segment was RMB30.8 million (US$4.3 million) in the second quarter of 2023, compared to a non-GAAP net loss of RMB119.4 million in the second quarter of 2022.

Net income attributable to Hello Group Inc.

Net income attributable to Hello Group Inc. was RMB568.4 million (US$78.4 million) in the second quarter of 2023, compared to RMB345.6 million during the same period of 2022.

Non-GAAP net income (note 1) attributable to Hello Group Inc. was RMB632.1 million (US$87.2 million) in the second quarter of 2023, compared to RMB463.5 million during the same period of 2022.

Net income per ADS

Diluted net income per ADS was RMB2.82 (US$0.39) in the second quarter of 2023, compared to RMB1.68 in the second quarter of 2022.

Non-GAAP diluted net income per ADS (note 1) was RMB3.14 (US$0.43) in the second quarter of 2023, compared to RMB2.22 in the second quarter of 2022.

Cash and cash flow

As of June 30, 2023, the Company's cash, cash equivalents, short-term deposits, long-term deposits, short-term investments, short-term restricted cash and long-term restricted cash totaled RMB11,267.4 million (US$1,553.9 million), compared to RMB13,398.8 million as of December 31, 2022. In the second quarter of 2023, we paid an equivalent of RMB937.2 million (US$129.3 million) cash dividend to our shareholders, and in late June we prepaid an equivalent of RMB2,258.5 million (US$322.1 million) cash to repurchase our convertible senior notes, which was settled in early July.

Net cash provided by operating activities in the second quarter of 2023 was RMB827.7 million (US$114.2 million), compared to RMB200.3 million in the second quarter of 2022.

First Half of 2023 Financial Results

Net revenues for the first half of 2023 were RMB5,956.5 million (US$821.4 million), a decrease of 4.8% from RMB6,258.5 million in the same period of 2022.

Net income attributable to Hello Group Inc. was RMB958.7 million (US$132.2 million) for the first half of 2023, compared to RMB635.5 million during the same period of 2022.

Non-GAAP net income attributable to Hello Group Inc. (note 1) was RMB1,104.1 million (US$152.3 million) for the first half of 2023, compared to RMB862.0 million during the same period of 2022.

Diluted net income per ADS was RMB4.78 (US$0.66) during the first half of 2023, compared to RMB3.11 in the same period of 2022.

Non-GAAP diluted net income per ADS (note 1) was RMB5.49 (US$0.76) during the first half of 2023, compared to RMB4.16 in the same period of 2022.

Net cash provided by operating activities was RMB1,278.8 million (US$176.4 million) during the first half of 2023, compared to RMB243.7 million in the same period of 2022.

Recent Development

Execution of share repurchase program

On June 7, 2022, Hello Group's board of directors authorized a share repurchase program under which the Company may repurchase up to US$200 million of its shares over the next 24 months. As of August 31, 2023, the Company has repurchased 12.1 million ADSs for US$57.2 million on the open market under this program, at an average purchase price of US$4.72 per ADS.

Business Outlook

For the third quarter of 2023, the Company expects total net revenues to be between RMB2.9 billion to RMB3.0 billion, representing a decrease of 10.3% to 7.2% year over year. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.

Note 1: Non-GAAP measures

To supplement our consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), we, Hello Group, use various non-GAAP financial measures that are adjusted from the most comparable GAAP results to exclude share-based compensation.

Reconciliations of our non-GAAP financial measures to our U.S. GAAP financial measures are shown in tables at the end of this earnings release, which provide more details about the non-GAAP financial measures.

Our non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of our continuing operations and our prospects for the future. Our non-GAAP financial information should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to the GAAP results. In addition, our calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Our non-GAAP information (including non-GAAP cost and operating expenses, income (loss) from operations, net income (loss), net income attributable to Hello Group Inc., and diluted net income per ADS) is adjusted from the most comparable GAAP results to exclude share-based compensation. A limitation of using these non-GAAP financial measures is that share-based compensation has been and will continue to be for the foreseeable future significant recurring expenses in our results of operations. We compensate for such limitation by providing reconciliations of our non-GAAP measures to our U.S. GAAP measures. Please see the reconciliation tables at the end of this earnings release.

Conference Call

Hello Group's management will host an earnings conference call on Thursday, August 31, 2023, at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Beijing / Hong Kong Time on August 31, 2023).

Participants can register for the conference call by navigating to:

https://s1.c-conf.com/diamondpass/10033114-tr54ev.html

Upon registration, each participant will receive details for the conference call, including dial-in numbers, conference call passcode and a unique access PIN. Please dial in 10 minutes before the call is scheduled to begin.

A telephone replay of the call will be available after the conclusion of the conference call through September 7, 2023. The dial-in details for the replay are as follows:

U.S. / Canada: 1-855-883-1031

Hong Kong: 800-930-639
Passcode: 10033114

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of Hello Group's website at https://ir.hellogroup.com.

About Hello Group Inc.

We are a leading player in China's online social and entertainment space. Through Momo, Tantan and other properties within our product portfolio, we enable users to discover new relationships, expand their social connections and build meaningful interactions. Momo is a mobile application that connects people and facilitates social interactions based on location, interests and a variety of online recreational activities. Tantan, which was added into our family of applications through acquisition in May 2018, is a leading social and dating application. Tantan is designed to help its users find and establish romantic connections as well as meet interesting people. We also operate a number of other applications to serve different social and entertainment demands from our users.

For investor and media inquiries, please contact:

Hello Group Inc.

Investor Relations
Phone: +86-10-5731-0538
Email: [email protected]

Christensen

In China
Mr. Eric Yuan
Phone: +86-10-5900-1548
E-mail: [email protected]

In U.S.

Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: [email protected]

Safe Harbor Statement

This news release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to our management quotes, our financial outlook for the third quarter of 2023, as well as the amount of, timing, methods and funding sources for repurchases of our shares under the share repurchase program.

Our forward-looking statements are not historical facts but instead represent only our belief regarding expected results and events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and other circumstances may differ, possibly materially, from the anticipated results and events indicated in these forward-looking statements. Announced results for the second quarter of 2023 are preliminary, unaudited and subject to audit adjustment. In addition, we may not meet our financial outlook for the third quarter of 2023 and may be unable to grow our business in the manner planned. We may also modify our strategy for growth. Moreover, there are other risks and uncertainties that could cause our actual results to differ from what we currently anticipate, including those relating to our ability to retain and grow our user base, our ability to attract and retain sufficiently trained professionals to support our operations, our ability to anticipate and develop new services and enhance existing services to meet the demand of our users or customers, the impact of the COVID-19 pandemic on the Company's business operations and the economy in China, the market price of the Company's stock prevailing from time to time, the nature of other investment opportunities presented to the Company from time to time, the Company's cash flows from operations, general economic conditions, and other factors. For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations, and prospects, please see our filings with the U.S. Securities and Exchange Commission.

All information provided in this press release and in the attachments is as of the date of the press release. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, after the date of this release, except as required by law. Such information speaks only as of the date of this release.