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01/11 03:24
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a decline in domestic revenue and margins, despite strong overseas growth. The Q&A highlights management's lack of clarity on key metrics and an expected decline in domestic revenue and profitability. The company's cautious guidance and regulatory challenges further contribute to a negative outlook. Given the small market cap, the stock is likely to react negatively, with a predicted decline of -2% to -8%.
Total Group Revenue RMB 2.65 billion, down 1% year-over-year. Domestic revenue reached RMB 2.12 billion, down 10% year-over-year, while overseas revenue was RMB 535 million, up 69% year-over-year. The decline in domestic revenue was attributed to tax scrutiny, softened consumer sentiment, and a decline in paying users on Tantan. The overseas revenue growth was driven by rapid expansion in social entertainment and dating brands.
Adjusted Operating Income RMB 404 million, down 11% year-over-year, with a margin of 15.2%. The decline was due to higher payout ratios to ease supply-side pressure amid tax scrutiny and a structural revenue shift towards overseas markets.
Momo Value-Added Service Revenue RMB 1.79 billion, down 11% year-over-year and 3% quarter-over-quarter. The decline was due to new tax requirements, inspections of agencies, and a significant revenue decline in audio and video-based scenarios.
Tantan Revenue RMB 150 million, down 30% year-over-year and 5% quarter-over-quarter. The decline was due to a decrease in the number of paying users, although ARPPU increased 25% year-over-year and 6% quarter-over-quarter.
Overseas Revenue RMB 535 million, up 69% year-over-year and 21% quarter-over-quarter. Growth was driven by audio and video social products in the MENA region, improved localized operations, and increased channel spending.
Non-GAAP Gross Margin 37.6%, down 1.7 percentage points year-over-year. The decline was due to higher payout ratios for Momo and a structural revenue shift towards overseas markets.
Non-GAAP R&D Expenses RMB 170.6 million, down 8% year-over-year. The decrease was attributed to personnel optimization.
Non-GAAP Sales and Marketing Expenses RMB 335.9 million, down from RMB 350.1 million year-over-year. The decrease was due to cost control strategies for PRC businesses, partially offset by increased channel investment for overseas apps.
Cash Reserves RMB 8.86 billion as of September 30, 2025, down from RMB 14.73 billion as of December 31, 2024. The decrease was due to repayment of bank loans, payment of special cash dividends, and a one-off withholding tax payment.
AI Chat Assistant: The AI chat assistant model was updated to better align with user preferences and chatting styles, leading to increased user engagement and retention. The feature has been promoted to improve penetration rates.
New Gifting Features: Introduced in audio-based scenarios, these features increased the paying ratio and added 200,000 paying users, reaching 3.7 million in Q3.
Unlimited Lives Privilege Pack: A new product introduced to fill the gap in low-tier membership offerings for Tantan.
Overseas Revenue Growth: Overseas revenue reached RMB 535 million, up 69% year-over-year and 21% quarter-over-quarter, driven by audio and video social products in the MENA region and dating products in developed markets.
Happn Acquisition: Acquired Happn, a European dating product, to expand the group's product landscape into Europe and Asia Pacific.
User Acquisition Strategy: Adjusted channel budget allocation to ensure 100% ROI, improving platform profitability by reducing expenditure on low-return users.
Revenue Sharing Policy: Implemented to support broadcasters and agencies affected by new tax requirements, partially offsetting revenue declines.
Focus on High-Value Users: Momo targeted high-value male users aged 30-40, maintaining brand loyalty and profitability.
Expansion into High ARPPU Regions: Testing audio and video-based social entertainment products in Gulf countries and Japan to drive future growth.
Revenue Decline: Total group revenue decreased by 1% year-over-year, with domestic revenue down 10% year-over-year. This indicates challenges in maintaining revenue growth, particularly in the domestic market.
Tax Scrutiny: New tax requirements and inspections by local tax authorities have significantly impacted broadcasters and agencies, leading to a decline in revenue from audio and video-based scenarios.
Consumer Sentiment: Softened consumer sentiment driven by macroeconomic factors has negatively affected revenue, particularly in Mainland China.
User Acquisition Costs: Higher user acquisition costs in overseas markets and a shift to profit-oriented strategies have led to reduced user scale and increased pressure on profitability.
Operational Focus Disruption: Tax scrutiny has distracted broadcasters and agencies, impacting their operational focus and leading to revenue declines.
Overseas Expansion Risks: While overseas revenue grew, the rapid rise in user acquisition costs and the need for scalable solutions pose challenges to sustainable growth.
Tantan Revenue Decline: Tantan's revenue decreased by 30% year-over-year due to a decline in paying users, despite efforts to improve ARPPU and monetization strategies.
Profit Margin Pressure: Non-GAAP gross margin decreased by 1.7 percentage points year-over-year, driven by higher payout ratios and a structural revenue shift towards higher-cost overseas markets.
Cash Reserves Decrease: Cash reserves decreased significantly due to repayment of bank loans, special cash dividends, and withholding tax payments, potentially limiting financial flexibility.
Regulatory and Tax Risks: Ongoing regulatory and tax scrutiny in Mainland China continues to pose risks to operational stability and revenue generation.
Momo App: Focus on maintaining a healthy social ecosystem by optimizing chat experiences and leveraging AI technologies to enhance user engagement and retention. Efforts include AI chat assistant model updates and new gifting features to improve user metrics and profitability.
Tantan App: Aim to improve the core dating experience and build an efficient business model for profitable growth. Strategies include optimizing female user experiences, adjusting monetization strategies, and enhancing algorithms to improve user retention and ARPPU.
Overseas Expansion: Deepen presence in overseas markets by enriching the brand portfolio and building long-term growth engines. Efforts include expanding audio and video-based social entertainment products in high ARPPU regions and leveraging acquisitions like Happn to enhance the dating product landscape.
Revenue Outlook: Estimated Q4 2025 revenue to range between RMB 2.52 billion and RMB 2.62 billion, representing a year-over-year decrease of 4.4% to 0.6%. Mainland China business revenue expected to decline by mid- to low teens percentage-wise, while overseas revenue is projected to maintain Q3 growth rates.
Overseas Revenue Growth: Overseas revenue accounted for 20% of total revenue in Q3 2025, up from 12% in the same period last year. Growth driven by audio and video social products in the MENA region and expansion into high ARPPU regions like Gulf countries and Japan.
Profitability and Cost Management: Focus on improving profitability through cost control strategies, optimizing user acquisition spending, and enhancing monetization strategies for both domestic and overseas businesses.
Special Cash Dividends: Payment of special cash dividends totaling RMB 346 million to shareholders in Q2.
The earnings call reveals a decline in domestic revenue and margins, despite strong overseas growth. The Q&A highlights management's lack of clarity on key metrics and an expected decline in domestic revenue and profitability. The company's cautious guidance and regulatory challenges further contribute to a negative outlook. Given the small market cap, the stock is likely to react negatively, with a predicted decline of -2% to -8%.
The earnings report presents a mixed picture: overseas revenue is growing strongly, but domestic revenue is declining. Despite some operational improvements, financial metrics like adjusted operating income and gross margin are down. The Q&A reveals uncertainty about consumer sentiment and tax impacts, which could weigh on future performance. However, the strong overseas growth and AI investments provide some positive outlook. Given the company's small market cap, the stock may react more strongly, but the mixed signals suggest a neutral overall sentiment, with potential for slight fluctuations.
The earnings call reveals several negative factors: declining domestic revenue, competitive pressures, and regulatory risks. Despite overseas growth, the guidance indicates further revenue decline. The Q&A highlights concerns over unclear management guidance and political instability affecting user sentiment. Although there's a special dividend, the lack of a share repurchase program and increased operational costs negatively impact sentiment. Given the small market cap, these factors likely lead to a negative stock price reaction.
The earnings call reveals declining revenues across core Momo and Tantan, with significant drops in paying users and live streaming revenue. Although management is optimistic about overseas growth and new apps, the vague 2025 guidance and strategic shift away from low-return users raise concerns. The special dividend is a positive note, but the overall sentiment is negative due to weak guidance and declining margins. Given the small market cap, the stock is likely to react negatively in the short term.
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